On 8 March 2013, the Australian Securities and Investments Commission released Consultation Paper 200: Managed Discretionary Accounts: Update to RG 179 ("CP200").
ASIC proposes to require MDA operators to meet enhanced financial resource requirements including a new net tangible asset requirement. Smaller AFS licensees who are permitted to offer MDA services to retail clients may struggle to meet the new requirements.
What is the MDA relief?
A managed discretionary account ("MDA") arrangement is an arrangement between a person (an MDA operator) and a client, where the MDA operator agrees to manage a discrete portfolio of assets on behalf of the client. Typically, the client grants the MDA operator the power (usually, by way of a power of attorney) to make and implement investment decisions on the client's behalf, without having to seek approval from the client for each decision.
ASIC exempts MDA operators from having to register a managed investment scheme and prepare a Product Disclosure Statement provided they: (i) hold an AFS licence authorisation permitting them to offer MDA services to retail clients; and (ii) comply with the relief granted in Class Order [CO 04/194].
More recently, an increased interest in MDA arrangements from industry participants has caused ASIC to review its relief.
As part of the changes, ASIC proposes to:
For a complete list of the proposed amendments click here to download a copy of CP200.
The proposed new financial resource requirements
ASIC proposes increased financial resource requirements for MDA operators to ensure that these correspond with the requirements that have applied to responsible entities of managed investment schemes since 1 November 2012.
Specifically, ASIC would like all MDA operators to meet:
The new NTA requirement seems especially onerous.
ASIC would seek to require MDA operators that do not provide custodial and depository services to hold the greater of:
ASIC would seek to require MDA operators that provide custodial and depository services to hold the greater of:
Smaller AFS licensees who are permitted to offer MDA services to retail clients may struggle to meet the new NTA requirement.
Halseys has prepared, and forwarded to ASIC, a submission in respect of the proposed increased NTA requirements. To access the submission, click here.