FOUR issues have been identified that have been common problems in recent debenture prospectuses, according to an Australian Securities and Investments Commission surveillance program.
Those issues were:
• Aggressive or misleading advertising;
• Poor disclosure about property developments;
• Related-party transactions; and
• Bad and doubtful debts.
The program, conducted late in 2004, followed an ASIC consumer alert relating to investing in debentures released in July 2004 and three previous warnings from 2003 and 2004.
ASIC examined the prospectuses and selected advertising for debentures issued by 11 companies offering high yields such as interest rates that were 4 per cent a year higher than bank term-deposit rates.
As a result of its surveillance ASIC prevented four offers that failed to disclose information relevant to the fundraising from proceeding until the defects had been addressed.
One of the four prospectuses required a final stop order, which permanently stopped the offer from proceeding.
The commission also stopped two misleading advertising campaigns and required companies to improve the information provided to investors in two other cases.