Powered by MOMENTUM MEDIA
subscribe to our newsletter

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”.

“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”.

Advertisement
Advertisement

PROMOTED CONTENT


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

ASIC deputy chair Daniel Crennan QC has resigned from his role following Friday’s revelations that the regulator may have incorrectly paid...

The financial services regulator has acknowledged the “totally unacceptable” delay it took in remedying breaches of remuneration limit, ...

The proportion of Australian fintechs focusing on lending has grown to 29 per cent of all fintechs, up from 21 per cent last year. ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: Court cases and penalties

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.