What is mFund?

On 8 May 2014, ASX launched its new mFund Settlement Service (mFund) which allows investors to electronically apply for and redeem units in certain unlisted simple managed investment schemes through their authorised ASX broker, doing away with paper forms and processes. Importantly, mFund is not a trading facility.

mFund allows investors to hold interests in unlisted managed funds that have been admitted to mFund, alongside their ASX-quoted shares, through a single Clearing House Electronic Sub-register System (CHESS) holding. Investors’ holdings in the relevant funds are linked to the same Holder Identification Number (HIN) as the HIN used for their other investments transacted using ASX (e.g. listed shares).

Who is eligible for mFund?

Currently, mFund is available only to simple managed investment schemes (MIS) (e.g. funds that invest in predominantly liquid assets) that issue shorter Product Disclosure Statements (PDS) under Part 7.9 Div 4.2C of the Corporations Regulations 2001 (Cth). The service is presently unavailable to funds classified as hedge funds or certain types of multifund for the purposes of ASIC Class Order 12/749 (CO 12/749).

To be admitted to mFund, the responsible entity (“RE”) must comply with the conditions of relief under ASIC Class Order 13/1621. The RE must be approved by ASX as an “AQUA Product Issuer” and each relevant fund must be admitted as an “AQUA Product” for transactions to be settled through mFund in relation to that fund. The RE must agree in writing to be bound by the ASX Operating Rules.

ASIC relief from application form requirements

ASIC has granted relief to exempt an RE of a registered scheme from the application form requirements in respect of electronic applications made through mFund. To avail itself of this relief, participating REs must satisfy certain conditions, including:

  • Electronic confirmations: prior to accepting an electronic application:
    • the broker must provide the RE with an electronic confirmation stating that a PDS has been given to the applicant and specifying the date of the PDS; and
    • the RE must ensure that the PDS referred to in the confirmation is the appropriate PDS and that it was not defective at the time of the application.
  • Written notice to investor of issue of unitswithin 5 business days that complies with certain requirements.
  • ASX notifications: The RE must notify the ASX in writing with ten business days if they become aware that a retail investor was not given a PDS before making an application.
  • Document retention: The RE must keep relevant documentation and records for a period of seven (7) years.

Disclosure requirements under mFund

The RE must satisfy certain disclosure requirements in relation to funds to be settled through mFund.

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Unit Pricing and Announcements

Pricing information (e.g. current unit price) for participating funds will be available on www.mfund.com.au. Participating brokers are also expected to make unit pricing information available on their own portfolio management systems.

Announcements relating to mFund products will also be released using ASX’s market announcements service, in addition to direct communications between investors and funds (e.g. details of distributions).

AML/CTF Rules

The Anti-Money Laundering and Counter-Terrorism Financing Rules have been amended so that REs do not need to separately conduct AML/KYC checks on an mFund investor if the investor’s broker confirms to the RE that it has already undertaken these checks. Importantly, these changes do not cover due diligence checks with which the fund may be required to comply under the Australian intergovernmental agreement in relation to the U.S. Foreign Account Tax Compliance Act (FATCA). Consequently, it is likely that a fund admitted to mFund will still have to conduct its own FATCA due diligence even if the AML/KYC checks are undertaken by the broker, subject to any separate arrangements entered into by the fund.