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ASIC says Telstra's disclosure practices are unacceptable.

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Wednesday 14 December 2005

ASIC says Telstra's disclosure practices are unacceptable


MARK COLVIN: It's been a tough six months for Telstra's new boss Sol Trujillo, but he finally got some good news today. 


The Australian Securities and Investments Commission announced that it wouldn't be taking legal action against Telstra over the leaking of confidential information. 


The corporate regulator says Telstra failed to properly release information to the market on three occasions this year. 


ASIC says Telstra's disclosure practices are unacceptable, but they don't warrant legal action. 


ASIC itself, though, finds itself on the back foot, defending accusations that it's gone soft in another high profile case. 


Neal Woolrich reports. 


NEAL WOOLRICH: When Sol Trujillo was named as Telstra's Chief Executive Officer earlier this year, the company's Chairman Donald McGauchie described it as the toughest job in corporate Australia. 


And in Sol Trujillo's first six months, there's been little let-up in pressure from the Government, competition regulators, investors and the media.  


But today there was some relief. 


In September, the Australian Securities and Investments Commission launched an investigation into whether Telstra failed to properly disclose confidential information to the market. 


Today, the corporate watchdog announced it won't be taking legal action. 


But ASIC's Chairman Jeffrey Lucy says the investigation revealed disclosure practices that are unacceptable for a company of Telstra's size and significance. 


JEFFREY LUCY: It is a wakeup call for Telstra. I think that they do need to be absolutely sure that under the current circumstances, as indeed with any public company, that they meet the continuous disclosure obligations very fully and very carefully. 


NEAL WOOLRICH: ASIC investigated three incidents. 


One, where a Telstra executive gave confidential briefing papers to journalists that were only intended for the Government. Another, where investment analysts were given information that was not immediately distributed to the wider market. 


And ASIC was also concerned that Telstra's profit downgrade in September could confuse ordinary shareholders. 


ASIC says some of Telstra's procedures may hinder its ability to meet disclosure obligations to the market. 


But Jeffrey Lucy says none of the incidents warrant enforcement action. 


JEFFREY LUCY: When we look at a company like Telstra, we've got to make sure that we don't either give them a higher bar or a lower bar to clear than anybody else. And so we've been very objective in that regard. 


And it is true that Telstra are in a very dynamic position at the minute, and that they've got a lot going on, and I guess our biggest concern and warning to Telstra is that they've got to be very careful when they are into the public arena debating and talking about some of their regulatory issues that they don't overlook the fact that they've got responsibilities to their shareholders, particularly the mum and dad shareholders who might be confused with some of the comments. 


NEAL WOOLRICH: ASIC has come under repeated criticism this year for not being tough enough in some high-profile cases. 


But ASIC's Chairman Jeffrey Lucy stands by today's decision to not charge Telstra. 


JEFFREY LUCY: Well I'm not sure that I'd accept that criticism. But no, there's been no pressure from any direction, frankly. We've gone through this very carefully. It is the unanimous view of the people that have been involved in this matter that the conclusion that we've reached is the right conclusion. So there's been no pressure. 


NEAL WOOLRICH: Telstra's company Secretary Douglas Gration denies that the company's policies are Inadequate or that it's at risk of future non-compliance. 


DOUGLAS GRATIAN: ASIC made a number of criticisms of us. We don't accept those criticisms, but we certainly feel our conduct has been vindicated by their finding that they wouldn't take any action. 


We're very proud of our continuous disclosure record and our general record of good corporate governance. We don't believe there are particular improvements that need to be made. 


NEAL WOOLRICH: But Labor Senator Stephen Conroy says ASIC should have at least fined Telstra. 


STEPHEN CONROY: Well they should comply with the law. And ASIC should be enforcing the law.  


ASIC are a corporate Chihuahua. This isn't good enough. We've seen a complete debacle that ASIC were engaged in around Steve Vizard. We've seen recently its case against some HIH officials fall apart.  


And today, ASIC can flout the law by not enforcing penalties when Telstra engaged in unacceptable behaviour. Comply with the law. Tell the truth to your shareholders. Tell the truth to the market. 


NEAL WOOLRICH: And Jeffrey Lucy says it's now up to Telstra to improve its market disclosure practices. 


JEFFREY LUCY: I sincerely hope that the do take on board our comments, because obviously if there was any failure to heed what our warnings suggest and if there were to be breaches going forward, then the very fact that we've put them on notice would count against them if we were obliged to take on any further activity. 


MARK COLVIN: The ASIC Chairman Jeffrey Lucy ending that report from Neal Woolrich.