ASIC has released new financial requirements for responsible entities (REs) of managed investment schemes (MISs).
The changes, implemented through Class Order (CO 11/1140]) and outlined in updated versions of Regulatory Guide 166 Licensing: Financial requirements (RG 166) and Pro Forma 209 Australian financial services licence conditions (PF 209), aim to ensure REs have adequate resources to meet operating costs and there is appropriate alignment with the interests of investors.
“To help ensure confident and informed investors, schemes wanting to take on the responsibility of managing investors’ money must be backed by REs with appropriate financial substance,” ASIC Chairman Greg Medcraft said.
“As Australia raises its profile as a leading financial centre, increasing minimum responsible entity capital requirements to a level that is globally comparable improves confidence in the integrity of our markets.”
Under the changes – which are the first significant changes in more than a decade to the rules covering financial requirements for MISs – REs must prepare 12-month cash-flow projections which must be approved at least quarterly by directors.
To meet the new net tangible asset (NTA) capital requirements, REs must hold the greater of:
- $150,000
- 0.5% of the average value of scheme property (capped at $5 million), or
- 10% of the average RE revenue (uncapped).
A liquidity requirement has also been introduced where an RE must hold at least 50% of its NTA requirement in cash or cash equivalents, and an amount equal to the NTA requirement in liquid assets.