Much was made about the changing policies of ASX and ASIC in 2016. Some of it was good, some of it was bad, and for a while a lot of it was uncertain. With the dust settled (hopefully), here are 3 things we learned from ASIC and ASX in 2016.
ASX raises the bar
Following industry feedback (and in some quarters, outrage) on its consultation paper, ASX released the final form of changes to its listing rules- in particular, changes to its admission requirements. The changes themselves are dealt with in more detail in our Alert here, but the general theme is that ASX is seeking to raise the bar on the size (objectively) and standard (somewhat more subjectively) of companies granted admission to the ASX. ASX has reinforced that it will exercise its general discretion to reject listings where it is not satisfied with the calibre of the company and its management. Time will tell what impact the changes have on the junior explorer and tech start-up markets, and the extent to which it presents an opportunity for NSX to seize market share, but would-be listed companies need to think critically about their operations and structure and whether adjustments need to be made in order to secure a listing.
On the flip side, ASX’s discretion also extends to waiving compliance with certain listing rules; something ASX has been willing to do in the right circumstances. ASX has also taken the welcome step of now publishing high level reasons why it has declined certain listing and waiver applications.
ASIC focuses on disclosure
For its part, ASIC also updated its guidance on forward looking statements and prospectus content. Responses to the updated position on forward looking statements varied from “business as usual” to “tectonic shift” – the reality is probably somewhere between the two. What does seem clear is that ASIC is demanding more rigour in companies’ disclosure than ever before, partly as a matter of general policy and partly in response to specific concerns about statements being made in connection with a number of initial public offerings. In particular, the changes saw a firming of the requirement for historical, audited financial information in disclosure documents and a restatement of the rules around forward looking statements (particularly production targets and forecast financial information). Companies need to ensure they understand those requirements as they are an area of focus for ASIC.
Confer early and often
It has always been important for companies and their advisers to maintain an open and effective dialogue with regulators. Our biggest takeout from 2016 is that now, more than ever, dialogue is critical to ensuring transactions stay on track and key milestones can be hit. Early and open dialogue is the best way to put the minds of regulators at ease with the company, its management and its business model. Identifying potential issues and having forthright discussions with ASX and, where appropriate, ASIC will give you the best chance of achieving a commercially sensible outcome and a completed transaction.