Under the Corporations Act, accountants are able to provide a certificate of attesting that a person is a 'sophisticated investor' and therefore does not need the protections that apply to a 'retail investor.'
The Corporate Regulator said in certain recent fundraisings, some accountants have used trust or company structures that purport to allow investors who are not 'sophisticated investors' to receive offers to purchase shares without a prospectus or other disclosure document.
“This has recently occurred in relation to offers of shares by Kwickie International Limited,” ASIC said in a public statement.
“ASIC has made a declaration, to put the issue beyond doubt, that Kwickie International Ltd shares may not be offered to retail investors through a trust structure.”
ASIC said it is continuing its investigation into the use of these structures and is in discussions with the appropriate accounting professional bodies about this issue.
Companies raising money by offering shares to retail investors must give the investors sufficient information by providing a prospectus or other regulated disclosure document, ASIC said.
“This helps investors in making a decision whether to invest in the company and is a key protection for 'retail investors' under the Corporations Act,” said ASIC.
“ASIC is aware of some instances where accountants have facilitated retail investors acquiring shares offered by a company without adequate, or any, disclosure.”
The Corporate Regulator said it is also concerned that some accountants may be harming retail investors by inappropriately providing 'sophisticated investor' certificates.
“ASIC considers that it is important that the 'sophisticated investor' test is applied in a way that is consistent with the reason these provisions are in the law. Otherwise 'retail investors' will not be afforded the safeguards in making appropriate investment decisions that the law explicitly provides for,” said ASIC.