ASIC releases draft guidance on shorter, better prospectuses

The Australian Securities and Investment Commission is calling for a major overhaul as to how prospectuses should be written to make them shorter and more effective.

Below is the edited announcement:

The Australian Securities and Investments Commission has today released draft guidelines for issuers and advisers on the preparation of prospectuses.

The draft policy statement, Better prospectus disclosure, includes advice about the Corporations Act requirement that prospectuses be worded and presented in a clear, concise and effective manner.

'Issuers need to make prospectuses more readable. That means shorter and clearer. There is no problem with the logic of the disclosure regime, it's more that issuers and their advisers have not yet fully adopted the 'clear, concise, and effective' style and that has to change,' said ASIC's acting chairman Jeremy Cooper.

'So far, there's been a lot of 'over-disclosure' as a means of limiting liability. That is clearly not the purpose of the disclosure requirements.'

Mr Cooper said issuers should explain the practical implications of what is being offered, rather than presenting a mass of legal and financial details.

'Prospectuses should present a balanced picture of risk and return. Risk disclosure should be specific and not just a long list of every conceivable risk,' he said.

'The 'clear, concise and effective' requirement demands that issuers and advisers re-think the whole craft of prospectus writing. The days of the 200 plus page prospectus (and sometimes more) have really got to be over.'

Under the draft guidance, ASIC recommends issuers:

- make prospectuses as short as possible;
- leave out extraneous material;
- highlight critical information;
- organise information in a logical way - e.g. cascade the story from the simple to the more detailed;
- provide clear navigation around the document;
- consider incorporating technical and detailed financial information by reference;
- use plain and direct language; and
- use a range of communication tools, including simple graphical illustrations.

The policy statement also provides guidance on some specific prospectus content issues that have arisen in the past such as:

- risk disclosure;
- high-yield debentures;
- use of proceeds of the fundraising; and
- share allocation policy.