ASIC has stripped Rex of its reduced-disclosure privileges for one year, after it deemed Rex had committed "continuous disclosure failures" towards its shareholders.

ASIC said Rex only revealed its intentions to expand on May 11 to a journalist from the Australian Financial Review, without telling the market first.

Rex placed a trading halt on its share the day after the article was published, and then the day after that it publicly announced its intentions to the ASX.

When it unfroze its shares the next day, Rex's holdings jumped a full 40 per cent at the open from $0.9 to $1.26. At the time of writing Rex's shares were trading for around $2.10, even higher than pre coronavirus levels.

Their plans for expansion have since been set in motion courtesy of foreign investors, with PAG Asia Capital chipping in $150 million in exchange for 48 per cent of Rex.

Following ASIC's decision, Rex will not be allowed to use "reduced-content prospectuses" until 14 December 2021, meaning it will have to disclose all relevant information when raising money from investors.

An ASIC spokesman said they made their decision in order to protect shareholders.

"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," he said.

"ASIC considers the ability to use a reduced-disclosure prospectus a privilege that is dependent on compliance with other aspects of the law, including that companies meet their ongoing disclosure obligations."

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ASIC's investigation into Rex is ongoing, and Rex is still able to overturn their decision by appealing to the Administrative Appeals Tribunal.

A Rex spokesman said they were exploring their options.

"Rex maintains a different view from ASIC and is considering its position in relation to ASIC's decision," he said.

"Rex confirms that these restrictions themselves do not impede the proposed transaction with [PAG] for the issue by Rex of up to $150 million in convertible notes."

Despite ASIC's recent ruling, Rex's plans for expansion do not appear to be in jeopardy, having already received approval from the Civil Aviation Safety Authority.

The PAG funding has also been set in stone, and all that remains is for Rex's shareholders to approve the transaction in late January next year.

The expansion will open up more connecting flights from Wagga, which will eventually be linked up to all the "major cities" in Australia under the new schedule.