Retail property fund managers will need to closely consider their compliance measures ahead of a two-year deadline to comply with product legislation passed in April.
The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Power) Bill 2019 was passed into law on 5 April 2019 and product intervention powers applied immediately. Further legislation on design and distribution obligations will come into force from 5 April 2021. The Act does not apply to wholesale products.
However, the Property Funds Association (PFA), which represents the $125bn Australian unlisted wholesale and retail property funds sector, said two years is ‘not a long time’ for property fund managers to comply with this regime.
It is also worried the legislation will limit the choices available to retail unlisted property investors.
PFA chief executive, Paul Healy, said: “PFA believes the Act mandates a compliance regime which could see managers shun retail products and favour wholesale products, limiting the choices available to retail unlisted property investors.
“Many unlisted property funds will find it more difficult and expensive to bring retail products to market.”
Healy added that the Act would mean responsibility shifted from the financial adviser to the product issuer.
“Product issuers may need to take extensive precautions with investors, including potential for needing to put in place fact finding measures, consumer testing or/and ensuring that financial advice is provided to prospective investors, even for simple products which are well understood in the marketplace.”