Responsible entities of unlisted property funds should familiarise themselves with the findings ASIC has made following its recent review of disclosure to investors by the unlisted property industry. In particular, they should ensure that all of the benchmarks in Regulatory Guide 46, Unlisted property schemes: Improving disclosure for retail investors are adequately addressed in a single location on their website and/or in a single stand-alone document available in print or electronic form.
ASIC has described its recent review of disclosure to investors by the unlisted property industry as 'disappointing'.
The review (see media release dated 23 July 2014), which was part of a broader surveillance into the managed investment and superannuation sectors including listed and unlisted property funds, found that unlisted property schemes were failing to adequately disclose against benchmarks put in place in March 2012 in Regulatory Guide 46 Unlisted property schemes: Improving disclosure for retail investors (see also media release dated 28 March 2012) to improve investors’ awareness of the risks of investing in these products.
RG 46 introduced benchmarks which unlisted property schemes are required to address on an ‘if not, why not’ basis, including key issues such as schemes’ gearing policy, interest cover policy, related party transactions and distribution practices. The findings from the review were that responsible entities either failed to address certain benchmarks or did not provide enough information and also failed to provide the information in a single location either on their website and/or in a single designated document.
As a result of the review, 1 scheme withdrew its Product Disclosure Document and a further 3 entities will be questioned about their disclosure. ASIC has also indicated that it will be meeting with industry to discuss its concerns and ensure they are addressed.
The review follows Report 398 Fee and cost disclosure: Superannuation and managed investment products which was released on 8 July 2014 (see also ASIC media release dated 8 July 2014). That report outlines the results of ASIC’s review of how fund managers and super funds disclose fees. It identified:
- key areas where inconsistent disclosure of fees and costs occurs, including non-disclosure of fees and costs relating to investment in underlying investment vehicles, incorrectly disclosing fees net of tax and inconsistent disclosure of performance fees;
- ASIC’s view on proper disclosure with regard to the key areas identified; and
- further work that ASIC will undertake to assist industry in meeting its fee and cost disclosure obligations, including industry guidance.
ASIC has indicated that it will shortly be releasing further information on its surveillance of the managed investment and superannuation sectors.