Forward guidance of listed firms: What are the possible legal risks?

While such disclosures may be strategically advantageous, there are potential pitfalls

- Yang Eu Jin and Tan Chong Huat

Investors increasingly seek insights into anticipated performance and strategy and the Singapore Exchange Regulation has lately been encouraging such disclosures to enhance market transparency and investor confidence. ST FILE PHOTO

(ST FILE PHOTO)

In the dynamic global capital markets, forward-looking disclosures, or “forward guidance”, have become an increasingly prominent feature for listed companies.

Investors increasingly seek insights into anticipated performance and strategy and the Singapore Exchange Regulation (SGX RegCo) has recently been encouraging such disclosures in order to enhance market transparency and investor confidence.

However, this raises an important question: How far can disclosures in forward-looking statements go before becoming legally unacceptable, exposing companies and directors to scrutiny and potential liability?

A Jan 16 SGX RegCo Guidance column, Forward Guidance — Why It Matters And How To Get It Right, reframes guidance as an opportunity, emphasising that good-faith guidance, with a reasonable basis and appropriate qualifications, should not ordinarily attract regulatory scrutiny. This aligns with the initiatives of the Equity Market Development Programme, promoting corporate-investor engagement and market clarity.

It is often the case that forward guidance is disseminated through multiple channels, such as results briefings, analyst calls, investor presentations and media interactions, on top of formal announcements on SGXNet, and collectively, they could form part of the information that investors rely on when making investment decisions.

This gives rise to distinct legal and governance considerations, as market expectations may be shaped by the cumulative effect of statements made across different platforms, audiences and time frames.