Levelling the playing field for retail investors | Second Interim Report

Dear Fellow Shareholder,

We are pleased the Senate Select Committee on Financial Technology and Regulatory Technology has acknowledged our desire to look after Australian retail investors and level the playing field on billions of dollars of capital raisings. The Committee has released the Second Interim Report on its Inquiry, opening the potential for the government to level the playing field for retail investors.

We firmly believe all shareholders (retail and wholesale) should be treated equally and equitably when investing in the Australian equity market. We have engaged with the Committee’s consultation process to propose reforms to regulation enabling all investors to equitably participate in equity raisings for entities listed on the Australian Securities Exchange (ASX).

We lodged our submission to the Committee on 11 December 2020 calling for the Committee to explore mechanisms to level the playing field for retail investors and on 12 February 2021 our Chief Financial Officer Jesse Hamilton spoke at the Committee’s hearing in Sydney.

The Committee’s report acknowledges the flaws of the current system and makes three notable recommendations:

Issues around capital raising

The committee sees the need to improve the regulatory framework around capital raisings, with data provided to the committee showing that only 13 per cent of recent capital raisings between February and November 2020 went to retail investors, with the rest going to fund managers and institutions. The committee considers that increased transparency about capital raisings would put pressure on companies to act in the interest of all shareholders; for example, companies should be required to disclose to all investors, after a capital raise is completed, how the raising has been allocated and why it has been allocated in a particular way. Modernising the rights issuance system through the use of technology should also be pursued to help address the inability of retail investors to fully engage with raisings. If these changes do not resolve these issues, the government should review the sophisticated investor definitions in the Corporations Act 2001, which witnesses before the committee have argued unfairly exclude some retail investors.

Recommendation 11
7.47 The committee recommends that the Australian Government amend existing legislation to require post-capital raising disclosure from listed companies.

Recommendation 12
7.48 The committee recommends that the Australian Government should ensure that technology drives an equitable deal for retail shareholders by modernising the rights issuance system.

Recommendation 13
7.49 The committee recommends that if the rights issues reforms contained in the recommendations above do not resolve the equity issues for retail shareholders, the Australian Government should conduct a review into retail shareholder participation in capital raisings.

I have been in contact with the Committee Chairman Senator Bragg regarding the report and its recommendations and we will continue to advocate for retail investors’ full and fair participation in the equity market. You can read more about our position on these matters by reading Chief Executive Officer Kate Thorley’s March 2020 Australian Financial Review column.

If you have any questions in relation to this matter, please call me or Corporate Affairs Advisor Olivia Harris on (02) 9247 6755.

Kind regards,

Geoff Wilson AO
Chairman & Chief Investment Officer