The corporate regulator has warned float hopefuls not to play fast and loose with facts amid an encouraging year-end run of initial public offers.
The Australian Securities and Investments Commission is concerned some companies are misleading investors in their rush to tap an emerging recovery in the equity-raising market.
While the number of IPO prospectuses lodged with the commission in October and November quadrupled to 22 from the previous two-month period, nearly a quarter were deficient, prompting regulatory action by ASIC.
Speaking in Perth yesterday, ASIC commissioner John Price said the shortcomings included "numerical forecasts where there doesn't appear to be a basis for the forecasts, missing historical financial information, overstatement of contracts or customers and insufficient disclosure of related party transactions".
"By and large, we think Australia has pretty good compliance and continuous disclosure regimes," Mr Price said.
"We see this as more of an opportunity to remind the market what the expectations are rather than saying anything is fundamentally broken.
"Investors need to have a strong degree of confidence in the disclosures they are reading when they are investing.
"If there are concerns, they may well have concerns about investing their hard-earned money into the stock market."
After an extended period of stagnancy, the IPO market is showing signs of recovery, with more than 20 companies lined up for listing this month.
They include some of this year's biggest raisings - Dick Smith Holdings, which will join the trading boards today, data and credit reporting company Veda Group (tomorrow), Nine Entertainment (Friday) and Affinity Education on December 11.
AISC no longer vets all prospectuses, instead making a risk-based assessment of the documents during the seven-day, so-called exposure period before the opening of an offer.
"We are looking at the adequacy of the disclosure, not the merits of the investment," Mr Price said.
ASIC has reinforced its stance recently by levying fines for continuous disclosure breaches by a number of companies.
Cloverdale based, Chinese-controlled gold explorer Stone Resources Australia is the latest to contribute to ASIC's coffers, paying a $33,000 fine for waiting nearly two weeks to disclose an increased gold resource in April.
ASIC said payment of the fine was not an admission of guilt or under the Corporations Act.