Regulation, licensing and registration

Principal regulatory bodies

What are the principal regulatory bodies that would have authority over a private equity fund and its manager in your jurisdiction, and what are the regulators’ audit and inspection rights and managers’ regulatory reporting requirements to investors or regulators?

ASIC is the principal regulatory authority that has oversight of the operation of PE funds in this jurisdiction. Through the AFSL licensing regime, licensed entities are required to prepare and publicly lodge audited accounts and comply with stringent ASIC requirements relating to compliance and compliance auditing. ASIC has the right at any time to inspect books and records of a licensed entity in relation to their compliance with these provisions of the Corporations Act.

Innovation and Science Australia is the government agency responsible for registering incorporated limited partnerships as ESVCLPs or VCLPs (as applicable).

Governmental requirements

What are the governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?

Most private equity funds target predominantly institutional or wholesale investors, meaning there are no registration requirements for the fund per se under the corporations legislation. If a private equity fund were to target retail investors, however, the Australian regulations would require the fund to be registered and the constituent documents to comply with strict requirements.

VCLPs and ESVCLPs established in Australia must be registered as an incorporated limited partnership in a particular state and as a VCLP or ESVCLP with the federal government body that oversees the VCLP and ESVCLP regimes.

The trustee of a MIT must elect for the trust to be treated as a MIT and, similarly, the trustee of an AMIT must elect for the trust to be treated as an AMIT (although this latter election can be evidenced in the way in which the tax return for the AMIT is prepared).

Otherwise, the AFSL requirements described in this chapter are the chief licensing requirements applicable to fund managers.

In some circumstances, a foreign investor may require approval to invest into an Australian-domiciled private equity fund under Australia’s foreign investment laws.

Registration of investment adviser

Is a private equity fund’s manager, or any of its officers, directors or control persons, required to register as an investment adviser in your jurisdiction?

The AFSL registration requirements as described in this chapter need to be satisfied.

Fund manager requirements

Are there any specific qualifications or other requirements imposed on a private equity fund’s manager, or any of its officers, directors or control persons, in your jurisdiction?

Under the terms of the AFSL, the entity managing the fund must have organisational capacity and relevant experience with dealing in and advising on securities to wholesale clients at a minimum. These requirements set out detailed tests that need to be satisfied by the persons responsible for the day-to-day management and operation of the PE fund.

Political contributions

Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure of, political contributions by a private equity fund’s manager or investment adviser or their employees.

In terms of political donations, the PE industry is not regulated as a separate industry. The Commonwealth Electoral Act 1918 (Electoral Act) implements a disclosure scheme that requires candidates, registered political parties, donors and other political actors to lodge annual or election period financial disclosure returns with the Australian Electoral Commission. This scheme requires the disclosure of certain information, including among other things any individuals who made a donation above the legislative threshold, which is currently A$13,800 (indexed annually).

The new Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018 amends the Electoral Act and is a significant change to Australia’s existing landscape of political funding and disclosure rules. Among other things, the reforms significantly restrict receipts from foreign donors.

Many Australian superannuation funds - which are significant investors in Australian PE - require fund managers to adopt governance rules in relation to various matters, including political donations. This varies from one fund to the next.

Use of intermediaries and lobbyist registration

Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure by a private equity fund’s manager or investment adviser of, the engagement of placement agents, lobbyists or other intermediaries in the marketing of the fund to public pension plans and other governmental entities. Describe any rules that require a fund’s investment adviser or its employees and agents to register as lobbyists in the marketing of the fund to public pension plans and governmental entities.

There are no rules that relate specifically to a PE fund manager’s marketing of a fund to public pension plans or government entities.

Bank participation

Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.

There are no Australian rules that specifically affect banks with respect to investing in or sponsoring private equity funds.