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HG Corporate Advisory and Governance Alert: ASIC updates its guidance for use of electronic disclosure documents - 7 March 2014

ASIC has issued its updated Regulatory Guide 107 (RG 107) with respect to the use and distribution of electronic disclosure documents following the release of its consultation paper in July 2013. A review of these arrangements was necessitated by rapid developments in the internet and other electronic communications since the commencement of the Corporations Act 2001 (Cth).

In this Alert, Partner Michael Hansel and Associate Richard Hanel examine RG 107 and outline several key guidelines for organisations to follow when using electronic disclosure documents.

Key take away points

  • Companies are being encouraged to use electronic disclosure documentation but will need to ensure that the electronic disclosure document is not materially different in content or format to the paper version and reflect the principles for good practice contained in RG 107.
  • When considering the use of electronic media to promote or distribute disclosure documents, companies will need to remain aware of their general obligations, and the requirements of the ASX, with regards to continuous disclosure and the advertising of offers.
  • Companies will need to keep investors’ email details up-to-date and follow-up investors by another method if they become aware that the electronic version has not been delivered.

About RG 107

RG 107 acknowledges the use and distribution of electronic disclosure documents without relief from ASIC.

However, the Corporations Act 2001 (Cth) specifies lodgement of a paper document with ASIC, which means that focus must continue to remain on the paper version. It will therefore be imperative to ensure that the electronic version is not materially different in content or format to the paper version. However, as discussed below, features which improve the functionality of the electronic version and will assist the investor in their interaction with the document are permitted without the need for relief and ASIC encourages the use of such features.

Several key proposals from the consultation paper have been excluded from the draft version of RG 107, namely the requirement to monitor online forums (and to make corrective disclosure) and the ban on targeted pre-offer promotion. However, companies will still need to be aware of their general obligations, and the requirements of the ASX, with regards to continuous disclosure and the advertising of offers when considering the use of electronic media to promote or distribute disclosure documents.

Principles for good practice

To overcome the risks that ASIC believe may arise from the use of electronic disclosure documents, RG 107 contains 15 principles for good practice guidance aimed at encouraging, and providing assistance for, the use of electronic media. The principles are supported by detailed “dos” and “don’ts” for distribution via electronic media, a sample of which are as follows:

  • Method of distribution: The method used must enable the investor to access the disclosure document in the future – by being able to easily download, save or print the document. An example is an email or notification with an attachment (eg PDF or TIFF), a hyperlink or a reference to a website/electronic facility where the document is available. The investor should be directed to electronically save or print the disclosure document.
  • Information protection: For security purposes, reasonable steps should be taken to ensure that the website is secure and an email attaching a hyperlink should specify that the link is a secured link and that personal information will be kept confidential. Companies should also ensure that appropriate software firewalls and protection tools are in place to protect investor information – provided that these do no inhibit efficient access to the document.
  • Use of hyperlinks: Hyperlinks should not go directly to a generic company page. It should go to the document cover page or to a dedicated page established specifically for the document, whether directly or via a page that first confirms eligibility to participate.
  • Future access: The company will need to ensure access to electronic versions for two years and retain the electronic version, a copy of the screen pages which facilitated an application being made online and a record of details used to confirm that an electronic application was received for seven years.
  • Interactive functions: Electronic versions can contain immaterial differences which reflect necessary adjustments or provide improved functionality due to the electronic media being used. ASIC acknowledges that interactive functions in an electronic document can improve an investor’s engagement with the document. Examples include navigational tools such as hyperlink (but only within the document or to documents incorporated by reference), format changes to address compatibility issues, inclusion of search tools and features such as “pop ups” for defined terms. This also enables inclusion of a prompt to read the disclosure document before completing the application form. Relief is required for other enhancements or use of emerging new technologies. Otherwise, the same content must be presented in the same sequence and with the same prominence as in the paper version.
  • Video content: Video presentations or other content in non-text form cannot be added to the electronic version without ASIC relief, which is available if the content is consistent with that contained in the paper version. ASIC encourages companies to seek relief and to use such presentations where it will assist investors to understand the information contained in the paper version.
  • Online application forms: Application forms can be accessed and completed on-line provided that the company can be satisfied, before accepting an application, that the application form was included in or accompanied by the disclosure document. Application forms can be provided by way of a separate electronic document, but mechanisms should be implemented to enable verification of receipt and access to the disclosure document before accessing the application form,  using a certification process or personalised reference numbers to be inserted into the application form and which are derived from the disclosure document.
  • Electronic payment: The current practice involving electronic payment processes such as BPAY, which utilise appropriate verification/identification mechanisms without delivery of a separate application form, is acceptable to ASIC, although electronic payment processes with different characteristics will require case-by-case relief.

Companies implementing such facilities will need to keep investors’ email details up-to-date and follow-up investors by another method if they become aware that the electronic version has not been delivered.

This is a sample of the guidance provided under RG 107, but demonstrates the flexibility available to companies via the use and distribution of electronic disclosure documents.

Companies wishing to improve their utilisation of the electronic media for the distribution of disclosure documents should give consideration to the good practice principles contained in RG 107 and contact HopgoodGanim’s Corporate Advisory and Governance team to discuss the implementation of an appropriate distribution process.

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