Labor senator calls for ASIC investigation into Rex

A Labor senator has requested that the corporate watchdog investigate whether Regional Express Holdings broke the law by announcing plans to expand with capital city services without informing the ASX.

Instead, the regional airline announced its scheme – along with a $200 million equity raising – through The Australian Financial Review on May 12, prompting the ASX to halt trading in the company's shares for breaking listing rules.

Now Labor senator Tony Sheldon wants the Australian Securities and Investments Commission to investigate Rex for possible breaches of the Corporations Act.

"Rex's plans to expand into markets in direct competition with Qantas and Virgin, after having received a disproportionate share of government financial support, are inappropriate and exploitative," he said.

"Their failure to inform the ASX of these plans per the ASX listing rules flies in the face of Australian corporate standards.

"If Rex or any officer of Rex has contravened the Act, I further request that ASIC take appropriate enforcement action against them."

Senator Sheldon's request – made in a letter to ASIC chairman James Shipton on Friday – refers to sections of the Act covering the continuous disclosure requirements of ASX-listed companies.

It binds these entities to inform the market operator of information it is required to under the listing rules. Further, the law requires disclosure to the ASX of any other information not generally available, or that which a reasonable person would expect to have a material effect on the company's shares.

The ASX defines the former in listing rule 3.1, which reiterates the requirements of the Act.

A breach of these requirements brings with it civil penalties.

When Rex exited the trading halt on May 13, after deputy chairman – former Nationals MP – John Sharp revealed the company's plan, shares soared 32 per cent to $1.19.

Rex shares have since fallen to $1.06.

"A reasonable person would expect that the information detailed by Mr Sharp, in his interview with [the Financial Review] in relation to Rex's expansion plans, would have a material effect on the price or value of Rex's securities," Senator Sheldon said.

Rex apologised to the ASX last week, saying it did not believe the information would materially affect its shares.

"Rex has always tried to ensure that any material information is disclosed to the ASX prior to the release to the general public," it said.

"In this particular instance, Rex believed that information about possible city operations was not sufficiently definitive to constitute material information.

"Rex has made many announcements of contracts worth several hundreds of millions [of dollars] with barely a ripple on the share price. Given how the share price reacted to the news, it is evident that our judgement call was erroneous.

"We wish to reassure ASX that Rex will err on the side of caution in the future."