ASIC freezes timber prospectus
TheAustralian Securities and Investments Commission(ASIC) has placed an interim stop order on the Timber Australia Project’s prospectus of April 19.
ASIC was concerned that the forecasts in the prospectus were not reasonable, and that investors would not be in a position to make an informed decision about investing in these securities.
The prospectus forecast that future prices of timber will increase by two per cent per annum for the next 15 years of the life of the project. ASIC did not believe that there were reasonable grounds for basing long-term timber prices on current prices and extrapolating those prices by an assumed annual Consumer Price Index (CPI) increase.
Another concern of the securities watchdog was that there was not adequate explanation to verify that the assumed CPI increase of two per cent per annum is reasonable over the period, and that there is a correlation between timber price movements and the CPI.
No independent opinion on the reasonableness of the forecast returns was offered, ASIC says, which would have complied with ASIC Draft Policy Statement 170 Prospective Financial Information.
The project had called for investments into a scheme that oversaw planting, harvesting and processing into timber products of Sydney blue gums and spotted gums. The prospectus offers interests in the project as well as shares in the landholding company, Timber Australia Properties.
“ASIC will continue to focus on the reasonable nature of forecast information in prospectuses and product disclosure documents, and take action where necessary,” ASIC director of financial services regulation Sean Hughes says.
“While experts have an important role in providing independent assurance to investors, they must ensure that they fully disclose the basis for their opinions and that their conclusions are reasonable.”
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