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Client update: Funds Management – 9 July 2004

Transaction costs update

In brief: ASIC has announced its interim position on transaction costs for registered managed investment scheme constitutions. ASIC has indicated that until 31 December 2004, it will consider granting relief for new scheme constitutions on a case by case basis and will take no action in relation to constitutions of existing schemes, as Lawyer Janna Vynokur reports.

The background

We reported in our May Focus: Funds Management that ASIC had adopted a practice of rejecting constitutions that include what is considered to be a fairly standard definition of 'transaction costs'. ASIC has since recognised that its stance has the potential to cause practical difficulties for funds managers and has decided to consult with the managed funds industry. In the meantime, interim relief may be available for new schemes and a no-action position will be taken in relation to existing schemes.

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Interim relief

Until 31 December 2004, ASIC will consider granting relief, on a case by case basis, to remove the need for a scheme constitution to contain a mechanism that is 'certain, complete and independently verifiable' for calculating the transaction costs component of the price of an interest in the scheme. ASIC has indicated that it will be a condition of the relief that:

  • the Product Disclosure Statement for the scheme discloses the basis for calculating the transaction costs; and
  • in exercising any discretion with respect to transaction costs permitted by the interim relief, the responsible entity will be subject to the duties imposed by section 601FC of the Corporations Act 2001.

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No-action position

Until 31 December 2004, ASIC will take no action in relation to any existing scheme constitutions that do not make adequate provision for the transaction costs component of the price.

Further information on the relief can be obtained on the ASIC website.

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Consultation during interim relief period

From now until 31 December 2004, ASIC will consult with the managed funds industry and IFSA on a proposal to grant ongoing class order relief from the requirement for a scheme constitution to make adequate provision for the transaction costs component of the price of an interest in certain circumstances. 

ASIC will release a document which sets out the proposal in detail and seeks consultation on a future date.

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How to make relief applications

An application for interim relief should be made to ASIC's FSR Application Manager and can be sent to the following e-mail address: fsr.applications.manager@asic.gov.au

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For further information, please contact:

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