AFS licensing requirement for trustees of unregistered managed investment schemes

This information sheet (INFO 251) is for trustees of unregistered managed investment schemes (unregistered schemes) that issue, vary or dispose of interests in unregistered schemes that are financial products. It outlines:

This information sheet does not cover AFS licensing requirements for other financial services provided by trustees.

AFS licensing requirements

A trustee that issues, varies or disposes of interests in an unregistered scheme must generally hold an AFS licence authorising it to deal in a financial product by issuing, varying or disposing of interests in a managed investment scheme.

In certain circumstances, a trustee may rely on exemptions from the requirement to hold an AFS licence. Exemptions from the requirement to hold an AFS licence include:

  • the exemption in section 911A(2)(a) of the Corporations Act 2001 (Corporations Act) as it applies to authorised representatives (authorised representative exemption)
  • the exemption in section 911A(2)(b) of the Corporations Act (intermediary authorisation exemption).

A trustee of an unregistered scheme who relies on the intermediary authorisation exemption cannot also be an authorised representative in relation to making offers to arrange to issue, vary or dispose of a financial product under an arrangement for that unregistered scheme.

Authorised representative exemption

Scope of the exemption

The authorised representative exemption is a limited exemption from the requirement to hold an AFS licence. If a person provides a financial service in Australia as an authorised representative of another person (a principal), the person must be authorised under section 916A of the Corporations Act to provide the financial service by a principal that has an AFS licence covering that particular financial service.

In order to determine whether a person can rely on the authorised representative exemption, the test is whether the person is acting as a principal or as a representative of a principal. The exemption applies only if the person is acting as a representative of a principal.

For more information on whether a person is acting as a principal or a representative, see Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36).

When to rely on the exemption

As an authorised representative of an AFS licensee, the trustee of an unregistered scheme can only rely on the authorised representative exemption if it provides a financial service on behalf of the AFS licensee.

However, the trustee cannot rely on this exemption to avoid the requirement to hold an AFS licence to issue, vary or dispose of an interest in an unregistered scheme for which it is the trustee. The action of issuing, varying or disposing of an interest in a scheme as a trustee is, by its nature, the action of a principal.

Intermediary authorisation exemption

Scope of the exemption

The intermediary authorisation exemption from the requirement to hold an AFS licence to issue, vary or dispose of a financial product including interests in an unregistered scheme may also only be relied on in limited circumstances. This exemption applies where:

  • a product provider has an intermediary authorisation arrangement in place with an AFS licensee
  • the AFS licensee or its authorised representative (if that person is not the product provider (e.g. not a trustee of an unregistered scheme)) makes an offer to arrange to issue, vary or dispose of the financial product
  • the product provider issues, varies or disposes of the financial product if the offer is accepted
  • the offer under which the issue, variation or disposal is made, is covered by the licence of the AFS licensee.

Example where an AFS licensee makes an offer

Figure 1 illustrates the case where the trustee of an unregistered scheme, as a product provider, can rely on the intermediary authorisation exemption to issue, vary or dispose of interests in an unregistered scheme for which it is the trustee. In this case, it is the AFS licensee that makes the offer to arrange for the issue, variation or disposal of interests in the unregistered scheme. The trustee issues, varies or disposes of the interest as the product provider.

Figure 1: AFS licensee offers to arrange for the issue, variation or disposal of the financial product

 Info251 Figure 1                     

Note: See the paragraph above for a description of this figure (accessible version).

Example where an authorised representative makes an offer

Figure 2 illustrates the case where the trustee of an unregistered scheme, as a product provider, can rely on the intermediary authorisation exemption. In this case, an authorised representative of the AFS licensee (that is not the trustee) makes the offer to arrange for the issue, variation or disposal of interests in the unregistered scheme. These offers are made on behalf of the AFS licensee.

Figure 2: Authorised representative offers to arrange for the issue, variation or disposal of the financial product

 Info251 Figure 2

Note: See the paragraph above for a description of this figure (accessible version).

Example where an offer cannot be made

Figure 3 illustrates the case where the trustee of an unregistered scheme cannot rely on the intermediary authorisation exemption to make offers.

Where the intermediary authorisation exemption is relied on by the trustee, as a product provider without its own licence, to issue, vary or dispose of interests in an unregistered scheme, the trustee cannot also make the offer to arrange for the issue, variation or disposal of those interests. This means that, under the intermediary authorisation exemption, the trustee as a product provider cannot also be the authorised representative.

Figure 3: An unlicensed product provider cannot offer to arrange to issue, vary or dispose of the financial product

 Info251 Figure 3

Note: See the paragraph above for a description of this figure (accessible version).

Where can I get more information?

See:

  • RG 1 AFS Licensing Kit: Part 1 – Applying for and varying an AFS licence
  • RG 36 Licensing: Financial product advice and dealing

Call ASIC on 1300 300 630 or ask a question online.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.

Last updated: 30/03/2021 09:23