Dealings, including takeovers, in securities involving Australian companies and other dealings on Australian financial markets must be conducted in accordance with the Corporations Act 2001 (Corporations Act).
- The Australian Securities and Investments Commission (ASIC) performs supervision of real‑time trading on all of Australia’s domestic licensed markets. ASIC is responsible for both the supervision and enforcement of the laws against misconduct on Australia’s financial markets. ASIC provides full details and guidance regarding these matters — please refer to ASIC’s website.
- The Takeovers Panel is a peer review body that regulates corporate control transactions in widely held Australian entities, and is the primary forum for resolving disputes about a takeover bid. The Panel publishes helpful information, including guidance notes and the reasons for its decisions, at its website.
- The Australian Securities Exchange (ASX) website also has information regarding ASX‑listed entities, including relevant forms and notices.
It is illegal under the Corporations Act to use inside information to acquire or dispose of financial products, or to procure another person to acquire or dispose of financial products.
ASIC is responsible for detecting insider trading. However allegations of insider trading may also be referred to ASIC by a market operator, usually the ASX, as well as by other sources including complaints made by the public and self‑reporting by stockbroking firms. ASIC is also responsible for investigating and prosecuting allegations of insider trading.
Serious civil and criminal penalties apply under the Corporations Act to both individuals and corporations for conduct amounting to insider trading.
Any deliberate attempt to force a security’s price to an artificial level is illegal under the Corporations Act, irrespective of the method(s) employed. ASIC continuously monitors market activity, in real time, for suspicious trading patterns that could indicate market misconduct. Where such patterns are observed, or if matters are referred to them, ASIC has broad powers to investigate and, where appropriate, prosecute misconduct. If the activity is determined to constitute market abuse, ASIC will pursue appropriate sanctions under the Corporations Act.
Serious civil and criminal penalties apply under the Corporations Act to both individuals and corporations for conduct amounting to market manipulation.
Disclosure of shareholdings
Under both the Corporations Act and the ASX Listing Rules, an entity (whether foreign or local) that controls five per cent or more of the securities (including the holdings of its associates) in an ASX‑listed entity is required to lodge a substantial shareholder (or security holder) notice with the listed entity and the ASX. It must also then lodge further notices whenever its shareholding increases or decreases by one per cent or more.
For both the takeovers and substantial shareholding provisions an associate of a company is any other body corporate that controls or is controlled by the original company, is controlled by the same holding company as the original company, or any person that the original company is acting in concert with in regards to the affairs of the entity in which the shares are held.
Takeovers and acquisitions
The Corporations Act imposes restrictions on the acquisition of voting power in companies or managed investment schemes. An entity must make a takeover bid for a company where it increases its (including the holdings of its associates) voting shareholding in a listed company or an unlisted company with more than 50 members:
- to more than 20 per cent; or
- further increases it holding from a starting point that is above 20 per cent.
There are a number of exceptions to this rule, including where an entity increases its shareholding in a company by no more than three per cent every six months or where the acquisition is approved by the target’s shareholders.
Disclosure to investors is generally required when capital is raised, whether by way of a new issue of securities or a sale of existing securities, unless an exception applies. Disclosure may take the form of a disclosure document such as a prospectus or, in the case of a managed investment scheme, a product disclosure statement.
A disclosure document must contain all the information that investors and their professional advisers would reasonably require to make an informed assessment of the rights and liabilities attached to the securities, as well as the assets and liabilities, financial position and performance, profits and losses and prospects of the entity.
An offer document must not contain any information that is likely to mislead or deceive investors or omit any material information.
Serious civil and criminal penalties apply for failing to adhere to the disclosure requirements under the Corporations Act.