Respondent
...
AUSTRALASIAN INVESTOR RELATIONS ASSOCIATION
ABN 66095554153
GPO Box 1365, Sydney NSW 2001 |
t +61 2 9872 9100 e administration@australsianir.com.au w australasianir.com.au
Beneficial Ownership and 13 December 2024
Transparency Unit
Market Conduct and Digital Division
Treasury
Langton Cres
Parkes ACT 2600 beneficialownership@treasury.gov.au
Dear Sir / Madam
Consultation on enhanced beneficial ownership disclosure for listed entities
This submission is made on behalf of the Australasian Investor Relations Association (AIRA), in response to Treasury’s consultation on enhanced beneficial ownership disclosure for listed entities (Consultation).
AIRA is the peak body representing investor relations practitioners in Australia and New
Zealand. The Association's 160 corporate members now represent over A$1.2 trillion of market capitalisation, over 80% of the total market capitalisation of companies listed on
ASX.
We exist to provide listed entities with a single voice in the public debate on corporate disclosure and to improve the skills and professionalism of members. Our vision and purpose are that investor relations enables and creates sustainable value for all capital market stakeholders by building and strengthening market confidence in listed and unlisted entities.
Key recommendations
AIRA is generally supportive of the proposed changes and is pleased that the Government is taking steps to increase transparency in the disclosure of interests held in listed companies. This is an issue that AIRA is concerned about and has raised previously.
In our view, it is highly important for companies to be able to detect the levels and forms of interests that investors possess through the use of derivatives.
We believe that this draft legislation should be limited to the disclosure and tracing of beneficial interests and not touch on takeover concepts, which require significantly more analysis.
Our detailed recommendations are set out below.
Page | 1
AIRA Submission | Enhanced Beneficial Ownership Disclosure for Listed Entities
1 Disclosure of information about ownership of listed entities
We support the requirement for holders/investors to disclose, in addition to their relevant interests,
details of their derivative-based holding percentages including their deemed physically settleable
derivative-based holding percentage (under proposed section 608A) and their deemed non-
physically settleable derivative-based holding percentage (under proposed section 608B). This will
assist in providing clarity to companies in relation to their ownership and control.
The requirement for substantial shareholders to disclose changes of 1% in each category of holding
(holding percentage, relatable derivative-based holding percentage, deemed physically settleable
derivative-based holding percentage and deemed non-physically settleable derivative-based
holding percentage) is also welcomed.
That said, we expect that this change will not necessarily prevent unintentional double-counting in
circumstances where a holder of shares has a legal or beneficial interest, and another investor has
been given a derivative-based holding over the same shares. For example, the new provisions will
allow a company to assess the aggregate holdings of the investor who has been building a voting
stake in the company by borrowing shares, but the company may not be informed about the
decrease in voting rights held by the beneficial owners of the shares being lent to create the
investor’s stake.
In our view, holders / investors should be required to disclose derivative interests so that the
company can understand who holds the voting powers.
AIRA is comfortable with having a standardised template to collect the holding interests
information, as this will be easier for issuers to maintain an accurate registry.
AIRA does not support the Government mandating that the RORI be machine readable.
In AIRA’s view, it would also be helpful if substantial shareholder information was not time-limited,
so as to provide companies with information in relation to short-sellers. We understand that ASIC
already captures such information, however given it is not currently available to companies and
shareholders, Treasury should consider requiring short sellers to make this information public in the
interests of transparency.
2 Access to registers of relevant interests
AIRA notes that the Corporations Act was amended in 2010 to insert certain provisions in relation
to accessing a company’s register of members. The provisions were aimed at clarifying the cost of
getting a copy of a company’s register and to prohibit the use of the register for certain purposes.
These changes were introduced in order to protect small shareholders from persons that had
obtained a copy of the register of members and were using it to engage in predatory conduct, such
as unsolicited offers at an unreasonable discount to market price, or charity solicitations.
Unfortunately, equivalent provisions were not inserted into the Corporations Act in relation to the
register or relevant interests (RORI).
In our view, it is important that equivalent protections be put in place so as to protect holders of
relevant interests, particularly where that holding is smaller scale. Companies do not want access to
the RORI to be used by the same predatory forces, with a view to targeting mum and dad investors.
We understand that the current service providers that provide RORI services to listed companies do
not sell their analysis of the RORI to third parties, because they already charge their clients (ie. the
listed companies) for the administration of these registers. However, we are concerned that a
newcomer to the market could potentially request a copy of the RORI, conduct and sell their own
analysis of the RORI, bypassing the existing protections (which are a code of practice, not a
legislative framework).
Page | 2
AIRA Submission | Enhanced Beneficial Ownership Disclosure for Listed Entities
We submit that:
• The cost to receive a copy of the RORI should be clarified (similar to the prescribed fee
specified for a copy of the register of members and set out in Item 1AA of Schedule 4 to the
Corporations Regulations). Item 3 of Schedule 4 to the Corporations Regulations sets out the
fee for a copy of the RORI if it is not kept on a computer, but does not specify a fee for
providing a copy where it is kept on a computer (it only specifies the cost of allowing an
inspection of the RORI kept on the computer). We believe the fee for a copy should be the
same, regardless of whether the RORI is kept on a computer or not.
• A prohibition should exist, preventing people from using the RORI to target unsophisticated
investors or engage in predatory behaviour. Companies have genuine concerns about
protecting the privacy of their registered shareholders and beneficial holders. The prohibition
could be similar to the prohibitions set out in Corporations Regulation 2C.1.03 (for registered
members).
To date, accessing a copy of the RORI (without accessing any analysis of its contents) has not
been of much practical use, providing a natural protection to smaller beneficial holders. Our
concern is that if a new market player were to sell its analysis of the RORI, predatory behaviour
could ensue. Our recommendation to prevent this occurring is to legislate to:
• Prohibit selling any analysis of the RORI other than analysis in relation to substantial
shareholders in a listed company. The information in relation to substantial shareholders is
already publicly available on the ASX platform, and in line with the Government’s
expectations around transparency of ownership levels (we understand from this consultation
that the Government is not proposing to lower the substantial shareholder notification level
below 5%); and
• Prohibit any person using information taken from the RORI, or any analysis of the RORI, for
the purposes set out in Corporations Regulation 2C.1.03; and
• Prohibit any journalist or academic from disclosing information taken from the RORI, if the
disclosure would identify a particular beneficial holder or their relevant interest in the
company, unless that interest is a substantial shareholding.
Ultimately, if the government decides to establish a public register of beneficial interests, the onus
to make disclosures must be on the underlying beneficial holder, not the company itself.
Further questions and clarifications
If you have any questions or comments about our submissions, please do not hesitate to contact us using the details below.
Yours sincerely
Ian Matheson
CEO
Page | 3
