ASIC Proposes Widening Prospectus Exemption For Rights Issues

LAWFUEL – The Legal Newswire – The Australian Securities and Investments Commission (ASIC) has released a consultation paper today seeking comments on its proposal to widen the disclosure exemption for rights issues to cover non-traditional features developed by issuers and their advisers to raise capital more effectively.

ASIC’s proposal would extend the disclosure exemption to rights issues that allow accelerated institutional participation and other deviations from the ‘vanilla’ rights issue format, provided there is, in substance, an equality of opportunity to participate for all holders.
The disclosure exemption for rights issues was introduced by the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007, allowing listed entities to conduct a rights issue without a prospectus or product disclosure statement (PDS) disclosure. The exemption is intended to benefit retail holders by encouraging listed entities to use rights issues, rather than other forms of fundraising that exclude retail participation (e.g. placements). Issuers generally prefer a method of raising capital that does not involve preparing a prospectus or PDS if available and so the exemption creates an incentive for listed entities to use rights issues.

For technical reasons, some rights issues would not qualify for the disclosure exemption without ASIC relief and ASIC has therefore proposed the widening of the exemption.

‘An issuer should not fall outside the disclosure exemption just because its preferred rights issue structure has non-traditional features, such as an accelerated timetable or other minor or temporary inequalities, that do not offend the underlying rationale of the exemption: being that
all holders should have an equal opportunity to participate’, said ASIC’s Acting Chairman,
Mr Jeremy Cooper.

‘We want to accommodate current practice in the market-place for rights issues so that the disclosure exemption is of maximum benefit to listed entities and their members.’
ASIC invites comments on the consultation paper by Wednesday 7 November, 2007.

For a copy of the consultation paper, please visit
For further information contact:
Emma Forehan
ASIC Media Unit
Telephone: 03 9289 3354
Mobile: 0409 702 310

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