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

Focus: Managed investment schemes
Services: Financial Services, Commercial
Industry Focus: Financial Services , Property

In brief

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])
  • 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 sets out ASIC's policy on the content requirements for a constitution of a registered managed investment scheme. The regulatory guide was first published in 1998, and last revised in 2000.

The updated RG 134 follows consultation by ASIC last year (Consultation Paper 188: Managed Investments: Constitutions – Updates to RG 134 (CP 188)).

Importantly, ASIC will not require existing scheme constitutions to be amended to comply with its new guidance, as it had proposed in CP 188. The new guidance will only apply to constitutions lodged for scheme registration from 1 October 2013.

The new guidance and relief

Scheme constitution content requirement Summary of new guidance / relief
Unit pricing discretions

ASIC has created a "safe harbour" of pricing provisions under [CO 13/655] on which responsible entities can rely to meet the requirement that the constitution makes adequate provision for the consideration to acquire an interest.

Instead of relying on the safe harbour provisions, a responsible entity can choose to use alternative wording. In this case, they are "encouraged" to make a submission to ASIC on those provisions before lodging the constitution, and can expect greater ASIC scrutiny of the constitution.

Some of the existing restrictions in [CO 05/26] have been removed or simplified in [CO 13/655] on the basis that investors have sufficient protection under the ASX listing rules and Corporations Act (eg placement limits, issues to associates and the quantum of the discount in rights issues).

The requirement for a documented policy on unit pricing discretions has been retained, and has now been added as a specific duty of the responsible entity under s.601FC(1).

Fees and indemnities

A responsible entity cannot be paid fees in advance of performing the duties to which the fees relate.

A responsible entity cannot be indemnified out of the scheme as an expense "at an hourly rate to be determined by it" or "on standard commercial terms" – this is a fee which must be specified in the constitution.


The responsible entity can comply with the complaints handling requirements 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) in dealing with member complaints.

If the scheme is open to wholesale clients, the responsible entity can devise different complaints handling procedures for those clients, however provisions about these procedures will need to be included in the constitution in order to comply with section 601GA(1)(c).

[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.


Constitutions should address four key aspects of the withdrawal process:

  • how the withdrawal right is triggered
  • any amount that is to be paid or given to members
  • restrictions on dealing with withdrawal requests, and
  • ceasing to be a member.

Constitutions should not include provisions that treat withdrawing members as having ceased to be a member before the time the scheme property is valued for the purpose of determining the withdrawal price, as they should not lose the right to benefit from any increase in value.

Winding up

ASIC has not gone ahead with its proposal in CP 188 to require the inclusion of prescriptive provisions about the winding up procedure.

ASIC has retained 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.

What should responsible entities be doing?

Responsible entities should:

  1. Ensure that scheme constitutions lodged after 1 October 2013 comply with RG 134 – in particular, this is likely to require amendments to unit pricing provisions and complaints handling provisions in the precedent constitution.
  2. Take the new RG 134 into account when preparing scheme constitutions for lodgement before 1 October 2013, as it deals with matters that ASIC has been raising for some time when dealing with applications for scheme registration.
  3. Check that existing scheme constitutions comply with the old RG 134 and [CO 05/26].

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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