ASIC releases new guidance for prospectuses

17 November 2011

ASIC has finalised guidance that will help companies produce better prospectuses. A new webpage on MoneySmart has been added to assist potential investors to understand them. Business Services partner David Williams reports.

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Guide 228 Prospectuses: Effective disclosure for retail investors (RG 228), follows extensive industry consultation on draft guidance set out in Consultation Paper 155 (CP 155).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 assist issuers and their advisers to produce s710 prospectuses that help retail investors assess the offer and make informed investment decisions.

ASIC Deputy Chairman, Belinda Gibson commented 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'.

Key points under RG 228:

This regulatory guide sets out our guidance on how to word and present prospectuses in a 'clear, concise and effective' manner.
This guide also sets out our guidance to issuers and their advisers on how to satisfy the content requirement for prospectuses.
Our guidance is general rather than prescriptive because the Corporations Act places responsibility on issuers to comply with the disclosure requirements.
Our guidance may also be relevant for other disclosure that requires shareholders to make an investment decision.

The regulatory guide provides guidance on the following key questions:

'Clear, concise and effective': Does your prospectus help retail investors make informed investment decisions?
Investment overview: Have you highlighted key information for retail investors? 24
Business model: How will you make money and generate income or capital growth for investors?
Risks: What are the risks associated with your business model, the security and the offer?
Financial information: What is your financial position, performance and prospects?
Directors and key managers, interests, benefits and related party transactions: Do those in control have the appropriate expertise and who will benefit?
The offer: What are the effect and terms and conditions of your offer?

Your prospectus must be lodged with ASIC.

What does this mean?

Prospectuses must present relevant information about the offer clearly and concisely in a well-structured format to help retail investors make informed investment decisions. Prospectuses must also ensure that the disclosure of benefits and risks is balanced. Specifically the risk disclosure must ensure that the directors have identified key risks and that these are highlighted and clearly explained.

For more information, please contact:

David Williams | Partner
Mullins Lawyers
t +61 7 3224 0270
f +61 7 3224 0333
dwilliams@mullinslaw.com.au