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Conflict of interest action

THE Australian Securities and Investments Commission has recommended that companies use a valuation model contained in the International Accounting Standards Board’s Exposure Draft relating to share-based payment to evaluate related party disclosures.

In 2002-03 ASIC conducted detailed surveillance on more than 50 sets of documents pertaining to related party transactions, and required alterations be made in 39 cases.

ASIC executive director policy and markets regulation Malcolm Rodgers said the commission examined related party documents because it was vital shareholders had full and accurate information before they approved transactions where directors might have a conflict of interest from a commercial perspective.

"ASIC’s review has found some common defects in the material provided to shareholders," he said.

Additionally, ASIC has found that disclosure was often inadequate in situations where a company proposed to acquire a business from a related party and that in such cases, it considers that the law requires prospectus type comprehensive disclosure be made to shareholders.

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