ASIC has turned its attention to responsible entities (REs)
operating managed investment schemes in the unlisted property
sector highlighting a number of potential compliance concerns. The
review has so far resulted in the suspension of an AFS license due
to substantial non-compliance and ASIC is working with other REs to
ensure necessary changes are made to meet their compliance
In a release issued 17 July 2012, ASIC Commissioner, Greg
Tanzer, said that the popularity of unlisted property schemes
amongst retail investors combined with current economic conditions
and issues of illiquidity make them a cause for concern for the
While the release was targeted at the unlisted property scheme
industry, Tanzer encouraged all REs and AFS license holders to
consider the issues highlighted and take the opportunity to ensure
compliance with all legal obligations.
ASIC highlighted five main areas of non-compliance:
non-compliance with key AFSL conditions including net tangible
assets (NTA), base level financial requirements, professional
indemnity insurance, external dispute resolution scheme membership
and key persons;
inappropriate compliance arrangements for the nature, scale and
complexity of the REs business and insufficient resources to
undertake the compliance function;
poor risk management systems/plans;
insufficient measures to control and monitor the release of
information to investors; and
inadequate controls to manage related party transactions.
We recommend all REs and AFS license holders read ASIC's
additional guidance for further details of these areas of concern,
click here to be taken to the document.
In our experience, clients that undertake properly considered
reviews (at least annual) of their compliance plans and risk
management systems are less likely to fall foul of the Corporations
Act and ASIC policy.
Ideally, compliance managers should consider updating compliance
plans and risk management systems (and not only processes and
procedures relevant to the change) when changes are made to
legislation and ASIC policy.
Significant changes to the NTA and cash flow requirements that
apply to responsible entities (contained in ASIC RG 166) and
disclosure benchmarks (updated ASIC RG46) will apply from 1
November 2012. A summary of the changes can be found in our updates
9 November 2011 and
8 May 2012.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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