Alexandre Alexander, Kimberly Diamonds’ former chief executive, was charged with four offences relating to false and misleading statements under the Corporations Act.

The conduct relates to statements made regarding Kimberley Diamond’s future earnings forecast and his failure to disclose earnings to the Australian Stock Exchange (ASX). Each offence attracts a maximum penalty of five years jail time and a possible $34,000 fine.

What Went Wrong?

Allegedly, statements made on Kimberly Diamonds’ behalf to the ASX, and which Alexander authorised, were false and misleading according to the Commonwealth Director of Public Prosecutions (DPP).

Kimberly Diamonds in-confidence negotiations with Tiffany & Co anticipated a 30% increased in the value of its rare yellow diamonds. Their statements failed to disclose this basis for its earnings forecast.

What Continuous Disclosure Does ASX Require?

Under the ASX continuous disclosure rules, once an entity becomes aware of any information that a reasonable person would expect to have a real impact on the price or the value of the entity’s securities, the entity must immediately notify the ASX.

What Are the Exceptions?

In certain circumstances, the ASX continuous disclosure rules permit an entity to keep a deal confidential, including while it is still uncertain. This is a necessary exception to the ASX continuous disclosure rules. In its absence, the market could not confidently operate if companies were required to disclose speculative and uncertain deals. An entity must, however, disclose a transaction if it forms the basis of its earnings forecast.

Include Detailed Assumptions

A company needs to set out the facts on which it bases its forward-looking statements. This includes detailed assumptions as well as any earnings forecast in a company’s forward-looking statements that may assist potential investors to consider any risks going forward.

Do Not Base Forward-Looking Statements on Uncertain Events

Alternatively, companies should not base forward-looking statements on uncertain events. Business owners need to check carefully their financial statements with their chief financial officer and accountant to understand their basis of their reports and set out the reasoning behind any assumptions. It is prudent to base earnings forecasts and other forward-looking statements on sufficiently certain events.

How Can Companies Protect Themselves?

As well as discussing statements with internal and external financial advisors, companies can obtain a second opinion from the lawyer. A well-advised company can obtain advice from a lawyer with capital market expertise.


LegalVision’s corporate and commercial lawyers are very experienced in corporations law and understanding directors’ duties. If you have any questions, please get in touch on 1300 544 755.

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