ASIC has recently issued an update to Regulatory Guide 107: Fundraising: Facilitating Electronic offers of securities that deals with electronic offers of securities and the use of electronic disclosure documents (such as a prospectus).
In the updates to RG 107, ASIC notes that while disclosure documents used for offers of securities have historically been paper based documents, it is becoming increasingly common for people to use the internet and electronic devices to receive important information.
As part of the RG 107 update, ASIC has confirmed that the use of electronic disclosure documents is permitted under the Corporations Act provided that the electronic disclosure document:
- Is identical in format and content to the disclosure document lodged with ASIC.
- Contains the same information in the same sequence and with the same prominence, as the lodged disclosure document (except for modifications that are immaterial and reflect necessary adjustments or increased functionality when using different electronic media).
The update includes 15 principles for good practice guidance to assist offerors, distributors and publishers involved in distributing offers of securities through electronic media. The 15 principles are as follows:
- Electronic disclosure documents should be easy to access, retrieve and read.
- Electronic disclosure documents should be distributed in a way that does not unreasonably expose investors to security risks.
- Offerors and distributors that distribute electronic disclosure documents for an entitlement offer to existing investor of a company should take reasonable steps to ensure that investors receive the electronic disclosure document.
- Offerors, distributors and publishers should take reasonable measures to ensure that electronic disclosure documents received by investors are complete and have not been altered or tampered with.
- Offerors and distributors that distribute electronic disclosure documents and electronic application forms should make available free paper copies of disclosure documents and application forms on request by an investor.
- Offerors and distributors of electronic disclosure documents should make updated disclosure documents available in both paper and electronic format.
- Investors should be able to keep a copy of the electronic disclosure document so that they can access it in the future.
- Offerors, distributors and publishers should retain copies and records of all electronic disclosure documents so that investors are able to prove which version of the disclosure document they relied on.
- Electronic disclosure documents should have the same content, presentation and prominence of information as paper versions.
- Hypertext links to, from or within the electronic disclosure document should not be used to take investors to material not forming part of the electronic disclosure document, other than jurisdictional confirmations or educational material.
- Electronic application forms must be included in, or accompanied by, the electronic disclosure document.
- Electronic application forms should contain appropriate warnings to ensure that investors are informed of the importance of reading the disclosure document before applying for securities.
- Electronic application forms should contain verification processes and should be secure.
- Reasonable measures should be taken to ensure that offers are only made in jurisdictions where the offer complies with the relevant securities laws.
- Promotional material should not be published in a way that may cause it to be confused with all or any part of the electronic disclosure document.
ASIC has stated that these principles seek to ensure that investors receive clear, concise and effective disclosure when disclosure documents are distributed in electronic format. It also provides guidance to assist offerors, distributors and publishers in complying with these obligations, including various “do’s and do nots”.
ASIC has also provided specific guidance around personalised or AFS licensee created application forms, and ensuring compliance with section 723 of the Corporations Act (which broadly relates to ensuring that application forms are accompanied by the relevant disclosure document). To this end, ASIC has issued Class Order CO14/26 which provides relief so that offerors may issue or transfer securities in response to an application form that has been created or personalised by an AFS licensee for an investor provided that certain conditions are met.
Accordingly, companies wishing to make offers of securities using the internet or electronic means, should carefully review RG 107 and its best practice guidance on how to comply before effecting their offer.