Your investments: Frozen funds and hardship payments - video transcript
Transcript of video about what to do if you have a dispute over frozen funds in a managed investment scheme, presented by Warren Day, Senior Executive Leader, Assessment and Intelligence, and Victorian Regional Commissioner, uploaded 2 June 2015.
What are frozen funds?
Frozen funds are registered managed investment schemes in which investors' funds are pooled with funds of other investors to purchase assets. The schemes are originally promoted on the basis that investors have a right to redeem their investment on request. But with frozen funds this right has been suspended.
Why do managed investment schemes freeze funds?
The law requires managed investment schemes to freeze funds if less than 80% of assets are in cash or readily convertible to cash. In some cases the scheme is unable to meet repayments at a price nominated in its constitution due to a fall in the value of the assets of the scheme. The freezing of repayments allows the scheme to sell assets in an orderly manner to meet request for repayments. This protects the capital of all investors in the scheme.
What can I do about getting my money back?
The scheme may make withdrawal offers to investors over time. ASIC has amended the law for some operators of frozen funds to simplify the procedure for periodic withdrawal offers out of available cash.
Investors may also be able to access some of their money on the grounds of hardship payments. ASIC has amended the law to allow some operators to make hardship payments to investors experiencing exceptional hardship in preference to other investors in the scheme. But this is subject to certain limits. However, it is up to the operator of the scheme to apply to ASIC to allow them to make hardship payments. Investors should contact the scheme operator to find out if they can lodge a claim for a payment in the case of hardship and seek further information about the process.
ASIC has published a list on our website of those operators who are allowed to make hardship payments.
As members of a scheme investors can exercise their members’ rights,hold members’ meetings and apply for court orders if a scheme is not performing its duties.
What's ASIC's role?
ASIC may amend the law for individual operators of frozen funds to facilitate investors' access to capital.
We also regulate scheme operators to promote compliance with the law and their duties to members.
Where we can will investigate serious allegations of unlawful activity against scheme operators. However, it is important to understand that ASIC does not decide who meets hardship criteria or issue hardship payments from frozen funds nor can we provide you with legal advice.