ASIC has published the first of a series of regular reports it intends issuing on the regulation of corporate finance issues in Australia.
Report 406 ASIC regulation of corporate finance: January to June 2014 (REP 406) provides statistical data, highlights key focus areas, and includes relevant guidance about ASIC’s regulation of:
- fundraising transactions
- mergers and acquisitions
- takeover documents
- corporate governance issues
- financial reporting, and
- share buy-backs.
REP 406 also details the approach ASIC takes in these areas, including the types of issues that have caused it to intervene and its approach to novel issues it has seen in mergers and acquisitions transactions.
As a result of ASIC’s review of prospectuses lodged with it in the period ASIC raised disclosure concerns with over 31% of the prospectuses lodged -subsequently, changes were made to over 25% of the documents.
When reviewing prospectuses in the period ASIC focused on, among other things:
(a) adequate disclosure in the ‘investment overview’ section; and
(b) due diligence practices of companies with significant foreign exposure.
It also intervened in offers of securities because of one or more of the following:
(a) concerns about the appropriate disclosure of financial accounts and company solvency (over 15% of all prospectuses lodged); and
(b) improper disclosure of forecast financial information (over 10% of all prospectuses).
ASIC also noted concerns, requested amended disclosure, or intervened in a number of offers due to insufficient disclosure about the structure of the offer; for example, in all prospectuses lodged during this period:
(a) control issues were evident in more than 8% of prospectuses; and
(b) related party issues were evident in 9.5% of prospectuses.
ASIC also raised a number disclosure concerns in this period in relation to:
(a) funding or financing (more than 5% of prospectuses lodged); and
(b) valuation (more than 3% of prospectuses lodged).
