Anton Tagliaferro, director of Investors Mutual, has raised concerns about the regulation of listed infrastructure funds calling for changes to the disclosure and accounting requirements for the stapled securities, which are usually a feature of such products.

Speaking on a panel at the 2006 ‘Corporate Governance – Managing Risk and Driving Value’ conference organised by governance advisory firm ISS and the University of Melbourne’s Centre for Corporate Law & Securities Regulation last week, Tagliaferro said Australia’s regulations have not yet caught up with the complex nature of listed infrastructure funds. Peter Doherty, Capital Partners principal, on the same panel as Tagliaferro, said investors in listed infrastructure products must be careful as it is a relatively new asset class. According to a statement issued by ISS, Doherty also said: “…promoters of infrastructure vehicles took considerable risks and it was appropriate for them to be rewarded for these risks.” As well, conference speakers also questioned the ‘cap and collar’ deals entered into by many executives that reduce the risk of them losing option benefits when their company share price drops. Geof Stapledon, managing director of ISS Australia, while some companies ban such arrangements, ‘cap and collar’ deals could undermine the long-term incentive component of executive pay. “Options are designed to place a portion of executive pay at-risk, so that the executive does well only if shareholder returns are growing,” Stapledon said. “But if an executive purchases an option-hedging product from an investment bank, this can minimise or eliminate the extent to which pay is actually at-risk.”

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