When do you need an AFSL for a managed investment scheme?
In an earlier article, we explained the concept of a managed investment scheme. In this article we explain when you need an Australian financial services licence (AFSL) for a managed investment scheme.
Providing a financial service
If you provide a financial service, generally you must have an AFSL. A financial service includes providing advice about a financial product and dealing in a financial product - for example, issuing the product. It also includes providing a custodial or depository service, such as acting as a custodian of assets of a managed investment scheme.
An interest in a managed investment scheme is a financial product, unless it is an unregistered scheme that:
has no more than 20 members; and
is not one of a group of schemes which ASIC treats as a single scheme with more than 20 members; and
was not promoted by a person in the business of promoting schemes.
If the managed investment scheme is registered with ASIC (see our article here), an interest in the managed investment scheme will always be a financial product. In addition, there must be a responsible entity of the registered scheme, and it must be a public company that holds an AFSL.
In summary, if an interest in a managed investment scheme is a financial product and you are providing a financial service in relation to that product, you will likely need an AFSL.
Licensing exemptions
There are exemptions from the requirement to hold an AFSL to provide financial services. Some of the exemptions that may be applicable to managed investment schemes include:
Product manufacturer: You issue scheme interests exclusively through licensed financial services providers.
Overseas regulated entity: You are regulated overseas and only service wholesale clients under ASIC-approved conditions.
Corporate group member: You only provide financial services to related bodies corporate.
Unregistered scheme trustee: You are a trustee of an unregistered scheme with a licensed related manager who accepts responsibility.
Securitisation provider: You are involved in securitisation transactions with wholesale clients, dealing in derivatives and forex contracts.
You will also not need an AFSL if you are acting as the authorised representative of an AFSL holder with authorisation to provide the financial services. However, if the financial service you are providing is issuing the product (i.e. the interests in a managed investment scheme), being an authorised representative may not be sufficient - ASIC says issuing a product is the act of a principal and so must be done by an AFSL holder (this is an issue currently before the courts).
Contact us
Please don’t hesitate to contact us if you need an AFSL for a managed investment scheme. We can assist with advice on licensing requirements and preparing your AFSL application.