Prospectus stop orders exposed

SINCE July 2002 ASIC has placed a total of 89 stop orders on defective prospectuses seeking to raise more than $383 million from the public.

ASIC executive director policy and markets regulation Malcolm Rodgers said the most common defect was a failure by companies to clarify how the funds would be applied in the event that the company failed to raise the amount originally sought in the raising where it was not underwritten, nor subject to a minimum subscription condition.

"In these circumstances ASIC expects to see a discussion about how the company intends applying the funds if a smaller amount is raised and the impact that may have, if any, on issues such as financial forecasts, risk and gearing," he said.

Other common defects related to the adequacy of financial information disclosed in the fundraising document and a lack of disclosure in relation to other material information – usually risks associated with the company’s current activities or the proposed ventures.

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