ASIC guidance about corporate disclosure obligations contradicted allegations the financial watchdog brought against global software firm Nuix, a judge has been told.
On the second day of a civil lawsuit in the Federal Court, Nuix barrister Matthew Darke SC challenged the claims brought against his client by the Australian Securities and Investments Commission.
ASIC has accused the company and its board of negligence by staying silent from January to April 2021 about the failure to meet forecasts made ahead of a $1.8 billion float in December the year before.
As part of its case, the regulator argues that between January 18 and February 25, the firm should have publicly disclosed a shortfall in annualised contract value.
The ACV is the total value of the agreements Nuix had with customers averaged out over the year.
Mr Darke argued that according to ASIC's own publicly available corporate guidance, this was impossible to do prior to Nuix's release of first half yearly financial statements in February of 2021.
"That case is utterly in the teeth of ASIC's own regulatory guidance," the barrister said.
The watchdog's guide said metrics such as ACV were not recommended by International Financial Reporting Standards and should not be included in isolation from measures of profitability that were recognised by IFRS, Justice Scott Goodman was told.
No reasonable investor would have expected Nuix to disclose something like ACV separate from its first half financial results, Mr Darke said.
In the initial public offering's prospectus, the firm claimed it could hit an estimated revenue for the 2021 financial year of $193.5 million and an ACV of $199.6 million.
Under ASIC's case, internal forecasts for Nuix's ACV had dropped to $161.9 million for the 2021 financial year by New Year's Eve of 2020, weeks after the float.
Estimates for the first half of FY21 were $17.1 million or 9.6 per cent less than the financial figures used to develop the prospectus prior to the float, ASIC barrister Jeremy Giles SC said on Monday.
Mr Darke argued the second quarter of FY21 was expected to be much larger than the first and that it was only when Nuix entered the final quarter of the year in April that it knew it was not going to hit its prospectus targets.
The forecasts had also been extensively checked and audited by accounting giant PwC ahead of the IPO, the court heard.
The executives sued include former executive chairman and CEO Rod Vawdrey, former executive chairman Jeffrey Bleich and then non-executive directors Iain Lobban, Daniel Phillips, and Susan Thomas.
ASIC is seeking court-ordered penalties and orders disqualifying the former Nuix directors from managing corporations.
Mr Darke will continue his opening submissions on Wednesday.