Debenture rules shake-up
DEBENTURE and retail bond issuers face tighter controls on disclosure and minimum capital under proposals released by the corporate regulator.
The Australia Securities and Investments Commission finally released its discussion paper outlining the changes, which now include any listed company issuing retail bonds.
The $4 billion debenture sector has been expecting regulatory reform since Financial Services Minister Bill Shorten flagged changes following the collapse of Banksia - in particular, whether investors understand the difference between banks and non-bank lenders.
Banksia Securities collapsed in October owing $660 million. Another debenture issuer, Southern Finance was sold to Bendigo and Adelaide Bank after concerns there would be a run in the wake of Banksia.
ASIC commissioner John Price said the consultation would look at minimum capital and liquidity requirements, improved disclosure to investors and giving trustees more powers.
ASIC proposes debenture holders keep a capital ratio of up to 9 per cent of total assets. And it wants laws changed so auditors are compelled to give half and full-year financial reports to trustees.
"These proposed reforms will apply to auditors of all listed and unlisted debenture issuers, not just retail debenture issuing lenders. As a result, they will apply to companies issuing retail corporate bonds,"
Comments are due by March 28.