Updated guidance for corporate collective investment vehicles
On 23 June 2022, the Australian Securities and Investments Commission (ASIC) released a range of documents relevant to the commencement of the corporate collective investment vehicles (CCIVs) regime on 1 July 2022.
The packet of material includes updates to key licensing guidance (Regulatory Guides 1, 2, and 3), general obligations under an Australian financial services (AFS) license (Regulatory Guides 104 and 105), and funds management (Regulatory Guides 132 and 133). . These amendments are now effective with the commencement of the CCIV regime.
Further amendments to existing instruments and guidance are scheduled to be released shortly.
A CCIV is a new type of company that can be registered from 1 July 2022. A CCIV is limited by shares, recognized as a separate legal entity, with one corporate director who is responsible for managing the business and conducting the affairs of the CCIV.
The Corporate Collective Investment Vehicle Framework and Other Measures Act 2022 (Cth) implements the legislative regime for CCIVs by amending the Corporations Act 2001 (Cth) (Corporations Act), the Australian Securities and Investments Commission Act 2001 (Cth) and the Personal Property Securities Act 2009 (Cth).
ASIC will be responsible for licensing corporate directors and registering CCIVs. In addition, ASIC will also offer guidance to corporate directors to ensure compliance with licensee requirements and other obligations under the Corporations Act.
New Guidance Material
ASIC released Information Sheet 272 ‘How to register a corporate collective investment vehicle and sub-fund’ which explains how to register:
- a CCIV and initial sub-fund(s);
- further sub-funds of a CCIV; and
- a sub-fund of a CCIV as an Australian passport fund.
Report 728, ‘Response to submissions on CP 360 Corporate collective investment vehicles: Preparing for the commencement of the new regime’ (REP 728), was also released and highlights the key issues that arose from the submissions received on CP 360 and details ASIC’s responses to those concerns.
Generally, respondents to CP 360 supported ASIC’s proposals for the licensing of corporate directors to operate a CCIV. However, the below three issues were raised.
1. AFS license or variation applications for CCIVs
In assessing an AFS license variation, ASIC will apply the same principles outlined in section 913B of the Corporations Act.. Therefore, ASIC must grant an AFS license if there is no reason to believe that an applicant is likely to contravene the general licensee obligations.
Moreover, ASIC will generally not impose a limit of a single sub-fund on corporate directors of wholesale CCIVs. Finally, AFS licensees that did not utilize the one-off offer of an ASIC-initiated variation by 3 May 2022 can still apply for a variation but will be required to pay an application fee and submit the required proofs.
2. Compensation and insurance arrangements for corporate directors
An AFS licensee that is both a responsible entity and a corporate director will be required to have adequate PI insurance having regard to the nature of the activities carried out by the licensee.
3. Financial resource requirements for corporate directors
An AFS licensee that is both a responsible entity and a corporate director will have a single NTA requirement.
Updated Guidance Material
ASIC has updated a range of regulatory guides to support the implementation of the CCIVs regime. Highlighted below are some of the key amendments relevant to CCIVs.
See below (Schedule 1) for a summary of key takeaways from the Updated Guidance Material.
Further Guidance Material
ASIC will soon release a new legislative instrument (ASIC Corporations (Financial Requirements for Corporate Directors of Retail Corporate Collective Investment Vehicles) Instrument 2022/449) and issue updated versions of the below guides:
- RG 126 Compensation and insurance arrangements for AFS licensees
- RG 134 Funds management: Constitutions
- RG 166 AFS licensing: Financial requirements
- RG 168 Disclosure: Product Disclosure Statements (and other disclosure obligations)
The regulatory space governing CCIVs will continue to change in the lead up to the implementation of the regime. As such, entities should familiarize themselves with the new guidance materials released by ASIC and keep informed of any upcoming regulatory or legislative amendments.
Schedule 1: Updated Guidance Material
Updates to RG 1 AFS Licensing Kit: Part 1 – Applying for and varying an AFS license
RG 1.2: You will provide financial services if you operate the business and conduct the affairs of a CCIV.
RG 1.77: If you have applied to operate the business and conduct the affairs of a CCIV, you will need to register the CCIV. You can apply to register the CCIV after you receive your final AFS license. Your CCIV registration application will be refused if you have not met the licensing requirements at the time you apply. Note: The initial sub-fund(s) of the CCIV are registered when the CCIV is registered. If your license limits you to operating one retail CCIV (with a single sub-fund), you will need to ensure your registration application is consistent with your license.
RG 1.131: If the variation to your AFS license includes an authorization to operate the business and conduct the affairs of a CCIV, you can apply to register the CCIV after you receive your final varied AFS license. Your registration application will be refused if you have not met the AFS licensing requirements at the time you apply.
Updates to: RG 2 AFS Licensing Kit: Part 2 – Preparing your AFS license or variation application
RG 2.69 and 2.78: If you wish to advise or deal with CCIV securities you must hold an AFS license authorization to advise or deal on ‘securities’ (this is a broad authorization covering all types of securities, including CCIV securities). Note: If you already hold an authorization to advise or deal on ‘securities’ as at 30 June 2022, you are able to advise on CCIV securities and will not be required to vary your AFS license.
RG 2.100: You generally do not need an authorization to provide custodial or depository services if you only operate a CCIV.
RG 2.127 – 2.144: Details how to operate the business and conduct the affairs of a CCIV. These regulations cover choosing what type of CCIV you will operate, limits on the operations of retail CCIVS, CCIV asset types, other authorizations and when to register.
RG 2.371: For each responsible manager you must set out, among other things, if you will be operating a CCIV, their knowledge and skills in relation to the operation of the CCIV and the assets under management to be held or the business operated by the CCIV.
RG 2.382: The financial requirements in Appendices 2-10 of RG 166 generally apply to corporate directors of retail CCIVs.
Updates to RG 3 AFS Licensing Kit: Part 3 – Preparing your additional proofs
RG 3.75 and 3.76: Outlines what proof is required for a CCIV Operating Capacity Statement and CCIV Asset Statement. For example, the statement must include the target investors and proposed number of sub-funds.
Updates to RG 104 AFS licensing: Meeting the general obligations
RG 104.1: If you are an operator of an Australian passport fund or a person with responsibilities in relation to an Australian passport fund, you must comply with the law of each host economy for the fund.
Updates to RG 105 AFS licensing: Organizational competence
RG 105.41 – If you operate a CCIV, your responsible managers must demonstrate that they understand the investment and operational issues of the assets under management or, if relevant, the business proposed to be operated under your AFS license.
RG 105.44 – If you operate a CCIV, you need to have at least one responsible manager with knowledge and skills for the CCIV.
RG 105.47 – When assessing whether a responsible manager meets the knowledge and skills component, the following are considered – qualifications and prior experience in providing financial product advice on and/or dealing in CCIVs, interests in a managed investment scheme; and/or similar overseas experience.
RG 105.104 – 105.109 outlines the limits on operations of retail CCIVs.
RG 105.110 – If you have an existing authorization to advise on and/or deal in securities, you are considered to be also authorized to advise on and/or deal in CCIV securities and will not need to apply to ASIC for a separate authorisation.
Updates to RG 132 Funds management: Compliance and oversight
RG 132.26 – A retail CCIV is not required to establish a compliance committee.
RG 132.91 – Given the fundamental differences between a managed investment scheme and a CCIV, a retail CCIV cannot incorporate by reference the compliance plan of a registered scheme.
RG 132.160 – All assets of a CCIV must be allocated to a sub-fund. A corporate director of a CCIV must set up and maintain a register of assets and liabilities of the CCIVs sub-funds.
RG 133 Funds management and custodial services: Holding assets
RG 133.6 – This guide does not apply to the corporate director of a corporate collective investment vehicle (CCIV), a CCIV or a custodian engaged by the corporate director or CCIV. However, where the assets of the CCIV are held by the CCIV, the corporate director may wish to consider the principles set out in this guide; and where the assets of the CCIV are held by a person other than the CCIV, the corporate director may wish to consider the principles set out in this guide when assessing whether that person has met the minimum standards in reg 8B.5.10(2) of the Corporations Regulations 2001.