ASIC mulls changes to ‘sunsetting’ class orders on managed funds
The Australian Securities and Investments Commission (ASIC) has announced it is seeking feedback on proposals to “remake” class orders imposing financial resource requirements on the managed funds industry.
Under the Corporations Act 2001, AFS licensees were required to hold “adequate resources”, including adequate financial resources.
This included obligations to hold, at all times, minimum amounts of net tangible assets and (NTA) and cash or cash equivalents.
The class orders were subject to repeal, or ‘sunsetting’, following a set period (typically 10 years).
ASIC published a consultation paper detailing its proposals, which included changes to:
- financial requirements for custodial or depository service providers; and
- financial requirements for corporate directors of retail corporate collective investment vehicles.
“These class orders set out the financial resource requirements that responsible entities, IDPS operators, custodians and corporate directors must meet as an Australian financial services (AFS) licensee,” ASIC noted in a statement.
Under the Legislation Act 2003, two of the class orders were due to expire on 1 October 2023, with one sunsetting on 1 October 2024.
“ASIC considers that the class orders are operating effectively and efficiently and continue to form a necessary and useful part of the legislative framework,” the regulator added.
“The fundamental policy principles that underpin the class orders have not changed.”
Specifically, ASIC moved to issue a combined legislative instrument designed to prescribe the financial resource requirements for responsible entities, IDPS operators and corporate directors of retail CCIVs.
The regulator stressed, however, a separate legislative instrument would be retained to prescribe the financial resource requirements for custodians.
The new legislative instruments was expected to have an expiry date of 1 October 2028.
ASIC invited consultation on the proposed extension of the class orders, with submissions due on or before 31 March 2023.
AUTHOR
Charbel Kadib
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