ASIC yesterday released a consultation paper on proposals to improve disclosure to retail investors in the debenture market. The rules may affect companies that issue $8 billion in securities.
In a media release ASIC said the disclosure measures are based on an "if not, why not" basis of reporting. That is, issuers would report to investors against eight principles and benchmarks, which issuers must either follow or explain why they did not follow those principles and benchmarks.
This means issuers of debentures may ignore the principles.
Those principles, in the ASIC media release, are:
- Issuers should have their debentures rated for credit risk by a recognised agency, and have that rating disclosed in the prospectus and advertising.
- Issuers should have a minimum of 20 per cent equity where funds are directly or indirectly lent to property development. In other cases, the equity should be a minimum of 10 per cent.
- Issuers should estimate their cash needs for the next three months and have cash on-hand to meet this need.
- Issuers lending money to property development should be required to maintain a 70 per cent loan to valuation ratio on 'as if complete' valuations and 80 per cent on the basis of the latest market valuation.
- Issuers should disclose how many loans they have, or expect to have, over the coming 12 months by number, value, location, activity and percentage of secured loans.
- Valuations should be provided. Development property assets should be valued on a cost, 'as is' and 'as if complete' basis with all three disclosed.
- Issuers should disclose how many loans they have, or expect to make, to related parties over the next 12 months and what assessment and approval process the follow for such loans.
- Issuers should disclose their approach to rollovers, including default rollovers.