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16-190MR Rhinomed pays penalty for alleged continuous disclosure breach and ASIC accepts enforceable undertaking to address continuous disclosure deficiencies
ASX-listed company Rhinomed Limited (Rhinomed) has paid a penalty of $33,000 after ASIC issued an infringement notice for an alleged failure by Rhinomed to comply with its continuous disclosure obligations.
In addition, ASIC has accepted an enforceable undertaking (EU) from Rhinomed which commits the company to engage an independent expert to review and make recommendations in relation to the company's disclosure practices and places certain restrictions on the company’s ability to raise capital without using a full-form prospectus until the expert's recommendations have been effectively implemented by the company.
The infringement notice was issued following an investigation into matters arising from an announcement on 15 May 2015 by Rhinomed to the Australian Securities Exchange (ASX) (15 May Announcement) that it had entered into a distribution arrangement with ResMed Inc (ResMed) for ResMed to sell Rhinomed's MuteTM product to the UK market through an online e-commerce platform, with sales to begin in June 2015.
ASIC alleges that, following discussions and email exchanges between Rhinomed and ResMed regarding the 15 May Announcement, on 9 June 2015 (AEST) Rhinomed were informed by ResMed that the distribution arrangement as disclosed in the announcement had been terminated.
On 21 August 2015, Rhinomed issued an announcement to the ASX titled "UK pharmacy distribution secured for Mute" in which it stated that the “Mute technology will be sold exclusively in the United Kingdom by Boots UK” and that this “exclusive deal supersedes previous UK distribution deals for Mute”.
ASIC alleges that by failing to inform the ASX on 9 June 2015 of the termination of the distribution arrangement with ResMed regarding the MuteTM product, Rhinomed was in breach of its continuous disclosure obligations between 9 June 2015 and 21 August 2015.
Under the EU, Rhinomed will engage an independent expert to review the company's disclosure practices, policies, procedures and resources and to implement the expert's recommendations. The EU also places certain restrictions on the company's ability to raise capital raise capital without using a full-form prospectus until the independent expert has reported to ASIC in relation to the review and has given an opinion to ASIC that Rhinomed has effectively implemented the expert's recommendations.
ASIC Commissioner Cathie Armour said, 'A listed company's obligation under the continuous disclosure regime is to immediately notify the ASX of information that a reasonable person would expect to have a material effect on the price or value of the company's securities, whether that information is positive or negative for the company. To meet this obligation, listed companies should have appropriate practices, policies, procedures and resources.
'In circumstances where a company experiences a material variation or termination of a significant commercial arrangement or agreement, the company must carefully consider whether the market needs to be informed this information and, if so, notify the ASX of the information promptly and without delay', Ms Armour added.
Details of the infringement notice will be published in the ASIC Gazette.
Section 674(2) of the Corporations Act and ASX Listing Rule 3.1 details listed companies’ continuous disclosure obligations.
The Corporations Act provides that compliance with infringement notices is not an admission of guilt or liability.
Rhinomed is not, by reason of its compliance with the notice, regarded as having contravened section 674(2) of the Corporations Act.
In May 2015, ASIC issued an infringement notice to Rhinomed alleging a failure by the company to disclose to the ASX between 6 June 2014 and 9 July 2014 an agreement concerning a promotional campaign in which Fitness First was to promote Rhinomed's Turbine® respiratory technology device in some of its gyms and health clubs in Australia. On 10 June 2015, Rhinomed paid a penalty of $33,000 for allegedly failing to comply with its continuous disclosure obligations (refer 15-144MR).