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Investor protection is a central policy goal of corporate and securities law around the world. Our recent Working Paper explores how Australian law protects public company investors when they rely to their detriment, on inadequate, false or misleading information released by the company. As our paper shows, although investors in these circumstances are in theory protected by the continuous disclosure regime and by the misleading or deceptive conduct provisions of Australia’s corporations legislation, various factors, such as the existence of carve-out provisions, can limit the effectiveness of that protection in practice.

Australia operates under a ‘twin peaks’ model of regulation. This model received attention following the global financial crisis, in view of Australia’s relatively good performance during the crisis, and it has now been adopted by several jurisdictions in Europe and other parts of the world. The two key peaks of the Australian model are APRA, the prudential regulator, and ASIC, the business conduct regulator.

Our paper focuses on the need for adequate enforcement to ensure that regulatory techniques, such as disclosure, are effective in practice. As our paper shows, Australia uses both public and private enforcement mechanisms to protect investors who have relied to their detriment, on inadequate, false or misleading information. ASIC occupies a particularly important position in relation to public enforcement because it is the primary enforcer of Australia’s civil penalty regime under the Corporations Act 2001, which encompasses statutory directors’ duties, continuous disclosure requirements, and market misconduct offences, such as market manipulation. In the private enforcement arena, as well as shareholder derivative suits, Australian law also permits the use of shareholder class actions. Although class actions were non-existent prior to the 1990s, they have become a significant private enforcement mechanism since that time.

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