The intention of current law is that investors should make
investment decisions based on the formal offer documents
– generally the prospectus and the investment statement
or a single document incorporating the information in both.
This is achieved by restricting other issuer communications that
could influence investors in the period before the formal offer
documents are issued. A limited number of exceptions are
An issuer may state that it is considering making an offer
provided no money is currently being sought and may provide
information as to how expressions of interest can be made and
certain other specified details about the offer.
Also allowed are:
announcements required to comply with continuous disclosure,
statements or reports made to shareholders meetings (e.g. to
approve the offer).
The FMA has confirmed that, in its view, analyst research
reports can be distributed on a confidential basis before
registration of the offer documents to institutional investors and
the financial advisers to the lead managers and brokers. This is
consistent in our experience with market practice for IPOs but the
confirmation is useful as this has been a grey area.
The guidance note clarifies that issuers can continue with their
usual brand advertising in the lead up to a regulated offer but
states that the advertisements cannot refer to the potential offer
or occur in association with another advertisement that refers to
In addition, the FMA has signalled that a radical change in
advertising content or intensity before the registration of the
formal offer documentation will invite regulator scrutiny and may
put the issuer in breach.
Financial Markets Conduct Bill
The Bill introduces a more relaxed approach toward pre-offer
communications. These will be allowed to go beyond simple advice on
how expressions of interest can be made to include additional
information regarding the issuer's business and prospects.
Any such statements, however, will have to include a disclaimer
that no money is currently being sought, that financial products
cannot be applied for, and that any offer will be in accordance
with the Act.
Although the content restrictions will be pared back under the
Bill, there will be a greater emphasis on the general "fair
dealing" prohibitions against conduct that is misleading or
deceptive or likely to mislead or deceive in relation to financial
The FMA will have a range of enforcement powers, which build on
current powers, including:
a "stop order" to prohibit the distribution of a
false or misleading communication
an "interim stop order" (generally up to 15 working
days) while the FMA decides whether to issue a permanent stop
a "direction order" requiring the issuer to comply
with the fair dealing regime and to publish corrective statements
or take other specified corrective actions.
Another important change in the Bill is that advertisements
outside the formal product disclosure statement will generally not
attract criminal liability for directors. This recognises that it
is unrealistic to expect directors to have the same oversight of
advertisements (which can include a broad range of communications)
than of the formal offer documentation.
The modern reality is that investors will have access to
significant information concerning an offer before the formal
documents are registered. Given this, we consider that it makes
sense to enable those who know the most about a potential offer,
and who have accountability for their statements, to discuss that
offer along with market commentators and media.
Thanks to Adrien Hunter for writing this Brief Counsel. For
further information, please contact the lawyers featured.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The committee set up to draft a Code on Resolution of Financial Firms, by the Ministry of Finance, Government of India, on September 28, 2016, released a draft bill – The Financial Resolution and Deposit Insurance Bill, 2016...
In a race to adopt technology innovations, Banks have increased their exposure to cyber incidents/ attacks thereby underlining the urgent need to put in place a robust cyber security and resilience framework.
RG 256 deals primarily with remediation programs conducted by licensees who provide personal advice to retail clients.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).