Insights / September 10th, 2018

ASIC regulation of corporate finance: January to June 2018

Report 589 is a timely reminder to market participants of the regulator’s key observations from the previous six months, and the primary areas of concern going forward. We have summarised the key points of the report, below:

Fundraising and Disclosure Concerns

Over the period from 1 January to 30 June 2018, 229 original disclosure documents were lodged, seeking to raise $6.8 billion. This compares with 329 original disclosure documents seeking to raise $5 billion over the 1 July to 30 December 2017 period.

Interim stop orders were made in relation to 10.5% of all offers, a significant increase from 1.8% over the previous period.

Raising concerns with 19% of the prospectuses it received, ASIC’s top five disclosure concerns were:

  1. inadequate disclosure of business models

  2. unclear or insufficient description of the use of raised funds

  3. misleading or deceptive disclosure

  4. insufficiently prominent, inadequate or untailored risk disclosure

  5. inadequate disclosure of capital structure or substantial holdings

Royal Commission and Initial Public Offerings (“IPO”)

For companies raising funds through an IPO, ASIC has warned that investors need to be given ‘candid information’ about whether the business may be affected by the Royal Commission into misconduct in the banking, superannuation and financial services industry.

This information includes details of the business’ interaction with regulators, possible outcomes from those interactions, and the specific regulatory risks that the business may encounter in the fallout from the Royal Commission.

Focus on Misleading Conduct

Going forward, ASIC is particularly concerned about statements regarding IPOs that may be misleading to retail clients. The following concerns were identified:

  • Leaking investor education reports. Leaking information to the media about an upcoming IPO could amount to making a misleading statement, leading to ASIC intervening and disrupting the offer. Retail investors may not appreciate the conflicts of interest contained in such reports.

  • Misleading promotional material. Poor compliance has resulted in stop orders for several IPOs.

  • Pre-commitment statements. Care should be taken so that misleading statements are not made to influence retail investors on the basis of perceived market interest.

Further Comments

Initial Coin Offerings (“ICOs”)

Several non-compliant ICOs were withdrawn or significantly modified over the period. ICOs bring added complexities, such as Australian financial services licensing requirements, market licensing requirements, and compliance with the Corporations Act where the ICO involves an offer of a financial product.

Mergers and Acquisitions

Foreign bidders continue to play a significant role in company takeovers. These parties were responsible for 93% of the implied target value of takeovers during the period. In a similar vein to its pursuit of misleading conduct in IPOs, ASIC has intervened in several takeovers where false and misleading statements were made by market participants, in particular, through unclear and ambiguous third-party statements.

Corporate Governance

As noted in our earlier insights titled “ASIC announce plans to embed staff in the big four banks and AMP”, as part of a $70.1 million funding package, ASIC will enhance its enforcement and supervisory role through establishing a corporate governance taskforce. It proposes embedding staff into the four major banks and AMP to ensure compliance with corporate governance obligations.


ASIC continues to actively monitor market participants’ compliance with disclosure obligations, and is focused especially on misleading conduct. If you have any questions about ASIC’s report or your legal obligations, please contact Hillary Ray or a member of our financial services team.

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