When does a managed investment scheme have to be registered?
General requirement
In general, a managed investment scheme has to be registered with ASIC if:
the scheme has more than 20 members; or
ASIC decides that the scheme and its closely related schemes have more than 20 members; or
it was promoted by a person in the business of promoting schemes.
Small offering exemption
A managed investment scheme is not required to be registered with ASIC if there are no more than 20 purchasers in any 12-month period and the issuance raises no more than $2 million in any 12-month period.
To prevent people trying to avoid the registration requirement by splitting schemes, ASIC can make a determination that a managed investment scheme is closely related to other investment schemes and that the total number of members of the schemes exceeds 20.
Joint holders of an interest in the scheme are considered to be a single member.
A beneficiary with an interest in the scheme held in trust for them is considered a member if they are entitled to a share of the trust estate or its income or they can control the trustee, either alone or with others.
Wholesale clients exemption
A managed investment scheme is also not required to be registered with ASIC if all the interests in the scheme are issued to wholesale clients.
There are 5 different eligibility tests for a wholesale client. If a person meets any of these tests, that person will be a wholesale client.
Product value test: The price for the provision of a financial product or the value of the financial product to which the financial service is related is not less than $500,000. (Corporations Act s 761G(7)(a), Corporations Regulations reg 7.1.18(2)).
Individual wealth test: The person has net assets of at least $2.5 million or a gross income of at least $250,000 per year in the last 2 financial years and is supported by a certificate given by a qualified accountant (valid for 2 years after issue). (Corporations Act s 761G(7)(c), Corporations Regulations reg 7.1.28 (1), reg 7.1.28 (2), reg 7.6.02AF).
Not a small business test: The financial product or service is provided for use in connection with a business that is not a small business. (Corporations Act ss 761G(7)(b) and 761G(12)).
Professional investor test: The client is a ‘professional investor’ as defined in the Corporations Act. This includes an AFS licensee, a body regulated by APRA, entities registered under the Financial Sector (Collection of Data) Act 2001 (Cth), a trustee of a superannuation fund with net assets of at least $10 million, a person controlling at least $10 million, an exempt public authority, a listed entity, and a body corporate that carries on certain investment businesses. (Corporations Act ss 9, 761G(7)(d)).
Sophisticated investor test: The financial product or service is not being provided in connection with a business and the AFSL holder is satisfied on reasonable grounds that the client has previous experience in using financial services and investing in financial products that allows the client to assess the merits, value, risks and information about the product or service. (Corporations Act s 761GA).
Registration requirements
A registered managed investment scheme requires a “responsible entity”, which must be a registered Australian public company holding an Australian financial services licence (AFSL) that authorises the responsible entity to operate the scheme and provide relevant financial services.
To apply for registration, the responsible entity needs to submit a Form 5100, selecting the type of scheme from various categories such as financial asset schemes, mortgage schemes, primary production schemes, etc. The application must include:
a copy of the scheme’s constitution;
a copy of the scheme’s compliance plan;
Form 5103, which is a directors' statement confirming the scheme’s constitution and compliance plan comply with the Corporations Act requirements;
an annexure that cross-references the contents of the constitution required by the Corporations Act to the equivalent provisions in the scheme's constitution; and
if necessary, an agent authority appointing another person to sign the compliance plan.
The responsible entity should not lodge the scheme registration application before receiving a draft AFSL.
Original documents must be retained for seven years from the date of online lodging.
For further details see ASIC information here.
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