Sophie Grace can assist you with all stages of obtaining an AFSL to establish an unregistered or registered managed investment scheme (MIS), or “fund”, in Australia. We will create an AFSL package to best suit your needs.
1. Determine which authorisations you need – To determine which authorisations you require on your AFSL, you will need to first determine some key components of your fund and how it will be run:
Are you the trustee?
If yes, you will need, dealing authorisations to issue a managed investment scheme (own scheme only, excluding Investor Directed Portfolio Service (IDPS) or including IDPS).
If no, you will need to outsource the ‘trustee’ role (i.e. the issuing) of the fund. Then you will not need the ‘issue a managed investment scheme’ authorisation on your AFSL. Then you will just be the ‘investment manager’, providing advice to the trustee on which assets the fund should invest in.
What assets are you investing in?
You will need to determine which assets your fund will be investing in and be sure which class of ‘financial product’ according to the Corporations Act definitions they fall in. The AFSL application will need both ‘advice’ and ‘dealing to acquire, vary or dispose’ authorisations in all of these financial products unless an advice exemption applies. You will also need the authorisations to cover managed investment schemes, i.e. so you can advise and deal in your own fund.
Classes of financial products include securities, government debentures, derivatives, foreign exchange, general insurance and deposit products.
Will you be insuring the assets?
You will need authorisations to provide advice and dealing services in insurance.
Will you be the custodian of the fund’s assets?
This can be outsourced and if so you won’t need to include custody in your application.
Wholesale clients only or retail as well?
You will need to determine if you want to provide your services to retail or wholesale clients. If you want to provide your services to retail clients, the requirements are more onerous and you will be required to register the managed investment scheme with ASIC, whereas wholesale schemes have the option to register or remain unregistered.
Will your fund be registered?
Operating a registered managed investment scheme authorisations will be required and you will become a Responsible Entity. This authorisation generally includes the name of the registered scheme and the types of assets in which the scheme will invest (generally retail applications only).
Sophie Grace will work with you to ensure you seek and obtain the appropriate authorisations needed to operate your business. Financial product/service delineations and boundaries are complex and it is easy to overlook or inaccurately define an aspect of your activities. There are serious penalties and repercussions for operating without an AFSL or without the correct authorisations.
2. Choose your Responsible Managers – You must ensure that the Responsible Managers nominated have appropriate skill and experience to provide the authorisations that your business is seeking. Broadly, this means they will:
- need to have worked in Australia for an AFSL for at least 3 in the past 5 years, or 5 in the past 8 years;
- have a university degree in a relevant field (e.g. commerce, science, economics);
- have held RG146 in in any products you will provide advice in (for retail AFSL applications only);
- be able to provide at least two referees who can attest to the RM’s AFSL experience;
- not be associated with more than one other AFSL (as RM, shareholder or director);
- have clear criminal and bankruptcy checks.
For this type of application, ASIC will generally require that there are two RMs. The first should have experience working for an AFSL and operating a managed investment scheme. The second should have experience in relation to the assets in which the scheme will invest.
3. Draft your Documents for ASIC – The documents submitted to ASIC for your AFSL application are known as ‘Proof Documents’. There are two types of proof documents, ‘Core Proofs’ and ‘Additional Proofs’. Sophie Grace will work closely with you to prepare the following proof documentation to meet the requirements of your ASIC AFSL application:
- Business Description
- People proofs for each nominated Responsible Manager
- Organisational Expertise Table
- Financial Resources Statements
Recently ASIC has stated that they require additional information relating to this type of AFSL application, including:
- specific details of the assets the fund will invest in;
- the details of your external custodian and a copy of the executed custody agreement;
- a copy of the Compliance Plan for the scheme which has been registered with ASIC (registered and retail applications only).
4. Additional Proof Documentation – Depending on the authorisations for which your business is seeking to be licensed, ASIC will require the submission of additional proof documentation. Sophie Grace will prepare these documents for you and liaise with ASIC on your behalf. Some of the documents which may be required include:
- Development Program for Responsible Managers
- Compliance Arrangements
- Outsourcing Statement
- Conflicts of Interest Arrangements
- Program for monitoring, supervision and training of Representatives
- Human Resources Capacity Statement
- Information Technology Capacity Statement
- Dispute Resolution System Statement
- Risk Management System Statement
- Compensation Capacity Statement
- Scheme Operating Capacity Statement (retail applications only)
- Scheme Property Statement (retail applications only)
- Product Distribution Channel Report (retail applications only)
- Funds Under Management Details (retail applications only)
Other documents that ASIC may request during the application process are:
- Draft Information Memorandum; and
- Copy of Trust Deed.
5. Ongoing AFSL Procedural Documentation – The ongoing compliance obligations of your new or varied AFSL will require procedure documents to maintain the good standing of your AFSL. Refer to our section on AFSL Procedural Documentation for more information.