The corporate regulator has slammed airline Regional Express Holdings Ltd (ASX: REX) for "continuous disclosure failures" to shareholders and the ASX.
The Australian Securities and Investments Commission (ASIC) on Wednesday slapped a one-year ban on the company from issuing reduced-content prospectuses to raise money on the ASX.
Regional Express must now produce a full prospectus to ask investors for further cash.
The corporate regulator didn't mince words in explaining the prohibition.
"ASIC's decision was based on REX's failure to disclose to the market that it was considering the feasibility of commencing domestic operations, such as flying to capital cities, in addition to its regional operations," stated the commission.
"This information was first released publicly to a journalist on 11 May 2020."
What did Rex do exactly?
The incident refers to Rex deputy chair John Sharp's interview with the Australian Financial Review, where he revealed a new $200 million plan to start flying between Sydney, Melbourne and Brisbane.
Up until then, Regional Express had flown between regional and rural destinations and never directly competed with the likes of Qantas Airways Limited (ASX: QAN) and Virgin Australia.
After the publication of that article, Regional Express was forced to place a trading halt on its shares. The next day it made an official announcement to the ASX revealing the $200 million initiative.
The Motley Fool has requested comment from Regional Express.
ASIC stated that the use of a reduced-disclosure prospectus was "a privilege" conditional on legal compliance, including meeting market disclosure responsibilities.
Ironically the reprimand failed to dampen investor enthusiasm for Rex shares.
The Rex share price was up 9.14% at 2.30pm AEDT on Wednesday, in response to the company's receipt of a High Capacity Air Operator's Certificate from the Civil Aviation Safety Authority.
This means the airline is another step closer to competing in the lucrative capital city routes, which it plans to do from 1 March.
