ASIC Introduces New disclosure Policy of Unlisted Property Scheme Risks

The Australian Securities and Investments Commission (ASIC) introduced a new disclosure principle and six new disclosure benchmarks for unlisted property schemes to improve investors’ awareness of the risks of investing in these products. 

Regulatory Guide 46 Unlisted property schemes: Improving disclosure for retail investors (RG 46) has been revised as ASIC was concerned there was insufficient consistency or comparability in the form of disclosure applied by responsible entities and as a result, important information was not being adequately disclosed to investors. ASIC consulted with the industry and has updated the existing disclosure principles and introduced disclosure benchmarks based on industry feedback. 

ASIC Commissioner Greg Tanzer said: ‘ASIC’s first priority is to ensure consumers and financial investors are fully informed and can make confident decisions. This is especially important when investing in financial products such as unlisted property schemes as they have particular risks such as gearing, valuations, liquidity, distributions and the diversification of the schemes’ portfolio. 

‘Many Australians like to invest in real estate, reflecting a preference for owning bricks and mortar over less tangible assets. Unlisted property schemes have become popular investment vehicles for such people, but they do carry risks as well as opportunities. It’s necessary to ensure investors have the information they need to make informed investment decisions as inadequate disclosure can contribute to investors not understanding the risks.’ 

Unlisted property schemes must disclose whether they meet the benchmarks and if not, why not. This means they must explain how they will deal with the business factor or the issue underlying the benchmark. 

RG 46 is the next in the series of the ‘if not, why not’ benchmark model of disclosure for sectors that pose particular risk to investors and financial consumers. It follows the issue of disclosure benchmarks for the infrastructure and over-the-counter contracts for difference sectors in Regulatory Guide 231 Infrastructure entities: Improving disclosure for retail investors (RG 231), Regulatory Guide 227 Over-the-counter contracts for difference: Improving disclosure for retail investors (RG 227) and Regulatory Guide 232 Agribusiness managed investment schemes: Improving disclosure for retail investors (RG 232) 

RG 46 also outlines the standards ASIC expects responsible entities to meet when advertising unlisted property schemes to retail investors as to clear, concise and effective disclosure of benchmark and disclosure principle information. Responsible entities of existing unlisted property schemes should disclose the benchmark and updated disclosure principle information to investors by 1 November 2012. For new product disclosure statements prominent and clear disclosure of the benchmark and disclosure principle information should be included in those issued on or after 1 November 2012.