Sophie Grace has experience in establishing a range of retail funds for our clients.
We can help you through all aspects of establishing and maintaining your retail fund.
The trustee of a retail fund is a Responsible Entity and must be a public company that holds an AFSL with the appropriate authorisations.
If you intend to operate a retail fund as the Responsible Entity, you will need to obtain an AFSL.
If you intend to act as the investment manager only, you are also required to be authorised by an AFSL (by either obtaining your own AFSL or acting as an Authorised Representative of another AFSL), however the authorisations are much more limited than those for a Responsible Entity, and you do not need to be a public company for this.
Retail funds are required to issue a Product Disclosure Statement (“PDS“) to investors unless an exemption applies. The PDS sets out a variety of information regarding the fund, including:
- key features of the fund including distributions, liquidity, redemption of units, withdrawal from the fund and complaints;
- the assets the fund will invest in and how these assets will be valued;
- information about the investment manager and how the fund will be managed;
- information about the trustee and custodian;
- design and distribution details for the fund;
- the risks associated with the fund;
- fees and expenses; and
- how to invest in the fund.
There is an exemption from disclosure (however not from licensing) in the Corporations Act for small-scale offerings of managed investment products.
“Small-scale offerings” must:
- not breach the 20 investors ceiling test;
- not breach the $2 million ceiling test; and
- be “personal offers”.
There will be a breach of the 20 investors ceiling test (item 1 above) if the offering “results in the number of people to whom the issuer has issued managed investment products exceeding 20 in any 12-month period”.
There will be a breach of the $2 million ceiling test (item 2 above) if the offering “results in the amount raised by the issuer exceeding $2 million in any 12-month period”.
To meet the “personal offers” test under the Corporations Act (item 3 above) the offer must:
- only be able to be accepted by the person to whom it is made; and
- be made to a person who is likely to be interested in the offer; having regard to:
- previous contact between the offeror and that person;
- professional or other connections between the offeror and that person; or
- actions by that person indicating they are interested in such offers.
It is important to remember that the disclosure exemption is not also an exemption from the requirement to hold an AFSL.
Retail funds are generally required to be registered with ASIC, subject to limited exceptions.
There are a number of documents required for registration, including:
- A constitution; and
- A compliance plan.
A compliance committee must also be formed where less than half the directors of the Responsible Entity are external directors.
Sophie Grace can:
- advise on fund establishment issues including the Financial Services Regulation implications of establishing a fund (e.g. licensing and the requirement to be registered as a managed investment scheme);
- prepare or review trust deeds and constitutions;
- prepare or review PDSs;
- prepare investor subscription agreements; and
- prepare or review outsourcing agreements including investment management, custody and fund administration agreements.
There are a number of other issues to be considered for those operating a funds management business. Please click here to read more.