Australia: On your radar: Five key matters affecting fund managers

Focus: Regulatory landscape for Australian fund management industry
Services: Commercial, Financial Services, Mergers & Acquisitions
Industry Focus: Financial Services

The regulatory landscape for the Australian funds management industry continues to change. This article provides an overview of five key matters that should be on the radar of fund managers.

  1. FATCA

The US Foreign Account Tax Compliance Act (FATCA) allows the US Internal Revenue Service (IRS) to identify and collect tax from "US persons" who invest in US assets through non-US "foreign financial institutions" (FFIs). FFIs include investment funds, as well as banks, building societies, credit unions, specified life insurance companies, custodians and some brokers.

Under FATCA, from 1 July 2014 FFIs are required to identify US clients and disclose their details to the IRS, or deduct 30% withholding tax from distributions of US-sourced income to those clients. See our previous article for further background on FATCA.

On 28 April 2014, the Australian and US governments signed an intergovernmental agreement (IGA) in respect of FATCA. Treasury also released draft implementing legislation for public comment. A key outcome of the IGA is that Australian fund managers and other financial institutions will not have to report account holder information to the IRS, but will instead be subject to annual reporting obligations to the ATO.

All fund managers should be urgently reviewing and updating their systems, processes and account opening documentation to comply with the new due diligence and reporting obligations. From 1 July 2014, they should also be reviewing existing client accounts to determine whether any of those accounts are US reportable accounts. This will require them to apply the due diligence procedures specified in Annex 1 to the IGA (alternatively, they may elect to use any alternative procedures described in the US Treasury regulations).

  1. FOFA amendments

The Australian Government introduced the Corporations (Streamlining of Future of Financial Advice) Bill 2014 (FOFA Amendment Bill) into Parliament on 19 March 2014. The FOFA Amendment Bill was referred to the Senate Economics Committee for industry consultation on 24 March, and implementation of the changes is on hold pending such consultation.

The amendments most relevant to fund managers relate to general advice. The government's initial proposal was to exempt general advice completely from the ban on conflicted remuneration (as reflected in the exposure draft released on 20 December 2013).

However, the government has retreated from this position and now proposes to limit the exemption so that it is available only if:

  • the benefit is given to an employee of the licensee in relation to general advice given to a retail client, and
  • the employee has not given personal advice to the retail client in the last 12 months,and
  • the financial product on which the general advice is given is a product issued or sold by the licensee.

We consider that there are a number of shortcomings with the revised proposal. It does not take account of group structures, where employees are employed by a related body corporate of the licensee. Nor would the exemption apply where the benefit is given to a contractor, yet there seems no policy reason why the exemption should not apply in that situation as well.

The revised proposal also fails to address the breach identified by ASIC in Regulatory Guide 246 (at paragraphs 112 and following) of a product issuer accepting management or administration fees (which might reasonably be expected to influence general advice given to retail clients to increase or maintain their investment with the product issuer). Accordingly, at this stage product issuers will need to continue to rely on ASIC's no-action position as described in RG 246.

Fund managers should continue to monitor the progress of the FOFA Amendment Bill. They should also keep an eye out for any consultation following on from the FOFA options paper on wholesale and retail clients published in 2011.

  1. Asia Region Funds Passport

On 16 April 2014, an APEC working group comprising Australia, Korea, New Zealand, Singapore, Thailand and the Philippines released a consultation paper on the Asia Region Funds Passport (Passport).

The Passport will be a new regulatory framework to facilitate the distribution of eligible 'collective investment schemes' to retail investors in passport member countries. The Consultation Paper sets out, and invites comments on, the proposed rules and processes developed by the working group to govern the operation of the Passport. The due date for submissions is 11 July 2014.

Once implemented, it is anticipated that the Passport will greatly enhance opportunities for Australian fund managers to tap into Asia's growing investor base.

  1. ASIC regulatory guidance and relief

Fund managers should also look out for developments in the following areas of ASIC guidance and relief:

  • ASIC Class Order 12/749 is due to expire on 30 June 2015. This Class Order relieves hedge funds, multi-fund offerings and superannuation platforms from the shorter PDS regime. Watch out for consultation or developments on any permanent arrangements which are to apply after expiry of the Class Order.
  • ASIC's final guidance on risk management systems of responsible entities is overdue for release, following on from last year's Consultation Paper 204 and draft regulatory guide.
  1. CAMAC report on managed investment schemes

The Corporations and Markets Advisory Committee (CAMAC) was established by the Federal Government in 1989 to provide independent advice on the regulation of corporations and financial markets. CAMAC has, for a few years, been reviewing managed investment schemes. It issued a report in 2012 which primarily considered matters relating to schemes in financial distress, and also proposed the concept of a scheme being a legal entity distinct from the responsible entity.

CAMAC has recently released its second report, which deals with the establishment and ongoing operation of schemes. CAMAC has stated that, in formulating its proposals, its general approach has been that the regulatory regime for managed investment schemes should be aligned with that for companies, unless there are compelling reasons for treating schemes differently.

CAMAC's proposals cover a range of areas including governance frameworks, matters to be dealt with in the constitution, scheme meetings, withdrawals, disclosure and takeovers. Perhaps its most controversial proposal is that all managed investment schemes should be registered. CAMAC questions whether wholesale schemes should be exempt from registration, and advocates the abolition of the disclosure test (under which schemes do not need to be registered if all interests in the scheme have been issued in a way that does not require PDS disclosure).

These proposals might be subsumed into the government's Financial System Inquiry, announced in December 2013, and fund managers should also keep this inquiry on their radar.

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.

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)
Related Video
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.