CCIV Update: New ASIC Guidance on Corporate Collective Investment Vehicle Regime

To support the implementation of the CCIV regime which began on July 1, 2022, ASIC has issued guidance for participants.

Earlier this year, we reported on the introduction of the Corporate Collective Investment Vehicle (CCVI) diet (see our article ‘Just say “CC(IV)”: Australia’s collective investment vehicle regime comes into force on July 1, 2022.‘). The Australian Securities and Investments Commission (ASICs) has just published a report (REP 728) and an information sheet (NEWS 272) and updated several regulatory guides to assist entities seeking to establish and offer investment products using the CCIV structure.1

REP 728: ASIC Response to Stakeholder Submissions

REP 728 outlines the main issues raised by ASIC’s consultation on the implementation of the CCIV regime and its responses to these issues. Primarily, this provides useful guidance in understanding how ASIC will assess applications to grant or amend Australian financial services licenses (AFSL) to enable fund managers to operate CCIVs.

Main takeaways include:2

  • where the applicant already holds an AFSL authorizing them to act as a responsible entity, ASIC will still exercise a reasonable degree of control with respect to the applicant’s request to add a company director authorization to their license;
  • ASIC will accept the filing of certain proficiency, suitability and ownership evidence documents previously provided to ASIC with respect to recent applications for a new or modified AFSL. However, certain additional evidence will be required from all applicants, including with respect to the applicant’s business description and specific CCIV compliance provisions;
  • ASIC will prioritize AFSL applications from prospective CCIV Trustees for at least six months from the start of the CCIV scheme. This has timing implications for other AFSL (non-CCIV) applications. In addition, due to the similarities between the Managed Investment Scheme and CCIV schemes, ASIC expects that applications from existing Responsible Entities and Wholesale Scheme Trustees seeking wholesale CCIV authorization may be finalized more quickly;
  • ASIC will generally not impose a single-bucket limit on administrators of wholesale CCIV companies (as it originally proposed to do). However, this limit may be imposed on a business executive of a retail CCIV who has not, in the opinion of ASIC, demonstrated organizational competence and the ability to conduct broader operations;
  • although he originally proposed to impose separate obligations on CCIV AFSL holders with respect to professional indemnity (IP) in addition to the existing PI insurance held, ASIC has reviewed its position. Instead, an AFSL holder who is both a Responsible Entity and a Corporate Director is required to have adequate PI insurance given the nature of their business. The insurance must also cover claims for a total amount equal to the lesser of:
    • $5 million; and
    • the sum of the value of all of its assets and (for retail CCIVs) the value of the assets of the CCIV; and
  • an AFS Licensee who is both a Responsible Entity and a Corporate Officer will have a single Net Tangible Asset (NTA) requirement (rather than separate requirements for its Responsible Entity and CCIV Administrator functions).

INFO 272: Tips for registering CCIVs and compartments

INFO 272 explains the requirements and process for applying for registration of a CCIV and subfunds. A company wishing to be registered as a CCIV and register one or more initial compartments must:3

  • fulfill the following CCIV registration conditions:
    • be limited by shares;
    • have a constitution that complies with subdivision C of part 8B.3 of the Companies Act 2001 (Cth);
    • have only one proposed director of the company (i.e. the corporate officer of the CCIV) which is a public company holding an AFSL authorizing it to operate the company and direct the affairs of a CCIV ;
    • have at least one compartment;
    • each compartment must have at least one member at the time of registration; and if the company is intended to be a retail CCIV – have a compliance plan and a compliance plan auditor; and
  • file an application for registration with the CCIV, including the required application form, constitution and compliance plan (if a retail CCIV), and pay an application fee.

INFO 272 also provides advice on the registration conditions of other compartments, after the registration of a CCIV.

Where to go from here?

ASIC continues to update several of its regulatory guides to reflect the CCIV regime and is expected to issue a new legislative instrument prescribing financial resource requirements for directors of retail CCIV companies. In the meantime, REP 728 and INFO 272 provide important insight into ASIC’s approach to participants looking to enter this new area of ​​the Australian investment markets.

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