The new benchmarks include better disclosure of fee structures; related party dealings, and; the independence and qualification of third-party experts. Photo: Peter Braig
THREE years after 60,000 investors lost more than $1 billion in the collapse of a string of tax-driven agribusiness schemes, the corporate regulator has issued new disclosure guidelines it hopes will stop it from happening again.
Heavily geared agribusiness managed investment schemes (MIS) offering investors up-front tax deductions, promoted by companies such as Timbercorp, Great Southern and Willmott Forests attracted more than $5 billion in five years before collapsing in the wake of the 2008 global financial crisis.
The collapses led to a parliamentary inquiry, chaired by federal Labor MP Bernie Ripoll, which reported in September 2009, and recommended changes to the up-front tax deductibility of non-forestry MIS, amendments to the corporations law to prevent conflicts of interest when schemes went broke and called on the corporate watchdog to improve the disclosure requirements for MIS promoters and their advisers.
Yesterday ASIC released a new regulatory guide outlining new benchmarks and principles that promoters of new agribusiness MISs would have to comply with in their product disclosure statements on an ''if not, why not'' basis - just like separate guidelines on infrastructure, contracts for difference and debentures.
The benchmarks include better disclosure of fee structures; related party dealings, and; the independence and qualification of third-party experts. The principles include disclosure of: any investor financing arrangements; the promoters' track record in operating agribusiness schemes; the promoter's own financial position, and; arrangements for access to land, licences and water. There are also standards for advertising of agribusiness MIS products. The requirements apply to any agribusiness MIS product offered after August this year.
Zenith Investment Partners senior analyst Dugald Higgins said yesterday the new ASIC guide was a positive step but cautioned ''none of these proposals are ever going to prevent people losing money''.
''As with all these investor's guides, we are always a little bit wary that mum and dad investors treat them in a way they're not meant to be treated.
''Investors will still need to understand that the fact that managers report on benchmarks isn't going to be the be-all and end-all.''
Inflows to the MIS sector collapsed by more than 95 per cent from 2008-09, and confidence is yet to return to the sector. Mr Higgins also said many financial planners could not recommend agribusiness MIS because professional indemnity insurers remained wary of the sector.
But Mr Ripoll, who is chairman of the Corporations and Financial Services Committee, which conducted the original inquiry, denied ASIC's new guide had come too late.
''There's no such thing as late. At any point in time if a regulatory guide can assist people, then I think that's a positive.''
Mr Ripoll defended the tax deductibility of agribusiness MISs, particularly in forestry schemes where it could take 25 years before investors can make a return.
''Consecutive governments have made the decision that the tax incentive is there to serve a specific purpose and has achieved that purpose and therefore that tax deductibility will remain.''
But Mr Ripoll said it was up to investors to examine the profitability of an MIS.
''It always ought to be the first port of call of any investor, to ensure that the scheme itself is designed to make a return.
Thousands of investors remain mired in litigation over the MIS collapses.
