ASX aware letters in a volatile market: insights for investor relations professionals

Sodali & Co and AIRA recently co-hosted a roundtable discussion attended by senior investor relations practitioners and ASX on the subject of ‘aware letters’ and their application in today’s volatile market environment.

Despite the data showing only a modest increase in the number of aware letters issued in the most recent reporting window, many issuers feel the combination of high-profile enforcement action and extensive media attention is creating a more demanding disclosure environment and consuming significant governance bandwidth.

While aware letters are viewed by ASX as a fact-finding mechanism rather than a sanction in their own right, issuers reported being concerned about the reputational risks associated with the letters and responses being published, with the perception their issuance indicates wrongdoing, regardless of the actual conclusion.

Participants highlighted a structural shift in how the market is behaving, including an increased focus on short-term outcomes and intraday share price volatility being amplified by algorithmic and quantitative strategies.

Another prominent concern was the influence of third-party consensus platforms that can provide an inconsistent view of key financial metrics that may still lead to material price reactions and subsequent regulatory enquiries.

Acknowledging the reality of an increasingly volatile market, ASX has increased its earnings surprise trigger threshold from five to 10 per cent or more on results days to reduce “false positives”. ASX’s methodology for assessing price moves, including the one-day close-to-close approach, is also under review, with any changes needing to be simple, consistent and operationally workable.

The importance of robust internal processes and documentation was emphasized by ASX, with companies needing to demonstrate adequate materiality assessment, governance processes and detailed timelines when responding to regulatory enquiries.

Practical takeaways for IR teams:

• Expect more queries in volatile markets. Even in well-managed disclosure environments, sharp price moves and granular expectations mean that queries, including aware letters, are likely to remain a feature of reporting seasons.
• Treat guidance as the primary anchor. Where guidance has been set, close and ongoing monitoring against it is essential. If performance moves materially, early internal escalation and, where appropriate, timely market updates remain critical.
• Define an internal view of consensus. Agree on a consistent method for what consensus means for your company, how third-party datasets are used and tested, and how that view feeds into real-time monitoring and board reporting.
• Prioritize documentation. Record key judgements as conditions evolve, rather than reconstructing the narrative after results. Short, contemporaneous notes of discussions and decisions can be highly valuable.
• Prepare for publication optics. Assume that aware letters and responses may be published. Build an internal and external communication plan so that boards, executives and frontline spokespeople understand the context and the process.
• Account for data limitations in engagement. Recognize that consensus platforms and other datasets can distort expectations. Use investor engagement to explain your performance drivers, clarify how you think about guidance, and address known anomalies in external numbers where appropriate.

Looking ahead, aware letters are expected to remain a core element of ASX’s disclosure assurance framework, particularly during periods of heightened volatility. Issuers broadly support the underlying objective of promoting timely, fair and well-understood disclosure.

At the same time, they face genuine operational and reputational challenges created by rapid market reactions, dependence on granular and sometimes imperfect data, and the public visibility of regulatory correspondence. AIRA will continue to engage with ASX and with members on these themes.

Areas of ongoing focus include improving market understanding of how aware letters operate, refining approaches to volatility and consensus in assessing disclosure expectations, and reducing unintended consequences for compliant issuers that are striving to do the right thing in a complex environment.

For further information or for assistance in preparing for and responding to ASX aware letters, contact Sodali & Co’s investor relations practice on ir@client.sodali.com.