The review was part of a recent broader surveillance of the managed investment and superannuation sectors, including listed and unlisted property funds, ASIC said.
In a statement released yesterday, ASIC said it found unlisted property schemes were “failing to adequately disclose against benchmarks put in place to improve investors’ awareness of the risks of investing in these products”.
“The results are disappointing, especially when, at a time in the rise of SMSFs, many Australians are looking to invest in real estate. Property schemes have become popular investment vehicles for such people, but they do carry risks as well as opportunities,” said ASIC commissioner Greg Tanzer.
“When schemes aren’t adequately disclosing those risks, investors are put in a vulnerable position.”
In 2012, ASIC introduced benchmarks that unlisted property schemes are required to address on an ‘if not, why not’ basis. The benchmarks addressed issues including schemes’ gearing policy, interest cover policy and related-party transactions.
ASIC’s review found schemes’ responsible entities either failed to address certain benchmarks or did not provide enough information. They also failed to provide the information in a single location on their website and/or in a single designated document, ASIC stated.
“While we are disappointed at the quality of the disclosure against the ASIC benchmarks, it was helpful to observe that the levels of leverage in the sample we reviewed appeared manageable,” Mr Tanzer said.
Following ASIC’s review, one scheme withdrew its product disclosure statement from the market and a further three entities will be questioned about their disclosure.
ASIC stated it will also be meeting with industry to discuss its concerns and follow up compliance.