The Federal Court has ordered defence, space and communications systems manufacturer Electro Optic Systems Holdings Limited (EOS) to pay a $4 million penalty for breaching continuous disclosure requirements.
Based on the Facts and Admissions agreed by the parties, the Court found that EOS failed to disclose a materially significant downgrade to its 2022 revenue forecast to the market for approximately 14 weeks.
Between May and June 2022, EOS advised the ASX that it expected its 2022 revenue to equal or exceed $212.3 million. By 25 July 2022, EOS became aware that its revenue was likely to be approximately $164 million, with a possibility of an additional $27 million.
Despite this, EOS did not explicitly correct its guidance until 31 October 2022.
The Court made declarations that EOS contravened s 674A(2) of the Corporations Act on 25 July 2022 and, by virtue of 1317QA, on each subsequent day until 31 October 2022 and ordered EOS to pay a pecuniary penalty of $4 million and ASIC's costs as agreed or taxed.
ASIC Chair Joe Longo said the outcome reinforced the importance of timely and accurate disclosure to Australia's financial markets.
'This result demonstrates that continuous disclosure is fundamental to keeping investors properly informed.
'When a listed company becomes aware of material changes to guidance, it must act promptly to disclose these to the market.
'Delays in correcting market‑sensitive information undermine market integrity and investor confidence,' the Chair said.
His Honour Justice Ian Jackman accepted that an appropriate pecuniary penalty was the agreed amount of $4 million and that such penalty 'is sufficiently substantial, having regard to EOS's size and financial resources, to achieve both specific and general deterrence, without being oppressive or disproportionate.'
ASIC has separately commenced proceedings against the former CEO and Director of EOS, Dr Ben Greene, in relation to alleged breaches of directors' duties.
