The Minister for Superannuation & Corporate Law’s recent speech discussed why Treasury will conduct a review of the current disclosure requirements of equity
derivatives:

Australian regulation of hedge funds is directed at
disclosure requirements, along with their licensing and registration as
managed investment schemes.

Such an approach seeks to ensure that there is sufficient
disclosure by these funds to allow all investors — particularly the
more unsophisticated investors — to make informed decisions about the
risks involved…

One of
the recent developments in financial markets relates to the substantial
growth in equity derivative products. 

Because the owners of these instruments only have indirect economic
ownership over the underlying securities, these equity derivatives have
enabled market participants, including speculators and hedge funds, to
avoid the disclosure requirements associated with direct stakes.

The use of these instruments have created uncertainty and
facilitated speculative trading which puts individual shareholders at
risk.  Companies don’t know who the ineffective owners are … investors
suffer from volatility as stock prices can be manipulated. 

To address these concerns, Australia intends to take a lead in
increasing the transparency of its financial markets.  The Prime
Minister recently announced that Australian Treasury would undertake an
immediate review of the current disclosure requirements of equity
derivatives.

While the Government is examining the disclosure requirements of
financial instruments that are used by hedge funds, we do not try to
dictate investment strategies or place undue limitations on hedge fund
activities and their leveraging.  Doing so may result in unintended and
possibly less efficient outcomes, which may be undesirable.

On the other hand, the investment strategies of hedge funds have
associated risks, which can influence the performance of prudentially
regulated institutions such as banks and superannuation funds.

For this reason, hedge funds need to provide a high level of
transparency to their investors, particularly those that are
prudentially regulated and of systemic importance, so that exposures to
market risks can be accurately assessed and managed by those investors.