Regional Express fined $66,000 by ASIC for non-disclosure of national airline plan to ASX

Regional Express (REX) stated it will comply with the penalty notice but has not admitted any guilt or liability under corporate regulations.

REX was formed in 2002 via a merger of Wagga-based Kendell Airlines with Hazelton Airlines in the Central West, and the company maintains a pilot academy at Wagga airport.

The Australian Securities and Investments Commission (ASIC) stated it found "reasonable grounds to believe that REX was in breach of its continuous disclosure obligations...by failing to inform the Australian Securities Exchange (ASX) that it was considering the feasibility of commencing domestic operations in addition to its regional operations".

The ASX requires publicly traded companies to disclose information to investors "that a reasonable person would expect to have a material effect on the price or value" of the company's shares.

REX deputy chairman John Sharp told the Australian Financial Review in May last year that the airline would seek to raise $200 million to "lease a fleet of about 10 aircraft and hire new pilots, cabin crew and ground staff" to compete with Qantas and Virgin Australia on capital city routes.

ASIC stated that companies were required to declare information that could affect share prices, including when the information is provided to a journalist, to "protect the integrity of the market by ensuring investors are provided with equal and timely access to information".

IN OTHER NEWS

The Financial Review story was published online at midnight on May 12 and the ASX paused trading in REX's shares a few minutes after the market opened at 10am that day.

"Following the release of the article on 12 May 2020, ASX contacted REX about the article and REX was placed in a trading halt," ASIC's statement said.

"Later that day, REX disclosed to ASX that it was considering the feasibility of commencing domestic operations."

NSW Labor Senator Tony Sheldon wrote a letter of complaint to ASIC, claiming REX's expansion plan was "inappropriate" while it was receiving millions of dollars in emergency funding from the federal government and its failure to keep investors informed "flies in the face of Australian corporate standards".

REX's response to ASIC and the ASX, authorised by executive chairman Lim Kim Hai, the airline stated that it "maintains the position that it did comply with those obligations at all times and will continue to comply with these disclosure obligations".

"Be that as it may, Rex has elected to comply with the Infringement Notice and pay the penalty of $66,000 on a no-admissions basis, and as provided for under the [Corporations] Act:

"The issue of the Infringement Notice, and subsequent compliance with it, is not an admission of liability by Rex and cannot be regarded as a finding that Rex has contravened subsection 674(2) of the [Corporations] Act for any other purpose".

In November, REX agreed to sell 48 per cent of its shares to Hong Kong-based firm PAG in exchange for $150 million, which the airline used to lease Boeing 737 jets and launch its capital city services in March.