In the ever-evolving landscape of corporate regulation, staying abreast of the latest updates from the Australian Securities and Investments Commission (ASIC) is crucial for businesses to remain compliant and competitive. ASIC's recent Corporate Finance Update introduces highlights significant changes that will impact reporting entities, product issuers, and companies undergoing schemes of arrangement. This blog breaks down the key updates and outlines the necessary actions your business should consider.
- Reporting Entities Should Prepare for Sustainability Reporting
Summary of the Update:
ASIC has highlighted the introduction of mandatory climate-related financial disclosures for many large Australian businesses and financial institutions, effective from 1 January 2025. This requirement stems from the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024. Entities will need to include an annual sustainability report as part of their regular reporting obligations, supplementing existing financial, directors’, and auditor’s reports.
ASIC has set up a dedicated sustainability reporting page to guide entities through the new regime and will expects to provide further regulatory guidance after consulting with stakeholders.
Action Required for Businesses:
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- Assess Applicability: Determine if your business falls under the category of large Australian businesses or financial institutions affected by the new reporting requirements.
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- Develop Capabilities: Begin developing the necessary internal processes and capabilities to collect, analyse, and report climate-related financial information.
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- Stay Informed: Regularly check ASIC's sustainability reporting page for updates and participate in stakeholder consultations to understand compliance expectations fully.
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- Plan for Transition: Recognise that there will be a transition period, and plan accordingly to ensure your organisation is ready by the implementation date.
- Product Issuers Must Improve Distribution Practices to Ensure DDO Compliance
Summary of the Update:
ASIC has called on product issuers to review and enhance their distribution practices to comply with the design and distribution obligations (DDO) under Part 7.8A of the Corporations Act 2001. Recent surveillance by ASIC revealed several areas where product issuers are falling short, particularly in ensuring that distribution aligns with their target market determinations.
Notably, ASIC issued an interim stop order on Candy Club Holdings Limited due to concerns over their distribution practices not aligning with their target market.
Action Required for Businesses:
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- Review Distribution Practices: Conduct a thorough review of your distribution channels and methods to ensure they are designed to reach the appropriate target market.
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- Align with Target Market Determinations: Ensure that your product distribution is consistent with the target market determination, taking reasonable steps to avoid mis-selling.
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- Update Compliance Frameworks: Incorporate the findings from ASIC's Report 795 and Regulatory Guide 274 into your compliance programs to address any identified deficiencies.
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- Engage with ASIC Guidance: Stay updated with ASIC’s regulatory guides and be prepared to adjust practices in response to any new guidance or surveillance findings.
- How to Avoid Risks with Shareholder Communications During Schemes
Summary of the Update:
Recent decisions by the Supreme Court of New South Wales in the Vonex Limited and Ansarada Group Limited schemes of arrangement have underscored the importance of proper shareholder communications during schemes. The Court emphasised that all communications with shareholders should be disclosed and approved to avoid compromising the integrity of the scheme process.
In both cases, the Court highlighted the need for scheme proponents to inform ASIC and the Court of any communications with shareholders, whether proposed or already made, especially at the first court hearing.
Action Required for Businesses:
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- Plan Communications Carefully: Before initiating a scheme of arrangement, plan all shareholder communications meticulously and ensure they are consistent with legal requirements.
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- Disclose to ASIC and the Court: Inform ASIC of the nature of all intended communications with shareholders before the first Court hearing. Be transparent about any communications that have already occurred.
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- Maintain Records: Keep detailed records of all shareholder communications, including inbound and outbound interactions, to provide evidence if required by the Court.
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- Seek Legal Guidance: Consult with legal advisors to ensure that all communications comply with regulatory expectations and do not inadvertently affect the scheme's validity.
Ready to Navigate These Changes?
Understanding and implementing these updates can be complex, but you don't have to do it alone. The Automic team is here to help you navigate these regulatory changes seamlessly.
Contact us today to clarify any of these updates and ensure your business remains compliant and ahead of the curve.
