This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.
In this Edition, we note ASIC’s warning in relation to faux financial advisors, comment on the Takeovers Panel’s decision in the Sementis case, and consider separate draft legislation to facilitate the increased use of technology by companies and implement Hayne Royal Commission recommendations. Finally, we consider FIRB’s 2019-20 Annual Report and comment on trends emerging on the foreign investment front.
GOVERNANCE & REGULATION
ASIC warns against faux financial advisors. In an age where online platforms are fast becoming the preferred means for communicating and engaging, ASIC notes reports of social media influencers giving financial advice (so-called “finfluencers”) are of concern. Speaking at a joint parliamentary committee hearing last week, ASIC Chairman Joe Longo noted ASIC would continue monitoring such advice and, where necessary, prosecute those providing unlicensed investment advice online. The need for this action is being heightened as young and inexperienced investors begin to flood the market (armed with stimulus payments) and start looking for advice as to how to invest their money.
Takeovers Panel requires undertakings with respect to supplementary disclosure in relation to an offer with a potential control effect. The Panel has declined to make a declaration of unacceptable circumstances in response to an application in relation to the affairs of Sementis Limited (Sementis), including Sementis’ proposed entitlement offer. The applicant argued that the control effect of the entitlement offer would exceed what was reasonably required for Sementis’ fundraising purposes. The Panel declined to make a declaration of unacceptable circumstances following the receipt of undertakings from each of Sementis and a shareholder of Sementis, Fortitude Nominees Pty Ltd (Fortitude Nominees). Notably, Sementis undertook to the Panel that it will not proceed with the entitlement offer unless or until it has lodged supplementary disclosure in relation to the offer which discloses Fortitude Nominees’ intentions with respect to participation in the offer and the business of Semantis if it obtains a relevant interest in at least 50.1% of the voting shares in Semantis (and ASIC and the Panel confirm they do not object to such supplementary disclosure). Fortitude Nominees similarly provided an undertaking that it will provide full details of such intentions and will not apply for, nor acquire, any securities in Sementis under the shortfall facility established in relation to the offer. While the Panel declined to make a declaration of unacceptable circumstances, directors should note the importance of sufficient disclosure where an offer (including a pro rata entitlement offer to existing shareholders) may potentially have a control impact. See the Panel’s media release. The Panel will separately publish reasons for its decision.
Parliament passes legislation establishing Financial Regulator Assessment Authority to oversee ASIC and APRA. On 23 June, the federal Senate passed the Financial Regulator Assessment Authority Bill 2021, which establishes a new independent body, the Financial Regulator Assessment Authority. The Authority will regularly review and report on the effectiveness of ASIC and APRA as recommended in the Hayne Royal Commission. See the Treasurer’s media release.
New legislation proposed to strengthen the financial advice sector. In a big week for the implementation of recommendations from the Hayne Royal Commission, the Better Advice Bill was introduced into Parliament last week. The notable changes proposed by the Bill include expanding the role of the Financial Services and Credit Panel within ASIC to operate as the single disciplinary body for financial advisers; creation of additional penalties and sanctions for financial advisers who have breached the Corporations Act; introduction of a new registration system for financial advisers; and the transfer of functions from the Financial Adviser Standards and Ethics Authority to the Minister responsible for administering the Corporations Act and to ASIC. See the Treasurer’s media release.
New draft legislation to enable the use of technology to hold meetings, sign and send documents. The Federal Government has released draft legislation that will facilitate the use of increased technology under the Corporations Act. The proposed legislation is essentially making permanent the temporary measures that were put in place during the pandemic with respect to electronic execution of company documents and meeting notifications. The draft legislation also allows sole directors who are not also appointed as the company secretary to electronically execute documents. Consultation on the draft legislation will close on 16 July 2021. See the Treasurer’s media release.
OVER THE HORIZON
China’s investment in Australia being slowed down by FIRB? FIRB recently released its 2019-20 Annual Report. This report noted that in 2019 to 2020, over 8,200 foreign investment applications were approved, representing potential investment of $195.5 billion. China was the sixth largest source country for approved investment by value (down from fifth in 2018-2019). The number of approved investments from China fell by approximately 600 in 2019-2020. However, the approved investments were of a higher value than in recent years – despite the lower number of approvals, the total value of Chinese approvals remained relatively steady in 2019-20 ($12.75 billion in 2019–20 compared to $13.14 billion in 2018–19). The specific sectors which experienced a decrease in approved investments from China were mineral exploration and development and services. However, the agriculture, finance and insurance, and manufacturing sectors experienced an increase in approved investments from China in 2019-20. The US was the largest source country by value, followed by Japan, Singapore, Canada and the UK. While FIRB’s 2019-20 report may capture some of the initial consequences of the January 2021 FIRB reforms, their full impact will remain to be seen over the coming financial year, and is likely to be compounded by the current geopolitical tensions between Australia and China.