ASIC’s latest Corporate Finance Update (Issue 14) cites a number of interesting developments in relation to fundraising.
Fundraising activity
ASIC has disclosed statistics on the aggregate level of fundraising activity for the period 1 January 2023 to 30 June 2023:
| JANUARY TO JUNE 2023 | PREVIOUS PERIOD (JULY TO DECEMBER 2022) |
|---|---|
| 229 original disclosure documents lodged, $3.66 billion sought | 289 original disclosure documents lodged, $3.54 billion sought |
| 19 initial public offerings (IPOs), $0.55 billion sought (value by original disclosure document) | 40 IPOs, $0.54 billion sought, (value by original disclosure document) |
| Top 10 fundraisings completed raised $4.22 billion | Top 10 fundraisings completed raised $4.34 billion |
The largest offers over the period included the Commonwealth Bank of Australia hybrid security offer raising $1.55 billion, the Australia and New Zealand Banking Group Limited hybrid security offer raising $1.5 billion and the Redox Limited IPO raising $0.4 billion.
Greenwashing and disclosure
ASIC has launched its second and third court actions in relation to alleged ‘greenwashing’ against Vanguard Investments Australia (Vanguard) and LGSS Pty Ltd (Active Super).
ASIC alleges that Vanguard has given investors false and misleading statements pertaining to the Vanguard Ethically Conscious Global Aggregate Bond Index Fund (Hedged) (Fund). Notwithstanding the Fund was marketed to investors seeking to invest in securities with an ethically conscious screen, investors were exposed to investments with ties to fossil fuels, including those with activities linked to oil and gas exploration. ASIC has reaffirmed its commitment to ensuring that if exclusions in investments are promised, these exclusions need to be upheld and robust processes must be implemented to enforce this.
ASIC has also commenced proceedings against Active Super in relation to representations made to investors, including on its website and social media accounts, that it was “an ethical and responsible superannuation fund”. The representations were accompanied by express statements that Active Super would “eliminate investments that pose too great a risk to the environment and the community, for example: tobacco, nuclear weapons, oil tar sands and gambling”. ASIC has alleged that Active Super exposed investors to a number of entities contrary to these representations, including to casinos and online gambling companies, Russian oil companies, coal mines and plastics producers for the tobacco industry.
These proceedings serve as a timely reminder that ASIC can and will hold entities accountable for representations made to investors, including on social media and other outlets.
ASIC reminds those making statements to potential investors relating to environmental and social governance that:
- there are general prohibitions against making false or misleading statements or engaging in dishonest, misleading or deceptive conduct in relation to financial products or services throughout the Corporations Act 2001 (Cth) (Corporations Act) and Australian Securities and Investments Commission Act 2001 (Cth);
- where a financial product has an investment component (including an offer for shares), its issuer must include in the PDS the extent to which labour standards or environmental, social or ethical considerations are taken into account in selecting, retaining or realising an investment;
- there is a particular risk of breaching the misleading statement prohibitions where entities make representations about future matters that are not supported with reasonable grounds; and
- whether a particular statement or conduct is misleading or deceptive will depend on all of the circumstances of the particular case, and the overall impression created for an investor.
Mandatory climate reporting
The second round of consultation has closed in relation to climate-related financial disclosure as of 21 July 2023. Submissions made during the consultation period are now being considered by the Australian Government and the Australian Accounting Standards Board.
AI disclosure
In light of the emerging interest in artificial intelligence (AI) technology, ASIC has issued a reminder for entities not to ‘overplay’ the role of AI in its business. Additionally, offer documents should disclose sufficient information about:
- the issuers AI technology;
- its impact on the business;
- how it was developed, how it operates in practice, and how it is distinguished from existing AI technologies;
- key dependencies in deployment and commercialisation; and
- any inherent risks (including in relation to erroneous results and legal liability).
Underwritten rights issues
ASIC has confirmed that they have recently intervened in a number of rights issues by listed entities, where the underwriters of the offers of securities would have gained a controlling interest in the listed entity. In each case, the underwriters were substantial shareholders or related parties of the listed entity.
ASIC has confirmed that it expects issuers to explore reasonable options and take available steps to minimise the potential effect of the rights issue on control of the issuer. This includes, for example, making genuine attempts to procure alternative underwriting arrangements.
Offer information statements
ASIC has issued a reminder to issuers of securities proposing to raise capital via an offer information statement that they must disclose a 12-month audited financial report with a balance date not more than six months before the securities are first offered under the offer information statement.
This article was written by David Naoum, Partner, Jaxon Lee, Solicitor and Lachlan Pearce, Law Graduate.
