Balancing transparency with commercial sensitivity 3 min read
ASIC has announced it will commence a targeted review of the information disclosure requirements in Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements (RG 97), which are the rules of the game for how fees and costs are required to be disclosed by superannuation trustees and responsible entities of registered managed investment schemes.
In this Insight, we set out the key information available so far and highlight what remains to be clarified as we await further detail.
A focus on stamp duty
At this stage, it appears the review will be limited to the disclosure of stamp duty payments (including, we expect, whether stamp duty amounts need to be disclosed at all).
ASIC's focus on stamp duty is likely to be broadly welcomed by trustees (and particularly by real estate managers) given stamp duty can represent a significant disclosable cost in investment transactions and the materiality of this disclosure can impact investment decisions—especially when trustees are faced with comparing investments in different asset classes.
While the focus on stamp duty disclosure is a step in the right direction, we are hopeful ASIC might be convinced to undertake a broader review of other RG 97 settings that currently operate to favour one asset class over others or that otherwise result in unintended disclosure outcomes (and, therefore, unintended asset allocation consequences). For example:
- the differing treatment of investments in property and infrastructure assets under the interposed vehicle test;
- the sometimes uncertain nature of where to draw the line for the interposed vehicle test; and
- lack of focus on net returns,
all arguably distort investment decision-making or otherwise discourage trustees from investing in products that have relatively higher fees but also the potential to generate greater returns.
We will await further detail from ASIC with anticipation.
Portfolio holdings disclosure relief for internally managed private credit portfolios in the offing?
Within the same press release, ASIC also flagged it will consider whether 'class order relief' should be given to private credit arrangements to ensure there is a consistent approach to how internally and externally managed private credit investments are disclosed by superannuation trustees.
While lacking in detail, this announcement likely relates to a technical disclosure point trustees have been grappling with for years under the portfolio holdings disclosure requirements, which has resulted in a fear that the disclosure rules—when applied to internally managed private credit portfolios—will result in sensitive pricing and other information of individual loan positions being disclosed (which, in turn, creates a somewhat perverse incentive for trustees to outsource management of those portfolios).
We welcome ASIC's review of those rules and consider that class order relief of the kind which seems to be foreshadowed would merely bring private credit disclosure in line with comparable unlisted asset classes.
Next steps
The ASIC review is slated to be completed by 30 November, and the ASIC review panel will seek direct submissions from experts and key stakeholders. Accordingly, it does not appear ASIC will release a formal consultation paper, so stakeholders might have to proactively reach out to the regulator if they wish to have the opportunity to comment on the proposals.