As the number of days left before the full implementation of the Australian Financial Service Reform Act falls below 100, it seems that every week, there is another announcement regarding a new property fund manager. The content of these announcements are becoming increasingly predictable in their disclosure of their business plans and claims of differentiation.
New fund managers will invariably claim to have a business plan that will provide the market with a full suite of unlisted managed investment schemes including unlisted property syndicates and open ended property trusts, a mortgage fund or two and some mezzanine finance opportunities tacked on ‘to cover the range of different risk profiles’.
New fund managers will also claim to be distinctive. In their eyes, they will do things differently and such will be their competence, composure and cunning that they will rise from the pack in a style that would make an AFL footballer proud.
These announcements, no matter how similar, are being made as a consequence of the Australian Financial Services Reform Act (AFS). The wider coverage of the Australian Financial Service licensing environment has brought many smaller enterprises under the umbrella of the Australian Securities and Investments Commission. Aspiring property investors, who in the past could raise funds from small groups of investors, cannot do so now without an AFS Licence. There is no grey area in which to hide.
We continue to find people who have woken up to the realisation that they will need to comply, and are now in a race against time to secure an AFS Licence before the cut off date of March 11, 2004. These companies are coming out of the woodpile and feeling the heat of having to comply with the same compliance regime as large established fund managers. They are not finding it easy. Managing investors’ money in 2004 will require a demonstrated level of experience, knowledge and integrity, as it should. Some best place buy tadalafil online will have difficulty demonstrating those attributes. In any case, our assessment is that many of those who manage to receive a Licence in time will find the ongoing compliance responsibilities just too tough in the longer run.
The Australian Financial Services industry is nearing its moment of truth. It is nearing the end of the first of three stages of revolutionary change. The first stage is over on December 10 after which any application received for an AFS Licence has no guarantee of receiving one by 11 March. Any financial services business without an AFS Licence on 11 March will effectively be unable to operate. Those businesses unable to submit a licence application in time will have to consider their future in financial services. This could open up a number of interesting mergers and acquisitions.
The second stage of revolutionary change will extend from the 11 March cut off date until around 30 June next year. This will be a consolidation period for many businesses as they dodge the smouldering ruins of unlicensed enterprises and work to meet their compliance obligations in the brave new world.
The final stage of the financial services revolution will cover the period following 30 June 2004. During this time, many companies will have their first compliance audit under the AFS umbrella. We would expect to see another round of mergers and acquisitions up to the end of 2005 as a number of participants wave the white flag.
The countdown continues and the tension continues to rise. Who will be left behind? Who will be unable to satisfy the base level financial requirements? How many businesses will fall into the fire of non-compliance as ASIC seeks to protect investors from the fire of preventable, needless financial loss?
For many in the financial services sector and property funds management in particular, it will be an interesting 2004.
*Anton Lawrence is a Director of Managed Investment Assessments
