The Federal Government has released draft legislation to give effect to the Asia Region Funds Passport (Passport) and the Corporate Collective Investment Vehicle (CCIV) regime.
The draft legislation proposes to insert two new chapters into the Corporations Act 2001 to establish a regulatory framework for the Passport and CCIV regime.
The Passport is a regional initiative which aims to facilitate the cross border marketing of managed funds across participating economies in the Asia region. Australia, Japan, South Korea, New Zealand and Thailand are currently members of the Passport.
Some benefits of the Passport are intended to include:
- enabling Australian funds managers to sell their products in other economies across the Asia-Pacific region;
- enabling managed fund providers from other Passport economies to sell their products in Australia, thereby increasing competition and providing greater investment choice for Australian consumers.
The CCIV regime supports the implementation of the Passport. It establishes a new type of investment vehicle which will allow Australian fund managers to offer investments through a company structure. CCIVs will offer an internationally recognisable investment vehicle which is intended to enhance the marketability of Australian managed funds to foreign investors, including through the Passport.
Some of the key features of the proposed CCIV regime are as follows:
- A company may register as a CCIV if the company is a company limited by shares and operated by a single corporate director.
- The corporate director must be a public company that holds an Australian financial services licence (AFSL) authorising it to operate a CCIV.
- A CCIV must not have any officers or employees other than the corporate director.
- The corporate director owes duties to the members of the CCIV and these duties will take precedence over the duties the corporate director owes to its own shareholders.
- A CCIV must have at least one sub-fund at all times.
- A CCIV may be open-ended or closed-ended.
- A CCIV must have a constitution that includes certain prescribed content requirements if the CCIV is a retail CCIV. A retail CCIV must also have a compliance plan.
- A retail CCIV must have a depositary that holds the assets of the CCIV on trust for the CCIV and supervises certain aspects of the corporate director’s responsibilities for the benefit of members. A wholesale CCIV may choose to have a depositary. The depositary is also subject to independence requirements which are aimed at providing retail investors additional protections. The depository will also require an AFSL authorising it to act as a depositary.
- The corporate director or depositary may appoint an agent or otherwise engage a person to do anything it is authorised to do in connection with the CCIV (except for the depositary’s supervisory role over the corporate director).
- A retail CCIV is subject to the full regulatory framework for CCIVs whereas a wholesale CCIV is subject to minimal requirements.
The Government is seeking submissions on the draft legislation and explanatory materials by 21 September 2017.