Chapter 5

Due Diligence Guidelines –

Disclosure to the Market

2. Disclosure: Non-Expert Sections

2.1 Standard

At the time of issue of a listing document, a sponsor, after reasonable due diligence, should have reasonable grounds to believe and should believe that:

(i) the information in the non-expert sections of the listing document is true, accurate and complete in all material respects and not misleading or deceptive in any material respect; and

(ii) there are no matters or facts the omission of which would make any information in the non-expert sections of a listing document or any other part of the listing document misleading in a material respect.

[Paragraph 17.5(b) of the Code of Conduct]

2.2 Guidance

2.2.1 A listing document includes an accountants’ report and, in some cases, reports by other experts such as valuers and industry experts. These reports are generally known as expert reports and collectively as the expert sections. The non-expert sections of a listing document refer to those sections of a listing document that are not expert reports.

2.2.2 A bifurcated approach has been taken with respect to the level of due diligence a sponsor is required to perform with respect to expert sections and non-expert sections.

For expert sections of a listing document, after performing the due diligence procedures set out in Paragraph 17.7 of the Code of Conduct (due diligence on expert reports), a sponsor will be entitled to rely on expert reports unless it believes or has reasonable grounds to believe that the information in the expert reports is untrue, misleading or contains any material omissions.

For non-expert sections of a listing document, however, at the time of issue of a listing document, a sponsor, after conducting reasonable due diligence, should have reasonable grounds to believe and should believe that: (i) the information in the non-expert sections of the listing document is true, accurate and complete in all material respects and not misleading or deceptive in any material respect and (ii) there are no matters or facts the omission of which would make any information in the non-expert sections of a listing document or any other part of the listing document misleading in a material respect.

Under the Listing Rules, in determining the reasonable due diligence enquires required, a sponsor must have regard to the due diligence practice note at Practice Note 21 to the Listing Rules and Paragraph 17 of the Code of Conduct.4 A sponsor must perform due diligence as set out in Paragraph 17.6 of the Code of Conduct (due diligence).

2.2.3 This reasonable due diligence requirement with respect to non-expert sections of a listing document substantially replicates the requirement under the Listing Rules. Under the Listing Rules, at the time of issue of a listing document, a sponsor is required to have conducted reasonable due diligence enquiries in order to make a declaration to the Stock Exchange that it has reasonable grounds to believe and does believe that the information in the non-expert sections of the listing document: (a) contains all information required by relevant legislation and rules; (b) is true, accurate and complete in all material respects and not misleading or deceptive in any material respect, or, to the extent it consists of opinions or forward looking statements by the directors of the listing applicant or any other person, such opinions or forward looking statements have been made after due and careful consideration and on bases and assumptions that are fair and reasonable; and (c) does not omit any matters or facts the omission of which would make any information in the non-expert sections of a listing document or any other part of the listing document misleading in a material respect.5

Endnotes

4. Listing Rule 3A.12.

5. Listing Rule 3A.13 and Appendix 19 to the Listing Rules.