Unlisted property schemes will be required to adhere to six new disclosure benchmarks from 1 November 2012.
Australian Securities and Investments Commission (ASIC) Regulatory Guide 46 has been updated to include benchmarks relating to the unlisted property scheme’s gearing policy, interest cover policy, interest capitalisation, valuation policy, related party transactions and distribution practices.
The scheme must disclose whether each benchmark is ‘met’ or ‘not met’, on an ‘if not, why not’ basis, according to RG 46.
The regulatory guide expresses ASIC’s concern that unlisted property schemes often appeal to retail investors "who may believe that the investment offers capital stability and consistent ongoing returns that are not likely to vary significantly".
ASIC commissioner Greg Tanzer warned that while "many Australians like to invest in real estate", unlisted property schemes "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," Tanzer said.
Responsible entities must also ensure that the advertising of unlisted property schemes is consistent with the disclosure of the new benchmarks in the Product Disclosure Statement (PDS).
Additionally, any investment rating used in the advertising must be issued by a research house with an Australian financial services licence, and must not mislead consumers, according to RG 46.
Responsible entities must disclose the benchmarks and the new principles to investors by 1 November 2012, and new PDSs after 1 November 2012 must include "prominent and clear disclosure" of the benchmarks.
