ASX’s proposed guidance on naming conventions for debt and hybrid securities should assist retail investors to gain a better understanding of the securities that they are buying and allow them to more easily compare the features of those securities.
The ASX Listing Rules do not currently prescribe the names that may be given to securities issued by ASX-listed entities and ASX has not, to date, provided any guidance. The different names and descriptions used are potentially confusing for retail investors and also make it difficult to compare the different features.
The new consultation paper on proposed new ASX Listing Rules Guidance Note 34, Naming conventions for debt and hybrid securities proposes to introduce naming conventions for debt and hybrid securities quoted on the ASX to assist retail investors to understand what they are buying.
The main points covered include:
- when should a security be described as a ‘debt security’ and when should it be described as a ‘hybrid security’?;
- what securities can be described as ‘bonds’ or ’notes’ without any further descriptors?;
- what securities can be described as ‘mortgage debentures’ or ‘debentures’ without any further descriptors?;
- the additional descriptors required for other securities;
- where should the required descriptors appear?; and
- the use of acronyms to describe securities.
If adopted, the proposed new Guidance Note will apply to securities quoted on the ASX on or after the date the new Guidance Note comes into effect. It will not operate retrospectively in relation to securities already quoted on the ASX prior to that date.
Submissions are due by 31 October 2014.