ASIC today issued Class Order [CO 13/1621] that provides relief that facilitates retail clients applying for interests in managed investment schemes through mFund Settlement Service (mFund).

mFund is a facility jointly operated by ASX Ltd (ASX) and ASX Settlement Pty Ltd (ASX Settlement) where requests for the issue or redemption of interests in unlisted managed investment schemes can be made, and holdings recorded through CHESS. It is not a trading facility.

ASIC received positive feedback in response to our proposals to provide this relief (refer 13-125MR).

The key aspects of CO 13/1621 are:

• it exempts responsible entities (REs) of managed investment schemes available through the mFund from only issuing interests in response to an application form that was included in or accompanied a PDS, and

• REs will generally be allowed to issue on the basis of an electronic message through mFund indicating that the investor has been given the current version of the PDS.

The sender of the electronic message must be an Australian financial services (AFS) licensee or an authorised representative and must not send an electronic message unless the investor has been given the latest product disclosure statement (PDS) for the scheme.

Commissioner Greg Tanzer said, 'This relief assists in making the industry more efficient without compromising investors receiving a product disclosure statement before investing.

This will make the process of acquiring and disposing of interests in managed investment schemes more efficient and lower operational costs for the investment management industry as a whole'.

Also, in order to facilitate the operating of mFund, Assistant Treasurer Senator Arthur Sinodinos has declared mFund is an exempt market. This means ASX Settlement will not have to hold an Australian Market Licence and a revised set of ASX Operating and ASX Settlement Operating Rules have been made.

Under these rules, there are several safeguards to ensure disclosure is received by investors, including specific responsibilities on licensees to provide an up-to-date PDS and on REs to check receipt with retail investors. Also, the use of mFund is limited to simple managed investment schemes.

In addition ASIC has exempted ASX and ASX Settlement from requiring an AFS licence for operating mFund. ASX already has an Australian Market Licence for operating its financial markets and ASX Settlement has a Clearing and Settlement Licence.

With the completion of these regulatory steps barriers have been removed under the Corporations Act to the ASX being in a position to launch mFund.

Background

mFund is a facility operated by ASX Ltd and ASX Settlement Pty Ltd that allows investors to electronically apply for or redeem units in simple managed investment schemes that have been admitted to the service through brokers who are authorised to participate.

On 28 May 2013, ASIC released Consultation Paper 208 ASX Managed Funds Service: Relief from the application form requirement (CP 208) to publicly consult on providing relief from the requirements of s1016A of the Corporations Act 2001. Previously, under s1016A of the Corporations Act, a retail investor must apply using an application form that was included in or accompanied a PDS, or an application form copied or directly derived, by the applicant from that form.

ASX sought relief from the requirement of section 1016A as this would prevent the efficient functioning of the mFund (previously referred to as the ASX Managed Funds Service). Also discussed in detail in CP 208 were the other regulatory elements the ASX needed to meet in order to operate the AMFS, being that ASX:

• be granted an exemption by the Minister from the requirement to hold an Australian market licence to operate mFund

• amend the ASX Operating Rules and ASX Settlement Operating Rules to accommodate the AMFS

• conclude its engagement with the regulator responsible for the Anti-Money Laundering and Counter-Terrorism Act 2006 (AML/CTF Act), the Australian Transaction Reports and Analysis Centre (AUSTRAC), about whether an existing Anti-Money Laundering and Counter-Terrorism Financing Rule would exempt an entity issuing, via the AMFS, from the AML/CTF Act in relation to the issuing of the products.

Download

• Report 381 Response to submissions on CP 208 ASX Managed Funds Service: Relief from the application form requirement (REP 381)

• Class Order [CO 13/1621]

• Consultation Paper 208 ASX Managed Funds Service: Relief from the application form requirement (CP 208)