ASIC publishes draft funds management guidance

By Penny Nikoloudis
Banking & Finance Private Capital Risk & Compliance

In brief

ASIC has released draft updates to four existing Regulatory Guides and drafts of two new Regulatory Guides for managed investment schemes, corporate collective investment vehicles and passport funds, and announced a consultation period which will run until 8 December. Partners Marc Kemp and Penny Nikoloudis and Senior Overseas Practitioner James Kanabar provide a high-level summary of the draft guidance.


As we reported on 25 August and 17 October, it has been a busy few months for the development of the new corporate collective investment vehicle (CCIV) and the Asia Region Funds Passport (Passport), with the Federal Government releasing exposure draft legislation in respect of both on 25 August, commencing a consultation period which ended on 25 September. Allens has been actively tracking and commenting on the development of both the CCIV and the Passport for a number of years, and has made detailed submissions on the drafts (both in our own name and through our involvement with key industry bodies). A copy of our submissions, the draft legislation and our commentary on issues relating to the introduction of new Australian collective investment vehicles (including the CCIV) can be found on our dedicated, one-stop-shop CIV hub, which we will be updating regularly as things develop.

In light of the draft CCIV and Passport legislation, the Australian Securities and Investments Commission (ASIC) has released Consultation Paper 296 (CP296) and draft Regulatory Guides in relation to CCIVs, Passport funds, managed investment schemes (MISs) and certain Australian Financial Services licensees involved in funds management.

What does the guidance cover?

ASIC has released drafts of six Regulatory Guides, two of which are entirely new and four of which represent a reboot of existing ASIC guidance:

  • RG 000 Funds management: Establishing and registering a fund – is a new Regulatory Guide explaining how ASIC will interpret and apply registration requirements in respect of CCIVs, Australian Passport funds and MISs, together with guidance on notification requirements following the establishment of a CCIV sub-fund;
  • RG 134 Funds management: Constitutions – has been updated by ASIC (in light of the fact that decisions on whether to register an MIS will be dealt with in RG 000 Funds Management: Establishing and registering a fund) and now provides guidance on the content of MIS, CCIV and Australian Passport fund constitutions required to meet the Corporations Act 2001 (Cth) requirements;
  • RG 132 Funds management: Compliance and oversight – has been updated by ASIC to provide new guidance, together with updated and consolidated guidance, on the development of a compliance management system under s912A Corporations Act, the content of a compliance plan for registered MISs and retail CCIVs to meet Corporations Act requirements, and oversight functions performed by compliance committees, compliance plan auditors, depositaries, etc. The new guidance is intended to consolidate, update and replace existing guidance on compliance plans in Regulatory Guides 116 to 120;
  • RG 133 Funds management and custodial services: Holding assets – has been updated by ASIC to extend guidance on minimum standards for holding assets to accommodate the CCIV and Passport regimes, both of which include obligations and requirements in respect of asset holding;
  • RG 136 Funds management: Discretionary powers – has been updated by ASIC to provide an explanation of its policy in exercising its powers of exemption and modification to grant relief in respect of Corporations Act requirements applying to MISs, CCIVs and Australian Passport funds; and
  • RG 000 Foreign passport funds – is a new Regulatory Guide, designed to assist offshore Passport fund operators to understand the requirements for entering and operating in Australia as a Passport host country, and to explain ASIC's role as a host regulator and the obligations it will impose on offshore Passport funds and their operators in Australia.

Consultation process and timing

ASIC is seeking feedback on the draft guidance from interested parties by 8 December. The consultation paper and draft regulatory guides come to 383 pages. If you were unsure what you might be reading over the next two months, ASIC has presented the solution.

CP 296 contains the usual ASIC health warning that the drafts represent an indication of the approach it may take and do not represent ASIC's final policy. ASIC also notes that the drafts are based on the exposure drafts of the CCIV and Passport legislation and, as such, are subject to change as that legislation evolves. Given the detail of Allens' submissions on the draft legislation and those of other industry bodies, it would not surprise us if ASIC is required to make significant changes to the draft guidance following release of the next tranche of CCIV and Passport legislation, for which there is currently no fixed timetable. ASIC intends to release its final guidance after the CCIV and Passport legislation is passed into law.

In addition to its draft substantive guidance, ASIC will make less substantive amendments to other, existing Regulatory Guides, noting (somewhat nebulously) that it will release those less substantive amendments 'later' and not confirming whether those changes will be subject to consultation.

Proposed changes to existing MIS guidance

In addition to providing guidance on CCIVs and the Passport, ASIC has taken the opportunity to reorganise and update its existing substantive guidance on MISs, with the aim of consolidating guidance on funds management into a smaller number of Regulatory Guides, and updating MIS policy to reflect ASIC's current views and practices and to address issues identified over time in the administration of the legislation relating to MISs. While those of us who work with the Corporations Act and the labyrinth of Class Orders and Regulatory Guides cannot help but applaud the move towards consolidation, the devil of the changes to the guidance on MISs will be in the detail and, in preparing our submissions, we will focus not only on the changes ASIC has proposed but also, based on our experience navigating the existing rules and guidance on behalf of our clients, whether there are other changes which it would be sensible for ASIC to include in this update.

ASIC has also indicated that it will develop an information sheet on funds management governance considerations. It will be very interesting to see what those governance considerations will be.

What next?

ASIC has requested submissions on the drafts from interested parties by 8 December, with a request to focus on certain key questions outlined in CP 296. ASIC will also be holding an information session in Brisbane, Sydney and Melbourne on the proposed guidance on Friday, 24 November.

We await the revised drafts of the CCIV and Passport legislation. Although the Federal Government has not given a fixed timetable, our expectation is that the next tranche will be the exposure draft tax legislation and could be released before the end of the year.