Managed investment schemes are receiving increased attention from ASIC. Particular attention is being paid to constitutions of registered schemes.
ASIC has released Consultation Paper 188 ("CP 188"). In CP 188 ASIC proposes new compulsory components to determine whether or not to register a managed investment scheme ("MIS" or "scheme") under section 601EB of the Corporations Act 2001 ("Corps Act").
The constitution of an MIS is a contract between the responsible entity ("RE") and the members of the scheme that sets out some or all of the rights, duties and liabilities of the RE in its operation of the scheme. The Corps Act requires that the constitution of a registered scheme must contain certain provisions. For example, the constitution must make adequate provision for the powers of the RE in relation to making investments of, or otherwise dealing with, scheme property (s 601GA(1)(b)).
When an application for registration of a scheme is lodged, ASIC assesses the scheme's constitution for compliance with the Corps Act. ASIC Regulatory Guide 134 ("RG 134") currently provides guidance as to how ASIC does this. However, ASIC has recently stated that it believes RG 134 should provide better guidance. Specifically, ASIC believes that RG 134 should "give our view on the requirements of the Corporations Act, and how we apply them in deciding whether to register a managed investment scheme".
For schemes seeking registration with ASIC, the proposed commencement date is 1 May 2013.
For existing registered schemes, ASIC proposes that:
A full description of the proposals in CP 188 is beyond the scope of this newsletter. However, any person involved in the management of a registered scheme will find CP 188 extremely interesting reading.
We recommend that anyone involved in any new registered schemes consider CP 188, and ensure that the scheme constitution complies.
Once RG 134 is amended, advisers are also likely to receive questions from clients who are participants in registered schemes, as there will probably be a number of proposed amendments to constitutions which will be put to members meetings. Inevitably, members will be provided with notices of meetings showing the proposed amendments and they may ask their advisers about the meaning of these amendments.
To download a full copy of Consultation Paper 188 visit www.asic.gov.au or click here.