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16-458MR ASIC to allow a wider range of managed investment products for the mFund settlement service
ASIC issued ASIC Corporations (Amendment) Instrument 2016/1212 to amend Class Order [CO 13/1621] to allow for a broader range of managed investment products that retail clients can apply for and redeem through mFund Settlement Service.
The mFund settlement service 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 the ASX group’s electronic register system CHESS. It is not a trading facility.
Previously, retail investors could only apply for and redeem interests in simple managed investment schemes that have a shorter PDS through mFund. The revision in the Class Order is to facilitate a wider range of managed investment products to be issued and redeemed through mFund.
The ASX has made an application to ASIC for this expansion, and its consultation with mFund issuers and brokers indicated general support for the expansion and the proposed amendment to the Class Order.
The expanded products (including certain hedge funds) in the mFund settlement service are those that under the ASX Operating and Settlement Rules comply with certain criteria, including rules relating to liquidity of scheme property and redemption of the units.
The key aspects of the class order are:
- it exempts responsible entities of managed investment schemes available through the mFund settlement service 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 the mFund settlement service indicating that the investor has been given the current version of the PDS and any supplementary PDS that apply to the particular fund.
The sender of the electronic message must be an Australian financial services (AFS) licensee or an authorised representative of an AFS licensee and must not send an electronic message unless the investor has been given the latest product disclosure statement (PDS) and any supplementary PDS for the managed investment products.
Commissioner John Price said, 'ASIC supports innovation that has the potential to provide benefits to consumers and efficiencies to industry.
'By extending the range of products that are available through the mFund settlement service, the relief will facilitate the potential for greater efficiency in the industry without compromising the requirement for an investor to receive disclosure needed, before investing.'
'This expansion can help make the process of applying for and redeeming interests in managed investment schemes more efficient for a greater range of products and can help lower operating costs for the investment management industry.'
The mFund settlement service 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 settlement service (previously referred to as the ASX Managed Funds Service or AMFS). 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, 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.
On 7 January 2014, ASIC issued Class Order [CO 13/1621] to make mFund available for simple managed investment schemes that can use a shorter PDS. Also, in order to facilitate the operating of mFund, the Assistant Treasurer has declared mFund 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.
- ASIC Corporations (Amendment) Instrument 2016/1212
- 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] and Legislative Instrument [2016/xxx]
- Consultation Paper 208 ASX Managed Funds Service: Relief from the application form requirement (CP 208)