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Australian pension fund portfolio holdings disclosure

Asset managers obtain a temporary reprieve Superannuation assets in Australia totalled AUD 1.8 trillion at the end of Q4 2013.1 As a result, superannuation trustees operate in an environment where governance and transparency are a key focus of government and regulators.

One transparency measure that has recently been introduced is portfolio holdings disclosure requirements, which require trustees of Australian superannuation/pension funds (known as "registrable superannuation entities" or RSEs) to publicly disclose details of the fund's portfolio holdings on a look-through basis. These reforms were passed into law on 26 June 2013. However, the first reporting day was initially deferred until 30 June 2014 and the Treasury has recently announced a further 12-month deferral until 30 June 2015.

Based on the current form of the draft regulations, trustees of all RSEs will be required to publish information on their websites that is sufficient to identify "each of the financial products or other property in which assets, or assets derived from assets, of the entity are invested", and their value as at 30 June and 31 December each year. At this stage, there is no limit as to the type or number of structures through which a trustee must trace the assets.

The disclosure obligation will be supported by two ancillary notification obligations:

  • firstly, a party acquiring a financial product in Australia, or entering into a custodial arrangement in Australia, using the assets, or assets derived from the assets, of an RSE must notify the other party that the contract or arrangement relates to assets, or assets derived from assets, of an RSE; and of the details of the RSE trustee; and
  • secondly, the recipient of the above notice must then disclose information to the RSE trustee about the financial product acquired by the RSE trustee; and if the party knows, or reasonably ought to know, that an asset will be used by the party or another person to acquire another financial product or property, details of that financial product or property.

The notification obligations above do not extend beyond assets acquired in Australia, however the disclosure obligation of the RSE trustee has no such jurisdictional limit. As such, it is likely that RSE trustees will ask asset managers and custodians to provide portfolio holdings information in order to comply with their general disclosure obligation.

In Australia, a number of concerns have been raised in relation to these new obligations. Of particular relevance to offshore asset managers is the potential for this level of disclosure to violate intellectual property rights and, potentially, enable market participants to deduce an asset manager's portfolio. This has led to concerns that certain investments will effectively become unavailable to Australian superfunds. However, the final regulations may go some way to alleviating these concerns by enabling disclosure on an aggregated basis, inclusion of materiality thresholds or by providing for specific exclusions from the disclosure requirements. It is not yet clear which of these options, if any, is likely.

While the first portfolio holdings "reporting date" has been postponed, the ancillary information obligations are currently in effect. This means that trustees and other industry participants will be considering how and when they will seek information from product issuers and service providers.

This may include revisions to service contracts, so as to include obligations to provide asset information and consents and/or waivers to the inclusion of such information on a publicly available website.

If you require further details please contact Jason Denisenko.

Footnotes

1. APRA's Quarterly Superannuation Performance (interim edition), December 2013 (issued 20 February 2014).

Legal and Regulatory Risk Note
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