Key takeaways
- ASIC proposes to ease pre-lodgement advertising and publicity restrictions for IPOs and other offers of unquoted securities requiring a disclosure document.
- The reform would allow earlier engagement with retail investors, provided communications include prescribed statements directing investors to the disclosure document.
- The proposal is a welcome step towards reducing regulatory burden and improving alignment with comparable fundraising regimes.
ASIC has announced a proposal which will relax restrictions on pre-IPO advertising and publicity for offers of securities requiring a prospectus.
Companies are currently restricted from advertising or making any statements that directly or indirectly refer to an IPO. There are limited exceptions to this rule (notably for roadshow presentations to wholesale investors, market research, and certain communications to existing shareholders and employees), which means that companies contemplating an IPO typically have to apply for technical relief before publishing any pre-offer advertising (which in practice means this is rarely done). The restrictions on pre-IPO communications impose cost and time burdens since companies going through an IPO process often require advice on whether their advertising and other promotional activities fall foul of the restrictions. It is questionable whether those costs are justified given the (very) low risks presented to investor protection by that conduct.
Seen in that light, ASIC’s announcement is a positive development.
The proposal allows statements about an offer that would require a prospectus (such as an IPO) to be made provided that the communication includes statements that:
- identify the issuer (and if applicable, the seller) of the securities
- a prospectus will be made available when the securities are offered
- make it clear where and when a prospectus will be made available
- direct investors to the prospectus as the key source of information before making an investment decision and that they’ll need to make an application using the application form accompanying the prospectus.
These criteria remove the ban on discussing an IPO’s advantages, benefits or merits which applied under ASIC’s existing exemptions for communications to employees and existing shareholders (and so ASIC will remove those exemptions since they’ll be subsumed by this broader relief).
These changes would allow companies (and their advisers) to communicate with retail investors and test their interest before lodging a prospectus without the need to seek ASIC relief. This will assist brokers engage with their client bases. On the face of it, it would also allow a draft prospectus to be shared with unsophisticated retail investors (provided that the above statements were included), although it is far from clear that this is what ASIC had in mind (careful consideration of whether and how to do this would be required, particularly in how to manage any subsequent updates to the disclosure).
We welcome the adoption of a more liberal approach in this area. It is encouraging to see ASIC introducing changes like this to better align to the regulatory approaches taken in comparable overseas jurisdictions and to create harmony between offers of shares and offers of financial products under the PDS regime (leaving aside for the moment that the mere fact there are differing disclosure regimes between securities and financial products is an ongoing inconsistency in regulation of Australian capital markets!). This proposal will (in a small way) help strengthen the competitiveness of public markets by reducing regulatory burden.
That said, while these changes reduce administrative red tape, we think there is some merit in further streamlining the conditions to reduce regulatory scrutiny of verbal statements. Under the proposed framework, where a company refers to a potential IPO in a speech or in an interview, it would still need to disclose details of where the disclosure document will be found and make a statement that an application needs to be made on the form accompanying the prospectus to avoid breaching the proposed conditions of the relief. This will be inelegant to do. ASIC is seeking feedback on its proposal by 11 September 2026.