New ASIC disclosure requirements for unlisted mortgage schemes

On 8 July 2008 ASIC released a consultation paper and draft regulatory guide outlining proposed enhanced disclosure requirements to retail investors by unlisted mortgage schemes and proposing a benchmark-based disclosure model.

Below is a summary of the key features of the proposal.

Disclosure benchmarks

Responsible entities should address the following key benchmarks in their product disclosure statements (PDSs) and ongoing disclosures: liquidity, scheme borrowing, portfolio diversification, related part transactions, valuation policy, lending principles—loan-to-valuations ratios and distribution practices, and withdrawal arrangements.

Applying the disclosure principles

• Existing schemes should provide disclosure against the benchmarks to existing investors by 31 October 2008. This may be done via a periodic statement, investor update report, through the scheme’s website (if regularly used for updates) or by supplementary PDS.
• ‘If not, why not’ approach for PDSs and ongoing disclosures from 31 October 2008 whereby PDSs and ongoing disclosure documents should address each of the benchmarks by stating that the mortgage scheme meets the benchmark or that it does not and explain how and why the responsible entity deals with the principle underlying the benchmark in another way.
• Material changes from 31 October 2008: when material changes to the responsible entity’s performance against the benchmarks occur, responsible entities should communicate this information to investors in an effective way, such as by an update on the scheme’s website.

Advertising standards

Responsible entities of both listed and unlisted mortgage schemes should adhere to prescribed advertising standards and investment ratings will need to be properly explained so that they do not create a misleading impression about the scheme.

Application of policy

The benchmarks and disclosure requirements will apply to unlisted mortgage schemes that raise funds from retail investors (directly or indirectly). The advertising standards will apply to all mortgage schemes (whether listed or unlisted) that raise funds from retail investors).

Compliance plans, compliance committees and compliance plan auditors

They should actively support the disclosure benchmarks and advertising standards. ASIC does not expect that responsible entities will necessarily update their compliance plans to reflect the new requirements.

ASIC’s timeline

ASIC is inviting submissions on the proposal by 5 August 2008. The final regulatory guide will be issued by 2 September 2008 and the enhanced disclosure requirements will apply from 31 October 2008.

For more information please contact

Name : Peter Rowe
Title : Partner
Office : Sydney
Phone : +61 2 9225 5343
Fax : +61 2 9322 4000
Email : peter.rowe@freehills.com

Name : Fiona Smedley
Title : Partner
Office : Sydney
Phone : +61 2 9225 5828
Fax : +61 2 9322 4000
Email : fiona.smedley@freehills.com

Name : Jim Graham
Title : Partner
Office : Sydney
Phone : +61 2 9225 5920
Fax : +61 2 9322 4000
Email : james.graham@freehills.com

Name : Ronald Spackman
Title : Partner
Office : Brisbane
Phone : +61 7 3258 6482
Fax : +61 7 3258 6444
Email : ron.spackman@freehills.com

Name : Andrew Shearwood
Title : Partner
Office : Perth
Phone : +61 8 9211 7509
Fax : +61 8 9211 7878
Email : andrew.shearwood@freehills.com

Name : Michael Ziegelaar
Title : Partner
Office : Melbourne
Phone : +61 3 9288 1422
Fax : +61 3 9288 1567
Email : michael.ziegelaar@freehills.com