ROLES OF LISTING RULES AND NDAS

ALISTED company recently stated that it was unable to provide a breakdown of the project or contract value of some contracts that it had secured, as this would violate the non-disclosure agreements (NDAs) signed and jeopardise its position with its competitors and clients.

The company had also not announced the awards or contracts immediately upon receipt of the same pursuant to Paragraph 9.03 of the Main Market Listing Requirements of Bursa Malaysia Securities Bhd. The company explained that this was due to the legal implications of the NDAs it signed with its clients. It was required to obtain consent or approval from the end clients before it could make any public announcement. The company also stated that it was constrained in making any single project announcement, which jeopardises its position with its competitors and clients by disclosing the exact contract value for each individual project.

This brings into play the interesting interplay between listing rules and NDAs — when does one take precedence over the other?

Listing rules and NDAs play vital roles in ensuring transparency and protecting sensitive information in the context of listed stocks. Listing rules are regulations set by stock exchanges to govern the conduct of listed companies, whereas NDAs are contractual agreements that restrict the disclosure of confidential information. While listing rules provide a framework for disclosure, NDAs serve as additional safeguards for proprietary information.

Listing Rules

Listing rules are designed to promote transparency and protect investors by ensuring that listed companies disclose relevant information in a timely and accurate manner. They typically mandate the disclosure of financial statements, material events and other information that may impact the company’s stock price. By adhering to listing rules, companies provide investors with the necessary information to make informed decisions about buying or selling their shares. They help maintain the integrity and reputation of the stock exchange by fostering trust and confidence among market participants.

One of the key advantages of listing rules is that they provide a standardised framework for disclosure, which helps level the playing field for all market participants. By mandating uniform disclosure requirements, listing rules reduce the likelihood of selective disclosure or insider trading, thereby promoting fair and efficient markets.

Non-Disclosure Agreements (NDAs)

On the other hand, NDAs are contractual agreements between parties that govern the sharing of confidential information. They are commonly used in business transactions, partnerships and employment relationships to protect proprietary information from unauthorised disclosure. In the context of listed stocks, companies may use NDAs to safeguard sensitive information, such as trade secrets, strategic plans or pending transactions, from being disclosed to competitors or the public.

NDAs serve as an additional layer of protection beyond listing rules by allowing companies to control the dissemination of confidential information on a caseby-case basis. While listing rules require companies to disclose certain information to the public, NDAs enable them to limit the disclosure of sensitive information to only authorised parties. This is valuable in situations where disclosing certain information could harm the company’s competitive position or undermine ongoing negotiations.

Interplay between Listing Rules and NDAs

The relationship between listing rules and NDAs is not necessarily adversarial; rather, they complement each other in ensuring transparency and protecting proprietary information. Listing rules establish minimum disclosure requirements that companies must adhere to, while NDAs provide companies with the flexibility to protect sensitive information that falls outside the scope of mandatory disclosure.

However, conflicts may arise when companies attempt to use NDAs to circumvent their obligations under listing rules or to conceal information that is material to investors. In such cases, regulators may intervene to ensure compliance with listing rules and to uphold the principles of transparency and investor protection.

Regulators will have to scrutinise the terms of NDAs to ensure that they do not unduly restrict the flow of information or impede market transparency.

While listing rules play a crucial role in promoting transparency and investor protection in the context of listed stocks, NDAs provide companies with a mechanism to protect proprietary information from unauthorised disclosure. Both listing rules and NDAs serve important functions in maintaining the integrity and efficiency of capital markets. However, it is essential to strike a balance between the need for disclosure mandated by listing rules and the legitimate interests of companies in protecting sensitive information through NDAs. Regulators play a critical role in overseeing compliance with listing rules and ensuring that NDAs are not used to undermine market transparency or investor confidence. Ultimately, a robust regulatory framework that incorporates both listing rules and NDAs is essential for fostering trust and integrity in listed stock markets.