The corporate regulator yesterday released Report 423: ASIC regulation of corporate finance: July to December 2014 (REP 423), in an effort to provide guidance on financial reporting and corporate governance issues, focusing specifically on investment company listings.
“In the last year we have seen an increase in the number of initial public offerings of listed investment companies,” the report stated.
“This raises a few disclosure concerns unique to listed investment company prospectuses.”
The report likened investment companies to hedge funds – both use complex investment strategies like leverage, short selling and derivatives, it said – and has noted concern that retail investors may find it difficult to understand how the company intends to generate profit.
It stated that if investment companies have a similar structure to hedge funds, they should follow the same disclosure procedures.
ASIC also found that almost 15 per cent of all prospectuses lodged had inappropriately disclosed financial accounts and company solvency.
Moreover, 11.8 per cent of prospectuses improperly disclosed the forecast financial information, up from 10.8 per cent in the previous period.
Report 423 is the second report in ASIC’s series on the regulation of corporate finance issues in Australia.
The report also includes statistical data, highlights key focus areas, and includes relevant guidance about ASIC’s regulation of funding transactions, mergers and acquisitions, corporate governance issues, financial reporting and share buybacks.
ASIC commissioner John Price said, “The report is a practical resource for practitioners seeking to understand ASIC’s approach to corporate finance regulation.”
