ASIC today released a consultation paper proposing to either remake or repeal ASIC Class Order [CO 07/74] Wholesale equity schemes: Licensing relief for trustees. This is due to expire (‘sunset’) on 1 October 2017.
This instrument grants relief to trustees of wholesale equity schemes from the requirement to obtain an Australian financial services (AFS) licence in the circumstances specified in the instrument.
A wholesale equity scheme is an unregistered managed investment scheme that primarily invests in securities of unlisted companies and whose members are wholesale clients. For tax reasons, wholesale equity schemes are usually structured by the manager using a multiple unit trust structure with separate corporate trustees that are related bodies corporate of the manager. The wholesale equity scheme is effectively operated by the manager that holds an AFS licence and that takes responsibility for the operation of the scheme.
In 2013, ASIC strengthened the financial and custody requirements for responsible entities and custodial and depository service providers implemented through Class Order [CO 13/760] Financial requirements for responsible entities and operators of investor directed portfolio services, Class Order [CO 13/761] Financial requirements for custodial and depository services and Class Order [CO 13/1410] Holding assets: Standards for providers of custodial and depository services. The financial and custody requirements are not currently reflected in [CO 07/74].
If ASIC forms the view that [CO 07/74] still forms a useful part of the legislative framework, we propose to continue the relief currently given by [CO 07/74] in a new legislative instrument that reflects current drafting practice with changes to:
- amend the relief to align it with [CO 13/760], [CO 13/761] and [CO 13/1410]; and
- provide transitional provisions to continue relief under [CO 07/74] until the end of the financial year for the trustee.
If we form the view that [CO 07/74] no longer forms a useful part of the legislative framework, we propose to repeal [CO 07/74] and provide transitional relief in the form of [CO 07/74] for a period of 12 months beyond its sunsetting date to allow sufficient time for any entities relying on the relief to make alternative arrangements.
Consultation Paper 280 ASIC class order on wholesale equity schemes: Licensing relief for trustees – [CO 07/74] (CP 280) outlines ASIC's rationale for proposing to either remake [CO 07/74] with changes or repeal it if it no longer forms a useful part of the legislative framework. We have published a draft ASIC instrument with CP 280.
Sunsetting class orders
Under the Legislation Act 2003, all class orders are repealed automatically or 'sunset' after a period of time (mostly 10 years) unless we take action to preserve them. This ensures that legislative instruments like class orders are kept up to date and only remain in force while they are fit for purpose and relevant.
All government organisations are responsible for considering whether the legislative instruments they have made that are due to sunset will be relevant after their sunset date.
Submissions to CP 280 are due by 13 April 2017.