Powered by MOMENTUM MEDIA
subscribe to our newsletter
ASIC uncovers ‘misleading and deceptive’ IPOs

ASIC uncovers ‘misleading and deceptive’ IPOs

An ASIC review of due diligence during the IPO process has uncovered prospectuses with “defective” levels of disclosure, ‘box-ticking’ approaches and superficial oversight at board level.

ASIC Report 484: Due diligence practices in initial public offerings has exposed problems in the prospectuses of some small and mid-size issuers as well as providing guidance from the regulator on good practice.

The report found that IPO issuers that demonstrated poor due diligence practices tended to produce prospectuses with defective disclosure, such as “misleading and deceptive statements with no reasonable basis”.

Advertisement
Advertisement

“These prospectuses also omitted material information that would have been included had the issuer conducted all reasonable investigations,” the report said.

ASIC also found that small to mid-size issuers tended to adopt fewer diligence processes – for example, they might “convene a due diligence committee but nothing more”.

Even when due diligence processes are adopted and followed, IPO issuers are often guilty of adopting a ‘box-ticking’ approach, according to the report.

“We [also] observed instances where certain directors had little involvement in the preparation of the prospectus before signing off on the document,” ASIC said.

The report contained a number of recommendations for effective due diligence during the IPO process, including effective oversight of the process; record-keeping concerning the key issues; and verification of all material statements.

“Issuers and their advisers should conduct a thorough and investigative due diligence process to ensure that the prospectus not only complies with the law but also promotes informed decision making by investors and their advisers,” the report said.

“To ensure that the contents of the prospectus are complete and do not contain any material misstatements, directors must make sure that a robust due diligence process has been undertaken.”

ASIC also noted that appropriate professionals and expert advisers should be engaged by the company undertaking an IPO.

[Related: Scottish Pacific completes ASX listing]

ASIC uncovers ‘misleading and deceptive’ IPOs
mortgagebusiness

 

Latest News

Almost half of prospective home buyers are unfamiliar with key mortgage terminology, according to new Westpac research. ...

Small businesses would be “unjustifiably disadvantaged” if limited recourse borrowing arrangements were to be abolished, the CEO of a c...

This year’s Easter auction volumes were the lowest since 2012, with Sydney and Melbourne reporting the sharpest falls, according to the la...

FROM THE WEB
podcast

LATEST PODCAST: The Third-Party Lending Report in summary

Do you think the banking royal commission recommendations could negatively impact competition in the mortgage market?