NEED TO KNOW
On 5 June 2013, the Australian Securities and Investment Commission (ASIC) released an updated version of Regulatory Guide 134: Managed investments: Constitutions (RG 134) and issued the following new class orders containing the relief on which responsible entities can rely:
- ASIC Class Order [CO 13/655] Provisions about the amount of consideration to acquire interests and withdrawal amounts not covered by [CO 05/26] ([CO 13/655]);
- ASIC Class Order [CO 13/656] Equality of treatment impacting on the acquisition of interests ([CO 13/656]); and
- ASIC Class Order [CO 13/657] Discretions affecting the amount of consideration to acquire interest and withdrawal amounts ([CO 13/657]).
Sections 601GA and 601GB of the Corporations Act 2001 (Cth) (Corporations Act) require that a constitution of a registered managed investment scheme contain certain provisions. RG 134, which was first published in 1998 and last revised in September 2000, sets out ASIC's policy on the content requirements for a constitution of a registered managed investment scheme.
On 18 September 2012, as part of ASIC's review of its guidance in RG 134, ASIC released Consultation Paper 188: Managed Investments: Constitutions – Updates to RG 134 (CP 188).
CP 188 outlined various key proposals to update RG 134 to reflect ASIC's views on how the content requirements set out in sections 601GA and 601GB of Corporations Act may be satisfied. The proposals contained in CP 188 were generally welcomed by the industry due to the uncertainty surrounding the interpretation of those sections of the Corporations Act and the lack of guidance in RG 134. There were also concerns that RG 134 referred to information that was out of date such as:
- references to ASIC class orders that have been replaced; and
- a complaints handling procedure that was different to the disputes resolution system required by section 912A(1)(g) of the Corporations Act for responsible entities operating schemes as Australian Financial Services licensees with retail clients.
Submissions on CP 188 closed on 13 November 2012 and ASIC refined the proposals in CP 188 in updating RG 134 based on the feedback in the submissions.
The key changes to RG 134 and the new ASIC Class Orders providing the relief on which responsible entities can rely are summarised below.
|Scheme constitution content requirement||Summary of update|
|Consideration to acquire an interest||
Creation of a safe harbour under [CO 13/655] on which responsible entities can rely to meet the requirement that the constitution make adequate provision for the consideration to acquire an interest.
Responsible entities can choose to:
[CO 13/655] also allows responsible entities of a stapled security to allocate the consideration to acquire an interest in a scheme if that interest is a component part of a stapled security and if the constitution contains adequate provisions for the consideration to acquire the stapled securities. This removes the need for the responsible entity to apply for individual ASIC relief.
Removal of the following existing conditions that were previously contained in ASIC Class Order [CO 05/26] Constitutional provisions about the consideration to acquire interests:
[CO 13/657] contains the following additional requirements which largely maintain ASIC's existing position:
If the scheme is open to retail clients, clarification that the complaints handling procedure for retail clients must be consistent with the AFS licensee dispute resolution requirements under section 912A(2)(a) for retail clients and:
If the scheme is open to wholesale clients, confirmation that the responsible entity can devise its own complaints handling procedures but should include provisions about the procedures in the constitution.
[CO 13/656] introduces relief so that responsible entities may treat retail and wholesale clients who may be in the same class differently in relation to member complaints handling.
|Winding up a scheme||
In respect of winding up a scheme, additional guidance that the constitution:
ASIC has also confirmed in RG 134 its existing position that the constitution needs to include a provision that provides for an independent audit of the final accounts after the winding up of a scheme.
|Payment of fees and indemnities||
Confirmation that the constitution need not expressly identify a fixed fee that will be paid by members. RG 134 provides additional guidance that the constitution:
|Right of withdrawal||
Where a right of withdrawal is provided by the scheme, additional guidance that the constitution should:
Addition of a requirement that for a constitution to be legally enforceable between the responsible entity and all members of the scheme, it should:
TIMING OF NEW REGIME
The revised guidance in RG 134 will apply for all schemes registered on or after 1 October 2013.
For any schemes registered before 1 October 2013, ASIC will not be requiring responsible entitles to amend their constitutions to comply with the updated RG 134 so long as the constitution for those existing schemes comply with the previous version of RG 134.
We are available to provide you with further information or guidance about this important development for the managed funds industry.
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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