Australia: ASX's mFund and the Best Interests Duty

Investment Management Alert
Last Updated: 9 March 2014
Article by Jim Bulling and Daniel Knight

With the Australian Securities Exchange (ASX) set to launch its mFund settlement service in the first half of 2014, investment platform providers and financial advisers need to spend some time coming to grips with the potential implications. mFund will be an online portal and settlement service, making it easier for investors to apply for interests in unlisted managed funds and then manage their investments. It is an obvious competitor to traditional platforms, even though the ASX itself insists that they are potential partners rather than adversaries. The potential impact on advisers will be more subtle. They will need to consider when mFund, rather than a traditional platform, will be in their clients' best interests.

mFund Features

Designed to leverage the simplicity of buying shares through the ASX, mFund aims to make it easier for investors to directly buy interests in unlisted managed funds. Applications and unit pricing will still be handled by the fund managers, but the processes will be streamlined through mFund's central portal. mFund will provide access to current Product Disclosure Statements (PDSs), historical unit price data and other information for all available funds. Following some relief from the Australian Securities and Investments Commission (ASIC), paper applications will not be required, as all orders can be placed electronically.

Initially, only 'simple' funds (which use the eight page shorter PDS regime) will be available through the service, but the ASX intends to expand it to include more complex products over time. Some 65 fund managers have signed as foundation members, with more to be added after the launch.

mFund will utilise the existing Clearing House Electronic Sub-register System (CHESS), so investors can use the same Holder Identification Number (HIN) as they use for shares. This paves the way for consolidated reporting across shares, exchange traded funds (ETFs) and now unlisted managed funds. This has not previously been possible without investing through a platform (discussed further below) or a similar service.

Investors will need to access mFund through a participating broker. To date, 11 brokers have signed on. The ASX will not charge investors to use mFund, so pricing will be determined by the brokers. While specific pricing is not yet available, it is anticipated that investors will be charged by brokers on a per trade basis, perhaps as flat dollar amounts or as a percentage of the value of the trades.

Self-managed superannuation funds (SMSFs) represent an obviously large and growing market segment and mFund has clearly been designed with SMSF trustees in mind. SMSFs currently invest less than 15% of their assets in managed funds and mFund could be a catalyst for this number to grow.

mFund and Platforms

Platforms have been a significant part of the managed funds landscape for some time, and the objectives of platforms have been to make it easier for clients to transact and to get a complete picture of their investments across a range of asset classes. Platforms include a custody component, so that investments are held 'on platform' in the name of the platform provider (or a custodian), which holds them in trust for the underlying investors. Platforms provide consolidated reporting and aim to ease end of year filings and tax compliance. Some managed funds charge reduced management fees for clients investing through a platform, to reflect their reduced administration costs.

Platforms and mFund both seek to address the needs of retail clients wishing to invest in unlisted managed funds. However, the ASX has been quick to point to the potential synergies between the two. It states that mFund could provide back-office savings for platform operators, and it seems some boutique operators agree, having already signed up as foundation members of mFund.

As platforms often charge asset-based fees as a percentage of funds under management, mFund may well be cheaper for investors, depending on how brokers set their fees and how fund managers price their mFund offerings. If this is the case, it will be challenging for platforms to continue to demonstrate value, and they may need to explore further innovation and evolution of their services to justify any price premium.


ASIC has recently updated Regulatory Guide 148 (RG 148). While the Regulatory Guide is primarily concerned with platform operators, ASIC also used the revised guide to set out its expectations for financial advisers who recommend investing through a platform.

To comply with their best interests duty, ASIC expects advisers to justify the use of platforms based on benefits which are relevant to the particular client. ASIC has indicated that it is more likely to scrutinise such advice where the client could have invested directly for less.

Once mFund is launched later this year, advisers may find this analysis becomes more challenging, as they may need to consider mFund as another option for their clients, particularly for clients seeking access only to 'simple' funds. Advisers who do recommend a platform will need to document their reasoning, either in the Statement of Advice or an internal file note.

Financial Services Licensees should look to revisit their processes and their research to ensure they are giving their advisers the tools they need to give compliant advice to their clients. Template documents may also need to be updated to deal with the nuances of recommending a platform over mFund.

While some details are yet to emerge, it is clear mFund could significantly change the managed funds landscape in Australia, with potentially far reaching implications for platforms providers, advisers and fund managers.

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.

K&L Gates has been awarded a 2012 EOWA Employer of Choice for Women citation acknowledging our commitment to workplace diversity.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.