Corporate watchdog ASIC will keep a keen eye on companies listing on the ASX after it suggested IPOs from small mining juniors might be open to a limited group of investors focused on short-term gains.

The Australian Securities and Investments Commission (ASIC) looked at 17 companies worth a collective $300 billion on the ASX in a review published last week.

These companies were seeking capital injections of less than $20m at the time and represented 23.6 per  cent of mining IPOs undertaken between 2016 and 2018.

After running an eye over 50,000 documents and interviewing 45 people, the watchdog highlighted a number of concerns.

These included that professional advisers had sometimes acted both as lead managers and agents for investing clients during an IPO.

ASIC took a view last Thursday that lead managers could therefore influence the make-up of a company’s register and make it tighter.

“Preferential allocations to investors within lead manager networks generally lead to a ‘tight’ register and greater levels of influence or control of the company’s register by the lead manager,” ASIC argued.

The watchdog also flagged the lead manager’s influence could tighten its control of the company and encourage a short-term rather than long-term perspective on shareholder returns.


ASIC monitoring may go way back

The regulator also argued the structure and design of IPOs could “inflate market interest in the company in the short term post-listing.”

“Promotional activities are often used to increase ‘news flow’ and interest in a company shortly after listing before it has had an opportunity to deliver the exploration program identified in its prospectus,” ASIC put forward.

The corporate regulator said it would continue to monitor mining transactions and the actions of lead managers and companies.

“We may intervene or take enforcement action where we consider there is conduct that is unlawful or poses risks of harm to investors,” ASIC wrote, noting it would look at other industries too.

“Our focus will not be limited to the prospectuses lodged by mining companies and we may review practices that occur before, or after, lodgement of a prospectus.

“In particular, we may focus on activities and conduct by lead managers given the significant roles many have in connection with mining IPOs.”

Mining and exploration companies accounted for the lion’s share of between 25 and 35 per cent of IPOs in 2017 and 2018, respectively.

Most of the listings, about 97 per cent, were targeting capital raisings of $20m or less.


Disclosure not be all and end all

In a statement issued with the report, ASIC Commissioner John Price argued disclosure rules had limitations and these could lead to “poor” outcomes for investors.

“Companies and advisers need to conduct themselves in a way that is fair and responsible,” Price said.

“Disclosure has limits and over reliance on disclosure alone can lead to poor investor outcomes and a loss of confidence in the market.”

The ASIC Commissioner tipped the regulator would look at business practices and the people involved with companies going forward.

“ASIC will … focus more on the underlying business practices and processes supporting IPO transactions in future, including the conduct and governance practices of company directors and advisers,” he warned.

Price confirmed ASIC would extend its attention to companies outside mining and exploration sectors and noted what the regulator had argued in its report, that it could intervene or take enforcement action where it “considers there is conduct that is unlawful or poses risks of harm to investors”.

ASIC believes recommendations in its report are consistent with recent ASX changes to listing rules and guidance designed to improve transparency.

To read ASIC report 641, visit