Australia: ASIC updates guidance on constitutions of registered managed investment schemes


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 There were also concerns that RG 134 referred to information that was out of date such as: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:

  • rely on the requirements in [CO 13/655]; or
  • ensure the scheme constitution otherwise contains alternative provisions (in which case ASIC will undertake greater scrutiny of the constitution).

[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:

  • issue of interests by way of placements, rights issues and dividend reinvestment plans where other regulatory protections already exist under section 601FC for treating members equally; and
  • calculating the consideration to acquire interests for negotiated fees where the existing policy contained in Class Order [CO 03/217] Differential fees is complied with.

[CO 13/657] contains the following additional requirements which largely maintain ASIC's existing position:

  • where a responsible entity exercises discretion that affects the determination of the consideration to acquire an interest and the withdrawal amount or removal in whole (or part) of the liability of a member, it must ensure its method for calculating the value of scheme property (or interest quoted on a financial market) is consistent with the ordinary commercial practice for valuing the particular type of property (or interests of the same kind) and produces a reasonably current value; and
  • the responsible entity must prepare and keep records relating to the exercise of discretions in respect of the consideration to acquire an interest in the scheme.
Complaints handling

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:

  • the responsible entity can comply with the complaints handling requirement of the Corporations Act by including a provision in the constitution that the responsible entity, as an AFS licensee, will comply with the dispute resolution requirements for AFS licensees under section 912A(2)(a) for retail clients;
  • to minimise duplication, the responsible entity can (if it chooses) to include a provision that the responsible entity will comply, as an AFS licensee, with section 912A(2) in dealing with member complains in relation to the scheme.

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:

  • should address the following four key areas:
    • identification of the assets and liabilities of the scheme;
    • distribution of the net proceeds of winding up;
    • identification of the costs of winding up; and
    • any payments to maximise the proceeds of winding up; and
  • can include a provision that the responsible entity has the power to postpone the realisation of assets on winding up of the scheme to maximise the net proceeds of realisation attributable to the members (so long as the responsible entity thinks the exercise of power is not inconsistent with its duties under the Corporations Act).

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:

  • can identify a maximum fee or a performance fee based on a benchmark to which the responsible entity is entitled provided that all the variables in calculating a fee are set out in the constitution;
  • must not allow the following:
    • a right to payment of a fee or expense to accrue in advance of the proper performance of the responsible entity's duties to which the fee relates; and
    • money received for the issue of interests that are not immediately issued to be withdrawn to pay fees except when an issue of interests occurs.
Right of withdrawal

Where a right of withdrawal is provided by the scheme, additional guidance that the constitution should:

  • focus on the following four key areas:
    • method and criteria for exercising a right to withdraw;
    • the consideration received by members to satisfy withdrawal requests;
    • any restrictions on satisfying withdrawal requests; and
    • what happens when a member ceases to be a member of the scheme in respect of those interests;
  • a statement that withdrawals will be made in accordance with Part 5C.6 of the Corporations Act where there is a right to withdraw while a scheme is non-liquid;
  • an express statement of any power to suspend and resume payment and the circumstances in which the power may be exercised;
  • a requirement that the formula the responsible entity decides to use in accordance with the discretion it is given under [CO 13/655] be determined on the basis the value of scheme property less liabilities (taking into account the material costs involved in disposal of the scheme assets); and
  • a provision specifying the maximum period in which the payment of withdrawal proceeds will occur (for non-liquid schemes, the maximum is 21 days).
Legal enforceability

Addition of a requirement that for a constitution to be legally enforceable between the responsible entity and all members of the scheme, it should:

  • be in a valid form and executive by the responsible entity;
  • be expressed to be binding between the responsible entity and all members of the scheme; and
  • not contain provisions that are inconsistent with the Corporations Act.


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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