ASIC extends hardship relief for investors in mortgage funds

The Australian Securities Investment Commission (ASIC) has announced changes to hardship withdrawals from frozen registered mortgage funds. The changes expand the circumstances in which responsible entities are able to make payments to fund members who demonstrate the need to access funds on hardship grounds. These changes include:

• the cap on hardship withdrawals for each member is increased to $100,000 each calendar year, from $20,000 plus 50per cent of the member’s interest
• an investor can make up to four hardship withdrawals a calendar year, instead of a once-only withdrawal (subject to the overall cap of $100,000) and
• hardship grounds are extended:
  • to cover a beneficiary of a deceased estate of a member where the beneficiary is suffering hardship and
  • to make it clear a person unemployed for at least three months without other means may apply for hardship relief.

Existing hardship grounds including, where the member is unable to meet reasonable and immediate family living expenses, compassionate grounds (eg medical costs for serious illness, funeral expenses or to prevent foreclosure) and in the case of permanent incapacity of the member will continue to apply.

It’s important to note that responsible entities who have been granted hardship relief must apply to ASIC for a variation of the conditions of their relief if they wish to rely on the expanded circumstances for hardship relief set out in the announcement.

A copy of ASIC’s announcement can be found here. ASIC grants relief to registered mortgage funds and other registered managed funds on a case-by-case basis to facilitate withdrawals from those funds by direct and indirect investors who satisfy the hardship grounds.

Typically, in order to obtain relief for frozen registered managed funds, the responsible entity must:

• apply to ASIC for relief
• amend the constitution of the registered managed fund(s) for which relief is sought and
• notify investors of the availability of withdrawals on hardship grounds and the procedures for making withdrawal applications.

Assistance

The Hall & Wilcox Financial Services team has experience in:

• providing advice to responsible entities in relation to hardship relief;
• applying for hardship relief for registered managed funds with ASIC; and
• preparing ancillary documents for responsible entities in respect of hardship relief applications submitted by members.