The Australian Securities and Investments Commission (ASIC) has issued a new Class Order, CO 03/957: ASX managed investment warrants – disclosure and reporting exemptions [CO 03/957], that addresses the inconsistent treatment of managed investment warrants, compared to the treatment of share warrants and stapled security warrants, under Part 7.9 of the Corporations Act (the Act).

The class order harmonises the regulatory regime for warrants by removing the additional disclosure requirements that only applied to warrants over managed investment products under the Act.

The class order exempts all issuers of Australian Stock Exchange (ASX)-traded instalment warrants over managed investment products from:

• compliance with the additional Product Disclosure Statement (PDS) content and procedural requirements under Part 7.9 (other than Division 6) of the Act that technically apply because of the legal characterisation of the warrants as ‘managed investment products’; and
• the reporting obligations under Chapter 2M, and the continuous disclosure obligations under Chapter 6CA, and instead, bring these obligations within the continuous disclosure requirements of section 1017B.

The provision of this relief ensures that the disclosure obligations under Part 7.9 apply uniformly to warrants, regardless of the nature of the underlying product to which the warrants relate.

‘There is no policy reason why warrants over managed investment products should be treated or regulated differently to warrants over other products. Warrants are a distinct and separate product from the underlying investment product. The underlying product is already subject to specific and separate regulation’, ASIC’s Director of Financial Services Regulation, Legal and Technical Operations, Ms Pamela McAlister said.

‘The relief is consistent with the legislative objectives of promoting regulatory neutrality for functionally similar products and services’, Ms McAlister said.

Under the class order, issuers of managed investment warrants will be exempted from the PDS requirements that would otherwise apply to managed investment products to:

• lodge the PDS with ASIC;
• obtain the consent of all directors of the ‘responsible person’ to the PDS (s1015B);
• not trade the managed investment warrants for the 7 to14 day exposure period (s1016B(1)); and
• date the PDS the date it is lodged with ASIC (s1013G).

ASIC’s relief also addresses industry concerns that warrant issuers would be subject to reporting and continuous disclosure requirements under Chapters 2M and 6CA as the ‘disclosing entity’ in relation to managed investment warrants, merely because the managed investment warrant is an ED security.

As a consequence of the class order, warrant issuers will be exempt from the reporting and disclosure requirements applicable to ED securities in relation to the managed investment warrants only. The class order does not affect an issuer’s reporting and continuous disclosure