ASIC reports findings of its study of IPO due diligence processes

ASIC today released findings of its study of the due diligence processes adopted by 12 IPOs. (VIEW LINK) Two key findings are of particular concern. The first is evidence of superficial involvement by the issuer's Board of Directors: certain directors have little involvement in preparing the prospectus before signing off on it. ASIC's view is the directors of small to mid-sized issuers, while typically more involved in the issuer's business, appear to not be engaged in or adequately oversee the due diligence process where they can add value. Secondly in a finding about IPO advisers, legal advisers were seen to vary considerably in the standard of legal due diligence, which ASIC attributes to the fact the due diligence process is typically managed and driven by the legal advisers. In other words, managing the process soaks up resources needed for the legal due diligence. ASIC appears happy with the financial due diligence by investigating accountants. ASIC says it will consider targeted reviews of offers supported by particular legal advisers as part of its ongoing monitoring of the IPO market.