Appeal court revests shares

THE sale of 22.4 million Flinders Diamonds Limited shares vested in the Australian Securities & Investments Commission will not proceed.

The court’s original order in June 2003 vested the appellants’ shares in Flinders Diamonds – then amounting to 39 per cent of the company in ASIC for sale – was varied and eventually stayed pending the outcome of the appeal.

On April 23 the Full Court ordered the orders relating to the sale of the shares and the disposal of the proceeds be set aside and that the shares currently vested in ASIC be revested in the defendants respectively in accordance with their previous holdings.

Flinders Diamonds have obtained a stay of the Full Court orders for 28 days.

The battle over the shareholdings first went to the South Australian Supreme Court when Flinders Diamonds took action against a number of its shareholders – Tiger International Resources Inc, Patric Barry, Anthony Campbell, Campbell Corporation Pty Ltd and Balance Tax Pty Ltd.

The court ordered certain shares in Flinders Diamonds Limited be vested in ASIC on June 12 2003.

Flinders has some holdings in the Kimberley.

ASIC scrutinises recent debenture prospectuses

AN overview of common defects identified in debenture prospectuses has been released.

The Australian Securities and Investments Commission has issued five interim stop orders and one final stop order involving debenture prospectuses seeking to raise more than $80 million from the public since January 1.

ASIC director of corporate finance Richard Cockburn said ASIC had focused on debt raising in the past year because of its concern that the prospectuses might not adequately identify the different risks associated with those fixed interest investments.

"Since debenture offerings can differ, it is important for investors to assess the different levels of risk to ensure they are comfortable with the risk level and believe they are adequately rewarded by the returns for those risks," he said.

Common defects identified in debenture prospectuses since January 2004 include:

p  The mis-description of debentures in prospectuses. Some issuers continue to incorrectly describe unsecured notes as debentures. This can be misleading and deceptive, as it leads investor to believe the instruments may be more secure than they are;

p  Failure to comply with the requirement to enter into a trust deed and with the retirement to appoint a trustee. These requirements are important protection mechanisms for investors and must be strictly adhered to;

p Insufficient disclosure on the prospects of the issuer. This information is critical in allowing investors and their professional advisers to make a fully informed investment decision and to compare potential investments;

p  Inadequate disclosure on borrowing limitations. Without this information investors will have difficulty in making an accurate call on the risk-reward returns in the offer.

In the current low interest rate environment, ASIC considers it is extremely important that debenture issuers provide adequate disclosure to enable investors to understand the risk profile of the products and make a fully informed decision about whether to invest in the issuer.

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