the regulator moves in...

A bit late but comforting to see someone is taking notice... from ASIC's website...

AD09-57 ASIC and ASX act to protect retail investors of partly paid securities

Monday 6 April 2009


ASIC and the Australian Securities Exchange (ASX) have agreed that ASX will implement changes to its market rules relating to partly paid securities and instalment receipts ‘Partly Paid Securities’.

The proposed amendments are aimed at improving disclosure for retail investors to ensure they are adequately aware of potential liabilities when making investment decisions.

ASIC is aware that a number of securities quoted on the ASX are partly paid securities with future obligations to contribute further capital. Therefore ASIC believes that the enhanced investor protection embodied in this new measure helps address current market concerns.

The specific operating rule changes agreed to are:
A new definition of ‘Partly Paid Security’ is to be included in the Definitions section of the market rules.
A new requirement for market participants and retail clients to enter into a Partly Paid Security Client Agreement prior to the retail client buying Partly Paid Securities for the first time.

The new market rules do not apply to no liability (‘NL’) companies, as NL companies do not have a contractual right to recover calls on the unpaid issue price of their shares; the shareholder has the option of paying the call or forfeiting the shares.

ASIC and ASX have been in direct contact with several market participants to ensure that they have contacted their clients with current orders to buy Partly Paid Securities and communicated their potential obligations to them.

Changes to the ASX market rules are subject to Ministerial approval and that approval was received today. The new rules are effective from 1 May 2009.