ASIC RG 107 — ASIC Regulatory Guide – RG 107 Fundraising: Facilitating electronic offers of securities

Page 1 REGULATORY GUIDE 107 Fundraising: Facilitating electronic offers of securities July 2020 About this guide This is a guide to facilitate the use of email and the internet to make offers of securities under Ch 6D of the Corporations Act. This guide:  explains how we interpret the fundraising provisions in Ch 6D when using electronic disclosure documents and electronic application forms, including the distribution of these documents by email and the internet;  describes the relief we have provided for personalised or Australian financial services (AFS) licensee created application forms; and  sets out our ‘good practice guidance’ for using electronic disclosure documents and electronic application forms, including the distribution of these documents by email and the internet. Page 2 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in July 2020 and is based on legislation and regulations as at the date of issue. This guide replaces:  Superseded Policy Statement 107, issued September 1996, reissued February 2000, rebadged as a regulatory guide on 5 July 2007  Superseded Policy Statement 150, issued February 2000, reissued July 2000, rebadged as a regulatory guide on 5 July 2007 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 3 Contents A Overview ........................................................................................... 4 Facilitating the use of email and the internet for offers of securities . 4 Our guidance and relief ..................................................................... 6 ASIC’s role ......................................................................................... 7 How you lodge disclosure documents and submit applications for relief ................................................................................................... 8 B Offers of securities using email or the internet under Ch 6D ..... 9 Key requirements in Ch 6D................................................................ 9 When is ASIC relief required for offers of securities using email or the internet? ..................................................................................... 10 Electronic disclosure documents ..................................................... 12 Electronic application forms and electronic acceptances ................ 13 Electronic supplementary and replacement disclosure documents 15 Advertising and social media ........................................................... 16 Securities hawking provisions.......................................................... 18 Jurisdictional issues ......................................................................... 18 C Personalised or AFS licensee created application forms ......... 20 Personalised and AFS licensee created application forms ............. 20 Requirements of the legislative instrument...................................... 22 D Good practice guidance ................................................................ 23 Principles for good practice guidance .............................................. 23 Key terms ............................................................................................... 37 Related information ............................................................................... 39 Page 4 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 4 A Overview Key points ASIC aims to facilitate and encourage the use of electronic disclosure documents and electronic application forms, including the use of email and the internet, for making offers of securities. In this guide, we: • explain our interpretation of the fundraising provisions in Ch 6D of the Corporations Act 2001 (Corporations Act) when using electronic disclosure documents and electronic application forms, including the distribution of these documents by email and the internet; • describe the relief we have provided for personalised or Australian financial services (AFS) licensee created application forms; and • set out our good practice guidance for using electronic disclosure documents and electronic application forms, including the distribution of these documents by email and the internet. Facilitating the use of email and the internet for offers of securities RG 107.1 While disclosure documents used for offers of securities have historically been paper-based documents, persons offering securities under Ch 6D of the Corporations Act are increasingly using electronic means and electronic media—primarily email and the internet (e.g. web-based platforms)—to distribute and present disclosure documents to investors. Additionally, it is becoming increasingly common for investors to receive and access important information in their daily life—including news, internet banking and securities trading—using electronic devices such as computers, tablets and smartphones. Note: In this document, references to sections (s), parts (Pts) and chapters (Chs) are to the Corporations Act, unless otherwise specified. References to ‘disclosure document’ include any supplementary or replacement disclosure document lodged with ASIC: see s719(4) and (5) of the Corporations Act. RG 107.2 We want to facilitate and encourage the continued and future use of electronic disclosure documents and electronic application forms for offers of securities under Ch 6D, including the use of multimedia or web-based platforms, particularly as we anticipate that this is an area that will grow in popularity and that may experience significant advances in technology. RG 107.3 We recognise that there are many advantages of using email and the internet to distribute disclosure documents and application forms, including the ease and convenience of use for investors. Additionally, web-based disclosure Page 5 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 5 documents with electronic content can be more interactive and promote understanding for investors. RG 107.4 The use of electronic disclosure documents also has advantages for persons offering securities and persons involved in the distribution of disclosure documents by reducing costs (e.g. printing and mailing) and increasing the speed and availability of information. RG 107.5 We are aware that some investors may not have access to the internet, or may still prefer to receive important and extensive information, such as disclosure documents, in paper format. Accordingly, we believe it is desirable for paper disclosure documents to remain accessible and be made available to investors on request to ensure that information is freely available to all sections of the community. RG 107.6 We have historically provided class order relief to permit the use of electronic disclosure documents in relation to the provisions of the old Corporations Law as it stood before the implementation of the Corporate Law Economic Reform Program Act 1999 (CLERP Act). We continued the relief in Class Order [CO 00/44] Electronic disclosure documents, electronic application forms and dealer personalised applications following CLERP, for the avoidance of doubt, to help ensure the continued use of electronic disclosure documents, even though the CLERP amendments were intended to facilitate the use of electronic disclosure documents. We have now revoked [CO 00/44] because we take the view that relief is not required. RG 107.7 We consider that the use of electronic disclosure documents and electronic application forms is permitted under Ch 6D without relief. As explained in the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 (CLERP Bill), changes to the fundraising provisions by the CLERP Act were made to: … facilitate the issue of a disclosure document in electronic form as well as paper documents. The Bill will remove barriers to electronic commerce by providing a statutory framework for electronic disclosure documents which is designed to promote investor confidence in the integrity of the electronic financial services marketplace. RG 107.8 The market now routinely uses electronic disclosure documents and electronic application forms for offers of securities under Ch 6D, and is comfortable with the ability to distribute these documents by email and the internet. Consequently, we believe that the market no longer requires comfort relief under [CO 00/44]. Page 6 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 6 Our guidance and relief RG 107.9 To facilitate the use and distribution of electronic disclosure documents and electronic application forms, including the use of email and the internet, to make offers of securities, we have: (a) explained our interpretation of the fundraising provisions in Ch 6D applying to electronic disclosure documents and electronic application forms, including the use of email and the internet to distribute these documents (see Section B); (b) provided relief for personalised and AFS licensee created application forms in ASIC Corporations (Application Form Requirements) Instrument 2017/241—and explained when ASIC relief may still be needed (see Sections B and C); and (c) given ‘good practice guidance‘ (see Table 1 for an overview) on using electronic disclosure documents and electronic application forms, including the use of email and the internet to distribute these documents, to assist persons offering securities (offerors), distributors and publishers in complying with their legal obligations, and meeting the objectives underlying the provisions, in Ch 6D (see Section D). RG 107.10 This guide focuses primarily on the use of email and the internet to distribute and present electronic disclosure documents and electronic application forms, as we understand that these are currently the most common electronic means and electronic media used for offers of securities. RG 107.11 We recognise that there may be other types of multimedia or web-based platforms that emerge in the future to distribute and present electronic disclosure documents and electronic application forms. This guide is principles based and is intended to apply to current and emerging forms of electronic disclosure documents and electronic application forms. Table 1: Overview of our good practice guidance Principle 1 Electronic disclosure documents should be easy to access, retrieve and read. Principle 2 Electronic disclosure documents should be distributed in a way that does not unreasonably expose investors to security risks. Principle 3 Offerors and distributors that distribute electronic disclosure documents for an entitlement offer to existing investors of a company should take reasonable steps to ensure that investors receive the electronic disclosure document. Principle 4 Offerors, distributors and publishers should take reasonable measures to ensure that electronic disclosure documents received by investors are complete and have not been altered or tampered with. Page 7 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 7 Principle 5 Offerors and distributors that distribute electronic disclosure documents and electronic application forms should make available free paper copies of disclosure documents and application forms on request by an investor. Principle 6 Offerors and distributors of electronic disclosure documents should make updated disclosure documents available in both paper and electronic format. Principle 7 Investors should be able to keep a copy of the electronic disclosure document so that they can access it in the future. Principle 8 Offerors, distributors and publishers should retain copies and records of all electronic disclosure documents so that investors are able to prove which version of the disclosure document they relied on. Principle 9 Electronic disclosure documents should have the same content, presentation and prominence of information as paper versions. Principle 10 Hypertext links to, from or within the electronic disclosure document should not be used to take investors to material not forming part of the electronic disclosure document, other than jurisdictional confirmations or educational material. Principle 11 Electronic application forms must be included in, or accompanied by, the electronic disclosure document. Principle 12 Electronic application forms should contain appropriate warnings to ensure that investors are informed of the importance of reading the disclosure document before applying for securities. Principle 13 Electronic application forms should contain verification processes and should be secure. Principle 14 Reasonable measures should be taken to ensure that offers are only made in jurisdictions where the offer complies with the relevant securities laws. Principle 15 Promotional material should not be published in a way that may cause it to be confused with all or any part of the electronic disclosure document. ASIC’s role RG 107.12 ASIC administers Offer Notice Board, a database providing information on current and past disclosure documents. We will continue to include details on Offer Notice Board of where disclosure documents may be accessed, including through a website. RG 107.13 We will consider applications for relief from offerors where there is some doubt about whether the proposed electronic disclosure document is a copy of the disclosure document lodged with ASIC. Page 8 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 8 How you lodge disclosure documents and submit applications for relief RG 107.14 Disclosure documents should be lodged through the ASIC Regulatory Portal using the ‘Lodge fundraising disclosure documents or statements’ transaction. Fees will apply for lodgement of these documents. We have provided details about payment options in the portal. For more information, see how you lodge fundraising and corporate finance documents. RG 107.15 Applications for relief should also be submitted through the ASIC Regulatory Portal. Fees will apply to an application. We have provided details about payment options in the portal. For more information, see how you apply for relief. Page 9 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 9 B Offers of securities using email or the internet under Ch 6D Key points This section sets out our interpretation of the fundraising provisions under Ch 6D and how they apply to: • making offers of securities using and distributing electronic disclosure documents, including by email and the internet; and • using and distributing electronic application forms for offers of securities, including by email, and through online applications and electronic payment processes. Our relief is not required for using electronic disclosure documents if the electronic version has the same content, presentation and prominence of information as the version lodged with ASIC. This section sets out some of the circumstances in which we may consider granting individual relief to facilitate the broader use of electronic disclosure documents. This section also provides some guidance on issues that might arise from email or internet distribution of these documents. Key requirements in Ch 6D RG 107.16 The fundamental policy of the fundraising provisions in the Corporations Act is to ensure that investors can make informed investment decisions on the basis of a current disclosure document containing or incorporating all material and relevant information about the securities being offered and about the person offering the securities for issue or sale. RG 107.17 The key components of the regulatory regime that are relevant in this context are summarised in Table 2. Table 2: Key Ch 6D requirements Requirement Description Section Offers of securities require a disclosure document The Corporations Act requires an offer for issue or sale of securities to be made using a disclosure document, unless the offer falls into a relevant exception. The disclosure document must be lodged with ASIC. s706, 707, 708, 708AA, 708A, 718 and 727 Information required in a disclosure document The Corporations Act requires that investors (and their advisers) are provided with sufficient information to make an informed investment decision. s710, 711, 713 and 715 Page 10 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 10 Requirement Description Section Application form included in, or accompanied by, disclosure document The Corporations Act requires that application forms for an offer of securities are only distributed if they are included in, or accompanied by, a disclosure document. This establishes a mechanism so that the investor receives a current disclosure document (which satisfies the information needs of investors and their advisers) before applying for securities. s723 and 727 Advertising and securities hawking restrictions The Corporations Act seeks to ensure that investors are encouraged to make investment decisions on the basis of a disclosure document rather than on the basis of promotional material or pressure selling. s734 and 736 Updating requirements The Corporations Act seeks to ensure that investors receive any necessary updates to information before their investment decision is finalised. s719 and 724 Civil liability provisions The Corporations Act seeks to ensure that investors have access to appropriate remedies if they invest on the basis of defective disclosure. s729, 737 and 738 RG 107.18 The requirements in Ch 6D apply to offers of securities made in any form, whether oral or written, and whether the offer is made on paper, by email or on the internet. Offering securities for issue includes inviting applications for the issue of securities, and offering securities for sale includes inviting offers to purchase the securities. RG 107.19 For a person to make an offer of securities, or distribute an application form for an offer of securities, they must first lodge a disclosure document for the offer with ASIC. They should lodge the disclosure document through the ASIC Regulatory Portal: see RG 107.14. When is ASIC relief required for offers of securities using email or the internet? RG 107.20 The underlying purpose of the relevant provisions in Ch 6D is to ensure that persons considering applying for securities under an offer are given the same information as is included in the disclosure document lodged with ASIC. RG 107.21 Our view is that electronic disclosure documents can be used and distributed without the need for ASIC relief, and constitute a ‘copy’ of the lodged disclosure document, provided that the electronic disclosure document: (a) is identical in format and content to the disclosure document lodged with ASIC; or Page 11 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 11 (b) contains the same information in the same sequence and with the same prominence, as the lodged disclosure document, with the exception of modifications that are immaterial and reflect necessary adjustments or increased functionality when using different electronic media—for example, modifications to enable the electronic document to be accessed and displayed in html format or on a web-based platform. RG 107.22 Our view in RG 107.21 reflects the legal requirement that, if an offer of securities needs disclosure to investors under Pt 6D.2 of the Corporations Act, a person is prohibited from offering securities or distributing an application form for the offer unless: (a) a disclosure document for the offer is lodged with ASIC; and (b) the offer or form is included in the disclosure document or accompanied by a copy of the disclosure document: see s727. RG 107.23 Our view is that electronic disclosure documents can be used and distributed without the need for ASIC relief where the circumstances in RG 107.21 are met. Use of electronic devices RG 107.24 To facilitate electronic disclosure documents being accessible and readable on different electronic devices (e.g. computers, smartphones and tablets), we recognise that modifications to the presentation and format of these documents may be required. In our view, relief is not required for necessary modifications to the display information in the electronic disclosure document on the investor’s electronic viewing device or in a print-out. Additionally, relief is not required for the use of aids to assist investors in reading the disclosure document—for example, the ability to enlarge text. This is provided that these modifications do not change the information, its prominence or its sequence. Use of hypertext links RG 107.25 Hypertext links and search facilities within an electronic disclosure document can assist readers to navigate through the document easily, and can make information more accessible (including allowing the reader to directly access sections of the document through the table of contents and to access documents incorporated by reference within the electronic disclosure document). We encourage the use of hypertext links and search tools within an electronic disclosure document to assist the reader. Page 12 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 12 RG 107.26 In our view, the use of hypertext links or the inclusion of search facilities will not, in itself, require our relief, because this would not change the content, presentation or prominence of the information contained in the electronic disclosure document from the disclosure document lodged with ASIC. Note: Principle 9 of our good practice guidance provides that electronic disclosure documents should contain the same information, in the same sequence and with the same prominence, as the disclosure document lodged with ASIC. The discussion in Principle 9 explains the modifications that can be made to the electronic disclosure document for it still to be considered a copy of the lodged version. The discussion in Principle 10 explains how we believe hypertext links should be used to, from or within an electronic disclosure document. Use of video and audio presentations RG 107.27 We also aim to encourage and facilitate the use of non-print based communication (e.g. video or audio presentations) to assist investors in understanding information and making informed investment decisions. However, in our view, information communicated in non-print form may not constitute a copy of the disclosure document lodged with ASIC. RG 107.28 Therefore, we encourage offerors seeking to use non-print based communication or multimedia platforms to assist in presenting the information in their electronic disclosure documents to make an application to ASIC for individual relief for our consideration. Electronic disclosure documents RG 107.29 An offeror or distributor needs to ensure that documents are easy to access and are capable of being easily saved and printed by the investor so that the investor can access an electronic version of the document at any time following the offer. Note: The discussion in Principles 1, 7 and 8 of our good practice guidance explains what steps we believe offerors, distributors and publishers should take to ensure the accessibility and retention of electronic disclosure documents. RG 107.30 While we want to encourage and facilitate the use of electronic disclosure documents, we also believe that investors should have the opportunity to obtain a free paper copy on request—and to be informed of this right—to ensure that disclosure is freely available to all sections of the community in whatever form they choose. Note: Principle 5 of our good practice guidance states that, if an electronic disclosure document is available, free paper copies should also be made available on request. Page 13 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 13 RG 107.31 We also recognise that there are certain risks that could arise from the use and distribution of electronic disclosure documents, including that electronic disclosure documents are potentially vulnerable to hacking or unauthorised alteration and tampering of information contained within the document. RG 107.32 Offerors, distributors and publishers need to ensure that adequate safeguards and precautions are in place to help reduce the risks of tampering. This will ensure that the electronic disclosure document received by the investor is the same as the disclosure document lodged with ASIC, and has not been tampered with or altered in any way (including the form, order, context and content). Note: The discussion in Principle 4 of our good practice guidance refers to some of the safeguards that should be considered to make an electronic disclosure document safe from unauthorised tampering or amendment (e.g. using a locked PDF file or a tagged image file format (TIFF), and using adequate firewall protection). Electronic application forms and electronic acceptances RG 107.33 There is no requirement in the Corporations Act for an application form to be lodged with ASIC when lodging a disclosure document. RG 107.34 Under the Corporations Act—specifically, s723—securities may only be issued or transferred in response to an application form if the person issuing or transferring the securities has reasonable grounds to believe that: (a) the application form was included in, or accompanied by, the disclosure document when the form was distributed by the person issuing or transferring the securities; or (b) the application form was copied, or directly derived, by the person making the application from a form referred to in RG 107.34(a). RG 107.35 Distributing and accessing disclosure documents and application forms by electronic means may make complying with these legal requirements more difficult to satisfy than distributing these documents in a paper format. RG 107.36 There is a risk arising from the distribution of electronic disclosure documents and electronic application forms that an investor may receive an application form without receiving the disclosure document. Offerors need to take steps to satisfy themselves that they have reasonable grounds to believe that the application form that the investor has received was accompanied by the electronic disclosure document. Note: The discussion in Principles 10 and 11 of our good practice guidance contains some measures that we believe offerors, distributors and publishers should consider when distributing electronic application forms to assist offerors in satisfying this requirement. Page 14 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 14 RG 107.37 Offerors, and distributors on behalf of offerors, are able to accept electronic application forms for offers of securities. If online applications are to be received, adequate safeguards and precautions should be in place (including encryption software, protection of confidential information, and adequate firewall protection) to ensure that information transmitted through email or the internet remains secure and safe from hacking. Note: The discussion in Principle 13 of our good practice guidance contains some precautions that we believe offerors and distributors should consider if they are to receive electronic applications for offers of securities. Electronic payment processes RG 107.38 We consider that the use of electronic payment processes (e.g. BPAY) to apply for securities, without investors being required to submit a completed application form to the issuer, may comply with the legal requirements and meet the underlying policy objectives of s723(1). RG 107.39 The underlying purpose of s723(1) is to ensure that a person applying for securities has received, and is making an investment decision based on, a current disclosure document. In our view, an issue or transfer of securities that occurs as a result of an electronic payment (e.g. BPAY) without the investor submitting a completed application form may, in certain circumstances, meet the requirement that the securities are issued or transferred ‘in response to an application form’ and that the form has been directly derived from an application form that was included in, or accompanied by, the disclosure document. RG 107.40 We believe that an electronic payment process that contains a means of verifying or linking an identifiable investor’s electronic payment to an application form distributed with a specific version of the disclosure document (including any supplementary or replacement disclosure document) is likely to satisfy s723(1). RG 107.41 In our view, this verification can be achieved if an investor makes an electronic payment using information that is contained only in an application form that was received together with a disclosure document (where that information is unique to the investor, the offer and to the specific version of the disclosure document), and if the issuer or the issuer’s share registry can only issue or transfer the securities on receipt of that information. RG 107.42 An example of an electronic payment process that satisfies the above settings is one that has the following features (which we understand is similar to the current BPAY payment process): (a) the investor receives a disclosure document together with a personalised application form which contains information that must be used by the investor to make an electronic payment, including: Page 15 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 15 (i) information that identifies the issuer (issuer identifier) (e.g. a numerical code such as a biller code); and (ii) information that is unique to the investor and to the disclosure document, which allows the investor and the disclosure document to be identified (investor identifier) (e.g. a customer reference number or barcode number); Note: The information in paragraphs RG 107.42(a)(i) and RG 107.42(a)(ii) can only be derived from the personalised application form that accompanied, or was included in, the disclosure document and not from any other source. (b) when an investor makes an electronic payment, the issuer or the issuer’s share registry receives notification (e.g. BPAY notification) from the issuer’s financial institution of the payment amount, payment date, the issuer identifier and the investor identifier; and (c) the issuer or the issuer’s share registry uses: (i) the payment amount to calculate the number of securities applied for; (ii) the issuer identifier to identify or confirm the offer and the issuer; and (iii) the investor identifier to identify the investor to which the payment relates. Note: The issuer should also be able to use the information received (or received by its share registry) to determine which version of the disclosure document the investor received with the application form (which contained the information required to make the payment). RG 107.43 We recognise that new electronic payment processes with different features may develop over time. If these do not satisfy the legal requirements, but may satisfy the policy objectives of s723(1), we will consider applications for individual relief. Electronic supplementary and replacement disclosure documents RG 107.44 A disclosure document lodged with ASIC may be updated or replaced by a supplementary or replacement disclosure document. The supplementary or replacement disclosure document must also be lodged with ASIC. They should be lodged through the ASIC Regulatory Portal: see RG 107.14. RG 107.45 Following lodgement of a supplementary or replacement disclosure document, any new offers to an investor must be made in, or be accompanied by: (a) the original disclosure document together with the supplementary disclosure document; or (b) the replacement disclosure document. Page 16 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 16 RG 107.46 In addition, offerors or persons involved in the distribution of an offer should consider providing the supplementary or replacement document to investors who have already received the original disclosure document if this will assist investors in making an investment decision. RG 107.47 Sometimes a supplementary or replacement disclosure document is lodged because the original disclosure document makes a misleading statement, omits information or does not refer to a new circumstance. If any of these are ‘materially adverse’ from the point of view of an investor, and the issuer does not opt to repay the application money, the Corporations Act requires the supplementary or replacement disclosure document to be provided to all applicants: see s724(2). RG 107.48 Consistent with the original disclosure document, electronic distribution of the supplementary or replacement disclosure documents is permissible under Ch 6D. If the original disclosure document was available in electronic format, any supplementary or replacement disclosure document should also be made available in electronic format. Note: The discussion in Principle 6 of our good practice guidance explains what steps we think should be taken by offerors and distributors when distributing supplementary and replacement disclosure documents. RG 107.49 The use of electronic disclosure documents and electronic application forms may create potential difficulties for offerors and distributors in knowing which version of the disclosure document was accessed in relation to an application (i.e. whether it was based on the original disclosure document or any updated disclosure document). In our view, such difficulties can be overcome if offerors and distributors retain copies and records of all electronic disclosure documents distributed to investors. Note: The discussion in Principle 8 of our good practice guidance explains what steps we think offerors, distributors and publishers should take to ensure that adequate copies and records of electronic disclosure documents are retained. RG 107.50 To comply with s723(1) of the Corporations Act, offerors need to take steps to help determine which version of the disclosure document a particular application form accompanied if new offers are made after the lodgement of a supplementary or replacement disclosure document. Advertising and social media RG 107.51 The Corporations Act provides advertising restrictions in relation to an offer of securities. These restrictions are to ensure that investors make a decision about the offer of securities on the basis of the disclosure document and not promotional material. Page 17 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 17 RG 107.52 Where a disclosure document has been lodged with ASIC, any advertisement or publication in relation to an offer must include statements explaining: (a) who the issuer is and what the securities are; (b) that a disclosure document for the offer is available and how this may be obtained; (c) that offers will be made in, or will be accompanied by, a copy of the disclosure document; (d) that persons should consider the disclosure document in deciding whether to acquire the securities; and (e) that persons wanting to acquire the securities will have to complete an application form that will be contained in, or will accompany, the disclosure document. Note: Restrictions in relation to pre-offer advertising and advertising after the lodgement of a disclosure document with ASIC are contained in s734(5) and (6), respectively: see Regulatory Guide 254 Offering securities under a disclosure document (RG 254). RG 107.53 In the paper environment, the disclosure document is usually a single bound document, which is readily distinguishable from any accompanying advertising material. The electronic environment potentially creates more ambiguity for investors to determine whether the information they are reading is promotional material or part of the electronic disclosure document. RG 107.54 We think that the advertising provisions should be considered by offerors, distributors and publishers during an offer period in relation to information contained on their own websites, social media platforms and blogs, and that care should be taken to ensure that the provisions of the Corporations Act have not been contravened in relation to such information contained on these platforms. RG 107.55 Advertising restrictions apply to all persons and, as such, third parties discussing an offer of securities on a website, social media page or blog should ensure that they do not inadvertently contravene advertising restrictions for offers requiring a disclosure document. Note: The discussion in Principle 15 of our good practice guidance refers to safeguards that should be taken in relation to promotional material about an offer that is published in electronic format, including promotional material distributed by email or published on the internet. Regulatory Guide 234 Advertising financial products and services (including credit): Good practice guidance (RG 234) provides further guidance for promoters of financial products and publishers of advertising for these products. Page 18 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 18 Securities hawking provisions RG 107.56 The securities hawking provisions in the Corporations Act stipulate that a person must not offer securities for issue or sale in the course of, or because of, an unsolicited meeting with another person or telephone call to another person. RG 107.57 The hawking prohibitions do not apply to unsolicited communications such as emails, letters, facsimiles, brochures, and media advertisements (press, radio or television), or making a disclosure document generally available on a website. However, when using these communication methods, the offeror or distributor still needs to ensure that they comply with any other relevant laws, including the consumer protection provisions. RG 107.58 Regardless of whether an offeror or distributor is subject to the hawking prohibitions for a particular transaction, the offeror or distributor needs to ensure that it complies with the prohibitions on: (a) unconscionable conduct (s12CA–12CC of the Australian Securities and Investments Commission Act 2001 (ASIC Act)) and s991A of the Corporations Act); (b) misleading or deceptive conduct (s12DA–12DB of the ASIC Act and s1041E–1041H of the Corporations Act); and (c) harassment or coercion (s12DJ of the ASIC Act). Jurisdictional issues Offers of foreign securities RG 107.59 Offers received in Australia, irrespective of where the securities are transferred or issued, are subject to the fundraising provisions of the Corporations Act. Therefore, offers transmitted electronically, including by email, into Australia from outside Australia must comply with Ch 6D. Similarly, an offer placed on an internet site generated by a server situated outside Australia will be subject to the fundraising provisions if it is capable of being received in Australia. RG 107.60 We have given guidance in Regulatory Guide 141 Offers of securities on the internet (RG 141), which explains our policy of not intending to regulate offers, invitations and advertisements of securities that are accessible in Australia on the internet if: (a) the offer, invitation or advertisement is not targeted at persons in Australia; (b) the offer or invitation contains a meaningful jurisdictional disclaimer; (c) the offer, invitation or advertisement has little or no impact on Australian investors; and (d) there is no misconduct. Page 19 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 19 Offers accessible overseas RG 107.61 An electronic disclosure document on an internet site may be accessible throughout the world. As a result, the person issuing the disclosure document may be subject to foreign laws, as well as Australian law. RG 107.62 One way of reducing the risk of contravening foreign securities laws may be to insert into an electronic disclosure document a jurisdictional clause stating to whom it is intended that the offer will be available. Note: The discussion in Principle 14 of our good practice guidance explains what steps we think offerors and distributors should take to ensure that offers are only made in certain jurisdictions. Page 20 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 20 C Personalised or AFS licensee created application forms Key points This section discusses our class order relief for the use and distribution of personalised or AFS licensee created application forms. We have given this relief in ASIC Corporations (Application Form Requirements) Instrument 2017/241. RG 107.63 Under s723(1), securities may only be issued or transferred in response to an application form and if the person issuing or transferring them has reasonable grounds to believe that: (a) the application form was included in, or accompanied by, the disclosure document when the form was distributed by the person; or (b) the application form was copied, or directly derived, by the person making the application from a form referred to in RG 107.63(a). RG 107.64 We have continued to grant class order relief to facilitate the distribution of personalised and AFS licensee created application forms, and to remove any doubt about whether the requirements of s723 are met when such application forms are used. Our relief applies to application forms in both paper and electronic formats. RG 107.65 We have granted class order relief because using personalised or AFS licensee created application forms can: (a) promote efficiency and may therefore lead to costs savings which could flow through to investors and industry; (b) assist in reducing the number of errors made in completing and processing multiple handwritten forms; (c) assist in reducing the time currently taken to complete and process handwritten forms; and (d) facilitate electronic acceptances. Personalised and AFS licensee created application forms RG 107.66 Offerors and AFS licensees occasionally personalise application forms they distribute to investors to assist investors with completing these forms. AFS licensees may also create and distribute their own application forms for offers of securities. A form created by an AFS licensee may differ from the application form distributed by the offeror to issue or transfer the securities. Page 21 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 21 RG 107.67 Relief is not needed to personalise an application form if the personalised application form has been distributed by the offeror and is included in, or accompanied by, the disclosure document. We consider that this is the case whether or not a blank application form was included in the disclosure document lodged with ASIC (as there is no requirement in the Corporations Act for an application form to be lodged with ASIC). RG 107.68 If an AFS licensee creates an application form, or personalises an application form that has been distributed by the offeror, the offeror may not have reasonable grounds to believe that the conditions in s723(1) are satisfied, because: (a) the personalised application form or AFS licensee-created application form is not the form that was distributed by the offeror; (b) the personalised application form is not a form that has been copied, or directly derived, by the person making the application from a form distributed by the offeror, unless the person making the application has authorised the AFS licensee to copy or derive the application form from the application form distributed by the offeror; and (c) the application form created by the AFS licensee has not been copied, or directly derived, by the investor from an application form included in or accompanied by the disclosure document distributed by the offeror. RG 107.69 ASIC Corporations (Application Form Requirements) Instrument 2017/241 provides relief so that an offeror may issue or transfer securities in response to an application form that has been: (a) personalised by an AFS licensee for an investor—our relief overcomes any concerns about the personalised application form not being one that has been distributed by the offeror, or not being copied or directly derived from such a form by the investor; or (b) created by an AFS licensee—our relief overcomes any concerns about an application form created by an AFS licensee not being one that has been distributed by the offeror, or not being copied or directly derived from such a form by the investor. Page 22 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 22 RG 107.70 AFS licensees creating or personalising application forms should ensure that they comply with the licensee obligations under the Corporations Act and any authorisation or conditions on their AFS licence. Note 1: Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36) contains guidance on the meaning of ‘provide financial product advice’, and the meaning of ‘deal in a financial product’ and ‘arranging’ in the context of activities involving the distribution of application forms: see, in particular, Table 4 in RG 36. Note 2: In addition, Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244) contains guidance about how AFS licensees can distribute and present information about a financial product without giving financial product advice, and Regulatory Guide 221 Facilitating digital financial services disclosure (RG 221) contains ‘good practice guidance’ on how to deliver digital financial services disclosure (e.g. Product Disclosure Statements and Financial Services Guides) to clients under Pts 7.6–7.9 of the Corporations Act. Requirements of the legislative instrument RG 107.71 An offeror may rely on the relief in ASIC Corporations (Application Form Requirements) Instrument 2017/241 if all of the requirements of the relief are fully complied with: see Table 3. Table 3: Requirements of the legislative instrument Requirement Description Access The investor is given access to the disclosure document at the same time and by the same means as access to the application form. Note: The reference to ‘disclosure document’ includes any supplementary or replacement disclosure document lodged with ASIC: see s719(4) and (5) of the Corporations Act. Application form The application form contains:  the following particulars of the offer and the disclosure document: − the identity of the issuer; − the nature of the securities being offered (e.g. ordinary shares or options); − the price of the securities; − the date of the disclosure document; and − the expiry date of the disclosure document; and  a prominent statement to the effect that: − there is a disclosure document with information about investing in the securities; and − it is advisable to read the disclosure document before applying for the securities. Page 23 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 23 D Good practice guidance Key points In this section, we have set out our good practice guidance for the use and distribution of electronic disclosure documents and electronic application forms. This guidance focuses primarily on the distribution of documents by email and the internet. However, the principles of good practice should be applied to any electronic method of distributing disclosure documents and application forms. We encourage offerors, distributors and publishers to apply our good practice guidance when distributing electronic disclosure documents and electronic application forms. Principles for good practice guidance RG 107.72 Our 15 principles for good practice guidance seek to ensure that investors receive clear, concise and effective disclosure when disclosure documents and application forms are distributed in electronic format. Our principles aim to address some of the specific risks that may arise or increase when using and distributing electronic disclosure documents and electronic application forms. RG 107.73 Some of this guidance includes our views on the legal requirements in Ch 6D. Our principles aim to assist offerors, distributors and publishers in complying with their legal obligations, and meeting the objectives underlying the provisions, in Ch 6D. We encourage offerors, distributors and publishers of electronic disclosure documents to apply our good practice guidance when using email and the internet for making offers of securities. RG 107.74 While our guidance is directed to prospectuses and other Ch 6D disclosure documents, we encourage offerors to apply the principles (where applicable) to other ‘prospectus-like’ documents (e.g. offer documents used for entitlement offers). Principle 1: Ensuring ease of access to electronic disclosure documents Principle 1 Electronic disclosure documents should be easy to access, retrieve and read. RG 107.75 We recognise that electronic disclosure documents may be distributed to investors in a number of different ways. We understand that the main way in which electronic disclosure documents and electronic application forms are Page 24 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 24 currently distributed in the market is by sending an email to an investor containing: (a) a downloadable electronic copy of the disclosure document (i.e. a locked PDF or TIFF file); or (b) a hypertext link to the disclosure document (on a webpage) or to a website containing the disclosure document. RG 107.76 When a disclosure document is made available on a website, we think it should be easy to find and access, particularly as investors may wish to view the document more than once. Investors should also be provided with clear instructions on how to view and download the disclosure document. RG 107.77 When an investor is provided with a hypertext link to the electronic disclosure document or to a website, the link should take the investor: (a) directly to the disclosure document itself. Hypertext links should take an investor to the first page of the disclosure document and not to a subsidiary page within the disclosure document (e.g. the hypertext link should not take an investor straight to an application form); (b) to a webpage containing the disclosure document (rather than a generic website address); or (c) to a webpage confirming the person’s eligibility to participate in the offering (including but not limited to a jurisdictional disclaimer or confirmation). RG 107.78 This is not intended to be an exhaustive description of the ways in which electronic disclosure documents may be distributed to investors. We acknowledge that there may be other methods of electronic distribution that are currently used in the market, and that technological developments may emerge in the future that create new ways for electronic distribution. We believe that it is up to the offeror to assess and determine the most appropriate method of distribution, taking into account the needs of investors. Principle 2: Managing security risks Principle 2 Electronic disclosure documents should be distributed in a way that does not unreasonably expose investors to security risks. RG 107.79 When an offeror or distributor distributes an electronic disclosure document by email with a hypertext link to a website containing the electronic disclosure document, the email should state whether the website is secure and that any personal details provided by the investor (e.g. to access the disclosure) will be kept confidential. Page 25 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 25 RG 107.80 An offeror should take reasonable steps to ensure that a website that contains the electronic disclosure document or electronic application form is secure. RG 107.81 We believe such reasonable steps would include the offeror ensuring that the publisher has a legal or contractual obligation (e.g. under the terms of any agreement between the offeror and publisher) to ensure that: (a) the website containing the electronic disclosure document or electronic application form is, and will remain, secure; and (b) the publisher has adequate software and safeguards to mitigate security risks. RG 107.82 Offerors and distributors should continue efforts to educate investors about internet scams and other security risks (e.g. phishing, fraud and data corruption or tampering), and may wish to direct investors to the Australian Cyber Security Centre’s Stay Smart Online program. Principle 3: Ensuring receipt of electronic disclosure documents Principle 3 Offerors and distributors that distribute electronic disclosure documents for an entitlement offer to existing investors of a company should take reasonable steps to ensure that investors receive the electronic disclosure document. RG 107.83 In the case of entitlement offers to existing investors of a company, it is important that offers are made to all eligible investors. It is becoming more common for investors to nominate an email address to receive communications from companies. Offerors and distributors should use that email address when sending electronic disclosure documents to investors. RG 107.84 If an offeror or distributor becomes aware that an existing investor of a company has not received the electronic disclosure document (e.g. the offeror or distributor receives an undeliverable email notice), it should make reasonable attempts to contact the investor by other means to give them the disclosure document (e.g. by sending it to an alternative electronic address, if one has been provided, or by sending a paper copy by mail to the investor). RG 107.85 We do not expect offerors and distributors to use special software to monitor whether emails containing electronic disclosure documents have been received, read or accessed. In our view, using a standard email ‘bounce-back’ or undeliverable notification function is a reasonable step that offerors and distributors can take to monitor the receipt of electronic disclosure documents. RG 107.86 We recommend that offerors (and their share registries, as relevant) should endeavour to ensure that investors’ contact details are kept up to date, particularly their email addresses if the offeror proposes to distribute entitlement offers to investors by email. Page 26 REGULATORY GUIDE 107: Fundraising: Facilitating electronic offers of securities © Australian Securities and Investments Commission July 2020 Page 26 Principle 4: Ensuring electronic disclosure documents received are complete and protected from tampering Principle 4 Offerors, distributors and publishers should take reasonable measures to ensure that electronic disclosure documents received by investors are complete and have not been altered or tampered with. RG 107.87 There are a variety of measures that an offeror, distributor or publisher can take to protect the integrity of an electronic disclosure document from unauthorised alteration or tampering, such as: (a) using firewall software to control the security settings of a webpage containing the electronic disclosure document; or (b) using protection tools—such as permission password encryptions, and locked and read-only functions—to control the security settings of the document. RG 107.88 The use of protection features should not prevent the electronic disclosure document from being downloaded, saved or copied by the investor into a personal electronic file for the investor’s own records. RG 107.89 We recommend that offerors and distributors clearly inform investors that they should contact the issuer if they are concerned that they have received an incomplete or altered version of the disclosure document, and advise them how to do so. RG 107.90 An offeror, or a distributor on behalf of an offeror, must not accept an application for securities if it has reason to believe that an investor has, or may have, received an electronic disclosure document that is incomplete, or may have been altered or tampered with. Principle 5: Providing free paper disclosure documents on request Principle 5 Offerors and distributors that distribute electronic disclosure documents and electronic application forms should make available free paper copies of disclosure documents and application forms on request by an investor. RG 107.91 An offeror or distributor should make available, during the life of the electronic disclosure document, paper versions of the disclosure document (including any supplementary or replacement document) and the application form, on request by an investor and free of charge. Such paper versions should be sent to the investor within a reasonable time period, being no more than two to three business days from the request being received. Page 27 REGULATORY GUIDE 107: Fundraising: Facilitating electronic off