Photos in a prospectus could be banned if proposals to overhaul the document are approved.
The Australian Securities and Investments Commission (ASIC) announced Tuesday (12 April) that it plans to make prospectuses easier for retail investors to use and improve the quality of information on the proposed business model and the associated risks.
ASIC's move comes after mounting criticisms that the information contained in a prospectus are too complex and hard to understand. Media mogul Kerry Stokes recently commented that he couldn't understand the information in the prospectus when selling his Seven Network to West Australian Newspapers.
Speaking to Lawyers Weekly, Clayton Utz partner Brendan Groves said changes to make prospectuses shorter and more focused on disclosure would be welcomed by lawyers and clients alike.
"Clients have often struggled with the complexity and length that goes into a prospectus," Groves said. "It will be a welcome development for the market to have ASIC provide guidance on how it believes issuers can provide more concise documentation."
ASIC has said that under its proposals, a prospectus would chiefly be a disclosure document, not a marketing tool for companies.
"First and foremost, a prospectus is a disclosure document aimed at informing investors," ASIC Commissioner and former Mallesons partner Belinda Gibson said. "Sales and marketing statements - and the extensive use of promotional photography - are secondary."
Under the proposals floated by ASIC, photos in a prospectus would be banned, except on the front cover. "There is a real tension between the fact that a prospectus is both a disclosure document regulated by the Corporations Act, but is also fundamentally a selling document," Groves said. He added that the proposal to ban photos within the document would "help investors focus on the fundamentals of their investment decision."
ASIC has also recommended that prior criminal convictions or personal bankruptcies or disciplinary actions taken against managers or key directors would also be disclosed.
"Any further disclosure that can be made to the market about the reputation or management of a company is a good thing," Groves said.