Australia: More than just photos: the new rules for prospectuses focus on the needs of retail investors

Last Updated: 13 November 2011
Article by Stuart Byrne

Australian fundraisers now have a new set of rules to follow when drafting prospectuses.

These changes, announced by ASIC today, are the biggest shake-up to prospectus rules in 20 years.

The core of the new requirements is a focus on the needs of retail investors.

The most obvious way this will manifest itself will be in the way prospectuses are structured. The press is also likely to seize on ASIC's warnings about the use of photos (particularly photos of celebrities).

Those, however, are not the real story. What's important is that prospectuses will not simply be judged by the amount of information that they contain.

Since 1991, when statutory checklists were abandoned, the key issue for anyone drafting a prospectus has been ensuring that there are no material omissions. This quickly led to complaints that prospectuses were too long for retail investors to get a handle on. Prospectus drafters responded that it was better to have too much information than to run the risk of inadvertently leaving out something material.

ASIC's new Regulatory Guide 228 aims to square that circle.

The result is more work for fundraisers, but better prospectuses for investors.

To put it bluntly, prospectuses will now have to explain why key information they contain is relevant to investors. They will also have to be structured so that that information is easy to find.

In this Alert, we summarise the key points of the Regulatory Guide, and then provide some comments based on our experiences with writing prospectuses under the new regime.

The big picture

There are seven key points in the new policy:

  • "Clear, concise and effective": although this requirement has been around for years, there has been a lack of clarity about what it actually means. ASIC's new policy contains detailed tools that will help to produce a clear, concise and effective prospectus. These range from guidance on language (short sentences, active rather than passive voice, etc) to structural issues (present information in logical order, voluntarily lodge information with ASIC so that it can be incorporated by reference, etc).
  • "Investment overview": the first substantive section of a prospectus should contain an investment overview for retail investors that highlights key information about the issuer and offer in a balanced way, and gives cross-references to more detailed information.
  • Business model: the prospectus should explain the issuer's business model, or, in ASIC's terms, "how you propose to make money and generate income or capital growth for investors (or otherwise achieve your objectives)".
  • Risks: the prospectus should explain the risks associated with the issuer (including the risks to the business model), the securities being offered and the offer itself. This is not a cookie-cutter exercise – the identification and treatment of risks must be tailored to the business and the offer, and relevant to the prospective investors.
  • Financial information: the prospectus must include relevant financial informationand any prospective financial information should only be included if it is based on reasonable grounds with all relevant assumptions explained.
  • Directors and key managers, interests, benefits and related party transactions: the prospectus should set out the experience and background of directors and key managers, as well as information on interests and benefits that persons connected with the issuer or offer will receive, plus any related party arrangements.
  • Effect and terms and conditions of the offer: the prospectus should clearly set out the effect of the offer on the issuer (including the proposed use of funds) and its terms and conditions.

But what does it mean?

This policy has not come out of the blue: ASIC flagged it with a very detailed consultation paper just over six months ago.

Having advised the issuers on the prospectuses released to date that reflected the guidance in the consultation paper, we can confidently say that the new rules require a fresh approach to drafting prospectuses.

Most importantly, the focus is on the target investors. The prospectus must do more than just give them the raw information on which to base their investment decision. It has to join the dots, by explaining why the information in the prospectus is relevant to their investment decision. In simple terms, testing information in the prospectus against the "So what?" test is helpful. The answer to the question should guide what information is conveyed to the target investors and how it is conveyed.

And it always has to be remembered that the key target audience is retail investors: this means that the language of the prospectus must be clear and (equally importantly) the amount of information provided must be appropriate. Repetition should be avoided, and fundraisers should be prepared to ditch information that isn't really required for an informed investment decision.

The new approach affects not only the way the prospectus is written, but also the process by which it is produced.

The first draft of a prospectus should not be regarded as an information dump, prepared using a few precedent prospectuses and an old business plan. The emphasis on disclosure of risks and the issuer's business model means that senior management need to be involved early in the drafting process. Management presentations on the business model and risks will play a large part in how those issues are dealt with and described in the prospectus.

Not just prospectuses

The new policy affects more than just prospectuses:

  • bidder's statements and scheme booklets for scrip bids will be expected to comply with the Regulatory Guide in full;
  • all bidder's statements and scheme booklets will be expected to comply with ASIC's guidance on "clear, concise and effective";
  • transaction-specific prospectuses under section 713 to finance a transaction that involves a major change in the nature or scale of the entity's business or finances will be expected to comply with the Regulatory Guide in full;
  • all transaction-specific prospectuses under section 713 will have to comply with ASIC's guidance on "clear, concise and effective", risk disclosure, director and management information and disclosure of the effect and terms and conditions of the offer;
  • offer information statements under section 715 will have to comply with the Regulatory Guide in full;
  • offer documents for a rights issue under section 708AA will have to comply with ASIC's guidance on "clear, concise and effective"; and
  • notices of company general meetings will have to comply with ASIC's guidance on "clear, concise and effective" (as will independent experts' reports).


As mentioned above, this is the most significant development in prospectus law since 1991 (when the concept of preparing prospectuses by reference to a statutory checklist was abandoned).

The content of prospectuses and the method of preparing them will now be even less a matter of relying on precedents and "market practice". That doesn't, of course, mean that every prospectus will be a matter of reinventing the wheel: given the unique nature of each prospectus, there will be an even greater emphasis on a strong and tested process for identifying and explaining the relevant issues.

(Oh, and if you're still curious, ASIC has backed away from its original position on the use of photographs of celebrities. Photographs of the bold and the beautiful will be still be allowed to grace prospectuses – provided there's an explanation of why the particular celebrity is "relevant".)

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

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”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.