On 5 April 2012 the Financial Markets Authority (FMA) released a revised draft of its Effective Disclosure Guidance Note for further and final feedback. The FMA also released a summary of its responses to submissions in a response document. Both documents can be found here.
After receiving 62 submissions on the first draft, the FMA appears to have adopted many of the submitters' suggestions and addressed many of their concerns in the revised draft. The key changes are summarised as follows:
- The FMA has made it clear that the guidance note is not intended to change or add to existing legal requirements for disclosure documents, but to assist issuers and their directors to comply with those requirements. The FMA has also clarified that not every aspect of the guidance note applies to all offers. The FMA has therefore amended the language used in the revised guidance note to avoid a "prescriptive tone", making it clear that the guidance given is not compulsory
- The guidance note has emphasised that issuers and their directors need to make sure disclosure documents are "holistically true" and the guidance should not be applied on a "tick box" basis
- While the first draft of the guidance note would have effectively banned brand information and images from the first few pages of a disclosure document, the revised draft guidance note accepts brand information as long as brand information does not dominate, distract or detract from the required disclosures, it can be used
- The FMA expects that continuous issuers (those issuers who already have disclosure documents in the market) should have had an opportunity to review and update their disclosure documents "no later than the next time they issue a new investment statement or register a new prospectus for an issue on or after 1 January 2013"
- The revised guidance note identifies areas where its guidance may be unnecessary if the Financial Markets Conduct Bill is enacted in its current form.
Although many submitters said they would continue to find a pre-registration service helpful in adjusting to the new guidance note, the pre-registration vetting service will not be reinstated (it ended on 30 March 2012). The FMA will instead engage with issuers before they register disclosure documents on novel products, strategic issues, complex or big issues or significant issues of securities (for example major IPOs). The FMA asks that in such cases issuers contact the FMA as soon as possible and to be selective about which issues they bring.
In our view, the FMA has vastly improved the document, and it is now one that market participants are likely to find helpful. We applaud the FMA in showing a real willingness to consider and incorporate the comments of those who submitted on the first draft.
Our only concern with the document is the timing of its implementation. Whilst the FMA has rightly taken a relaxed approach in relation to when continuous issuers need to update their disclosure documents, those preparing documents for new issues could have as little as one day's notice of the final guidance before having to comply with it. Given the length of time involved in preparing disclosure documents for new issues and running due diligence processes, we believe a six week lead-in time would be more appropriate.