ASIC has restricted Black Mountain Resources Limited (Black Mountain) from issuing a reduced content prospectus until 22 April 2017.

The decision means Black Mountain will not be able to rely on reduced disclosure rules and must issue a full prospectus in order to raise funds from retail investors.

ASIC's decision was based on Black Mountain's failure to inform the market of details in relation to its convertible note agreements entered into in 2015, including details of:

• The names of the lenders and terms of conversion;
• The face value of the converticble notes; and
• The extent of conversion and amount outstanding under each relevant convertible note.

Black Mountain has also failed to comply with the accounting standards in relation to its disclosure of the convertible notes as an after reporting date event in its annual report for the 2014/2015 financial year.

ASIC Commissioner John Price said, ‘A company’s ability to use reduced disclosure rules is predicated upon them meeting their ongoing disclosure and financial reporting obligations.

‘If this doesn’t happen, ASIC will intervene so that companies seeking to raise funds from retail investors are required to issue a full prospectus. This ensures that current and potential future shareholders are in a better position to assess a company’s prospects and financial position', Mr Price said.

Black Mountain has the right to appeal to the Administrative Appeals Tribunal for review of ASIC's decision.

Background

Under the law, a listed company can offer securities using a reduced content prospectus containing information relating only to the particular offer itself.

ASIC has the power to prevent a company from relying on these rules if the company breaches its continuous disclosure or financial reporting obligations.

On 29 July 2015, Black Mountain announced that it was finalising a convertible note raising of $2.24m.

On 24 August 2015, Black Mountain issued a rights issue offer document, in which it disclosed that it had $2,560,000 outstanding under a convertible note facility.

On 30 September 2015, Black Mountain disclosed its financial report for the 2014/2015 financial year to the ASX. Note 21 to the financial statements included, as an event after reporting date, the rights issue but not the convertible notes issue.

Other than the reference in the rights issue offer document, Black Mountain did not disclose details of the convertible notes to the market.