Australian Securities & Investments Commission, in the matter of MG Responsible Entity Limited v MG Responsible Entity Limited

The Australian Securities and Investments Commission (ASIC) brought proceedings against MG Responsible Entity Limited (MGRE) in relation to alleged breaches of the Corporations Act 2001. ASIC claimed that MGRE had contravened section 674(2) of the Act by making certain statements regarding the future financial performance of MG, a large dairy company. The parties agreed that the contravention was serious for the purposes of section 1317G(1A) of the Act. MGRE, a wholly-owned subsidiary of MG, had issued a product disclosure statement (PDS) and made subsequent public statements that contained forecasts for MG's net profit after tax (NPAT) and farm milk price (FMP) for the financial year 2016. These forecasts were based on assumptions that dairy commodity prices would strengthen. However, subsequent announcements indicated that the forecasts might not be achieved if certain conditions were not met. The court was required to determine whether MGRE's actions constituted a contravention of section 674(2) of the Act and whether the contravention was serious enough to warrant a pecuniary penalty under section 1317G(1A). The court found that MGRE's statements were misleading because they did not adequately disclose the risks associated with the forecasts, particularly the dependence on the strengthening of dairy commodity prices. The court held that MGRE had contravened section 674(2) of the Act and that the contravention was serious. Consequently, the court ordered MGRE to pay a pecuniary penalty of $650,000 and the plaintiff's costs of $25,000. This decision highlights the importance of ensuring that public statements regarding future financial performance are not misleading and that all material risks are adequately disclosed.