ASIC has issued two interim stop orders on Candy Club Holdings Limited (Candy Club) in relation to:
- a public offer (Offer) made under a prospectus lodged with ASIC on 21 August 2024 (Prospectus) in connection with the back door listing of Scalare Partners Pty Limited (Scalare); and
- a target market determination (TMD) prepared by Candy Club in connection with the Offer.
Candy Club is currently suspended from trading on the Australian Securities Exchange.
The interim stop orders prevent Candy Club from:
- offering or issuing securities under the Prospectus; and
- dealing with interests in Candy Club, giving a prospectus or providing financial advice to retail clients under the existing TMD.
The orders are valid for 21 days unless revoked earlier.
Prospectus interim stop order
ASIC was concerned that the Prospectus did not adequately disclose all of the required information under section 710 of the Corporations Act 2001 (Corporations Act), including, but not limited to:
- Scalare's proposed expansion into the United States, including information regarding potential risks of the proposed expansion and whether Candy Club needed to raise further capital in order to fund that expansion; and
- the valuation and performance of underlying investments in Candy Club's portfolio on completion of the Offer, including how each of the underlying investments will be valued and how a dollar value will be attributed to qualitative valuation measures.
DDO interim stop order
At the time of lodgement of the Prospectus, Candy Club had not prepared a TMD for the Offer. While the Offer relates to an offer of ordinary shares, ASIC considered that the design and distribution obligations (DDO) applied to the issuer on the basis that, on completion of the Offer, Candy Club would be carrying on an investment business for the purposes of section 994B(4)(b) of the Corporations Act. Candy Club subsequently provided a TMD for ASIC's review after ASIC communicated with the company.
ASIC was concerned that Candy Club's TMD was deficient and did not comply with Part 7.8A of the Corporations Act. ASIC made the interim stop order to protect retail investors from potentially investing in an offer that may not be suitable for their financial objectives, situation or needs.
ASIC was concerned that it would not be reasonable to conclude that, if the product were issued to a retail client in accordance with Candy Club's distribution conditions, that it would be likely that the retail client falls within the company's target market.
Background
Where ASIC has concerns that a prospectus does not meet relevant disclosure requirements under the Corporations Act, it may issue an interim stop order that no offer or issue of securities be made while the order is in force. Where ASIC's concerns are promptly satisfied, ASIC may revoke the interim stop order to allow the offer to proceed.
DDO requires firms to design financial products that meet the needs of consumers, and to distribute those products in a targeted manner. ASIC reminds issuers that a TMD is an important requirement under DDO. It is a mandatory public document that sets out the class of consumers a financial product is likely to be appropriate for (target market) and matters relevant to the product's distribution and review.
ASIC recently called on product issuers to review their distribution practices for DDO compliance. For more information see 24-200MR.
To date, ASIC has issued 88 interim stop orders and one final stop order under DDO, including the order for Candy Club.
Ensuring compliance with the design and distribution obligations is a key focus for ASIC. We will continue to take regulatory action where warranted and use the design and distribution obligations to improve consumer outcomes.
