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Managed Investments: Constitutions – Updates to Regulatory Guide 134 – Regulation Impact Statement – Australian Securities and Investments Commission

On 5 June 2013, the Australian Securities and Investments Commission (ASIC) released an update to its Regulatory Guide 134, Managed Investments: Constitutions. ASIC is required to register managed investment schemes that meet relevant requirements under the Corporations Act. This includes the requirement for the scheme to have a constitution that sets out some (or all) of the rights, duties and liabilities of the responsible entity in its operation of the scheme. Regulatory Guide 134 provides guidance on how ASIC assesses whether a scheme’s constitution meets these legislative requirements. Regulatory Guide 134 was last updated in 2000, and since then the managed investment industry has changed significantly. Consultation with industry highlighted that the Guide was out of date (including references to superseded class orders and Australian standards), lacked sufficient guidance on certain matters and did not reflect how the relevant provisions under the Corporations Act are currently applied. This created uncertainty for responsible entities regarding their compliance obligations, and inefficient operational practices for ASIC when assessing applications to register a scheme. The revised Guide:

  • removes duplicated requirements regarding consideration to acquire an interest, and outlines what ASIC considers to be an adequate provision;
  • clarifies requirements for complaints handling and dispute resolution for Australian Financial Service Licensees;
  • gives more specific guidance on winding-up obligations, including the identification of assets and liabilities, distribution of the net proceeds, and identification of wind-up costs;
  • gives more specific guidance on fees and indemnities, as well as transparency requirements;
  • requires entities to provide more specific guidance on when a right of withdrawal may be exercised; and
  • sets out the requirements that must be met in order for the constitution to be legally enforceable.

A Regulation Impact Statement was prepared by ASIC and assessed as adequate by the Office of Best Practice Regulation.