Funds management

About managed investment schemes and the proposed regimes for corporate collective investment vehicles and the Asia Region Funds Passport.

Draft guidance on funds management

ASIC has released Consultation Paper 296 Funds management, seeking feedback on our draft new and updated guidance in relation to managed investment schemes and the proposed new Asia Region Funds Passport and corporate collective investment vehicle (CCIV) regimes.

Managed investment schemes

Managed investment schemes are also known as 'managed funds', 'pooled investments' or 'collective investments'. Generally in a managed investment scheme:

  • people are brought together to contribute money to get an interest in the scheme ('interests' in a scheme are a type of 'financial product' and are regulated by the Corporations Act 2001 (Corporations Act))
  • money is pooled together with other investors (often many hundreds or thousands of investors) or used in a common enterprise
  • a 'responsible entity' operates the scheme. Investors do not have day to day control over the operation of the scheme.

Managed investment schemes cover a wide variety of investments. Some of the popular managed investment schemes that may be offered include:

  • cash management trusts
  • property trusts
  • Australian equity (share) trusts
  • many agricultural schemes (eg horticulture, aquaculture, commercial horse breeding)
  • international equity trusts
  • some film schemes
  • timeshare schemes
  • some mortgage schemes
  • actively managed strata title schemes.

What types of investments are NOT managed investment schemes? Generally, only investments that are 'collective' are managed investment schemes. Some examples of investments that are not managed investments schemes include:

  • regulated superannuation funds
  • approved deposit funds
  • debentures issued by a body corporate
  • barter schemes
  • franchises
  • direct purchases of shares or other equities
  • schemes operated by an Australian bank in the ordinary course of banking business (eg term deposit).

Asia Region Funds Passport

The Asia Region Funds Passport will provide a multilaterally agreed framework to facilitate the cross-border marketing of passport funds across participating economies in the Asia region. It is intended to support the development of an Asia-wide funds management industry through improved market access and regulatory harmonisation.

The following countries have signed the Memorandum of Cooperation on the Establishment and Implementation of the Asia Region Fund Passport (Memorandum of Cooperation): Australia, New Zealand, Japan, Korea and Thailand.

The key objectives for the Asia Region Funds Passport include to:

  • ensure investors receive the benefits of increased competition (e.g. lower fees and greater fund choice)
  • provide a high degree of investor protection to promote informed and confident investors, by ensuring high standards for the operation and offer of passport funds
  • strengthen the capacity and competitiveness of the region's funds management industry
  • deepen the region's financial markets by improving liquidity and access to finance
  • ensure economies can continue to maintain financial system stability and efficiency. Retaining capital flows within the Asia region could assist in strengthening resilience.

The Asia Region Funds Passport is yet to be implemented in Australia. It is proposed to be implemented through amendments to the Corporations Act and a legislative instrument making rules that reflect the Passport Rules annexed to the Memorandum of Cooperation.

Key aspects of the proposed regime include:

  • a proposed passport fund must be a regulated collective investment scheme
  • the operator must be an eligible entity, including having officers with the relevant qualifications and meeting a financial resources test, organisational arrangements test, track record test and good standing test
  • once registered, the passport fund must comply with the Passport Rules, including rules about permitted investments, portfolio restrictions and limits, breach reporting, notifying the home and host regulators of certain changes, custody, financial reporting, annual reviews of compliance with the Passport Rules, redemption and valuation and deregistration.

Corporate collective investment vehicles

The proposed corporate collective investment vehicles (CCIVs) regime is an optional alternative to the managed investments regime in Ch 5C of the Corporations Act. It is proposed to be implemented in Australia through amendments to the Corporations Act. A CCIV will be a collective investment vehicle that is a public company and is structured as an umbrella fund incorporating one or more sub-funds.

The key objectives for the CCIV regime are to:

  • enhance the international competitiveness of the Australian funds management industry by providing an internationally recognisable collective investment vehicle that will facilitate participation in the Asia Region Funds Passport
  • expand the range of collective investment schemes offered in Australia
  • maximise the economic benefits of Government initiatives to improve access to overseas markets, including the Asia Region Funds Passport regime.

Key aspects of the proposed CCIV regime are:

  • a CCIV will be a public company that is limited by shares and structured as an umbrella fund with sub-funds, each of which may hold different assets and have different investment strategies
  • the CCIV will be operated by a corporate director that is an Australian public company and holds an Australian financial services (AFS) licence authorising it to operate a CCIV
  • a retail CCIV will have a depositary that is either an Australian public company or a foreign company registered under Part 5B.2 of the Corporations Act, and holds an AFS licence authorising it to act as a depositary of a CCIV
  • the depositary will be responsible for holding the assets of the CCIV on trust and oversight of the operation of the CCIV.

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Last updated: 26/10/2017 12:28