Overview

The Australian Securities and Investments Commission (ASIC) introduced Class Order [CO 09/1084] under the Corporations Act 2001 to address the issue of credit ratings being cited in disclosure documents, Product Disclosure Statements (PDS), target's statements, and bidder's statements without the consent of the credit rating agencies. Previously, Class Orders [CO 07/428] and [CO 07/429] allowed issuers to include credit ratings from Standard & Poor’s, Moody’s Investor Service, and Fitch Ratings without obtaining consent. However, following public consultation, ASIC decided to withdraw this relief, effective for documents dated after 1 January 2010. The primary objective of Class Order [CO 09/1084] is to ensure that credit rating agencies have control over the use and presentation of their ratings in disclosure documents, thereby enhancing accountability and ensuring that liability for the content of these documents attaches only to those who have consented to having their statements cited.

Scope and Application

ASIC Class Order [CO 09/1084] applies to issuers and other entities involved in the preparation of disclosure documents, Product Disclosure Statements (PDS), target's statements, and bidder's statements that reference credit ratings from Standard & Poor’s, Moody’s Investor Service, and Fitch Ratings. The Class Order operates within the jurisdiction of the Australian Securities and Investments Commission (ASIC) and affects entities that are subject to the Corporations Act 2001. It modifies previous class orders, [CO 07/428] and [CO 07/429], by withdrawing the relief that allowed the citation of credit ratings without the consent of the credit rating agencies. This change means that from 1 January 2010, issuers and other relevant entities must obtain consent from the credit rating agencies before including their ratings in any disclosure document, PDS, target's statement, or bidder's statement. The Class Order applies nationally across Australia, as it is an instrument made under the Commonwealth’s legislative authority. The modifications made by this Class Order do not apply to documents dated before 1 January 2010, thereby ensuring that only future documents are subject to the stricter consent requirements.

Key Provisions

The ASIC Class Order [CO 09/1084] modifies two previous class orders, [CO 07/428] and [CO 07/429], to withdraw the relief that previously allowed issuers to cite credit ratings from Standard & Poor's, Moody's Investor Service, and Fitch Ratings in disclosure documents, Product Disclosure Statements (PDS), target's statements, and bidder's statements without the consent of these credit rating agencies (section 3). This change applies to any such documents dated after 1 January 2010, while documents dated before this date remain unaffected (section 4). The purpose of this class order is to reassert the requirement for consent from credit rating agencies before their ratings are cited in these documents, thus aligning with the general requirement under the Corporations Act 2001 that statements in such documents must be consented to by the person making them (section 1). Under the Corporations Act 2001, issuers are prohibited from citing a statement in a prospectus or PDS unless the person who made the statement has consented to its inclusion (section 716 and 1013K). The obligations imposed by the ASIC Class Order [CO 09/1084] on issuers and other relevant parties are to ensure that they obtain explicit consent from the credit rating agencies before including their ratings in any disclosure documents, PDS, target's statement, or bidder's statement. This requirement aims to maintain the integrity and accountability of the information presented to investors and the public, ensuring that credit rating agencies have control over how their ratings are used and presented. The withdrawal of the relief provided by the previous class orders does not introduce new offences or penalties but reinforces the existing legal framework under the Corporations Act 2001. Non-compliance with the requirement to obtain consent from credit rating agencies before citing their ratings in disclosure documents, PDS, target's statements, or bidder's statements could lead to legal consequences under the Act. This may include enforcement actions by ASIC, which could result in penalties for the issuer, including fines and other corrective measures. The penalties for breaches of the Corporations Act 2001 can vary, but for serious or repeated breaches, individuals may face substantial fines, and corporations can face even higher financial penalties, depending on the severity and impact of the breach.