ASIC has released an updated version of Regulatory Guide 31 Acquisitions by a broker acting as principal for client facilitation purposes (RG 31).
RG 31 provides guidance on when ASIC will grant individual relief from the 20% threshold as specified in s606 of the Corporations Act, which allows a broker to acquire as principal, a large parcel of securities from a client. ASIC will only grant relief where the broker acquires the parcel for prompt disposal in the course of providing client facilitation services to its client.
ASIC will not grant relief where it appears to us that the broker has a control purpose. In other words, the broker must be acquiring the securities with the purpose of disposing them, rather than the purpose of holding or voting any of the securities. Applications for individual relief must demonstrate that the applicant does not have a control purpose.
ASIC has simplified the conditions to individual relief. The updated conditions in the revised version of RG 31 are that the broker:
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must reduce its voting power in the relevant entity to 20% or less within 14 days after acquiring the securities;
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must not exercise any voting rights attached to those securities in excess of 20% without ASIC’s consent; an
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in selling any securities acquired under the relief, must use its best endeavours to obtain as wide a placement as practicable, for the highest practicable price.
These conditions are designed to restrict the broker’s ability to exert control over the relevant entity and to prevent warehousing.
Where ASIC grants individual relief, the broker will still be required to comply with the obligation to give substantial holding notices in s671B. Under the revised version of RG 31, ASIC will no longer give relief from this requirement. This is because ASIC considers that compliance with the substantial holding provisions will promote the principle that the acquisition of control takes place in an efficient, competitive and informed market. It will also provide information to ASIC and the market about the process by which the relevant parcel has been sold down, including whether there have been any off-market transfers.