By Felicity Simpson

13 December 2016

The governance of the financial product and services sector is comprised of an integral and wide reaching web of obligations, exclusions and exceptions. An area often overlooked and misunderstood, is that of Managed Investment Schemes.

The old saying of “substance over form”, is central to the provisions which govern Managed Investment Schemes. Irrespective of how an arrangement is framed, where a structure provides for the pooling of resources for a common purpose, the promoters need to ask themselves – does this amount to a Managed Investment Scheme?
What is a Managed Investment Scheme?
In its simplified form, the governing regime is wide reaching and potentially captures any pooling of funds for a common purpose, where the investors do not have day to day management of the business/investment. By way of example, an investment into a unit trust structure, where the unit holders do not have control of the day to day management of the business or investment may be a Managed Investment Scheme.

Consequently, anyone who has engaged with passive investors, whether to purchase property, undertake a development etc, may find themselves inadvertently falling foul of the Managed Investment Schemes provisions set out in the Corporations Act (Cth) 2001 (Act). To minimize this risk and to ensure compliance with the Act, careful consideration should be given to any project or investment, involving passive investors.
What does it mean to be a Managed Investment Scheme?
An advice that a particular scheme, fund or trust amounts to a Managed Investment Scheme does not necessarily mean that it is controlled by the provision of the Act. Not all Managed Investment Schemes are required to be registered with ASIC.

There are many factors to be taken into consideration in advising upon whether registration is required depending upon the specific circumstances of the client.

Issues for consideration can include:
Who are the investors – retail or wholesale?
How many investors are there?
What is the value of the Managed Investment Scheme?
Is the controller (or any related entity) of the MIS in the business of conducting MIS?
What does the Managed Investment Scheme do? ie. does it own property for the purposes of development or lease, or does it invest in mortgages etc.

Given the breadth of structures which may be caught by the definition of a Managed Investment Scheme, there are an array of exemptions that may be available in different scenarios. Detailed instructions are required to enable us to form a legal opinion on the registration obligations (if any) in any given situation.

What does registration mean to the trustee/promoter?
If a Managed Investment Scheme is required to be registered, the Act sets out many formal requirements for consideration. We can provide detailed advice focused upon your specific circumstances.

If you operate in this area and are unsure of your obligations, please contact our business and corporate team to discuss.

Related Articles

View All
Business Law / Commercial Contracts & Agreements / Litigation & Dispute Resolution

Corporate Divorce – The Importance of Prompt Damage Control

When good companies fail due to deteriorating business relationships, there is often a cast of familiar players: 1 The...
Read More
Business Law / Commercial Contracts & Agreements

Important Contractual Clauses: Things You Must Consider Carefully

The following are some items to consider when you review a contract: Term: Outlines the duration of the contract It’s...
Read More
Business Law

Tips for Ensuring Agreements Don’t Fail

If you are entering into an agreement, considering the following tips to make sure you are protecting yourself and/or...
Read More
Business Law

Tips for Ensuring Agreements Don’t Fail

If you are entering into an agreement, considering the following tips to make sure you are protecting yourself and/or...
Read More
Business Law / Employment Law

Employee Departures | How to Protect your Business

A large part of the parameters of these are already set down in whatever employment contract your employee has been...
Read More
Business Law

Unfair Contracts

Does the regime apply to your contract You need to consider: Whether your entity meets the definition of a ‘small...
Read More
Employment Law / Business Law

The Unsigned Employment Contract | Binding Agreement or Meaningless Piece of Paper?

Employers prepare such documents and present them to prospective employees at the commencement of the employment...
Read More
Business Law

Business Owners Beware | Protect Your Name, Protect Your Reputation

Selecting a business name The first step when selecting an appropriate name for your business is to consider...
Read More
Business Law

Michael Caine’s Terrific House and Contracts for the Supply of Services

Mr Caine clearly had a good lawyer representing him A business paying for services needs to have appropriate...
Read More
Business Law

How to Expand your Business without Adding Financial Risk

Some of the ways include: Distribution agreements where you allow another party to sell your product through pre...
Read More
Business Law

Why do I need a Shareholder or Unit Holder Agreement? – Structuring, Protections and Exits

In such circumstances, it is integral to consider the following factors to assist in achieving a resolution: How to...
Read More