Investment Funds 2024

Last Updated February 08, 2024

Australia

Law and Practice

Authors



MinterEllison operates in every capital city in mainland Australia, as well as in New Zealand, Hong Kong, China, Mongolia and the UK, through a network of integrated and affiliated offices. The firm is recognised as having one of the largest and most specialised financial services practices in Australia. With over 40 qualified practitioners and a dedicated alternative funds group, the funds team has a deep understanding of the financial services regulatory environment and is an active participant in industry working groups. The team’s expertise includes: advising on fund (including retail) formation, fundraising, distribution and investor disclosure; addressing regulatory requirements and liaising with regulators; third-party/service-provider engagement; advising on investments; participating in investor negotiations; and project management. The team has advised on leading alternative methods of raising funds in the industry, with clients including Next Capital, Quadrant Private Equity, Carthona Capital, Metrics Credit Partners and Tanarra Credit Partners. The team also works with BlackRock, Vanguard, Macquarie, BetaShares, Challenger and Qualitas in relation to their investment management businesses, including extensive work in exchange-traded funds and A-REITs.

The Australian investment funds market is highly developed, from both a regulatory and commercial perspective. Australia is a jurisdiction that is welcoming to retail and alternative fund strategies and managers.

There has continued to be a significant flow of transactional and regulatory matters following initially restrained activity during the COVID-19 pandemic, and this is anticipated to continue in the year ahead.

The most commonly used structure is a unit trust, due to its flexibility.

For private equity and venture capital funds, a unit trust or a limited partnership, usually in the form of a venture capital limited partnership (VCLP) or early-stage venture capital limited partnership (ESVCLP) (in certain circumstances), can be used.

A unit trust is simpler to establish and offers greater flexibility with respect to the asset classes in which it can invest; however, certain limited partnerships can attract tax benefits for investors and fund managers, when certain requirements are met. 

For hedge and credit strategies, a unit trust is the suitable local structure.

Following recent legislative changes, it is possible to establish corporate collective investment vehicles (CCIVs) which can be used as investment vehicles for a variety of asset classes.

A regulated Australian unit trust will require registration with the Australian Securities & Investments Commission (ASIC). Such unit trusts are known as registered managed investment schemes. Once ASIC receives an application, it must make a decision on registration within 14 days. Key approval criteria are that:

  • the trustee of the fund holds an Australian Financial Services Licence (AFSL) authorising it to be a “responsible entity” of a registered managed investment scheme;
  • the responsible entity is an Australian public company; and
  • the constitution of the fund meets the requirements of the Corporations Act 2001 (Cth) (the “Corporations Act”) and relevant ASIC guidance.

The key required documentation is a constitution/trust deed. An investment management agreement is also typically required, by which the trustee outsources investment management to a manager entity.

The setting-up process is not lengthy, and costs are reasonable. Establishment of a registered managed investment scheme and registration with ASIC can take place within three to four weeks.

An unregistered unit trust can be established within one to two weeks.

The above timings assume a simple structure and that relevant licensing arrangements are previously in place.

VCLPs and ESVCLPs are incorporated limited partnerships established under state-based legislation. They are bodies corporate and need to be registered with relevant state regulatory bodies. In addition, these entities require registration with Innovation and Science Australia under the Venture Capital Act 2006 (Cth) (the “VC Act”). Due to legislative requirements, the general partner of the VCLPs and ESVCLPs must also be an incorporated limited partnership (VCMP). The general partner of that VCMP is generally a company.

The benefit of registering VCLPs and ESVCLPs is primarily the manner in which investment proceeds are taxed for both the general partner and the limited partners. Managers of each of these vehicles are required to:

  • hold an AFSL;
  • be an authorised representative of an AFSL holder; or
  • have the benefit of a relevant exemption.

Key documents for partnerships are:

  • a partnership agreement;
  • a subscription agreement;
  • a management agreement; and
  • any side letters.

A partnership agreement for the VCMP is also required.

Incorporation of a limited partnership can occur in approximately two business days with modest registration fees. Registration of a VCLP or ESVCLP can be conditional or unconditional depending on whether all registration conditions have been met. Following receipt of a complete application, Innovation and Science Australia must typically make a decision in respect of registration under the VC Act within 60 days.

A significant workstream to be undertaken on fund inception is the relevant “carry” vehicles and rules applicable for the carry participants.

As discussed later (see 2.2.2 Legal Structures Used by Fund Managers), if a CCIV is the preferred vehicle, these are formed on registration with ASIC. 

The trust deed for most unit trusts includes what is, in effect, a contractual limitation of liability of investors. The effectiveness of such limitations has broad commercial acceptance. Despite such acceptance, the question of the legal effectiveness of such limitations has not been settled across Australia’s states and territories.

In relation to limited partnership structures, as a general rule, an investor’s liability is limited to their capital committed to the investment vehicle. Typically, if there is a tax impost relating to an investor’s commitment, the investor must fund that impost.

A fundamental disclosure requirement is that communications to investors cannot be misleading or deceptive, including by omission.

Where retail investors are issued with interests in a fund, the product disclosure statement (PDS) must comply with statutory disclosure rules, including detailed costs disclosure. The issuer of the product has continuous disclosure obligations.

Institutional investors from Australia and offshore frequently invest in alternative funds. Most major Australian institutional investors have an allocation for private equity and private debt funds. Venture capital investment in Australia is mostly high net worth and family office led, though some institutions have a venture capital allocation. 

Unit Trusts

In Australia, unit trusts can be structured as open- or closed-end vehicles, where performance fees can take the form of a traditional performance fee on net asset value increase or a private equity-style “carry waterfall”.

There are very few legal requirements that apply to Australian unit trusts, which are simple to establish and, provided they are only offered to wholesale investors, often have no regulatory or other registration or approval requirements (note that there would typically be regulatory requirements for the manager or trustee; see 2.3 Regulatory Environment).

A unit trust is managed by its trustee, who may, in practice, appoint an investment manager to provide investment management services in respect of the trust. The use of corporate trustees is common by fund managers who do not wish to manage the day-to-day administration of their own trust or who may lack the necessary regulatory licence to act as a trustee.

Partnerships

The common partnership structures used by a private equity or venture capital fund to invest primarily in Australian businesses are known as VCLPs for private equity and venture capital funds, or as ESVCLPs for early-stage venture capital funds.

Overview of VCLPs and ESVCLPs

An incorporated limited partnership must meet specific requirements before it can be registered as a VCLP or an ESVCLP with Industry Innovation and Science Australia, an Australian government department. There are specific requirements for a VCLP and an ESVCLP set out in the VC Act, with many consistencies between the two, including that:

  • the term of the partnership must be more than five years and less than 15 years;
  • the minimum committed capital must be at least AUD10 million; and
  • the partnership must only carry on activities that are related to making eligible venture capital investments (EVCIs), as defined by relevant Australian tax legislation.

An EVCI is an equity investment in an unlisted company or unlisted trust that:

  • is located in Australia;
  • does not exceed more than 30% of the partnership’s committed capital; and
  • has a predominant activity that is not an ineligible activity.

An ineligible activity includes:

  • property development or land ownership;
  • banking;
  • providing capital to others;
  • leasing;
  • factoring;
  • securitisation;
  • insurance;
  • construction or acquisition of infrastructure facilities and/or related facilities; and
  • making investments that are directed at deriving income in the nature of interest, rent, dividends, royalties or lease payments.

For an investment to qualify as an EVCI, the investment must not exceed the value restriction imposed at the time of the investment (ie, AUD50 million for an investment by an ESVCLP and AUD250 million for an investment by a VCLP).

In addition to the requirements for registration, the VC Act applies various restrictions to these structures:

  • no single investor in an ESVCLP, other than in certain circumstances, can contribute more than 30% of the total committed capital;
  • the maximum committed capital for an ESVCLP is AUD200 million;
  • VCLPs and ESVCLPs cannot invest in a single investment whose total assets exceed AUD200 million at the time of investment; and
  • in general, they cannot make debt investments other than permitted loans as defined in the VC Act.

Given the strict requirements and restrictions imposed on VCLPs and ESVCLPs, many fund managers establish these vehicles together with parallel funds (usually soft stapled-unit trusts). This structure allows fund managers to obtain the tax benefits afforded to VCLPs and ESVCLPs in respect of investments that are EVCIs, while providing the fund manager the flexibility to invest in non-EVCIs via the parallel funds. This has been a common strategy for leading Australian private equity and venture capital funds.

CCIVs

Recent amendments to the Corporations Act have facilitated the emergence of a new fund vehicle – the CCIV. This vehicle is a company limited by shares, which must consist of one or more “sub-funds”. While the CCIV itself is a legal entity, sub-funds are not separate legal entities. Each share in a CCIV must be referrable to a single sub-fund and the assets of the CCIV must be allocated to a particular sub-fund in an allocation register. The Corporations Act provides that the assets of one sub-fund are not available to satisfy the liabilities of another sub-fund.

CCIVs can be structured as open ended or closed ended and are suitable for retail or wholesale clients. A retail CCIV is subject to specific rules broadly similar to registered managed investment schemes. A CCIV must be designated as retail or wholesale, though under certain circumstances a CCIV will be required to register as a retail CCIV.

A CCIV is managed by a “corporate director” which must be a public company with an AFSL authorisation to “operate the business and conduct the affairs of a CCIV” for retail or wholesale CCIVs (as applicable) holding the relevant type of assets. A CCIV and each sub-fund is established on registration with ASIC and is governed by that CCIV’s constitution. 

Australia has a highly developed and continually evolving regulatory regime in relation to investments from offshore into Australia.

In summary, the Treasurer of Australia, acting through the Foreign Investments Review Board (FIRB), can block foreign direct investment that is “contrary to Australia’s national interest” if clearance is required.

The foreign investment review framework is set by the Foreign Acquisitions and Takeovers Act 1975 (the “FATA Act”) and the Foreign Acquisitions and Takeovers Fees Impositions Act 2015, along with their associated regulations.

The legislation generally regulates foreign investment proposals by a “foreign person”. Foreign persons involved in applicable transactions are required to notify FIRB. “Foreign persons” essentially means individuals, offshore companies, or onshore companies in which offshore foreigners hold a substantial interest. It includes private foreign investors and foreign government investors.

Changes to the rules applied by FIRB from 1 January 2021 also give the Treasurer “call-in powers” and “last-resort powers”, by which the Treasurer may “call in” investments not notified to FIRB for review and in exceptional circumstances may exercise “last-resort powers” to impose conditions, vary existing conditions or require divestment of approved investments where national security risks emerge. In addition, a new set of rules applies for screening national security businesses, which include:

  • communications (including telecommunications, broadcasting and domain name systems);
  • higher education and research;
  • data storage and processing;
  • the defence industry;
  • energy (including electricity, gas, energy market operators and liquid fuels);
  • food and grocery;
  • financial services and markets (including banking, superannuation, insurance and financial market infrastructure);
  • healthcare and medical (including hospitals);
  • space technology;
  • transport (including ports, freight infrastructure, freight services, public transport and aviation); and
  • water and sewerage.

The critical infrastructure rules and FIRB’s guidance also outline some specific entities (eg, Australia’s big supermarkets, banks, insurers and superannuation funds) as critical infrastructure assets.

Entities managing alternative funds should:

  • hold an AFSL with appropriate authorisations;
  • be appointed as the authorised representative of the holder of an AFSL; or
  • fall within a relevant licensing exemption under the Corporations Act.

Where the fund is a unit trust, the trustee and the manager should have the appropriate authorisations in respect of managing, and issuing, interests in a managed investment scheme. Where a foreign manager wishes to offer interests in an Australian fund, it is common to appoint a corporate trustee as the trustee of the fund, who would appoint the manager as the investment manager of the fund (see 2.3.3 Local Regulatory Requirements for Non-local Managers regarding regulation of the manager).

From a regulatory perspective, alternative funds open to only wholesale clients operate with relative freedom.

There are very few limitations applying to alternative funds. Significantly for private equity funds, there are adverse tax implications if a trust were to control a business such that it would be designated a “trading trust”. In such a case, the trust would potentially not be eligible to qualify as a managed investment trust and could potentially be treated like a company (where the trust is widely held). The concept of “control” is widely interpreted for Australian income tax purposes.

In certain circumstances, including where 20% of the interests in an Australian fund are held by a foreign entity or 40% of the interests in aggregate in an Australian fund are held by foreign entities and their associates, approval may be required by FIRB in respect of the investments of such fund.

Please see 2.3.3 Local Regulatory Requirements for Non-local Managers.

Non-local providers of financial services, including investment managers, have two main options for providing financial services to Australian wholesale clients, in addition to the option of holding a full AFSL:

  • they may apply for a foreign AFSL, which is a more limited type of AFSL;
  • they may apply for individual relief from ASIC to be relieved of the obligation to hold an AFSL; or
  • they may rely on some form of transitional relief.

Foreign AFSL

The foreign financial services providers (FFSPs) framework is under review. A new regime was initially proposed to take full effect on 1 April 2022, but has been delayed until 1 April 2025. The Australian federal government (the “Federal Government”) consulted on a new direction for the regime in 2021 and introduced a bill in February 2022. However, when the Federal Government called an election in May 2022, the bill containing proposed new exemptions lapsed. A subsequent bill was introduced to Parliament in August 2023 with a proposed commencement date of 1 April 2024.

As a result, the current licensing arrangements for FFSPs remain in a transitional period. See The Foreign Financial Service Providers (FFSP) Regime in 4.1 Recent Developments and Proposals for Reform for further information.

ASIC has announced that it will pause assessment of “foreign AFS licence” applications already lodged by FFSPs, unless specifically requested to proceed by the applicant. FFSPs that have been or are granted a foreign AFS licence will be able to continue to operate under the licence issued by ASIC, noting that the Federal Government’s consultation is ongoing at the time of writing.

A foreign AFS licence allows FFSPs that are from jurisdictions that are regulated in a “sufficiently equivalent jurisdiction to Australia” to apply for a foreign AFS licence so they can provide a range of financial services to Australian wholesale clients, whether from inside or outside Australia.

This is similar to the former passport relief that was previously available to FFSPs regulated by the FCA (UK), SEC (US) (and certain other US regulators), MAS (Singapore), SFC (Hong Kong), BaFin (Germany) and CSSF (Luxembourg).

To be eligible to apply for a foreign AFS licence, FFSPs must satisfy a number of conditions. Most importantly, they must be regulated under an overseas regulatory regime that has been assessed by ASIC as “sufficiently equivalent” to Australia’s regime. This includes not only those listed above but also those regulated by the Danish FSA, the Swedish FI, the French AMF or ARPR, or the Ontario Securities Commission (subject to holding relevant authorisations).

Foreign AFS licensees do not need to comply with all the obligations of normal AFS licensees, but they do have a broader range of obligations than FFSPs relying on other forms of relief.

A regulated fund (typically an Australian unit trust) is known as a registered managed investment scheme, meaning that it is registered with ASIC. The registration process is relatively straightforward and only requires that:

  • the trustee of the fund holds an AFSL authorising it to be a “responsible entity” of a registered managed investment scheme;
  • the responsible entity is an Australian public company; and
  • the constitution of the fund meets the requirements of the Corporations Act.

Once an application for registration is received by ASIC, a decision on registration must be made within 14 days.

As previously noted, incorporation of a limited partnership can occur within approximately two business days. Registration of VCLPs and ESVCLPs can take as little as one month, assuming all required documents have been prepared. Registration fees are modest.

In Australia, pre-marketing of alternative funds, like marketing of alternative funds, may involve the provision of financial services in Australia, for which an AFSL will be required, subject to applicable exemptions.

Please refer to 2.3.3 Local Regulatory Requirements for Non-local Managers, 2.3.6 Rules Concerning Marketing of Alternative Funds and 2.3.7 Marketing of Alternative Funds.

Marketing an alternative fund may involve the provision of financial services in Australia, for which an AFSL will be required, subject to applicable exemptions.

Non-local providers of financial services should refer to 2.3.3 Local Regulatory Requirements for Non-local Managers.

Alternative funds can be marketed in Australia, as long as the person marketing the fund is authorised under an AFSL (or an exemption – see 2.3.3 Local Regulatory Requirements for Non-local Managers) to provide financial product advice, or to deal in the relevant fund interests to the relevant client group. Typically, these funds would be marketed to wholesale clients only.

If the person is not authorised to provide these services to retail clients, marketing activities must be limited to wholesale clients. In addition, where the fund is marketed to retail clients, it would usually need to be registered with ASIC as a “registered managed investment scheme” (see 2.3.4 Regulatory Approval Process) and comply with regulated disclosure requirements (see 3.3.1 Regulatory Regime) and associated rules applying to regulated products.

In Australia, marketing of alternative funds may involve the provision of financial services in Australia, for which an AFSL will be required, subject to applicable exemptions. In these circumstances, depending on whether an AFSL will be required or whether an exemption is available, some form of prior authorisation or notification may be required to be made to ASIC. 

For example, if it is determined that an AFSL is required, an application for an AFSL will need to be made to ASIC prior to any marketing activities taking place. 

Alternatively, if it is determined that an exemption is available, then depending on the exemption, prior notification to ASIC may be required. 

Please refer to 2.3.3 Local Regulatory Requirements for Non-local Managers.

Once an alternative fund has been marketed to investors in Australia, there may be certain ongoing requirements that need to be considered. 

Certain activities in relation to the alternative fund (for example, issuing interests in the alternative fund to investors in Australia and providing reporting and information to such investors) may involve the provision of a financial service in Australia. In these circumstances, the fund operator may require an AFSL or be able to rely on an exemption.

If an AFSL is obtained, the licensed entity will be subject to ongoing statutory duties and obligations including, for example, to:

  • provide their services efficiently, honestly and fairly;
  • manage conflicts of interest; and
  • report “reportable situations” to ASIC. 

Alternatively, if a relevant exemption was being relied upon, the conditions of that exemption would need to be complied with on an ongoing basis. For example, the sufficient equivalence relief includes certain reporting requirements to ASIC.

Please refer to 2.3.3 Local Regulatory Requirements for Non-local Managers.

Investor protection rules in relation to financial services provided to wholesale clients are primarily focused on compliance with the conditions applicable in relation to the AFSL under which the relevant financial service is being provided. This includes compliance with relevant provisions of the Corporations Act, including restrictions on misleading and deceptive conduct.

Investor protection rules in relation to financial services provided to retail clients include compliance with the matters noted immediately above, and additional rules designed to protect retail clients, including membership of an alternative dispute resolution system, and more detailed and prescriptive product disclosure rules.

Since October 2021, persons issuing and distributing financial products to retail clients have been subject to provisions of the Corporations Act known as the financial product “design and distribution obligations” (DDO). This has been a significant focus of the industry in recent times.

Under the new obligations, to ensure that their products are designed and distributed appropriately, issuers are required to make a target market determination (TMD) for each product that identifies, among other things, the intended class of consumers. They are then required to take “reasonable steps” that will (or are reasonably likely to) result in the financial product being distributed in a manner that is consistent with the TMD. Issuers are obliged to conduct reviews of the TMD periodically and keep certain records; and where there are significant dealings in the financial product that are inconsistent with the TMD, issuers are required to notify ASIC.

Distributors are also subject to certain obligations under the DDO – specifically to:

  • not engage in retail product distribution unless they reasonably believe a TMD has been made or is not required to be made;
  • take “reasonable steps” that will (or are reasonably likely to) result in distribution being consistent with the TMD;
  • notify the issuer of significant dealings that are inconsistent with the TMD; and
  • keep certain records.

As the non-prudential regulator of the Australian financial services (AFS) industry, ASIC plays an active role. It conducts surveillance and enforcement of the industry and facilitates regulatory development and implementation.

ASIC’s position on a range of regulatory matters is publicised via the ASIC website and through other communication channels. Documents issued by ASIC include regulatory guides, information sheets and media releases.

Meetings between industry participants and ASIC take place from time to time, in a variety of contexts.

The key restriction applicable in relation to the operation of an alternative investment fund is licensing. Each entity involved in the operation of the fund must hold or be authorised under a relevant AFSL, or must be subject to or validly rely on an applicable exemption.

As previously noted, there are very few limitations applying to alternative funds. Significantly for private equity funds, there are adverse tax implications if a trust were to control a business such that it would be designated a “trading trust”. In such a case, the trust would potentially not be eligible to qualify as a managed investment trust and could be treated like a company (where the trust is widely held). The concept of “control” is currently widely interpreted for Australian income tax purposes.

Provided the trustee of the fund is appropriately authorised under its AFSL, there is no legal requirement for a depository or a custodian to be appointed to hold its fund assets.

Specific operational requirements for AFSL holders include:

  • providing financial services efficiently, honestly and fairly;
  • having in place adequate arrangements for the management of conflicts of interest;
  • complying with the conditions on the entity’s AFSL;
  • complying with the financial services laws of Australia;
  • taking reasonable steps to ensure that their representatives comply with the financial services laws of Australia;
  • having available adequate resources (including financial, technological and human resources) to provide the financial services covered by an entity’s AFSL;
  • maintaining competence to provide the financial services; and
  • ensuring that their representatives are adequately trained.

ASIC has issued guidance in relation to compliance with these obligations, and there are various practical ways in which AFSL holders may satisfy the obligations.

The fund finance market in Australia is highly developed.

Restrictions on borrowings may arise due to the agreements that the fund equity holders have in place between themselves, or as a function of the constituent documents of the fund. In addition, financier-imposed borrowing restrictions and covenants will be relevant.

It is common for financiers to take security for finance provided, including mortgages, in relation to property and infrastructure funds.

Alternative fund managers often utilise capital call facilities, which are secured by the unpaid capital commitments of the investors to the investment vehicle, rather than the assets of the vehicle.

Certain large, institutional-grade investors do not support the use of capital call facilities.

There are limited examples of funds raising debt via bond markets, which typically takes place offshore.

Taxation of a Trust

Typically, the income and gains of a trust are subject to flow-through tax treatment (ie, taxable income of a trust is taxed at the hands of the investors) and, therefore, investors are taxed directly on their pro rata share of the income of the trust and gains arising from the disposal of any investment of the trust.

In order to qualify as a “managed investment trust”, broadly, the trust:

  • must be managed by an AFSL holder;
  • must be widely held;
  • must not be closely held; and
  • cannot control a trading business.

Where the trust qualifies and elects to be a “managed investment trust”:

  • fund payment distributions made by the managed investment trust to foreign investors may be subject to the concessional managed investment withholding tax of 15%; and
  • investors’ share of the gains arising from disposals of investments by the funds should be taxed under the capital gains tax provisions rather than be treated as a revenue gain (where certain election has been made by the trust) – as a result, a capital gains tax (CGT) discount may be available for eligible Australian resident investors.

Further detail is provided in 3.6 Tax Regime.

Taxation of a VCLP or an ESVCLP

A VCLP or an ESVCLP provides fund managers and investors with support to help stimulate venture capital investments by way of tax benefits.

For a VCLP, the key Australian tax implications include:

  • “flow-through” treatment – taxable income derived by the VCLP “flows through” the partnership to the investors and will be taxed in the hands of the investors; and
  • CGT exemption – a full CGT exemption is available for eligible venture capital partners (ie, tax-exempt foreign residents or foreign venture capital funds) on gains derived from the disposal of EVCIs made by the VCLP (subject to satisfying certain requirements).

For an ESVCLP, the key Australian tax implications include:

  • “flow-through” treatment – taxable income derived by the VCLP “flows through” the partnership to the investors and will be taxed in the hands of the investors;
  • tax offset – a non-refundable carried-forward tax offset is available to investors for the lesser of 10% of their eligible contributions or share of investments in the ESVCLP (subject to satisfying certain requirements);
  • revenue gain or profit exemption – any revenue gain or profit arising from the disposal of an EVCI by an ESVCLP will be excluded from the taxable income of an investor of the ESVCLP, which applies only if the revenue gain that arises would have been subject to the CGT exemption if the asset disposed of was a CGT asset (note that the exemption is capped where the relevant investment exceeds AUD250 million); and
  • income exemption – an investor’s share of income (eg, dividend) derived from EVCIs made by an ESVCLP will be excluded from the partner’s taxable income calculation if the partner is a limited partner of an Australian-resident general partner.

Generally, a resident trust should be able to qualify for the benefits of a double tax treaty between Australia and a foreign jurisdiction. However, this should be considered on a jurisdiction-by-jurisdiction basis.

CCIVs

The new CCIV structure has been designed to provide tax treatment that aligns with the existing tax treatment of Attribution Managed Investment Trusts (AMITs). Investors in a CCIV sub-fund will receive the same tax treatment as those in an AMIT, including “flow-through” tax treatment.

Unit Trust

The most commonly used structure for retail funds in Australia is a unit trust. Each unit entitles the unit holder (ie, the investor) to a beneficial interest in the trust property as a whole, but not in any particular asset comprising the trust property.

The trustee (which in the context of retail funds is referred to as a responsible entity) is responsible for the operation and management of the unit trust. As retail funds are regulated in Australia, the Corporations Act requires that the responsible entity be an Australian public company that holds an AFSL. For this reason, offshore managers looking to establish an Australian retail fund will often use the services of a local responsible entity for hire to act as responsible entity of the fund, as opposed to establishing their own responsible entity in Australia.

The responsible entity may then appoint an investment manager to manage the assets of the fund. The investment manager can be an offshore entity or could be a locally established (usually an Australian proprietary company limited by shares) subsidiary of an offshore manager. The investment manager, regardless of whether it is locally established or offshore, would generally need to obtain an AFSL or a foreign AFSL (if available), or be able to rely on a relevant exemption. Please see 3.3.3 Local Regulatory Requirements for Non-local Managers for further discussion regarding the local regulatory requirements for offshore managers.

Key Advantages and Disadvantages of Unit Trusts

The key advantages of unit trusts include the following.

  • Tax “flow through” – unit trusts that have passive investments (and do not have active businesses) are typically managed as a flow-through vehicle for tax purposes, which means that, unlike a company, a unit trust does not itself pay tax. Rather, the unit holders of the unit trust will pay tax on their proportional share of the distributions to them.
  • Asset protection – unit trusts offer additional asset protection from internal and external parties as the assets of the unit trust are held by the trustee on trust for the unit holders. The trustee is also subject to fiduciary and (as a responsible entity) statutory duties, including to act in the best interests of unit holders.

The perceived disadvantages of unit trusts include the following.

  • Unit trusts are not common offshore – unit trusts tend to be creatures of common law jurisdictions and hence they are often only used or well understood in some offshore jurisdictions.
  • No separate legal identity – unlike a company, a unit trust is not itself a separate legal entity and therefore any contracts relating to the fund will be entered into by the responsible entity. This can give rise to some additional complexities when applying the insolvency rules.

CCIVs

Recent amendments to the Corporations Act have facilitated the emergence of an alternative fund vehicle to the unit trust, namely the CCIV. Please refer to 2.2.2 Legal Structures Used by Fund Managers for further information.

Registration Requirement

A retail fund in Australia will generally be required to be registered with ASIC as a managed investment scheme in accordance with Chapter 5C of the Corporations Act, unless all investors are wholesale clients. Wholesale clients include:

  • professional investors (for example, AFSL holders, trustees of superannuation funds with net assets of at least AUD10 million, or entities regulated by the Australian Prudential Regulation Authority);
  • sophisticated investors (ie, persons regarded as having sufficient experience to assess the relevant investment);
  • investors investing at least AUD500,000; and
  • investors meeting the requisite wealth test of net assets of AUD2.5 million or gross income of AUD250,000 in each of the previous two years.

Investors that do not satisfy one of the wholesale client tests are considered retail clients.

CCIVs and their sub-funds are also subject to a registration requirement under the Corporations Act, although the registration requirement applies to both retail and wholesale CCIVs.

Process and Documentation Required

To register a fund with ASIC, the responsible entity must lodge the following documentation with ASIC:

  • a prescribed form including details of the responsible entity, fund, the auditor and compliance plan auditor;
  • the constitution (ie, the trust deed) for the fund, which complies with the prescribed requirements in the Corporations Act and relevant ASIC guidance; and
  • the compliance plan for the fund, which complies with the prescribed requirements in the Corporations Act and relevant ASIC guidance.

Once an application for registration has been lodged with ASIC, ASIC has a statutory 14-day period to consider the application and register the fund or reject the application. During the 14-day registration period, ASIC will generally respond with queries and comments in relation to the constitution and compliance plan.

Despite the prescribed requirements for constitutions and compliance plans, the cost of preparing and lodging these documents with ASIC for registration is reasonable.

The registration process and documentation for a CCIV and its sub-funds is similar, and includes lodgement of the CCIV’s constitution and, in the case of a CCIV offered to retail clients, the compliance plan.

The trust deed for most unit trusts includes what is, in effect, a contractual limitation of liability of investors. The effectiveness of such limitations has broad commercial acceptance. Despite such acceptance, the question of the legal effectiveness of such limitations has not been settled across Australia’s states and territories.

CCIVs take the form of a company limited by shares, which means that the liability of each investor is limited to the value of their shares.

Product Disclosure Statement

The offer of interests in an Australian retail fund to retail investors will generally require a PDS (ie, a regulated offer document), except in certain limited circumstances. The PDS will need to comply with the prescribed content requirements in the Corporations Act and relevant ASIC guidance and include disclosure regarding the benefits, risks and fees associated with the fund.

Confirmations

As the issuer of the Australian retail fund, the responsible entity (or corporate director in the case of a CCIV) will have an obligation to provide retail clients with certain confirmation statements. Broadly, these are provided in relation to transactions where a retail client acquires interests in the fund or redeems some or all of their interests in the fund.

Ongoing and Continuous Disclosure Requirements

The issuer of an Australian retail fund will also have continuous disclosure requirements with which they must comply under the Corporations Act. Broadly, these obligations require the issuer to disclose material changes, significant events and information that is not generally available and that a reasonable person would expect to have a material effect on the price or value of the interests in the fund (that is, influence persons who commonly invest in units in deciding whether to acquire or dispose of the interests).

Periodic Reporting

The issuer will have certain periodic disclosure requirements where the Australian retail fund is issued to retail clients. This generally involves providing retail clients with an annual periodic report detailing certain matters concerning their investment (for example, opening and closing balances, details of transactions during the reporting period and the return on investment).

Breach Reporting

In addition to the above disclosure and reporting requirements, the responsible entity or corporate director, as the holder of an AFSL, will also have an obligation to notify ASIC of certain breaches or likely breaches of its obligations under the Corporations Act and relevant financial services laws. 

Certain changes to the breach reporting requirements commenced in October 2021. Please see 4.1 Recent Developments and Proposals for Reform for further discussion in relation to this.

Investor demand in the Australian retail funds market continues to grow, with approximately AUD480.1 billion total funds under management as of the end of September 2023 (Australian Bureau of Statistics, Managed Funds, Australian, September 2023).

The size and steady growth of the market is largely underpinned by the compulsory superannuation contribution system in Australia that was introduced in the early 1990s.

Retail fund managers established in Australia are themselves typically structured as Australian proprietary companies limited by shares. However, fund managers’ internal structures often provide that the Australian management entity may contract with other internal entities for the provision of investment management services to mitigate tax and legal exposure.

There are no restrictions on the types of investors that may, or are eligible to, invest in an Australian retail fund that is a registered managed investment scheme. Therefore, retail clients and wholesale clients could invest in an Australian retail fund. Please see 3.1.2 Common Process for Setting Up Investment Funds for further discussion on the definitions of “retail client” and “wholesale client”.

The regulatory regime governing Australian retail funds includes three key areas, namely: registration, disclosure and licensing requirements.

Registration

A retail fund in Australia will generally be required to be registered with ASIC as a managed investment scheme in accordance with Chapter 5C of the Corporations Act. A CCIV is also subject to registration requirements. Please see 3.1.2 Common Process for Setting Up Investment Funds for further discussion regarding the process and documentation involved in applying for registration with ASIC.

As a registered managed investment scheme, the fund will be governed by the provisions in Chapter 5C of the Corporations Act together with the fund constitution. Under Chapter 5C of the Corporations Act, the responsible entity and its officers will have certain statutory duties, including duties to:

  • act honestly;
  • exercise care and diligence; and
  • act in the best interests of members.

Chapter 5C of the Corporations Act also governs the process by which a responsible entity may retire and be appointed as responsible entity of the fund.

CCIVs are subject to similar requirements under Chapter 8B of the Corporations Act.

Notably, an Australian retail fund is not subject to any investment limitations or restrictions under the Corporations Act (although the introduction of the DDO in October 2021 means that some Australian retail funds will need to restrict the scope of their investments – please see 4.1 Recent Developments and Proposals for Reform). Rather, the scope of investments and permitted assets is governed by, and documented in, the constitution and associated disclosure documentation.

Disclosure

The offer of units in an Australian retail fund to retail investors will generally require a PDS (ie, a regulated offer document), except in certain limited circumstances. The PDS will need to comply with the prescribed content requirements in the Corporations Act and relevant ASIC guidance, and include disclosure regarding the benefits, risks and fees associated with the fund. Please see 3.1.4 Disclosure Requirements for further discussion regarding PDSs.

Licensing

The Corporations Act requires a person, regardless of whether they are local or from offshore, who “carries on a financial services business in Australia” to hold an AFSL covering the provision of such services, unless an exemption applies. A person provides a financial service if, among other things, the person:

  • provides financial product advice;
  • deals in a financial product; or
  • operates a registered managed investment scheme.

For these purposes, a unit in an Australian retail fund that is a registered managed investment scheme will be a financial product.

The responsible entity or corporate director of an Australian retail fund is required to hold an AFSL. The investment manager would also generally hold an AFSL or rely on an available exemption in order to provide these financial services.

As discussed in 3.3.1 Regulatory Regime, the Corporations Act requires a person, regardless of whether they are local or from offshore, who “carries on a financial services business in Australia” to hold an AFSL covering the provision of such services, unless an exemption applies. Depending on the scope and structure of the provision of the relevant services, a non-local service provider may need an AFSL or to be able to rely on an exemption in order to provide their services to an Australian retail fund.

Australian Licensing Options

If a non-local service provider is deemed to be carrying on a financial services business in Australia, it will need to:

  • obtain an AFSL;
  • apply for a foreign AFSL (if available); or
  • consider whether there are any available exemptions.

Please see 2.3.3 Local Regulatory Requirements for Non-local Managers and 4. Legal, Regulatory or Tax Changes for further discussion.

Authorised Representative Exemption

An alternative exemption available is for a person to be appointed as an authorised representative of a holder of an AFSL. This effectively enables the non-local service provider to provide the same financial services as the AFSL holder, and the AFSL holder will be responsible for the provision of the relevant financial services by the non-local service provider.

AFSL

If a non-local service provider is not able to rely upon a suitable exemption or does not qualify for the foreign AFSL regime, the non-local service provider will likely need to apply for an AFSL.

Registration as a Foreign Company

Additionally, to the extent that a foreign company, itself or through its agents, is carrying on business in Australia, Australian law will require that company to be registered with ASIC as a foreign company in Australia.

Similar to as discussed in 3.3.2 Requirements for Non-local Service Providers, any non-local manager that provides financial services in Australia would need to hold an AFSL or a foreign AFSL (if available) or seek to rely on an alternative exemption, depending on the scope of the services and the category of clients to whom those services are provided.

Where a non-local manager manages an Australian retail fund, particular consideration will need to be given as to whom the services are provided.

If the non-local manager provides financial services directly to retail clients in Australia, it would likely be required to obtain an AFSL or be appointed as an authorised representative to cover the provisions of these services to retail clients.

For more information on the key licensing options/exemptions that may be available, please see 3.3.2 Requirements for Non-local Service Providers.

Applying for Registration

As discussed in 3.3.1 Regulatory Regime, the regulatory approval process for an Australian retail fund is relatively straightforward. Once the requisite documentation has been prepared (ie, the fund constitution and compliance plan), these are lodged with ASIC for its consideration. In the case of a registered managed investment scheme, ASIC then has a statutory 14-day period to consider the application and register the fund or reject the application. During the 14-day registration period, ASIC will generally respond with queries and comments in relation to the constitution and compliance plan.

Applying for an AFSL or Foreign AFSL

As discussed in 3.3.2 Requirements for Non-local Service Providers, separate to registering the fund with ASIC, and depending on the structure and scope of services to be provided in relation to the fund, an AFSL or foreign AFSL (if available) may be required for the investment manager and will be required for the responsible entity or corporate director. The process of applying for an AFSL or foreign AFSL can be relatively lengthy and involves preparing a number of documents to be submitted to ASIC. The time to prepare an application, lodge it with ASIC and obtain the AFSL or foreign AFSL can take six to eight months or more.

In Australia, pre-marketing of retail funds, as with marketing of retail funds, will likely involve the provision of financial services in Australia, for which an AFSL will be required, subject to applicable exemptions.

Please refer to 3.3.2 Requirements for Non-local Service Providers, 3.3.3 Local Regulatory Requirements for Non-local Managers, 3.3.6 Rules Concerning Marketing of Retail Funds and 3.3.7 Marketing of Retail Funds.

Similar to as discussed in 3.3.2 Requirements for Non-local Service Providers and 3.3.3 Local Regulatory Requirements for Non-local Managers, an entity (whether local or offshore) that is involved in or engages in the marketing of an Australian retail fund to Australian clients (whether retail clients or wholesale clients) will need to consider its Australian licensing options. This is because the activity of marketing the fund will likely involve the provision of financial services (in particular, financial product advice, as well as potentially dealing or arranging for dealing in financial products).

The Corporations Act does not impose any restrictions on the types of investors that an Australian retail fund may be marketed to. Therefore, an Australian retail fund that is registered as a managed investment scheme may be marketed to any person in Australia, provided the entity marketing the fund holds an appropriate AFSL or a foreign AFSL (if available) or is able to rely on an available exemption that authorises it to provide the relevant financial services in relation to retail clients and wholesale clients.

The recent introduction of the DDO in October 2021 means that some Australian retail funds must ensure their marketing activities comply with the new obligations. Please see 4.1 Recent Developments and Proposals for Reform for further discussion.

In Australia, marketing of retail funds may involve the provision of financial services in Australia, for which an AFSL will be required, subject to applicable exemptions. In these circumstances, depending on whether an AFSL will be required or whether an exemption is available, some form of prior authorisation or notification may be required to be made to ASIC. 

For example, if it is determined that an AFSL is required, an application for an AFSL will need to be made to ASIC prior to any marketing activities taking place. 

Alternatively, if it is determined that an exemption is available, depending on the exemption, prior notification to ASIC may be required. 

Please refer to 3.3.3 Local Regulatory Requirements for Non-local Managers.

Once a retail fund has been marketed to investors in Australia, there may be certain ongoing requirements that need to be considered. 

Certain activities in relation to the retail fund (for example, issuing interests in the retail fund to investors in Australia and providing reporting and information to such investors) may involve the provision of a financial service in Australia. In these circumstances, the fund operator may require an AFSL or be able to rely on an exemption.

If an AFSL is obtained, the licensed entity will be subject to ongoing statutory duties and obligations including, for example, to:

  • provide their services efficiently, honestly and fairly;
  • manage conflicts of interest; and
  • report “reportable situations” to ASIC. 

Alternatively, if a relevant exemption was being relied upon, the conditions of that exemption would need to be complied with on an ongoing basis. For example, the sufficient equivalence relief includes certain reporting requirements to ASIC.

Please refer to 3.3.3 Local Regulatory Requirements for Non-local Managers.

Investor protection rules in relation to financial services provided to a retail client in an Australian retail fund are primarily focused on compliance with the conditions applicable to the AFSL under which the relevant financial service is being provided. This includes compliance with the Corporations Act, which comprises prohibitions on unconscionable conduct and engaging in misleading, deceptive or dishonest conduct.

The investor protection rules also include provisions designed to protect retail clients. In addition to the prescribed product disclosure requirements discussed in 3.1.4 Disclosure Requirements, these include obligations regarding dispute resolution systems, compensation and breaches of PDS obligations.

In addition to the above, the new DDO regime applies to product issuers and distributors. Please see 4.1 Recent Developments and Proposals for Reform.

The provision of financial services in Australia is regulated and licensed by ASIC, which is an independent Australian government body established and administered under the Australian Securities and Investments Commissions Act 2001 (Cth) (the “ASIC Act”).

ASIC’s relationship with entities that are licensed or providing financial services in Australia is generally of an ad hoc nature, as opposed to an ongoing one, and usually arises in the context of specific circumstances or matters (for example, in response to lodgement of a breach report). While entities will generally not be assigned a designated officer for their relationship with the regulator, depending on the circumstances, it is often possible to reach out to ASIC to discuss or obtain feedback on certain matters.

There are a number of operational requirements that should be considered in the context of an Australian retail fund.

Obligations as a Responsible Entity of an Australian Retail Fund

An Australian retail fund that is structured as a registered managed investment scheme must be operated by its responsible entity in accordance with its constitution, compliance plan and the provisions of the Corporations Act. While the Corporations Act does not prescribe the types of assets that may be held by, or the types of investors that may invest in, an Australian retail fund, as discussed in 3.1.2 Common Process for Setting Up Investment Funds, the Corporations Act does prescribe certain matters to be addressed in the content of the constitution and compliance plan. ASIC provides additional guidance in relation to these matters.

From an operational perspective, some of the key considerations will include:

  • the issue and redemption pricing for units in the fund;
  • the valuation of fund assets; and
  • the holding of fund assets by the responsible entity itself or by a custodian.

Similar to a registered managed investment scheme, a retail CCIV must be operated by its corporate director in accordance with its constitution, compliance plan and the provisions of the Corporations Act.

Obligations as an AFSL Holder

As an AFSL holder, the responsible entity or corporate director of the Australian retail fund will be required to comply with obligations regarding:

  • management of conflicts;
  • availability of adequate resources;
  • training of representatives;
  • risk management; and
  • dispute resolution.

ASIC provides guidance in relation to compliance with each of these requirements, which should be considered when developing relevant policies and procedures to address these matters.

Other Operational Considerations

Other operational obligations and requirements that will need to be considered include:

  • anti-money laundering and counter-terrorism financing;
  • insider dealing and market abuse;
  • short selling; and
  • derivatives transaction reporting.

There continues to be strong growth and competition in the Australian fund financing market, providing greater accessibility to retail funds looking to borrow or leverage their portfolio. The Australian domestic banks tend to be the key players; however, offshore commercial banks and investment banks are becoming increasingly active in the fund financing market.

The facilities are usually provided on a bilateral basis, as opposed to a syndicated basis, and the lender will take some form of security (for example, over the assets of the fund or in the form of a guarantee). The fund financing documentation will also often impose certain limitations and restrictions on the use of the borrowings.

In terms of the fund documentation itself, a key consideration will be to ensure that the constitution of the fund permits the responsible entity to borrow and grant security over the assets of the fund.

Overview of Tax Regime

The tax regime applying to Australian retail funds structured as a unit trust is comprehensive and complex, and should be carefully considered when establishing a fund in Australia. The Australian Taxation Office (ATO) is responsible for administering the federal tax laws in Australia.

Typically, the income and gains of a trust are subject to flow-through tax treatment, which means that the taxable income of a trust is taxed in the hands of the investors, and not the trust itself. Therefore, investors are taxed directly on their pro rata share of both the income of the trust and gains arising from the disposal of any investment of the trust, as well as on any disposal of their interests in the trust.

For Australian income tax purposes, different kinds of investors are subject to different taxation principles and taxation rates – for example:

  • corporates are taxed at the corporate tax rate (generally 30% unless a complying small business):
  • individuals are taxed at the relevant marginal tax rate (the highest being 45%); and
  • complying superannuation funds are taxed at a rate of 15%.

Tax concessions may be available for foreign pension funds and sovereign wealth funds.

Where a capital gain has been derived by an Australian resident investor from its investment in a trust (ie, as a result of a disposal of either a capital asset by the trust or a disposal of an interest in the trust), the capital gain could be subject to a discount where the relevant asset has been held for at least 12 months and the investor is a qualifying taxpayer (ie, not a company).

Where a capital gain has been derived by a non-resident investor from its investment in a trust (ie, as a result of either a disposal of a capital asset by the trust or a disposal of an interest in the trust), the capital gain could be exempt if the relevant asset is not taxable Australian property (TAP). TAP is generally limited to interests in land and certain interests in land-rich entities. No capital gains discount is available for non-resident taxpayers.

Where a non-resident investor disposes of an asset that qualifies as TAP (eg, interest in a land-rich Australian fund), the purchaser will be required to withhold 12.5% of the purchase price and remit this amount to the ATO. The non-resident investor may be able to claim a tax credit for the amount withheld (which could be refundable if the tax liability of the non-resident investor is lower than the withheld amount).

Managed Investment Trust

Where the trust qualifies and elects to be a “managed investment trust” (MIT), certain MIT tax concessions are available, including those stipulated in 2.6 Tax Regime.

Broadly, to qualify as an MIT, the trust must satisfy the requirements specified in 2.6 Tax Regime.

AMIT

The attribution management investment trust (AMIT) regime provides for taxation on an attribution basis as opposed to distributing funds on a distribution basis, and is designed to provide greater flexibility for trusts and fairness for their investors. Under the AMIT regime, investors are taxed on income that is attributed to them on a “fair and reasonable basis” for each financial year, and the trust would not be liable to tax, provided all its taxable income is attributed to investors.

CCIVs

Detail of the new CCIV structure is provided in 2.6 Tax Regime.

There have been numerous recent legal and regulatory developments and proposals for reform in the financial services industry in Australia, including some arising from the recommendations of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (the “Royal Commission”).

Some of the key areas of development and proposals for reform that are impacting on the Australian funds market are as follows.

The Design and Distribution Obligations Regime

The DDO regime commenced on 5 October 2021. This new regime applies broadly to the distribution of retail products and is not applicable to non-retail client products, such as wholesale investment funds. Please see 2.3.10 Investor Protection Rules and 3.3.10 Investor Protection Rules for further information.

The introduction of the DDO regime represented a fundamental shift in retail consumer protection in financial services and has allowed ASIC to move quickly to respond to potential retail consumer harm. Since July 2022, ASIC’s approach to DDO has moved from facilitation to enforcement, and as of mid-June 2023, ASIC had issued approximately 71 interim stop orders after finding deficiencies in the TMDs of product issuers, including issuers of investment funds. Generally, interim stop orders prevent a product provider from issuing interests in a fund, giving a PDS for a fund or providing general advice to retail clients about an investment in a fund. The product issuers are expected to address ASIC’s concerns promptly; otherwise, ASIC will consider making a final order.

ASIC published Report 762 Design and distribution obligations: investment products in May 2023, which sets out some of ASIC’s key observations arising from its surveillance and enforcement activities. The observations primarily relate to an issuers’ obligation to prepare a TMD, and include observations about:

  • target markets being defined too broadly;
  • inappropriate risk profiles being used in the target market;
  • appropriate levels of portfolio allocation;
  • inappropriate use of template TMDs; and
  • inappropriate or no distribution conditions.

The Report also shares some observations in relation to an issuer’s reasonable-steps obligation and in relation to the level of surveillance and due diligence that issuers should undertake in relation to their distributors.   

Greenwashing – ASIC INFO Sheet 271

ASIC is seeking to support effective climate and sustainability governance and disclosure, and its regulatory focus is responding to the growth in sustainability-related investments. This growth has been stimulated by the global trend of capital markets aligning with sustainability goals, but ASIC is concerned that poor governance and disclosure will result in an increased risk of greenwashing.

Further to issuing Information Sheet 271 How to avoid greenwashing when offering or promoting sustainability-related products (“INFO 271”) in June 2022, in 2023 ASIC began engaging in the enforcement of the principles derived therefrom. These principles are underpinned by misleading and deceptive conduct law derived from the Corporations Act and the ASIC Act. INFO 271 defines greenwashing as the practice of misrepresenting the extent to which a financial product or investment strategy is environmentally friendly, sustainable or ethical. INFO 271 provides nine principles (“Principles”) that ASIC considers should be taken into account when preparing communications regarding sustainability-related products, as follows.

Is the product true to label?

Sustainability-related labels must reflect the substance of the product and the underlying investment strategy, stewardship approach and asset holdings.

Has vague terminology been used?

ASIC cautions against broad, sustainability-related statements or “jargon”, including “socially responsible” and “ethical investing”.

Are headline claims potentially misleading?

Sustainability-related “headline claims” should not be misleading or inconsistent with other disclosure document information. 

How are sustainability-related factors incorporated into investment decisions and stewardship activities?

Issuers are to specify the sustainability-related considerations taken into account, and how they are incorporated into investment decisions and activities.

Has a clear explanation of investment screening been provided?

Disclosures must contain sufficient detail to enable investors to understand the product’s sustainability-related screening criteria and how this is applied, including whether the particular investment screen applies only to a certain product or to the issuer as a whole.

Is there a clear explanation of the issuer's level of influence over the relevant benchmark?

Where issuers are able to influence the composition of an index against which portfolio composition is determined or performance is measured, they should disclose their level of influence.

Is a clear explanation of sustainability metrics provided?

Issuers relying on sustainability-related metrics in assessing whether an investment aligns with their product’s stated objective/strategy should disclose the extent of metrics involvement, sources of metrics and a description of underlying data and risks/limitations.

Are there reasonable grounds for sustainability targets?

Products with sustainability targets attached should explain:

  • what the target is;
  • how and when it is expected to be reached;
  • measurement metrics; and
  • any assumptions relied on when setting targets/measuring progress.        

Is information readily accessible?

Investors should have ready access to “adequate information, concise and clear enough to understand the sustainability-related considerations incorporated into the product”. This information should be “consistent across all mediums”.

ASIC has now provided additional guidance as to the interpretation of the Principles, through enforcement action. Key takeaways from this enforcement action include the following.

  • When applying an investment screen, specificity as to the extent of the applicable exclusion is essential. See ASIC Infringement Notices – Vanguard Investments Australia Ltd issued 11 November 2023; Australian Securities & Investments Commission V LGSS Pty Limited ACN 078 003 497 as trustee for Local Government Super ABN 28 901 371 321 [2023] FCA NSD847/2023.
  • Whether investment screening is a key facet of a bespoke investment strategy or is part of a broader investment policy, the same level of screening specificity is required (ASIC Infringement Notices – Vanguard Investments Australia Ltd issued 11 November 2022).
  • Where third-party data providers are relied upon for investment screening purposes, issuers must be aware of the scope and accuracy of that data as is captured by the INFO 271 Principles (Australian Securities & Investments Commission v Vanguard Investments Australia Ltd ACN 072 881 086 [2023] FCA VID563/2023).
  • ESG disclosure must be consistent across all platforms, including disclosure documents, websites and social media (Australian Securities & Investments Commission v Mercer Superannuation (Australia) Limited ACN 004 717 533 [2023] FCA VID117/2023).
  • Disclosures made prior to INFO 271 being issued in June 2022 are subject to the Principles, as the law underpinning the Principles has not changed (ASIC Infringement Notice – Future Super Investment Services Pty Ltd issued 21 April 2023).

ASIC has also released a report outlining its recent greenwashing interventions. This report summarises a range of ASIC enforcement and action taken as a result of ASIC’s review of the PDSs of 122 funds, the investment processes of 17 funds, and responses to reported misconduct.

ASIC is expected to continue its focus on greenwashing in 2024.

Report on the Updated Breach-Reporting Rules

The new breach-reporting rules for AFS licensees came into effect on 1 October 2021, arising from amendments to the Corporations Act, as inserted by the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth). The reforms sought to address recommendations made by the Royal Commission that called for the strengthening and clarification of the breach-reporting regime for financial services licensees.

Under the new breach-reporting rules, ASIC is required to publish an annual report setting out its observations arising from the breach reports received.

ASIC published its second insights report in October 2023 in relation to the reports lodged with ASIC by licensees under the regime between 1 July 2022 and 30 June 2023. The report focuses on insights in relation to the following:

  • the volume of reports and nature of lodgers;
  • the subject of the reports and root causes of the breaches;
  • the identification and investigation of breaches; and
  • customer impact, remediation and rectification of breaches.

Some of the key insights shared by ASIC in Report 775 included that:

  • the proportion of the licensee population engaging in reporting remains low;
  • there was a significant increase in the proportion of larger licensees reporting;
  • false and misleading statements remains the most common category of issues to which reports relate;
  • the most common root cause of breaches continues to be staff negligence and/or error;
  • a significant proportion of breaches involved customer financial loss;
  • timeliness of identifying and investigating breaches remains a concern; and
  • while there was a notable decrease from the previous reporting period in the time taken to complete rectification, significant variability was observed and a considerable number of remediations are still taking too long to complete.

Undoubtedly, breach reporting will remain an area of focus for ASIC, with it having recently announced compliance with the regime as one of its 2024 enforcement priorities.

The Foreign Financial Service Providers (FFSP) Regime

The FFSP Regime has been in a state of regulatory uncertainty following a prolonged period of ongoing transitional arrangements. However, there now appears to be some certainty with the introduction of the Treasury Laws Amendment (Measures for Future Bills) Bill 2023 to Parliament. 

By way of background, in Australia FFSPs to wholesale clients have historically been able to benefit from class order relief, exempting them from the need to hold an AFSL, including by virtue of the “sufficient equivalence” relief (also known as “passport relief”) and “limited connection” relief, subject to transitional arrangements. 

ASIC released a new regulatory framework for the foreign AFSL regime on 1 April 2020, repealing the passport relief and limited connection relief for FFSPs, and introducing a new funds management relief in their place. The transitional period for the class order relief was extended, and the new foreign AFSL regime was confirmed.

In the 2021–22 Federal Budget, the government announced that it would “consult on options to restore previously well-established regulatory relief” from holding an AFSL for FFSPs licensed and regulated in jurisdictions with comparable financial services rules and obligations to, or limited connection with, Australia. In addition, the government indicated that it would consult on options to create a “fast track” licensing process for FFSPs that wish to establish more permanent operations in Australia.

This announcement created uncertainty for the new FFSP regulatory framework that had been introduced by ASIC, and which was set to commence on 1 April 2022. The reforms were subject to criticism and further consultation was undertaken by the government towards the end of 2021 and into early 2022.

In February 2022, the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 (the “2022 Bill”) was introduced into the Australian Parliament. The 2022 Bill provided for two exemptions for FFSPs from the requirement to hold an AFSL, as follows.

  • A new comparable regulator exemption – this exemption sought to replace the passport relief but with some changes, including that it would apply to all types of regulated financial services and products provided to wholesale clients. It would also apply to a broader range of regulators approved (by the government and not ASIC) as sufficiently equivalent.
  • A new professional investor exemption – this exemption was designed to replace the limited connection relief, but would require FFSPs to notify ASIC before relying on the exemption.

However, when the government called an election in May 2022, the 2022 Bill, containing the above proposed new exemptions, lapsed.

On 7 August 2023, the Treasury announced new proposals to provide FFSPs with exemptions from the requirement to obtain an AFS licence by virtue of the Treasury Laws Amendment (Measures for Future Bills) Bill 2023 (the “2023 Bill”), for which consultation closed in September. The proposed legislation is akin to that previously tabled in Parliament, but with a few notable changes:

  • the 2023 Bill proposes to give the government the power to stop FFSPs relying on the professional investor exemption in relation to dealings in financial products traded on prescribed markets – there is no indication when or whether this power will be used;
  • a new exemption is proposed for making of a market for derivatives that are able to be traded on a prescribed market – again, there is no detail about when this exemption will be available;
  • an additional condition applies to all the exemptions to require that financial services are provided efficiently, honestly and fairly (with certain carveouts); and
  • ASIC is conferred an additional power to cancel an exemption on the grounds that the person is not providing financial services efficiently, honestly and fairly.

On 4 August 2023, ASIC released ASIC Corporations (Amendment) Instrument 2023/588 to extend the existing relief for FFSPs until 31 March 2025. Accordingly, FFSPs may continue to rely on the passport relief and limited connection exemptions for a further year. Notably, the passport relief is only available to an entity if that entity was relying on the exemption before 31 March 2020. Because of this, ASIC has indicated that it will consider new temporary licensing relief applications for FFSPs that were not relying on the passport relief as of 31 March 2020, or foreign AFSL applications for entities that cannot rely on the transitional relief.

FFSPs already validly relying on passport relief (relief for FFSPs already covered by regulations sufficiently equivalent to those in Australia) can continue to do so until 31 March 2025. New applications for this relief can only be made under an application for individual relief in the same form as the passport relief (ie, providing an avenue for new FFSPs to have access to relief in the form of the passport relief).

FFSPs that have been granted a foreign AFSL or are granted one during this period can continue operating their financial services business in Australia.

FFSPs may also still rely on the limited connection relief to allow them to provide financial services to wholesale clients in Australia, until 31 March 2025. This relief allows FFSPs operating outside Australia to provide financial services to wholesale clients in Australia.

The 2023 Bill currently has a proposed commencement date of 1 April 2024. This signals the government’s intention that FFSPs would have 12 months to switch from relying on one of the existing exemptions to the new exemptions proposed in the Bill.

Please see 2.3.3 Local Regulatory Requirements for Non-local Managers for further discussion regarding the FFSP regime.

Unfair Contracts Regime

Following a 12-month transition period, on 9 November 2023 the updated unfair contract terms (UCTs) regime commenced. Reforms to the Competition and Consumer Act 2010 (Cth) and the ASIC Act 2001 (Cth) now mean there are significant consequences for using or relying on unfair terms in a standard-form consumer or small business contract. Businesses now face substantial penalties for contravening the updated laws, and with each unfair term forming a separate contravention there could be multiple contraventions in a single contract. Penalties up to AUD50 million or more, depending on the benefit obtained from the conduct, could be imposed for each contravention.

ASIC updated its guidance material on UCTs in INFO 210 (for consumers) and INFO 211 (for small businesses) following the commencement of significant changes to the UCT regime.

In summary, a standard-form contract is a contract that has been prepared by one party to the contract (the business offering the product or service) without negotiation between the parties. It could apply even when the other party has the opportunity to only negotiate minor changes, or where changes are permitted but only from a range of pre-prepared options. A term of a standard-form contract could be “unfair” if it:

  • would cause a significant imbalance in the parties’ rights and obligations arising under the contract;
  • is not reasonably necessary to protect the legitimate interests of the party that would benefit from the term; or
  • would cause detriment (financial or otherwise) to a small business if it were to be applied or relied on.

There is an exception that applies to the funds management industry. The UCT regime does not apply to a contract that is the constitution of a managed investment scheme. However, if the contractual arrangements fall outside the constitution of the scheme, the product issuer might still be caught.

One feature of the reforms was that they expanded the class of small business that can rely on UCT protections. A business will be a small business if it either:

  • employs fewer than 100 people; or
  • has a turnover of less than AUD10 million for the previous income year.

If a contract relates to financial products and services, there is a monetary cap on the upfront price of AUD5 million. For other types of contracts, there is no cap. The “small business” definition has resulted in some unintended consequences, including some large sophisticated financial services entities being caught by the reforms. The authors believe that both ASIC and the industry is turning its attention towards such issues, particularly where dealings are between two institutional parties.

Compliance with the UCT regime is among ASIC’s 2023 enforcement priorities.

MinterEllison

Level 40, Governor Macquarie Tower
1 Farrer Place
Sydney 2000
Australia

+61 2 9921 8888

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www.minterellison.com
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Trends and Developments


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MinterEllison operates in every capital city in mainland Australia, as well as in New Zealand, Hong Kong, China, Mongolia and the UK, through a network of integrated and affiliated offices. The firm is recognised as having one of the largest and most specialised financial services practices in Australia. With over 40 qualified practitioners and a dedicated alternative funds group, the funds team has a deep understanding of the financial services regulatory environment and is an active participant in industry working groups. The team’s expertise includes: advising on fund (including retail) formation, fundraising, distribution and investor disclosure; addressing regulatory requirements and liaising with regulators; third-party/service-provider engagement; advising on investments; participating in investor negotiations; and project management. The team has advised on leading alternative methods of raising funds in the industry, with clients including Next Capital, Quadrant Private Equity, Carthona Capital, Metrics Credit Partners and Tanarra Credit Partners. The team also works with BlackRock, Vanguard, Macquarie, BetaShares, Challenger and Qualitas in relation to their investment management businesses, including extensive work in exchange-traded funds and A-REITs.

The Australian investment funds landscape has seen a number of trends and developments over the past 12 months, from both a commercial and regulatory perspective.

Commercial Trends and Developments

Direct to retail

The Australian market continues to move away from intermediated retail with fund managers pursuing avenues that provide a more direct path to retail inventors. There is strong growth in the ETF market with traditional fund managers exploring exchange-traded structures, particularly for active or bespoke strategies. Retail investors are seeking access to a more diverse range of investment offerings at competitive price points.

Dual access

There has been increasing interest in the dual access structure for ETFs, with fund managers wanting to take advantage of the benefits and flexibility provided by the structure. This structure allows a financial product issuer to offer the product as an ETF (by quoting units in the fund on an exchange such as the ASX) while also allowing applications and redemptions off-market. Dual access mechanics and infrastructure are increasingly being considered and built into new products, even where the structure is not immediately utilised, to allow fund managers the flexibility to offer this access when demand arises.

Regulatory Trends and Developments

ASIC focus on enforcement

On 3 November 2023, in his opening statement at the Parliamentary Joint Committee on Corporations and Financial Services, Oversight of ASIC, the Takeovers Panel and the Corporations Legislation, ASIC Chair Joe Longo emphasised ASIC’s strong enforcement outcomes by reference to an increase from 107 to 134 in new investigations commenced from 2022 to 2023, a 24% increase in surveillances and a 16% increase in internal summary prosecutions.

High-level observations by ASIC Deputy Chair Sarah Court in her opening speech at the ASIC Annual Forum included that ASIC is one of the most active enforcement agencies in Australia, the regulator having appeared before courts almost every business day during 2023. Ms Court stated: “ASIC’s enforcement approach of today is fundamentally different to that which pre-dated the Royal Commission. In those days, ASIC negotiated outcomes, accepted undertakings from large financial institutions and – in those matters that did go to court – penalties were relatively low. Our enforcement approach of today, by contrast, is proactive, strategic and bold.”

Other remarks included that ASIC operates with finite resources and therefore prioritises investigations that promise the most extensive deterrent impact. This strategic approach often leads to pursuing civil actions against major corporations, their misconduct typically inflicting the greatest harm on consumers and investors. ASIC stands firm in this approach, taking on challenging cases where outcomes may be uncertain. The agency has been proactive in ensuring that the laws enacted by Parliament have “broad protective application”. ASIC is “comfortable in testing the limits of the law” where it considers there to be “consumer or investor detriment, or damage to market integrity”, even where the law is complex or has not previously been litigated. Recently, this has been particularly evident in the enforcement of design and distribution legislation, which will be expanded on shortly.

The authors expect to see this bold action approach continue into 2024 as ASIC continues to focus on its immediate enforcement priorities, which include acting on:

  • misleading misconduct relating to greenwashing;
  • technology and operational resilience for market operators and market participants; and
  • DDO compliance.

It is with this outlook that existing participants and new entrants of the Australian funds market need to always ensure they:

  • have a customer-centric mindset;
  • implement adequate legal compliance processes to monitor their financial services activities; and
  • maintain the appropriate governance, oversight and systems over those compliance processes. 

Design and distribution obligations

ASIC has demonstrated that it is actively monitoring DDO compliance and stands ready to act where necessary to prevent consumer harm. Since the obligations commenced, ASIC has instigated civil penalty proceedings against three providers. Between July and mid-December 2022, ASIC issued 21 interim stop orders. At least 50 interim stop orders were issued between January and June 2023, including 38 against 67 pet insurance products for deficient target market determinations. ASIC has announced that enforcement action targeting poor distribution of financial products will remain an enforcement priority in 2024.

In simple terms, DDO requires issuers of financial products to “retail” clients to design their products to meet consumer needs, and for distributors of those products to distribute them in a more targeted manner. ASIC intervention can be very disruptive from an operational and product-continuity perspective. A product issuer’s reputation is also at risk given that ASIC’s approach is to publicly announce its regulatory findings (including the issuing of stop orders), which are typically picked up quickly by the financial press.

It is thus important for product issuers to ensure they have appropriate product governance arrangements in place through each stage of the product life cycle, including during product design, product distribution, monitoring and review. ASIC expects that product governance arrangements would, among other things, include:

  • an assessment of products against the likely objectives, financial situation and needs of the class of consumers for whom the product is intended;
  • analysis of distribution methods;
  • product testing;
  • consideration of how consumer outcomes will be measured and monitored when the product is being distributed;
  • a risk-product-distribution risk assessment; and
  • regular monitoring and reviewing of product performance and distribution. 

ASIC have shown through their actions that where they identify financial product issuers and distributors which in their view are not adopting a consumer-centric approach, they “will take quick action under DDO to disrupt poor conduct and prevent potential consumer harm”. 

ESG and greenwashing

Further to ASIC publishing INFO 271 in 2022, in 2023 ASIC has continued its focus on ESG and greenwashing. INFO 271 continues to provide a stringent framework of disclosure principles and standards to prevent greenwashing of financial services and products, with this framework now resulting in enforcement action by ASIC, including its having commenced a number of civil penalty proceedings in the Federal Court against issuers deemed to have engaged in potentially misleading disclosure.

INFO 271 complements ASIC’s true-to-label and marketing review initiatives, requiring a high standard of clarifying disclosure for sustainability-related financial products. ASIC has been focusing on the use of claims and jargon terminology related to ESG, “green” or “sustainable” products, and has made it clear that product issuers making these claims or using ESG labels and terms need to disclose and explain these thoroughly. INFO 271 sets out nine sustainability-related disclosure principles (“Principles”). These include regarding:

  • use of jargon terminology;
  • misleading headline claims;
  • disclosing sustainability-related measures, benchmarks and screens; and
  • inadequate explanation of sustainability and stewardship claims.

Through enforcement of the Principles, ASIC has now provided additional guidance as to their scope and application. One such example is Australian Securities & Investments Commission v Mercer Superannuation (Australia) Limited ACN 004 717 533 [2023] FCA VID117/2023, which in particular provides that ESG disclosure must be consistent across all platforms. ASIC’s scrutiny is not limited to disclosure documents, but also includes websites and social media.

These enforcement actions taken by ASIC send a clear message to those providing financial services in Australia that the bar has been raised, and that more detail and disclosure is required to avoid greenwashing and, in turn, ASIC enforcement action.

Foreign financial services providers

A key area of interest for foreign investment managers is the state of play of the regime for regulating foreign financial services providers (FFSPs) in Australia. ASIC has extended the transitional relief for FFSPs from the need to hold an Australian financial services (AFS) licence, and has delayed the start of the new proposed “funds management financial services relief” until 31 March 2025. In welcome news for FFSPs given what has been a prolonged period of uncertainty, the government has also released exposure draft legislation to provide FFSPs with exemptions from the requirement to obtain an AFS licence, for which consultation is now closed. The Bill is largely akin to that of 2022 which lapsed due to the calling of the last federal election. The proposed legislation seeks to introduce the following.

  • A comparable regulator exemption – similar to ASIC’s current “sufficient equivalence” relief, this will be available to FFSPs that provide financial services from within Australia or their home jurisdiction to wholesale clients, and that are regulated by regulators approved by the government (and not ASIC, as is currently the case).
  • A professional investor exemption (which will replace ASIC’s current “limited connection” relief), available where:
    1. an FFSP provides a financial service to a “professional investor”;
    2. the service is provided from outside Australia or during a permitted “marketing visit”;
    3. the service does not involve dealing in certain financial products tradeable on certain licensed markets; and
    4. the FFSP reasonably believes that providing the same or similar service would not contravene any laws in the location where it is provided from or where the FFSP’s head office and principal place of business are located.
  • A market maker exemption – available where an FFSP is making a market for derivatives that are able to be traded on a licensed market prescribed by the regulations from outside Australia (exchange-traded futures only), and the FFSP reasonably believes that making a market in derivatives would not contravene any laws in the location where it is provided from or where the FFSP’s head office and principal place of business are located.
  • An exemption from the fit and proper person assessment – available to FFSPs authorised to provide substantially the same financial services in a comparable regulatory regime to wholesale clients, to fast-track the licensing process.

If passed, the exemptions will take effect on 1 April 2024.

While ASIC has not amended the transitional arrangements to allow new FFSPs to rely on the “sufficient equivalence” relief (that is, relief for FFSPs from the need to hold an AFS licence where they are regulated by a foreign regulator sufficiently equivalent to the applicable regulations in Australia), ASIC has indicated that it will consider new temporary individual licensing relief applications for FFSPs seeking relief in the same form as the “sufficient equivalence” relief. This means that during the remaining transitional period FFSPs that were not relying on such relief before 1 April 2020 need to:

  • rely on the “limited connection” relief;
  • apply for individual relief in the same form as the “sufficient equivalence” relief; or
  • apply for an AFS licence if they wish to commence providing financial services in Australia.

Cyber-risk

Most fund managers generally have mature risk management systems and processes. This is because it is a requirement of the Australian financial services licensing regime. However, with the frequency and sophistication of cyber-attacks on the rise, ASIC is calling on licensees to prioritise their cybersecurity risks; in fact, ASIC wants this to be a top priority. This call comes after a recent ASIC report into the cyber capability of corporate Australia identified that “organisations are reactive rather than proactive when it comes to managing their cybersecurity”.

ASIC are encouraging the industry to start focusing on cyber “resilience” rather than cyber “security”; that is, it should have adequate arrangements in place to prepare for, detect, respond to and recover from a cyber-attack, rather than just focusing on trying to prevent a cyber-attack. ASIC has indicated that this should include oversight of cybersecurity risk throughout the fund manager’s supply chain (eg, administrators, custodians, distributors or other third-party service providers). This is because ASIC recently found that “third-party relationships provide threat actors with easy access to an organisation’s systems and networks”.

Good practice on cyber-resilience would include practices such as:

  • ensuring boards are engaged with the cyber strategy and are increasingly educated about cyber-resilience;
  • tailoring governance processes to ensure “responsive governance”;
  • having proactive arrangements to prepare for, detect, respond to and recover from a cyber-attack;
  • regularly reviewing crisis management arrangements, including incident response plans and recovery processes;
  • regularly testing plans and assumptions to test for vulnerabilities;
  • undertaking cyber-risk management, including through collaboration, information-sharing and third-party risk management;
  • having centralised asset-management systems;
  • conducting audits to identify confidential and business-critical systems and data; and
  • providing internal cyber-awareness and training.

Cyber and operational resilience is a current strategic priority for ASIC. Its Chair, Joe Longo, has indicated it will be more active in this space by “looking for the right case where company directors and boards failed to take reasonable steps, or make reasonable investments proportionate to the risks that their business poses”.

Unfair contract terms

With the updated unfair contract terms (UCT) regime now in place, fund managers need to consider whether any of their contracts need to be reviewed for potentially unfair terms, particularly given that penalties of up to AUD50 million or more could be imposed for each contravention within a contract. While it should be noted that the constitution of a managed investment scheme is carved out of the regime, there may be terms that fall outside the constitution and that could be caught. For example, fund managers may need to consider whether an application form or the terms and conditions of their website or investor portals contain any potentially unfair terms. In addition, potentially unfair terms could arise in service provider or other scheme-related agreements. Compliance with the UCT regime is among ASIC’s 2023 enforcement priorities.

AML

In April 2023, two rounds of public consultation on proposed reforms of Australia’s anti-money laundering and counter-terrorism financing (AML/CTF) regime were announced. The reforms are aimed at aligning Australia’s AML/CTF regime with current international standards, including expanding the regime to capture a range of industries which do not currently have AML/CTF obligations – ie, lawyers, accountants, conveyancers, real estate agents, trust/company service providers and, potentially, property/leasing managers. 

Among other things, it is proposed that the regime be streamlined and that a less prescriptive approach be implemented via overarching obligations. This is intended to provide flexibility for reporting entities to implement risk-based systems and controls that suit their particular business. It also demonstrates the government’s intention to discourage tick-a-box compliance behaviour. Instead, reporting entities will be required to invest time and resources to properly consider their risks and implement appropriate controls and procedures. The proposal includes proposed changes to:

  • the structure of the AML/CTF programme;
  • customer due diligence obligations;
  • amendments to existing safe-harbour provisions; and
  • the standards reporting entities should adhere to.

The first round of public consultation has closed.

MinterEllison

Level 40, Governor Macquarie Tower
1 Farrer Place
Sydney 2000
Australia

+61 2 9921 8888

+61 2 9921 8123

www.minterellison.com
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Law and Practice

Authors



MinterEllison operates in every capital city in mainland Australia, as well as in New Zealand, Hong Kong, China, Mongolia and the UK, through a network of integrated and affiliated offices. The firm is recognised as having one of the largest and most specialised financial services practices in Australia. With over 40 qualified practitioners and a dedicated alternative funds group, the funds team has a deep understanding of the financial services regulatory environment and is an active participant in industry working groups. The team’s expertise includes: advising on fund (including retail) formation, fundraising, distribution and investor disclosure; addressing regulatory requirements and liaising with regulators; third-party/service-provider engagement; advising on investments; participating in investor negotiations; and project management. The team has advised on leading alternative methods of raising funds in the industry, with clients including Next Capital, Quadrant Private Equity, Carthona Capital, Metrics Credit Partners and Tanarra Credit Partners. The team also works with BlackRock, Vanguard, Macquarie, BetaShares, Challenger and Qualitas in relation to their investment management businesses, including extensive work in exchange-traded funds and A-REITs.

Trends and Development

Authors



MinterEllison operates in every capital city in mainland Australia, as well as in New Zealand, Hong Kong, China, Mongolia and the UK, through a network of integrated and affiliated offices. The firm is recognised as having one of the largest and most specialised financial services practices in Australia. With over 40 qualified practitioners and a dedicated alternative funds group, the funds team has a deep understanding of the financial services regulatory environment and is an active participant in industry working groups. The team’s expertise includes: advising on fund (including retail) formation, fundraising, distribution and investor disclosure; addressing regulatory requirements and liaising with regulators; third-party/service-provider engagement; advising on investments; participating in investor negotiations; and project management. The team has advised on leading alternative methods of raising funds in the industry, with clients including Next Capital, Quadrant Private Equity, Carthona Capital, Metrics Credit Partners and Tanarra Credit Partners. The team also works with BlackRock, Vanguard, Macquarie, BetaShares, Challenger and Qualitas in relation to their investment management businesses, including extensive work in exchange-traded funds and A-REITs.

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