The Asia Region Funds Passport (“Passport”) and the Corporate Collective Investment Vehicles (“CCIVs”) are finally here. On 26 October 2017, ASIC released Consultation Paper 296 Funds Management, along with six (6) draft new and updated regulatory guides (“RGs”), for public consultation.
The six draft regulatory guides include:
- RG000 Funds Management: Establishing and Registering a Fund;
- RG132 Funds Management: Compliance and Oversight;
- RG133 Funds Management and Custodial Services: Holding Assets;
- RG134 Funds Management: Constitutions;
- RG136 Funds Management: Discretionary Powers; and
- RG000 Foreign Passport Funds.
The concept of both the CCIV and Passport originated in a report called Australia as a Financial Centre: Building on Our Strengthens released by the Australian Financial Centre Forum in 2009 (“Johnson Report”). The Johnson Report recommended a package of reforms to facilitate Australian fund managers’ attracting overseas investment into funds operated and administered from Australia.
After years of international negotiation, the Australian Government is one step closer to implementing the long-awaited new regimes.
What is the Passport?
The Asia Region Funds Passport is an international initiative that, once implemented, will provide a multilateral agreed framework to facilitate the cross-border marketing of Passport funds across participating economies in the Asia region. It is intended to support the development of an Asia-wide funds management industry through improved market access and regulatory harmonisation.
The Passport regime will comprise a combination of laws of the home economy, the host economy and the new Passport rules. Under the proposed regulatory guides, an entity can apply to be registered as a Passport fund if it is both:
- a collective investment scheme regulated by the corporations legislation of a participating economy; and
- registered as a Passport fund in a participating economy.
In Australia, if you operate a managed investment scheme registered in accordance with the Corporations Act 2001 (Cth), you may be eligible for registering as a Passport fund if:
- the fund’s operator satisfies the eligibility criteria set out in the Passport rules, one of which is that you must have at least USD500 million worth of assets under management; and
- ASIC is satisfied that the fund will comply with the laws in Australia.
Overseas funds that are registered in a participating country as Passport funds, must lodge an application with ASIC if they want to “passport” into the Australian market. However, ASIC is entitled to refuse entry and one of the grounds for refusal is that the fund is unlikely to comply with Australian, or the home countries, laws and regulations.
What is a CCIV?
A CCIV is a legal structure: a company limited by shares with one public company as its director and is an alternative to a pooled investment vehicle (typically, a unit trust) under the current management investment scheme regime in Chapter 5C of the Corporations Act 2001 (Cth).
The introduction of the CCIV regime will align Australia’s fund’s structure (unit trusts) with structures commonly used in other countries (typically corporate and limited partnership investment vehicles), and hence increase the international competitiveness of Australia’s managed fund industry.
The draft regulatory guides outline the requirements for the registra
tion of a CCIV, including:
- a “director” of a CCIV must be a public company holding an Australian Financial Services Licence; and
- the “director” will operate the CCIV similarly to a responsible entity under the current managed investment scheme regime.
Persons who hold shares in a CCIV will be considered members of the CCIV. Shares in a CCIV are referred to as a “sub-fund”.
Draft Regulatory Guides & Next Steps
The public consultation will close on 8 December 2017.
During the public consultation period, ASIC will host a briefing for funds management industry participants to discuss the proposed new guidance for CCIVs and Passport funds. The briefing session is currently scheduled for Friday 24 November 2017 at 9 am in ASIC’s offices in Sydney, Melbourne and Brisbane.
Sophie Grace will participate in the briefing session. If you would like to discuss the proposed new guidance or have any questions, please contact us.
Melody assists in preparing, reviewing and negotiating legal documentation for participants in the financial services industry. Melody also assists with developing, reviewing and amending compliance documentation. She also supports the Compliance Consultants with the preparation of AFSL and ACL applications, variations and compliance reviews. Melody provides ongoing legal support and also assists in implementing ongoing compliance support, updating procedural documentation and preparing compliance reporting for Compliance Committees and Boards of Directors.