The Australian Securities and Investments Commission (ASIC) has released new disclosure benchmarks and principles for infrastructure entities in order to provide retail investors with a better understanding of the associated investment risks.
Regulatory Guide 231 'Infrastructure entities: Improving disclosure for retail investors' (RG 231) outlines nine benchmarks and eleven disclosure principles aimed at addressing the characteristics of infrastructure entities.
ASIC first released a consultation paper on the matter in April 2010 following concerns raised by investors during the global financial crisis, many of whom had lost considerable capital after investing infrastructure entities.
The commission stated the crisis indicated that existing disclosure did not effectively communicate an understanding of these investment options.
Effective disclosure of investment risk is particularly important because there is an increasing tendency for products within the infrastructure sector to be funded by capital raised from the general public, ASIC chairman Greg Medcraft said.
The benchmarks under the new regulatory guide relate to topics such as corporate structure and management, remuneration of management, classes of units and shares, substantial related party transactions, cashflow forecast, base-case financial model, performance and forecast, distributions and updating the unit price.
Infrastructure entities are also required to disclose against a number of principles concerning key relationships, management and performance fees, related party transactions, foreign exchange and interest rate hedging, and portfolio diversification, among others.
In addition, RG 231 outlines standards for advertising infrastructure entities to retail investors.
ASIC stated that the latest regulatory guide is the next in a series of 'if not, why not' disclosure benchmarks for sectors that pose particular risks to consumers, and follows on from similar guidelines for over-the-counter contracts for difference released in August last year.
Responsible entities of infrastructure entities must disclose the benchmark and principle information in any existing and new disclosure dated on or after 1 July 2012.
