Retail corporate bonds: not yet available at Coles or Woolies

Is your desk bending under the weight of a pile of monotonously similar, simple, clear-concise-and-effective, two-part retail bond prospectuses? No? Before you call your broker, read on.

Unshackling the retail bond market or going in circles? 

The Commonwealth Government has recently released an exposure draft of proposed amendments that are, in the Government's words, designed to improve the attractiveness for corporations of issuing corporate bonds to retail investors. While welcome, the proposals do not go much beyond similar recent efforts by ASIC (achieved through modifying the Corporations Act using its Class Orders power), which in almost two years have had a negligible effect on the number of retail corporate bond issues. The proposals then, are no game changer, but are a modest step in the right direction.

What's on the table?

Under the Government's proposals, a listed entity (or a subsidiary of a listed entity) will be able to issue corporate bonds to retail investors under a two-part, short-form prospectus that must satisfy content requirements similar to those for a short-form prospectus for the issue of quoted securities. A two-part prospectus will comprise:

• a base prospectus, which can last for up to three years, that can be used for a number of different bond offers; and
• a second part prospectus, that contains information relating to a specific issue of bonds, which must have an expiry date no more than 13 months after it is lodged with ASIC.