"Jumping the Gun": An Examination of the Law Relating to Securities Issues in Australia
AbstractThe author puts forward the thesis that the Corporations Law fails to provide an adequate foundation for the effective regulation of "image" advertising, during the period prior to the registration of a prospectus, by corporations intending to issue securities. The paper begins with an examination of the philosophy of disclosure and identifies three goals of mandatory disclosure regulation: investor protection from undisclosed risk; deterrence of fraud; and improved securities market efficiency. The current legal framework for the regulation of disclosure in initial public offerings is then described, with reference to both legislation and policy. The third part of the paper asks whether the current regulatory regime is sufficient to achieve the goals of disclosure regulation and concludes that it is not. Part Four makes suggestions for improvement to the current regime by issuing guidelines, introducing new procedures and amending legislation. The paper concludes that mandatory disclosure by prospectus is necessary in initial public offerings of securities and that strict control of advertising is needed to ensure that the good work of disclosure is not undone. Lessons must be learned from the large privatisations and corporate floats of the early 1990s if capital markets are to continue to attract investors; particularly in the light of the many privatisations pending. Amendment of existing legislation is necessary to clarify current uncertainty. |