No. A failed capital raising does not, by itself, prevent misleading conduct from breaching Australian law. Whether a breach occurred depends on the provision and the facts. ASIC may pursue regulatory remedies without proving that any investor lost money. A private claim for damages needs a loss caused by the contravening conduct. This guide uses the reported Firmus float as its example. |
The rule
These three provisions matter. Section 1041H of the Corporations Act 2001 (Cth) (Corporations Act) bans conduct, in this jurisdiction, in relation to a financial product or financial service that is misleading or deceptive, or likely to mislead or deceive. Section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) bans the same kind of conduct in trade or commerce in relation to financial services.
Section 1041E of the Corporations Act has extra elements and can attract criminal liability. It covers a statement or information that is false in a material particular or materially misleading. The statement must be likely to induce people in this jurisdiction to apply for, acquire or dispose of financial products. Or it must be likely to increase, reduce, maintain or stabilise the price for trading in financial products on a financial market operated in this jurisdiction. The person making the statement or disseminating the information must not care whether it is true, or must know, or ought reasonably to have known, that it is materially false or misleading.
For misleading conduct, the assessment is objective. The court identifies the conduct, works out what meaning it conveyed to the people it was aimed at, and asks whether that meaning was misleading. It looks at the conduct as a whole, in its setting: Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8 at [80]–[83]. The Federal Court had applied the same principles to a listed company’s market statements in ASIC v GetSwift Ltd (Liability Hearing) [2021] FCA 1384. A half-truth can mislead even if each word is literally true: ASIC v Select AFSL Pty Ltd (No 2) [2022] FCA 786 at [262].
The right regime depends on the communication. Misleading statements in a prospectus or other disclosure document under Chapter 6D of the Corporations Act are dealt with separately. Section 728 prohibits them, and s 729 gives a right to recover loss or damage caused by a breach of s 728. Sections 1041H and 12DA carve out conduct that breaches s 728, and conduct that breaches the takeover disclosure rule in s 670A (s 1041H(3); ASIC Act s 12DA(1A)). So an offer document and a broker’s demand message should not automatically be analysed the same way.
What has been reported about Firmus
Firmus Technologies withdrew its proposed ASX listing on 9 October 2026, citing market volatility and prevailing market conditions. The listing would have valued the company at about $44 billion. That is the market value, not the amount it sought to raise, which was reported as about US$5 billion. Press reports also said the following. We have not seen the book, the broker emails or the offer documents and we do not make any comment about the accuracy of the reported information.
- Broker and syndicate messages reportedly told clients that indications of interest were “well in excess” of the offer size (AFR, 8 and 9 October; Guardian Australia, 9 October).
- One broker’s client email reportedly put demand at more than $7.5 billion against $5 billion of available stock. The email as reported does not state the currency (AFR, 9 October).
- The first book message reportedly said that about half the offer would go to, or be allocated to, a select group of existing strategic and institutional shareholders (AFR, 8 October; Guardian Australia, 9 October).
- David Paradice, of Paradice Investment Management, was reported as saying his firm had been told of large US bids that never eventuated (AFR, 9 October).
- An ASIC spokesman declined to comment (AFR, 9 October).
Nothing here is a finding. Testing whether those messages were accurate would need the book at the time and the supporting communications, including what kind of demand was recorded and on what conditions. Public reporting alone does not establish a breach. This guide does not suggest that anyone acted unlawfully.
Why a failed deal does not end the regulatory risk
A failed deal does not, by itself, remove the risk. The question is what was said, when, to whom, and whether the elements of the relevant provision were met at that time.
ASIC does not need to prove an investor’s loss to seek most regulatory remedies. It can apply for an injunction (Corporations Act s 1324; ASIC Act s 12GD). It can seek declarations. It can accept a court-enforceable undertaking (ASIC Act s 93AA). Loss becomes relevant if ASIC seeks compensation for investors. Depending on the facts, inaccurate demand messaging may also raise questions under a licensee’s general obligations, including the duty to provide financial services efficiently, honestly and fairly (Corporations Act s 912A).
Some market misconduct provisions carry civil penalties. Sections 1041H and 12DA do not. Section 1041H carries civil liability only. Section 1041E is an offence provision, and a breach of it can also ground a damages claim under s 1041I.
There is an earlier example of ASIC intervening. It concerned a November 2015 block trade of Healthscope shares run by Goldman Sachs Australia. In July 2018, ASIC accepted an enforceable undertaking from the bank. ASIC’s concerns, recorded in the undertaking, were about representations to potential investors on minimum fixed demand. They also covered whether those statements were corrected when demand softened. By then, the bank had already introduced legal or compliance sign-off of bookbuild messages and compliance attendance on launch sales calls. The undertaking required it to review its systems and controls and fix any deficiencies. It was an undertaking, not a court finding, and that trade did complete.
In December 2018, ASIC’s Report 605 on allocations set out its expectations. Licensees should have a reasonable basis before describing an offer as “covered” or “cornered” (at [169]–[170] and item E1(e)). They should send an update if earlier information becomes inaccurate (item E1(f)). Issuers should ask about the make-up of demand (item E2(b)). These are ASIC’s stated expectations, not new legal duties.
When a private claim arises
A claim for damages is harder. A person can recover loss or damage suffered “by” the contravening conduct: Corporations Act s 1041I (for ss 1041E to 1041H) and ASIC Act s 12GF (for s 12DA, among others). The claim must be brought within six years after the cause of action arose.
Proportionate liability can apply to claims for economic loss based on s 1041H or s 12DA (Corporations Act s 1041L; ASIC Act s 12GP). It does not extend to claims based on ss 1041E to 1041G just because they arise from the same conduct: Selig v Wealthsure Pty Ltd [2015] HCA 18.
The leading High Court case on causation is Henville v Walker (2001) 206 CLR 459; [2001] HCA 52. It was a property case under the former Trade Practices Act. The conduct need not be the only cause of the loss. It is enough that it played some part: at [106]–[107]. But the claimant must still prove that the conduct was a cause of the loss, and the amount. Another event will break the link only in exceptional cases.
If an offer never completes and application money is returned, an applicant will usually have no loss on the shares themselves. Any claim would turn on proving a specific loss caused by the statement, such as costs incurred in reliance on it. Losses can also arise elsewhere. For example, assume an adviser’s pitch about a related listed share was itself misleading, and an investor bought that share because of it. If the share then fell, the investor would need to prove that the pitch was a cause of the loss. The later market reaction would not, by itself, defeat that claim.
Others affected by the conduct can apply for an injunction without proving loss (Corporations Act s 1324; ASIC Act s 12GD). Whether an injunction is still useful after a deal has failed depends on the continuing effects of the conduct and the relief sought.
The trap: "indications" is not a safe word
My view is that the careful word is not the safe word. A message that says “indications” are “well in excess” of the offer uses cautious language. But the court asks what impression the message conveyed to the people it was sent to, at the time. If they would reasonably conclude that the offer is covered, and it is not, the hedge may not help. The reverse also holds true. An accurate statement about non-binding indications does not become false just because bids are later withdrawn. The test is not hindsight.
The same applies to how demand is described. “Taken up”, “reserved”, “indicated” and “committed” mean different things in a bookbuild. So do demand from existing shareholders, demand from connected parties and demand from other investors. None of these is invalid in itself. But a message can be accurate on each point and still leave the impression of broad market support. Say which is which.
Finally, check what brokers say about your raise. Whether an issuer is responsible for a broker’s message depends on the facts: who authorised it, who supplied the numbers, and who left it uncorrected. Assume a regulator would look at the broker’s message alongside your own process.
What to do
- Name one owner of the book. Every demand statement should come from one record. Nobody should write a number from memory.
- Verify, classify and date every number. “Firm bids of $X from new investors as at 9am Tuesday” is safer than “strong demand”. A date does not cure an unsupported figure.
- Separate the kinds of demand. Say whether demand comes from existing shareholders, connected parties or other investors, and whether it is indicated or committed.
- Set a correction rule. As an internal control, if demand softens, promptly assess and correct any continuing misleading impression. Tell everyone who received the earlier message.
- Review what your brokers send. Ask for a copy of any client email that refers to your raise before it goes out.
- If a raise has already gone wrong, preserve the record. Keep emails, call notes, chat logs and book data. Take advice on privilege before anyone writes an internal post-mortem.
If an investor dispute communication on a raise or block trade is on your desk, Trevor Withane leads our commercial disputes team. He can be reached at trevor.withane@ironbridgelegal.com.au.
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Further Information
For further information about misleading and deceptive conduct in capital raisings, regulatory risks associated with bookbuild demand messaging, ASIC enforcement action, or investor claims arising from unsuccessful capital raisings, please contact the author of this article:
