ASIC guidelines for financial services providers released
ASIC has released a series of new and updated guidance documents for financial service providers.
New guides have been released for preparation of expert reports that are commissioned to assist security holders and others to make major financial decisions, including on takeover bids, schemes of arrangement and related party transactions.
These two RGs are being released in conjunction with further new guidance from ASIC – Regulatory Guide 76 Related party transactions (RG 76) – which is aimed at improving disclosure and decision- making in public companies and managed investment schemes (MISs) that propose or enter into related party transactions. Related party transactions often involve expert reports.
ASIC Deputy Chairman Belinda Gibson said ASIC's decision to provide the new guidance reflected the importance to investors of quality expert assistance when assessing significant corporate transactions, such as takeover bids and schemes of arrangement.
'Investors are entitled to expect that an expert is independent, that the expert’s conclusions have a reasonable basis and that any assumptions in the report are spelled out fully', Belinda Gibson said.
Additional guidance is provided on how experts should assess whether a proposal is fair and reasonable. It requires experts to explain any material difference between their assessed value of a security and the recent market price of the security.
ASIC requires that experts have a reasonable basis for forward-looking statements. There is clarification about the use of the discounted cash flow methodology, particularly when valuing a start up project where there is a long lead time until cash is generated. The expert must have a reasonable basis for the forward looking information and be explicit in disclosing the extent and nature of the adjustments made to allow for development stage risks.
Four regulatory guides for Australian financial services licence holders have been updated to incorporate minor technical updates and remove outdated references. These guides are:
- Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36)
- Regulatory Guide 121 Doing financial services business in Australia (RG 121)
- Regulatory Guide 170 Prospective financial information (RG 170)
- Regulatory Guide 175 Licensing: Financial product advisers - conduct and disclosure (RG 175)
Copies of the regulatory guides and reports can be found on the ASIC website at www.asic.gov.au/rg.