The Australian Securities and Investment Commission (ASIC) has released a consultation paper outlining proposals to improve disclosure for retail investors considering investing in unlisted property schemes.

The proposals follow an ASIC review of disclosure documents issued by responsible entities in the $28 billion unlisted retail property sector.

ASIC found a number of key disclosures were not adequately addressed, including:

  • the risks associated with the borrowing maturity profile and the extent of hedging;

  • details about property development activities (primarily timetables and funding);

  • the basis of valuations and the risks associated with ‘as if complete’ valuations;

  • reasons for distributions being made from sources other than income and the sustainability of these distributions over the next 12 months; and

  • withdrawal rights and the risks associated with withdrawal arrangements promoted to investors.

ASIC Chairman Greg Medcraft said: ‘One of our business priorities focuses on promoting confident and informed investors and financial consumers.

‘These proposals are aimed at improving the level, comparability and consistency of disclosure provided to retail investors by extending our ‘if not, why not’ benchmark disclosure model to unlisted property schemes.’

The six benchmarks address key issues including:

  • gearing policyinterest cover policy

  • interest capitalisation

  • valuation policy
  • related party transactions
  • distribution practices

The proposals also clarify the eight disclosure principles in Section C of RG 46 and provide further guidance on how responsible entities should apply the principles.

‘Our experience indicates that investors need better quality and relevant disclosure, presented in a way best suited to investor understanding,’ Mr Medcraft said.

‘PDSs must be worded and presented in a clear, concise and effective manner to help retail investors assess an offer and make informed investment decisions.’

1 July 2012 is proposed as the start date for responsible entities to disclose against the benchmarks and amended disclosure principles.

Comments on Consultation Paper 163 Unlisted property schemes: Update to RG 46 (CP 163) are due by 6 September 2011.