ASIC explanation of the objective of the relaxation for SPPs:
"Without relief from the prospectus and product disclosure statement provisions of the Act, it is unlikely that such schemes would be offered, disadvantaging the smaller investors who are the most likely to participate in them and obtain the most benefit from them."
ASIC class order 09/425 explanatory notes
If the brokers' scheme that you are speaking of result in a scale back of applications, it will partially frustrate the objective of the relaxation.
The notes also explain the purpose of the monetary limit and the 12 month rule - it is to limit risk to small shareholders who will not have the 'protection' of a prospectus and its disclosures.
The TXN SPP was not scaled back.
An SPP is obviously in conflict with the equality of treatment obtained under a standard rights issue but there is a public policy aspect provided that small holders benefit (Robin Hood would have approved). Where the SPP is not scaled back, brokers who orchestrate schemes to exploit SPPs disadvantage large holders, who suffer dilution contrary to the equal treatment implicit in a rights issue. This analysis suggests that such brokers, when identified, should be shunned by large investors, who may be construed as having suffered financial loss as a result. Perhaps ASIC should reconsider whether fit to be licensed.
Either way, whether there is a scale back or not, they should be keel-hauled.
TXN Price at posting:
70.5¢ Sentiment: Hold Disclosure: Held
