Focus: Funds Management ASIC provides relief to Singaporean collective investment schemes
21 December 2007
In brief: Consistent with its policy on foreign collective investment schemes, the Australian Securities and Investment Commission has released a class order that provides conditional exemptions allowing some Singaporean collective investment schemes to be offered in Australia. Senior Associate Rebecca Devon and Vacation Clerk Judith Hammerschlag report.
- What schemes are covered by the class order?
- What scheme operators are covered by the class order?
- What relief is granted?
- What are the conditions for relying on the class order?
How does it affect you?
- Operators of Singaporean collective investment schemes may be eligible for exemptions from Australian registration, licensing and product disclosure requirements. However, only particular types of schemes and operators are covered by the class order, there are conditions that need to be satisfied and the class order has various limitations.
- For Australian investors, the class order may provide easier access to Singaporean collective investment schemes.
The class order [CO 07/753] was issued by the Australian Securities and Investment Commission (ASIC) in mid-November 2007. Consistent with ASIC's policy of granting exemptions to foreign collective investment schemes (FCIS) where there is a 'sufficiently equivalent regulatory regime', the class order provides conditional exemptions to certain Singaporean collective investment schemes. The class order seeks to balance the protection of Australian resident investors and the integrity of Australian markets, whilst assisting with the opening up of the Australian market to certain Singaporean collective investment schemes.
The class order applies to schemes (the exempt FCIS) constituted in Singapore as a unit trust and authorised by the Monetary Authority of Singapore (MAS). Australia must not be the principal market in which interests in the scheme are offered.
A foreign company operator of an exempt FCIS may rely on the class order if it is registered as a foreign company under the Corporations Act 2001 (Cth) and gives ASIC various documents. These include:
- a deed poll covenanting to (among other things) comply with Singaporean regulatory requirements and submitting to the non exclusive jurisdiction of Australian courts;
- the scheme's constituent documents and the most recent prospectus; and
- written consent to disclosures between ASIC and MAS.
The operator must also notify ASIC of significant changes to its regulatory environment (the exempt operator).
An exempt operator does not need to register the exempt FCIS as a managed investment scheme under the Corporations Act.
The exempt operator is also not required to hold an Australian financial services licence (AFSL) for:
- dealing in financial products in the scheme's ordinary course of operation (other than by issuing financial products);
- dealing in derivatives or foreign exchange contracts for the purpose of managing a financial risk to an exempt FCIS that arises in the ordinary course of its operation (and which is not a significant part of the business); and
- providing a custodial or depositary service by holding assets of an exempt FCIS.
Importantly, exempt operators will still need an AFSL to issue interests in the exempt FCIS, or identify an AFSL exemption that applies. Exempt operators should also consider whether they will be providing financial product advice. If so, an AFSL will be required or an applicable AFSL exemption identified.
Under the class order, an exempt operator does not need to prepare a product disclosure statement for an exempt FCIS. However, the exempt operator remains subject to the dispute resolution system requirements, the advertising restrictions and ASIC stop order powers (each as modified by the class order).
In order to rely on the class order, an exempt operator must comply with a series of conditions. These conditions include giving a Singaporean prospectus relating to interests in the exempt FCIS to retail clients, ensuring the prospectus complies with Singaporean regulatory requirements, and making disclosures in the Singaporean prospectus that is given to retail clients (eg outlining the rights and remedies available to Australian investors under Singaporean dispute resolution mechanisms and significant Australian taxation implications). The exempt operator must also notify ASIC if a Singaporean prospectus is in use in Australia.
The exempt operator must also:
- provide specified information about the exempt FCIS to members;
- provide ASIC with annual financial statements of the exempt FCIS;
- maintain a register of Australian-based members; and
- ensure that no more than 30 per cent by value of all interests in the exempt FCIS are held by Australian-based members.
- John BeckinsalePartner,
Ph: +61 7 3334 3520
- Andrew PascoePartner,
Ph: +61 8 9488 3741