Responding to the FSI’s request for views on proposals to change the disclosure regimes concerning capital raisings and to create (further) differentiated markets, our submission explores the practicalities and underlying principles of the Australian disclosure and capital raisings regimes.
In our view, we believe that reforms to the disclosure regime should:
- permit simple retail bond issues by any listed issuer using a “‘debt standard’” cleansing notice – to promote extension of wholesale bond issues to retail
- streamline offering rules more generally in order to:
- permit post-IPO capital raisings by listed issuers to be conducted using an ‘equity standard’ cleansing notice (not just placements and rights issues) – equivalent to the New Zealand regime;
- rationalise features of the legislation that intensify prospectus processes – specifically, directors deemed civil liability, directors consents, third-party consents, incorporation by reference mechanisms and liability; and
- remove the distinction between prospectuses and product disclosure statements for listed products
The dilution rules in the ASX Listing Rules do not need to be reformed – we think that the Listing Rules are sufficient as they are. The selection of an appropriate capital raising structure is a matter for directors’ duties, and involves significant considerations beyond dilution. More prescriptive rules would not allow these to be balanced in a way that best serves the interests of an issuer as a whole.
We note that the FSI should exercise caution regarding differentiated ‘junior’ markets. These have tended to suffer from poor liquidity and a high rate of corporate failure, impacting on the reputation of the exchange.
Regulatory ‘bans’ on financial products, or intrusion into structuring, will cause harm to the market, to innovation and to access to funding for Australian banks and businesses, and will not achieve the intended aim. It may also prevent genuinely experienced investors from accessing sophisticated products.
Investor education and improved access to, and quality of, financial advice is important. However, suitability assessments should be conducted by skilled advisers and intermediaries rather than issuers (who are usually not in a position to determine suitability). The logic of suitability assessments particularly needs to be tested for listed products where any investor can trade in the securities.