Australian Parliament Resets Bar for Breach of Continuous Disclosure Laws
The new measures will amend Australia's continuous disclosure regime by adding a fault or intention requirement that replaces the previous strict liability approach.
On 10 August 2021, the Australian Parliament passed the Treasury Laws Amendment (2021 Measures No. 1) Bill, which will permanently reform its continuous disclosure regime and related prohibitions on misleading conduct by adding a fault or intention requirement to replace the previous strict liability approach. The law took effect on 14 August 2021.
The permanent reforms follow on from the temporary changes to the continuous disclosure obligations under the Corporations (Coronavirus Economic Response) Determination (No. 2) 2020, which also added fault/intention requirements from May 2020 until 23 March 2021.
Under the permanent reforms, actions by the regulator, the Australian Securities and Investments Commission ("ASIC"), for contraventions of the civil penalty provisions and actions by shareholders for a compensation order both must prove that the disclosing entity knew, or was reckless, or negligent, as to whether information would have a material effect on the price or value of the entity's securities.
The reforms raise the liability threshold for disclosing entities and their directors so as to provide protection from opportunistic class actions but still maintain the need for timely disclosure to ensure market integrity. This change effectively reinstates earlier law and will be welcomed by corporate Australia.
The reforms do not alter disclosure obligations nor the requirements for a criminal prosecution or for ASIC to issue an infringement notice.
Disclosing entities and their directors may receive early guidance as to how the new reforms will operate as ASIC has commenced civil penalty proceedings against Holista CollTech Limited and its Executive Chairman. In that case, part of the alleged failure to comply with the continuous disclosure regime was subject to the temporary COVID-19 measures in the Corporations (Coronavirus Economic Response) Determination (No. 2) 2020.
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