VZCZCXRO1270
PP RUEHPT
DE RUEHBY #1112 3080456
ZNR UUUUU ZZH
P 030456Z NOV 08
FM AMEMBASSY CANBERRA
TO RUEHC/SECSTATE WASHDC PRIORITY 0465
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RUEHKO/AMEMBASSY TOKYO 3272
RUEHBJ/AMEMBASSY BEIJING 9234
RUEHWL/AMEMBASSY WELLINGTON 5502
RUEHGP/AMEMBASSY SINGAPORE 1600
RUEHLO/AMEMBASSY LONDON 1909
RUEHDN/AMCONSUL SYDNEY 3948
RUEHBN/AMCONSUL MELBOURNE 5739
RUEHPT/AMCONSUL PERTH 4010

UNCLAS CANBERRA 001112 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN AS
SUBJECT: AUSTRALIAN REGULATOR GRANTS LIMITED ACCESS TO 
FROZEN FUNDS 
 
REF: A. CANBERRA 1103 
     ¶B. CANBERRA 1076 
     ¶C. CANBERRA 1072 
     ¶D. CANBERRA 1036 
     ¶E. CANBERRA 1020 
 
¶1. (SBU) Summary:  Australian regulators on October 31 
announced new procedures to grant limited access for 
investors to their frozen mortgage funds.  Funds faced 
problems before GOA announced bank guarantees, but the 
guarantees made their situation more uncertain.  Financial 
industry response to ASIC's move has been generally positive. 
 End summary. 
¶2. (U) Late on Friday October 31 the Australian Securities 
and Investments Commission (ASIC) announced new procedures to 
allow limited access on a case-by-case basis for investors to 
frozen mortgage trusts, changing regulations that required 
all investors to be treated equally.  Specifically, they will 
be allowed to take out A$20,000 (US$13,400) plus half of 
their remaining investment; the Investment and Financial 
Services Association (IFSA) says the average balance of these 
funds is A$50,000.  Such relief will be granted only be on 
case-by-case basis of hardship, if the investor is unable to 
meet immediate living expenses, on compassionate grounds 
(i.e., funeral costs, serious illness, to prevent foreclosure 
on family home), or if the investor faces permanent 
incapacity. 
 
¶3. (U) ASIC Chairman Tony D'Aloisio commented that the 
decisions by funds to freeze of billions of dollars worth of 
investment funds including mortgage trusts (reftels) were 
useful because they prevent withdrawals from destabilizing 
the funds, adding that a freeze does not mean the asset has 
lost value nor that investors won't get their money back.  He 
said the freeze "is a prudent measure".  Treasurer Wayne Swan 
on November 1 praised the decision, and again refuted 
Opposition and industry claims that the GOA decision to 
guarantee bank deposits (reftels) had caused the freeze, 
saying "There were at least 10 funds that had suspended 
redemptions before the Government took its decision on the 
bank guarantee."  Industry sources said it would be difficult 
to tell how many investors would qualify for such 
consideration, but generally have responded positively.  IFSA 
CEO Richard Gilbert called it an "excellent decision" for 
funds that still remain low on cash. 
 
(SBU) Comment:  An ASIC official told Embassy that the 
decision came after the usual round of consultations with 
other regulators.  It wasn't strictly driven by the guarantee 
for bank deposits, since the GOA is accurate in stating that 
these funds were being targeted for redemption before PM 
Rudd's October 12 announcement.  But clearly the blanket and 
initially unlimited bank guarantee made an uncertain 
situation for these funds even worse, and the ASIC move is 
intended to sooth the jagged nerves of Australian investors 
and fund managers. 
 
MCCALLUM