The Australian Securities and Investments Commission (ASIC) has provided class order relief which will help promote the issue of vanilla corporate bonds to retail investors.

The ASIC initiatives will simplify the disclosure requirements for certain offers of listed vanilla bonds by allowing such offers to be made with reduced disclosure under a short-form prospectus. The measures will also allow vanilla bonds to be offered under a two-part prospectus, comprising a base prospectus (which may be used for a number of different offers) and a second part prospectus (which will relate to a particular offer).

ASIC has also provided class order relief to facilitate offers of convertible notes to wholesale investors.

'This is an important change which will help build the depth and liquidity of the country's capital markets and, in the longer-term, assist in developing Australia as a global financial centre,' said Mr Tony D'Aloisio, Chairman of ASIC.

'This relief will facilitate corporate fund raising, reducing the time and expense for companies to issue these bonds,' Mr D'Aloisio said.

The relief is subject to the following conditions: The size of the issue is at least $50 million to maximise the prospects of a liquid secondary market (this requirement will lapse after 2 years unless ASIC renews it); the bonds will be publicly quoted on an exchange on issue; the issuer must provide certain upfront and ongoing disclosures in relation to the bonds; companies issuing the bonds are listed and have a good continuous disclosure history.

They have not been suspended for more than five days over a period of 12 months. the bonds are vanilla, that is, they are do not have complex or unusual terms of conditions; the bonds have a maximum term of ten years; and, the relief does not currently extend to the issue of subordinated debt (ASIC intends to consult further on relief for offers of subordinated bonds within the next 12 months).

The relief is consistent with recommendations of the Johnson Report on 'Australia as a Financial Centre: Building on our Strengths' to develop a more diversified and liquid retail bond market, but does not adopt all of its recommendations at this stage. For example, the ASIC relief is limited to issuers that are listed on an Australian financial market rather than overseas markets. In addition, the ASIC relief does not require the bonds or the issuer to have a minimum credit rating since there are currently no credit ratings agencies with a licence covering the provision of ratings to retail investors.