Australian Financial Services and Credit Licensees – insurance and risk issues from COVID-19
The COVID-19 pandemic is causing turmoil in markets and investor in certainty. Reports suggest that “cash is King” and investors seem to be rushing to liquidate their investments. Insurers fear future claim activity which may be brought by retail and wholesale investors against fund/investment managers. All face a varying array of issues:
- For wholesale funds issues include default of investors in funds, extension of fund life, fundraising and investment periods, the extent of risk disclosures (if any) required in relation to the pandemic, accuracy of valuations given market uncertainty and the requirement to communicate clearly and accurately with investors.
- For unlisted retail funds issues include liquidity and redemptions, significant adjustments to new PDSs, delay in offerings, greater capital requirements for licensees, the suspension of unit pricing (this may occur if a responsible entity determines that the value of the fund's assets or liabilities cannot be calculated reliably) and redemptions, adjustments to buy/sell spreads, the affect of COVID-19 on third party providers.
- Details will be required on how fund operation have been affected, and adapted, to the issues presented by COVID-19. What advice is being taken by external experts to respond to the issues presented by COVID-19.
- Please include details of successes and failures of:
- staff being able to work remotely and to access the Insured’s computer systems; and
- service providers (such as investment managers, custodians and administrators) are able to maintain their levels of service.
- What review (if any) have you conducted with your third party providers or corporate authorised representatives.
- Have you sent out any information to your investors in respect to how COVID-19 has affected the company?
- Are you experiencing any difficulties obtaining Net Asset Value calculations in the current environment? If so, how are you managing this and how are you communicating this to investors?
- What level of redemption requests have you received? Do investors have any withdrawal or redemptions rights available to them within the next 6 months?
- Has the fund experienced any liquidity issues during, or does it foreshadow any following the pandemic? Have any investors, auditors, directors or regulators raised any concerns about the performance or liquidity of the fund?
- Where you are: (a) a mortgage fund, please advise whether you are experiencing increase in arrears and aged debt (b) a direct property fund, please advise what negotiations are taking place with tenants and the effect of abatement on investor returns; (c) a development fund, any delays in projects or non-completion of pre-sales in projects.
- Are there any plans to change any part of the fund’s investment strategy?