ASIC zeros in on prospectus

RUBBERY financial figures used to increase the attractiveness of new business ventures have come under the spotlight of Australia’s investment police.

The Australian Securities and Investment Commission is continuing in its campaign to ensure prospective investors are given the complete and accurate picture when deciding whether to put money into a scheme.

The Commission has released a draft policy statement on the use of prospective financial information, including financial forecasts, in prospectuses, disclosure documents and product disclosure statements.

ASIC director corporate finance Richard Cockburn said baseless and inaccurate financial forecasts were among the most common reasons ASIC placed stop orders on prospectuses or other disclosure documents. The draft policy statement aims to educate companies on what is appropriate and on what grounds the Commission will reject a prospectus.

“Our draft policy statement addresses these issues and will provide assistance for companies issuing prospectuses in the future,” Mr Cockburn said.

A further explanation is set out in the policy statement: “We are concerned at the degree of unreliability of some prospective financial information and the grounds on which it has been prepared,” the statement says.

“Internal ASIC reviews have consistently identified problems with prospective financial information as a leading cause of ASIC issuing stop orders since the mid-1990s. In light of these reasons, ASIC has issued this further guidance.”

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