Analysis Of Bellamy’s Australia 2017 Annual Report And The Necessity Of Continuous Disclosure Regime For Disclosure Entities In Australia

Recent Financial Predicament of Bellamy’s Australia Ltd

The central idea behind the restriction on insider trading and continuous disclosure is to develop robust and efficient equities market in Australia. This is because they help the market in providing information to the fullest extent possible at the time of making investment decisions along with providing the ability of depending on efficient information provision (Aspris, Foley and Frino 2014). The recent investigation of Newcrest on the part of the corporate regulator regarding the breach of continuous disclosure obligations has proven a salutary lesson for the listed entities with the continuation of the reporting season.

There are disclosure practices enforced on the part of the “Australian Securities and Investment Commission (ASIC)” and a chastened Newcrest attempting to regain its brand image must have prompted other public entities to have an effective look at their own compliance measures. Thus, the current report would aim to discuss the necessity of a continuous reporting regime for disclosure entities and its overall effectiveness.

The disclosure requirements are not new to Company Law in Australia and the timely disclosure related to material market information has been needed for above 100 years (Bhasin 2015). The existing continuous disclosure regime has been initiated in 1994 and it is regulated mainly in “Chapter 6CA (Sections 674 – 678) Corporations Act” and through the “ASX Listing Rules (Chapter 3)”.

According to “Section 674”, it is necessary for the organisations to notify the investors regarding the information not available generally having a material effect on the value or price of the securities. As per “Listing Rule 3.1”, market-sensitive information is to be revealed immediately upon the organisation becoming aware of it and “Guidance Note 8” helps in clarifying the above-stated application (Buckby, Gallery and Ma 2015).

Continuous disclosure helps in minimising information asymmetry between investors and managers and it is a measure of effective governance, which has been reinforced in “Principle 5 in ASX Corporate Governance Principles and Recommendations”. ASIC has various enforcement alternatives available, in which an organisation violates its continuous disclosure obligations. Such alternatives might be in the form of civil penalty proceedings having a maximum fine of $1,000,000, enforceable undertakings, proceedings related to criminal penalty and use of notices related to infringement initiated in 2004 (Carnegie and O’Connell 2014).

The adherence to notice of infringement does not prohibit ASIC to undertake civil penalty proceedings against those associated with the alleged violation and it does not have any influence the obligations of the third parties, which has been affected negatively on the part of the conduct “(Section 1317HA)”. Even though infringement notices could be handled rapidly, there is likelihood that big organisations might envision such notices as a simple and cheap way with minimum effect on reputation.

2017 Profit and Loss Statement with Special Reference to Impairment Test, Suspension of CNCA Licence, and Administrative and Other Costs

The policing activity of ASIC helps in judging the extent of the continuous disclosure regime. The Commissioner of ASIC in a presentation to the “Australasian Investor Relations Association (AIRA)” on 31st July 2013 has stated that there have been 28 insider-trading actions, out of which 18 of them have to be solved and 5 are yet to be resolved. In addition, the conviction rate of ASIC from 2009 until present is nearly four times higher in contrast to the previous decade (Henderson et al. 2015). At present, 25 investigations pertaining to insider trading have been active and ASIC has issued 11 infringement notices to nine organisations for failing to satisfy the continuous disclosure obligations (Chang, Hooi and Wee 2014).

The following are the main principles of the continuous disclosure regime in Australia:

  • It is necessary for the entities to release adequate information for allowing investors to make rightful judgements regarding the security prices, even though the investors might make distinct judgements based on such information. In addition, the entities must not disclose misleading or falsified information to the users.
  • The organisations are required to reveal price sensitive information materially to the market, as soon as they obtain information. In addition, they need to reveal information promptly at the time it becomes evident that disclosure could not be withheld legitimately anymore.
  • Price sensitive information needs to be made available to the investors equally for placing them in an advantageous position in contrast to others. In this context, North (2014) stated that the absence of selective disclosure is essential to the integrity of the market. Hence, selective disclosure develops the potential in relation to insider trading, in which the investors’ trade based on materially price sensitive information.
  • It is necessary for the continuous disclosure regime to strike an effective balance between strengthening timely disclosure of price sensitive information materially and restricting the prior disclosure of such information. Moreover, the entities are restricted to develop a speculative environment and volatility of price with the help of frequent conflicting declarations regarding indefinite or incomplete matters.
  • The continuous disclosure regime needs to develop an effective balance between requiring the timely revelation of materially price sensitive information and protecting the commercial benefits of the disclosing firms. However, this application could be made only, in which there is strict maintenance of confidentiality in relation to such matters.
  • The materially price sensitive information withheld from the investors need to be kept confidential. While an organisation might disseminate information to its commercial partners and advisers, these individuals need not trade in the shares of the organisation. In situations, information is available widely due to the violation of confidence; it needs to be disclosed to the investors based on time and equality.
  • The organisations need to receive consistent and clear guidance in association with their obligation for disclosing materially price sensitive information. This regime needs to take into account a group of penalties, which could be tailored to various circumstances (Reitmaier et al. 2017).

The concentration of investigation of ASIC into Newcrest is whether it revealed its position to the chosen analysts prior to a market update release announcing production downfall and considerable write-offs. There is a close association between insider trading and selective disclosure. As pointed out by Chapple and Truong (2015), markets depend on the information flow; however, such dependence must not be at the cost of efficiency and equity. In addition, it must not restrain the informed and confident investors. Thus, selective disclosures skews the loyalty of the analysts, restricts the investors obtaining equal admission to information, undermines transparency and spoils confidence.

Selective disclosure could result in vicious cycle, in which the organisations use the chosen access of the analysts in the form of a tool for securing favourable reviews in gaining an overview that access could be withdrawn; in case, the report do not resemble the goals of the organisation. Along with this, the institutional investors might utilise their power of investment for extracting preferential access to information from the listed organisations via private briefings (Choi et al. 2016).

However, it would not be a feasible idea to suggest abolishing selective briefings. They play a significant role by filling in gaps that the analysts might misuse in the normal course of inquiries. This is pertinent, since the investors are the individuals benefitted from the expertise of the analysts. Webcasting and access to all the pertinent documents with the help of the company website, is a method of levelling the playing field (Fu, Carson and Simnett 2015). The organisations have started already to adopt this method in relation to formalised analysts and in few cases, journalist briefings. Despite the fact that selective briefings are another matter clearly and even though free access to each analyst briefing might convince the retail investors, the goal could be adjudged as unrealistic. Thus, the recent initiative of surveillance undertaken on the part of ASIC is a significant inclusion in the disclosure regime.  

Analysis and Recommendation prior to the recent Share Price Decline and Share Trading Halt

The new program of ASIC to carry out spot checks with the chosen organisations and monitoring adherence is overdue. This is because of the complexities of successful mounting and succeeding in criminal prosecution along with the overall implications of costs for ASIC of civil as well as criminal proceedings (Gopalan and Hogan 2014). The laws could be a blend of punishment and persuasion. The push of ASIC to the briefings of the analysts is considered as third pillar, which is participation. Thus, it has become increasingly inherent that corporate governance could be monitored properly and it needs to be improved as well, if the regulators involve in its processes.  


Based on the above discussion, it could be inferred that the continuous disclosure regulations of Australia hold good; however, it is necessary for the regulators like ASIC to balance the books and they need to think in a creative fashion. The various layers of enforcement, regulation and guidance aim the offending conduct in an effective fashion. However, the presence of regulation does not assure compliance. In addition, the initiation of the briefings surveillance initiative of ASIC is considered as significant evidence, which the regulator is planning ahead. Therefore, the continuous disclosure regime is effective for the disclosing entities in Australia to provide the investors with timely and accurate information.


Aspris, A., Foley, S. and Frino, A., 2014. Does insider trading explain price run?up ahead of takeover announcements?. Accounting & Finance, 54(1), pp.25-45.

Bhasin, M.L., 2015. Disclosure of Intellectual Capital in Annual Reports: Comparing Evidence from India and Australia.

Buckby, S., Gallery, G. and Ma, J., 2015. An analysis of risk management disclosures: Australian evidence. Managerial Auditing Journal, 30(8/9), pp.812-869.

Carnegie, G.D. and O’Connell, B.T., 2014. A longitudinal study of the interplay of corporate collapse, accounting failure and governance change in Australia: Early 1890s to early 2000s. Critical Perspectives on Accounting, 25(6), pp.446-468.

Chang, M., Hooi, L. and Wee, M., 2014. How does investor relations disclosure affect analysts’ forecasts?. Accounting & Finance, 54(2), pp.365-391.

Chapple, L. and Truong, T.P., 2015. Continuous disclosure compliance: does corporate governance matter?. Accounting & Finance, 55(4), pp.965-988.

Choi, K.W.S., Chen, X., Wright, S. and Wu, H., 2016. Responsive Enforcement Strategy and Corporate Compliance with Disclosure Regulations.

Fu, Y., Carson, E. and Simnett, R., 2015. Transparency report disclosure by Australian audit firms and opportunities for research. Managerial Auditing Journal, 30(8/9), pp.870-910.

Gopalan, S. and Hogan, K., 2014. Ethical Transnational Corporate Activity At Home And Abroad: A proposal for reforming continuous disclosure obligations in Australia and the United States. Colum. Hum. Rts. L. Rev., 46, p.1.

Henderson, S., Peirson, G., Herbohn, K. and Howieson, B., 2015. Issues in financial accounting. Pearson Higher Education AU.

North, G., 2014. Listed Company Disclosure and Financial Market Transparency: Is this a Battle Worth Fighting or Merely Policy and Regulatory Mantra?. Browser Download This Paper.

Reitmaier, C., Reitmaier, C., Schultze, W. and Schultze, W., 2017. Enhanced business reporting: value relevance and determinants of valuation-related disclosures. Journal of Intellectual Capital, 18(4), pp.832-867.

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