IN THE MATTER OF SISS BUSINESS SECURITIES SYSTEMS LIMITED
(ACN 085 265 309)

1. SISS Business Securities Systems Ltd (SISS) is an Australian unlisted public company. It is developing advanced information technology programmes and for some years has raised capital to fund development work by private offers to investors known to the directors or introduced to them.

2. That type of offer of shares may lawfully be made in Australia without a registered prospectus provided one or more grounds of exemption are satisfied. Aside from the exemptions, Australian law provides that an offer of securities may not be made unless disclosure has been made to the investor by means of a prospectus registered with the Australian Securities & Investments Commission.

3. The Australian applicable law is found in the Corporations Act 2001, Part 6D.2 (entitled "Disclosure to investors about securities"). Section 727(1) provides that a person must not make an offer of securities or distribute an application form for an offer that needs disclosure to investors by a registered prospectus under Part 6D.2, while section 734 provides that a person must not advertise an offer of securities that would need disclosure by a prospectus.

4. The exemptions within Part 6D.2 are found in section 708 of the Corporations Act. They fall into a number of categories and are technical. It is possible to combine the exemptions. Exempt offers may be made: (a) to a restricted number of private investors up to a maximum number per annum and subject to an annual ceiling as to value; (b) to investors who are certified by their accountant as sophisticated (able to look after their own interests); (c) to professional investors as defined; (d) to investors who are assumed (due to the size of the investment to which they agree) to be able to look after their own interests; and so on.

5. I am instructed that SISS believed that it was complying with the exemptions in its capital raising activities. It now accepts that at times in the period from 1 July 2008 through to about 6 October 2009 it did not do so. Ironically, during 2009, SISS was working with its then lawyers to draft and register a prospectus to enable it to offer its shares more widely to the public.

6. In mid 2009, ASIC expressed concern to SISS that its then corporate fundraising was not fully compliant with the Australian prospectus provisions. Accordingly, ASIC commenced a legal action in the Federal Court of Australia, seeking orders and declarations against SISS and its managing director. SISS gave a voluntary undertaking to the Court in October 2009 to abide by the law and the proceeding was settled by agreement in November 2009 without trial, on a "no contest basis": SISS agreed that it would consent to a declaration that it had breached the Australian prospectus and share advertising rules in the period 1 July 2008 to 6 October 2009 and would not oppose an injunction requiring it and its director to comply with the law (that is, not to make offers that required a prospectus without registering one). The Federal Court duly made declarations and orders to this effect on 21 December 2009.

7. The orders left SISS free to carry on its business; to raise capital by exempt offers (provided the terms of the exemptions were observed); and to raise capital from the public under a registered prospectus that complied with the law. SISS's prospectus was lodged with ASIC with effect from 24 December 2009. SISS has lodged further prospectuses in May and September 2010.

8. It should be observed that the orders against SISS were the minimum relief sought by ASIC and involved ASIC not pursuing a broader, contested case that SISS maintained it would defend vigorously. The Court made no findings of wider misconduct or infringements and there was no evidence put before the Court. No fine, damages, penalty or conviction was found or entered against SISS or its directors or executives.

PETER WILLIS
Barrister at law
Owen Dixon Chambers, Melbourne
October 2010