ASIC’s guide, Regulatory Guide 228 Prospectuses: Effective disclosure for retail investors (RG 228), follows extensive industry consultation on draft guidance set out in Consultation Paper 155 (CP 155). It aims to address problems ASIC has identified with prospectuses in the past. The guide also contains practical tools to assist issuers and their advisers producing clear, concise and effective disclosure.
ASIC Deputy Chairman, Belinda Gibson, said the market had welcomed the draft guidance published in April and that a number of companies had already used the guidance to produce more user-friendly prospectuses with better quality information presentation.
‘We’re now seeing some prospectuses that clearly advise retail investors about what information they should focus on, in language they can understand. We’re also seeing prospectuses that explain key risks from the investors' perspective — this is a big improvement on prospectuses that list every conceivable risk but give no useful information on any of them’, Ms Gibson said.
ASIC received 22 submissions on CP 155 from stakeholders including leading industry associations and several law and accounting firms. These submissions were very positive about ASIC’s proposal to give guidance on prospectuses. However, there were differing views on some issues such as the use of photographs, disclosure of financial information and directors’ track records. Requests were also made for further guidance on disclosure of confidential information about a company’s business.
‘We took all the comments into account and consulted further on some issues to refine our guidance. Leading lawyers, investment bankers, accountants and investor representatives generously shared their ideas. The result we think is innovative and world class guidance’, Ms Gibson said.
‘We have also developed a page on our consumer website, MoneySmart, for retail investors to access to learn more about understanding prospectuses. It references back to the key issues we highlight for disclosure in the regulatory guide. We’ll closely monitor this for feedback to ensure we’re in touch with investors’ needs’.
Visit MoneySmart to read about prospectuses
The table below summarises ASIC’s key solutions for more user-friendly prospectuses:
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Shortcoming |
Solution |
|---|---|
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Front section of prospectuses are often ineffective with:
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Provide one balanced investment overview that tells retail investors what key information to focus on and which helps them navigate the prospectus. Only include photographs after this investment overview and ensure they are relevant. |
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Risk disclosure is too general, vague and may resemble a ‘shopping list’. Risk disclosure may also be highly technical and presume a lot of specialised knowledge. |
Highlight the key risks and explain what these risks mean to investors and give some indication of what is likely to happen if the risk occurs. |
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Fragmented information on what the company does and the associated risks — which requires investors to piece together the picture for themselves. Often the information is also descriptive rather than analytical. For e.g. the terms of a key contract will be described but there is no explanation of what the contract means for the business. |
Include a clear explanation of the company's business model – i.e. how the company plans to make money and/or generate income or capital growth. |
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Prospectuses are long and difficult to read. |
Use practical communication tools. The investment overview also helps investors to use a long document. Reduce length where possible — for e.g. by leaving out irrelevant information and using incorporation by reference. |
Download:
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RG 228 Prospectuses: Effective disclosure for retail investors
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CP 155 Prospectus disclosure: Improving disclosure for retail investors