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ASIC has raised concerns over the use of trust or company structures by investors who are not ‘sophisticated investors’ to receive share offers without disclosure documents.
Under the Corporations Act, accountants are entitled to provide a certificate attesting that a person is a ‘sophisticated investor’ and, therefore, does not need the protections that apply to a ‘retail investor’.
ASIC has raised an issue with recent fundraisings which have seen accountants use trust or company structures that purport to allow investors who are not sophisticated investors to receive offers to purchase shares without a prospectus or other disclosure document.
“This has recently occurred in relation to offers of shares by Kwickie International Limited,” ASIC said in a statement.
“To put the issue beyond doubt… Kwickie International Ltd shares may not be offered to retail investors through a trust structure.”
The corporate regulator said it would continue to look into the use of these structures and is in talks with the appropriate accounting professional bodies about the issue.
ASIC said that the sophisticated investor test needs to be applied consistently to give retail investors safeguards when making appropriate investment decisions that the law explicitly provides for.
“Companies raising money by offering shares to retail investors must give the investors sufficient information by providing a prospectus or other regulated disclosure document,” the corporate regulator said.
“This helps investors in making a decision whether to invest in the company and is a key protection for retail investors under the Corporations Act.
“ASIC is aware of some instances where accountants have facilitated retail investors acquiring shares offered by a company without adequate, or any, disclosure.”