ASIC tightens debenture rules
The securities regulator has released a consultation paper outlining improved disclosure rules for the unlisted and unrated debentures market.
The improved disclosure measures will be based on an ‘if not, why not’ basis of reporting. This means issuers are expected to report to investors against certain principles and benchmarks, which they must follow or explain why they have not.
“The fundamental objective is to provide retail investors, and their advisers, with more investor information to make their decisions before they invest,” said Australian Securities and Investments Commission (ASIC) chairman Tony D’Aloisio.
The consultation paper is the next major stage in ASIC’s plan to deal with unlisted and unrated debentures, announced by D’Aloisio on May 30, 2007, at a hearing of the Senate Standing Committee on Economics.
The benchmarks will cover credit ratings, liquidity lending, adequate equity capital and loan portfolio diversification.
ASIC’s proposal is designed around four key principles, which will include providing benchmarks to assist retail investors and their advisers in assessing risk, and requiring issuers to disclosure against those benchmarks.
Issuers will also be required to have a minimum 20 per cent equity where funds are directly or indirectly lent to property developments.
ASIC also proposed that advertising for these products not use words such as ‘secure’ and ‘safe’ and plans to produce an investor guide to aid their understanding of how the benchmarks apply to them.
ASIC is taking submissions on the “Unlisted, unrated debentures — improving disclosure for retail investors” consultation paper until October 1, 2007.
“We would like to test our proposals and hear from all those involved on whether we have the right balance between improved disclosure for investors and not unduly restricting this market as a means of raising capital,” D’Aloisio said.
Recommended for you
ASIC has released the results of its first adviser exam to be held in 2025, with 241 candidates attempting the test.
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
