In September 2012 the Australian Securities and Investments Commission (ASIC) released disclosure benchmarks and principles for hedge funds, which it said were aimed at improving investor awareness of product risks.
Hedge funds have been excluded from the shorter PDS regime (along with superannuation platforms and multifunds) since 22 June 2012 under a class order from Minister for Financial Services and Superannuation Bill Shorten “until these products can be fully considered in respect of the policy intent of the shorter PDS regime”.
This is a temporary exclusion, until 22 June 2014, to allow the government to develop a permanent solution, although shorter PDSs for hedge funds put in place prior to the class order are allowed to continue, ASIC stated. These transitional arrangements have been extended to apply until 1 February 2014.
ASIC has released an updated version of its Regulatory Guide 240, Hedge funds: Improving disclosure (RG 240) for consultation.
RG 240 defines a hedge fund as a scheme that is promoted as being a hedge fund or exhibits at least two of the following criteria:
- complexity of investment strategy or structure
- use of debt
- use of derivatives (subject to limited carve-outs)
- use of short selling, or
- has rights to charge a performance fee (in contrast to fees based on funds under management)
The new RG 240 updates the original guide, released in September last year, extending the start date to 1 February 2014 “to allow consideration of submissions and continue engagement with a number of issuers”.
A PDS issued after 22 June 2012 for a fund that satisfies the definition of hedge fund must issue a longer form PDS, ASIC stated.
“ASIC’s discussions with industry over this issue have been constructive,” said ASIC commissioner Greg Tanzer.
“We are confident this extension best balances the need for ASIC to fully consider the submissions from industry and provide industry with sufficient time to adjust to any revised definition, while ensuring investors are provided with the key information under RG 240 as soon as possible.”
