Australia's high-technology sector has been warned to report its bad news along with its good news.
The two bodies that regulate Australia's listed companies have begun a crackdown on businesses failing to disclose news with negative implications for their share price.
The Australian Securities and Investments Commission (ASIC) and the Australian Stock Exchange (ASX) have signalled the change in direction for so-called "continuous disclosure" investigations.
The investigations will involve ASIC contacting a representative sample of ASX-listed entities to review aspects of their compliance to obligations under the Corporations Law.
The joint Continuous Disclosure program started in February. The program will expand to all state capitals after its initial success in Perth and Brisbane, and be broadened to place more emphasis on best practice' disclosure. Until recently the first point of contact with companies falling within the project was an audit letter.
The program initially targeted delays in the release of price sensitive-information by listed companies in the technology and mining sectors, which would have had the effect of increasing the price of the companies' shares.
The results of the program to date show a marked decrease in the number of price query letters sent out in April by the ASX in Perth and Brisbane in response to unexplained movements in share price and share trade volume. ASIC director, national markets unit, Clair Grose, said the scope of the review will be broadened to the timely disclosure of all information, including bad news.
"The main purpose of the shift in the program is to determine whether there is any concern that listed companies are not disclosing all information likely to have an adverse impact on the price of the company's shares," Grose said.
ASX executive general manager investors and companies John McMurtrie said the new direction reflects changed market conditions.
"Since the surveillance program began our computer surveillance systems have not detected anywhere near the number of periods of trading in which there were significant unexplained movements in price and volume," McMurtrie said.
In broad terms, in the high-tech sector, the market has moved from one characterised by significant upward movements in share price and volume in response to rumours of "deals" to one characterised by a weakening interest in high-tech shares based on market trend and a reassessment of fundamental value.
ASIC and ASX will initially look at newly listed companies or those that recently raised funds to help in a backdoor listing under rule 11.1.
The program will examine company activities against two benchmark documents: the prospectus issued by a company and cash flow statements.