ASIC has given class order relief ensuring that non-traditional rights issue structures are covered by the prospectus and PDS disclosure exemption for rights issues, an issue identified by ASIC’s Retail Investor Taskforce work to increase the opportunities for retail investors to participate in fundraising offers.
‘The aim of the disclosure exemption is to encourage companies to use pro rata rights issues, rather than placements, so retail investors can participate,’ ASIC’s Deputy Chairman, Jeremy Cooper, who is specifically focusing on retail investor issues said.
The ASIC class order recognises that issuers have adapted the traditional rights issue structure to meet different fundraising needs. An example of a non-traditional rights issue is an accelerated offer to institutions e.g. a ‘jumbo’.
ASIC considers that any rights issue should fall within the disclosure exemption where it provides an equal opportunity to all holders to participate and does not compromise retail investor protection.
ASIC has released Regulatory Guide 189 Disclosure relief for rights issues (RG 189). This regulatory guide explains the relief ASIC has given in Class Order (CO 08/35) Disclosure relief for rights issues. This includes relief:
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for accelerated offers to institutions;
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from the requirement to lodge multiple cleansing notices;
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for disposal of a shortfall (e.g. through a book-build); and
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to make offers of shares to convertible security holders.
CO 08/35 also gives technical relief in relation to the treatment of foreign holders, offers of stapled securities and rounding of entitlements.
The class order will commence on the date when it is recorded on the Federal Register of Legislative Instruments (FRLI) in electronic form. The FRLI may be accessed at www.frli.gov.au.
Background
The disclosure exemption for rights issues was introduced by the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007, allowing listed entities to conduct a rights issue without a prospectus or PDS. The disclosure exemption is limited to quoted securities or interests because continuous disclosure facilitates informed decisions on the rights issue by holders.
ASIC published Consultation Paper 91 Non-traditional rights issues (CP 91), released on 28 September 2007, seeking comments on its proposed relief to extend this disclosure exemption to accommodate current practices in rights issue structuring. Responses to our consultation paper were generally positive and suggested that the proposed relief would be likely to facilitate retail participation in capital raisings and make the legislative provisions more accommodating to market adaptations of traditional rights issues.
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