ASIC has decided to withdraw current class order relief that allows issuers of investment products to cite credit ratings without the consent of credit rating agencies.
Following public consultation, ASIC has decided to remove the exemption from 1 January 2010. This will make credit rating agencies accountable for ratings cited in disclosure and strengthen credit rating agencies’ control over the use of their credit ratings.
From 1 January 2010, issuers must ensure that the credit rating agency has given its consent for the inclusion of a credit rating (and its form and context) in any fund raising or takeover documents that will be issued after this date.
Currently a class order provides relief from the requirement that an issuer must not cite a statement made by a person in a prospectus or PDS, unless the person has consented to that statement being included in the form and context in which it appears. Another class order provides similar relief in respect of bidder's statements and target’s statements in takeovers. The class order relief permits issuers to cite credit ratings from Standard & Poor’s, Moody’s Investor Service and Fitch Ratings in a prospectus or PDS without the consent of credit rating agencies themselves.
As liability for the content of disclosure only attaches to persons who have consented to having their statements cited, the class order relief has implications for the accountability of credit rating agencies.
By withdrawing our relief, ASIC is allowing credit rating agencies to control the use and presentation of their ratings in disclosure by giving or withholding consent.
Background
ASIC Class Order [CO 07/428] declares that s716 and 1013K of the Corporations Act are modified so that a disclosure document or PDS may include credit rating references without the consent of credit rating agencies.
ASIC Class Order [CO 07/429] declares that s636 and 638 of the Corporations Act are modified so that a bidder's statement or target's statement may include credit rating references without the consent of credit rating agencies.
In September 2009, ASIC sought public comment in Consultation Paper 117 Consent to quote credit ratings in disclosure documents and PDSs (CP 117) on whether to modify [CO 07/428] and [CO 07/429] to withdraw our relief relating to the citation of credit ratings. Submissions for CP 117 closed on 22 October 2009.