Further consultation on new disclosure rules is the right answer
Monday 5 May 2014
The Australian Private Equity & Venture Capital Association Limited (AVCAL) supports the announcement made today by the Government that there will be a 12 month deferral period to allow for further consultation on the design of new rules that would have required commercially-sensitive information to be published by superannuation funds from 1 July 2014.
AVCAL Chief Executive Yasser El-Ansary said that the Minister for Finance and Acting Assistant Treasurer has made the right decision to provide much-needed market certainty by deferring the commencement date of the new portfolio holdings disclosure regime.
“The proposed new disclosure framework would not have delivered more meaningful information to superannuation fund members – instead, fund members would have been subjected to volumes of immaterial information that would only have served to confuse them,” said AVCAL Chief Executive, Yasser El-Ansary.
“With any new disclosure framework, it’s critical that you strike the right balance between providing more information, as against providing too much information that turns people away from trying to engage in understanding what it all means,” he added.
The new portfolio holdings disclosure rules were due to commence from 1 July 2014, and as currently drafted, would require superannuation funds to disclose every investment held, along with the relative market valuation of that investment every six months.
In a number of recent submissions to the Department of the Treasury and the Government, AVCAL set out its views that the new rules would have the effect of forcing private equity and venture capital funds to divulge market sensitive valuation information about assets that could potentially jeopardise impending commercial sale negotiations. AVCAL argued that such an obligation would ultimately be to the disadvantage of superannuation fund members, who would in the future be excluded from being able to invest in private equity funds as a result of the practical application of these rules.
“For private equity and venture capital funds, these rules are the equivalent of asking the vendor of a property to tell everyone what their reserve price is before the start of an auction,” said Mr El-Ansary. “There’s a reason why vendors don’t do that – it doesn’t help them to realise the best market price for their asset,” he added.
AVCAL will continue to participate in the next phases of this consultation process over the coming 12 months, to ensure that Australia’s new portfolio holdings disclosure regime is designed to be comparable with equivalent regimes in other developed markets.
Copies of AVCAL’s submissions in relation to the proposed new disclosure regime are available here.
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Author: Adrian O’Shannessy, Director, Greenwoods & Herbert Smith Freehills