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New market disclosure measures to enhance capital raising and continuous disclosure by unlisted entities
AD09-110 New market disclosure measures to enhance capital raising and continuous disclosure by unlisted entities
Thursday 18 June 2009
ASIC today released new measures to enhance market disclosure and efficiency in capital raisings and unlisted disclosing entities.
The new equity raising policies released today seek to streamline the fundraising process by faster and more effective disclosure. The measures also aim to make it easier to include retail investor participation in fundraisings by expanding situations where a full prospectus or product disclosure statement (PDS) is not required.
The policies allow listed companies and managed investment schemes engaging in equity raisings increased scope to update the market through continuous disclosure obligations and a ‘cleansing notice’ instead of the currently required prospectus or PDS. A ‘cleansing notice’ confirms that the market has all information the entity would be obliged to release under the continuous disclosure requirements, including information on incomplete proposals or negotiations. It should be issued at the time of the share offer.
ASIC has also announced today measures to clarify how unlisted entities should provide continuous disclosure to investors. An unlisted disclosing entity includes unlisted companies and managed investment schemes with more than 100 members and unlisted debenture issuers.
The continuous disclosure laws apply to unlisted entities. Instead of lodging information with ASX, they must lodge with ASIC. In practice, many entities just put the information on their website, though not necessarily as expeditiously as the law may require.
ASIC recognises that for many entities, disclosure on their website provides a more useful and direct way of communicating with investors. For many investors, such a website is where they would expect to see important information they would use in deciding whether to buy, sell or hold particular investments.
The guide contains good practice guidelines for website publication, including ensuring information is easy to locate on the site and posted as soon as practicable. Entities should make clear how they intend to comply with their continuous disclosure obligations.
Background
Capital raising
The legal provisions associated with capital raisings will be made more efficient by allowing:
existing shareholders or unitholders to purchase further shares or units worth up to $15,000 through share purchase plans without a prospectus or PDS;
listed managed investment schemes to make placements at a discount of more than ten per cent to the current unit price without member approval;
more rights issues and placements using a cleansing notice instead of a prospectus or PDS, even if a listed entity has been suspended for more than the current five day maximum period;
members to participate in accelerated rights issues and rights issue shortfall facilities even if they exceed the twenty per cent takeover threshold by doing so; and
a person to underwrite a dividend reinvestment plan even if they exceed the twenty per cent takeover threshold by doing so.
ASIC expects companies to ensure that investor protections are maintained and meet their obligations to ensure that:
the market is fully informed at all relevant times;
investors are fully informed before they agree to buy securities; and
there is minimal risk of any unacceptable transfer of control resulting from the equity capital raising.
During the policy consultation process, ASIC received a number of submissions regarding market practices in effecting placements and other capital raisings. Of clear concern is the market anticipating a placement or share issue as a result of issuer’s adviser's soundings on the prospect. ASIC intends to focus on how confidential information is managed in these transactions and expects to provide further guidance about this towards the end of the year.
Continuous disclosure by unlisted entities:
The new Regulatory Guide 198 Unlisted disclosing entities: Continuous disclosing entities: Continuous disclosure obligations (RG 198) sets out good practice guidelines for website publication, including ensuring such information is easily located and posted as soon as practicable after it comes to the entity’s attention.Download:
