Board and senior management's involvement made breach more serious, court found
The Federal Court ordered Australian defence, space and communications company EOS to pay a $4 million penalty for breaching continuous disclosure requirements.
In Australian Securities and Investments Commission v Electro Optic Systems Holdings Limited [2026] FCA 405, handed down on 8 April 2026, Justice Jackman confirmed that Electro Optic Systems Holdings Limited (EOS) failed to notify the market of a material downgrade to its 2022 revenue forecast for approximately 14 weeks.
In June 2022, EOS publicly guided that its 2022 revenue would equal or exceed $212.3 million. By 25 July 2022, EOS knew its revenue was more likely to reach only $164 million, with a possibility of an additional $27 million. EOS did not explicitly correct this guidance until 31 October 2022.
The shortfall traced back to four revenue items EOS had included in its internal forecasts. First, supply chain disruptions curtailed production of land remote weapon systems (RWS) units under a major overseas defence contract. Second, a $10 million Commonwealth Government contract opportunity stalled in a funding review. On 20 July 2022, then-CEO Dr Ben Greene informed EOS's financial adviser that the funding would not emerge before September, making an award in 2022 "now less likely." On or before 26 July 2022, Dr Greene was informed that the opportunity had been "caught in major review," and in an email dated 26 July 2022 recorded that the predicted revenue from the opportunity for FY2022 was now "$nil." Third, EOS had no active contract negotiations for $12 million in anticipated Ukraine-related RWS sales. Fourth, EOS had not yet secured any commitment for an expected $15 million in research and development funding.
By 25 July 2022, EOS had no reasonable basis to include amounts totalling $49 million in its revenue forecast, leaving a forecast figure of $164 million. The acting Chief Financial Officer told the EOS Board at its 25 July meeting that prior experience indicated EOS would not realise all new business in the forecast, and that material items might slip into 2023.
The Court found that EOS contravened section 674A(2) of the Corporations Act 2001 (Cth) on 25 July 2022 and, under section 1317QA, on each subsequent day until 31 October 2022. The total theoretical maximum penalty across all individual daily contraventions reached $1,497,740,000. The Court treated the contraventions as a single course of conduct.
From 26 July to 8 September 2022, shares in EOS traded in an uninformed or misinformed market. In that period, 35,809,353 EOS shares, valued at $30,693,841, traded in 41,202 transactions on the ASX.
EOS admitted its conduct was negligent rather than deliberate, cooperated with ASIC, made admissions at the earliest available opportunity and expressed genuine contrition. The Court noted that the Board and Dr Greene, as the most senior officers of EOS, were involved in the contraventions and that this was a serious factor in determining the appropriate penalty.
Justice Jackman accepted the agreed penalty of $4 million as appropriate, finding it "sufficiently substantial, having regard to EOS's size and financial resources, to achieve both specific and general deterrence, without being oppressive or disproportionate."
In a media release, 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," Longo said.
"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," he said.
ASIC separately commenced proceedings against former CEO and Director Dr Ben Greene for alleged breaches of directors' duties.
