The corporate regulator released Report 589: ASIC regulation of corporate finance on Friday. The report covers ASIC’s regulation of fundraising activities, M&A and other corporate governance transactions throughout the first six months of 2018.
ASIC raised disclosure concerns with 19 per cent of the prospectuses filed in the period. The top concern was that the business model was not fully of adequately disclosed.
One of the ongoing concerns for ASIC this year when it comes to IPOs has been the disclosure of risks associated with the royal commission into misconduct in the banking, superannuation and financial services industry.
ASIC reveals in the report that during the first six months of 2018 it “closely examined and queried the adequacy of disclosure about the risks associated with a wealth management company’s vertical integration model”.
“If a financial services company raises funds through an IPO over the coming period, we consider that investors should be given candid information about how the business may be affected by the issues being raised in the royal commission,” said ASIC.
Depending on the business model, companies will be required to disclose relevant historical and current interactions with regulators – as well as specific regulatory risks the the business may encounter, said ASIC.
ASIC also warned against the practice of leaking information to the media about upcoming IPOs.
“We are concerned that references to investor education reports are made public through the media, often before the prospectus is lodged with ASIC,” said the regulator.
Statements about pre-commitment to an IPO by institutional investors or ‘cornerstone investors’ should also be “made with care”, warned ASIC.
“Retail investors may interpret a large pre-commitment by institutional investors as a sign the IPO is a good investment and decide to follow suit,” said the report.
