28 August 2013

Australia: ASIC releases report on emerging market issuers

Following the high profile collapse of some emerging market issuers overseas ASIC has undertaken a review of these types of entities here in Australia. Our review has not identified at this time any areas of systemic concern, however ASIC does consider that there are some specific challenges that retail investors should be aware of before making the decision to invest in an emerging market issuer.

Today ASIC has published Report 368 Emerging market issuers (REP 368) about our review of emerging market issuers.

REP 368’s key points:

  • ASIC identified challenges emerging market issuers may be more likely to encounter than entities operating wholly in Australia.
  • ASIC is urging emerging market issuers and their advisers to focus on their corporate governance and the disclosure they provide to Australian investors regarding these challenges.
  • Investors should consider the risks before investing in an emerging market issuer.
  • Investors need to know that they may not have the same protections when investing in an emerging market issuer that is listed in Australia but incorporated abroad.

As described in REP 368, ASIC found that there are a number of challenges faced by entities that are operating in, or have significant exposure to, emerging markets. Common challenges include implementing good corporate governance and management systems, operating through complex ownership or contractual arrangements, risks associated with relying on one or two key individuals located outside Australia, and the difficulty in accessing or verifying reliable information about an entity’s operation and performance.

The report recommends emerging market issuers respond to these challenges by implementing effective internal controls and risk management systems. It is important that entities focus on making appropriate disclosure to investors consistent with an exchange’s listing rules and ASIC’s regulatory guidance.

ASIC is shining a light on emerging market issuers and their governance and disclosure, because we want to lift the sector’s transparency. And that is because we want investors to be confident and informed when putting their money in these companies,’ ASIC Commissioner John Price said.


ASIC will continue to monitor emerging market issuers in the coming year by including a number of these entities in its financial reporting surveillance programs and through reviewing selected disclosure documents lodged with it.

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