ASIC has recently commenced the consultation process to update its policy and requirements for electronic offers of securities.
This is a reflection of the fact that it is becoming increasingly common for offerors to make offers of securities over the internet and other electronic means. There are many advantages in doing so. From an investor's perspective the documents can be interactive and convenient to access. From an issuer's perspective it may involve reduced costs, increased speed and, importantly, wider availability of information.
As part of its reform, ASIC proposes to issue "good practice guidance" which will apply to any electronic method of distributing disclosure documents and application forms. The key principles of the proposed guidance are:
- electronic disclosure documents should be easy to access, retrieve and read;
- they should be distributed in a way that does not unreasonably expose investors to security risks (e.g. phishing);
- offerors should take reasonable measures to ensure that electronic disclosure documents are complete and have not been altered or tampered with (for example, using firewalls and protection tools);
- offerors should make available for free paper documents on request by investors;
- offerors should make updated disclosure documents available in both electronic and paper form;
- investors should be able to keep a copy of the documents so that they can access them in the future (namely, the documents should be able to be downloaded, printed and saved and ASIC considers that two years is an appropriate period);
- offerors should retain copies and records of all electronic disclosure documents so that investors are able to prove which versions they relied on;
- electronic disclosure documents should be the same as paper versions in both content and presentation (differences which are immaterial and reflect necessary adjustments or increased functionality for electronic versions will be permissible);
- hypertext links should only be used to bring investors to the electronic disclosure document, or within the electronic disclosure document itself, or to documents incorporated by reference;
- electronic application forms must be included in, or accompanied by, the electronic disclosure document (and reasonable measures should be taken to ensure that an investor who is issued an electronic application form is given access to the disclosure document at the same time and by the same means);
- electronic application forms and facilities should contain certain warnings to ensure investors are informed of the importance of reading the disclosure document before applying for securities;
- electronic application forms and facilities should contain verification processes (that is, verification of the investor) and should be secure;
- promotional material should not be published in a way that may cause it to be confused with all or any part of the electronic disclosure document; and
- offerors should actively monitor online and social media networks for misleading information about an offer of securities.
In substance many of these principles are common sense, and some are existing policy. Importantly, using the internet for dissemination of disclosure documents will operate in conjunction with, and not replace, existing paper based disclosure documents.
ASIC intends to release the updated regulatory guide in November 2013. We will keep you updated of important developments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
