New MIS refusal power canvassed for ASIC

A new Treasury review of Managed Investment Schemes (MISs) has actively canvassed giving the Australian Securities and Investments Commission (ASIC) the power to refuse to register the schemes.

This would represent a significant strengthening of ASIC’s powers of the MIS regime because, under current legislative arrangements, the regulator has now power to make a judgement about their suitability for retail clients.

Rather, the consultation paper makes clear that, currently, “ASIC is under a statutory obligation to register a scheme within 14 days of receiving the application unless it appears that the application does not meet one or more of the registration requirements”,

The discussion paper has therefore raised as questions for consideration whether conditions should be imposed on certain scheme arrangements when offered to retail clients, and whether any changes should be warranted to the procedure for scheme registration.

It then poses the question: “[On] What grounds, if any, should ASIC be permitted to refuse to register a scheme”.

The Treasury discussion paper needs to be viewed against the background of the Government having already decided to exclude Managed Investment Schemes from the funding arrangements for the Compensation Scheme of Last Resort (CSLR).

The Treasury discussion paper noted that a 2014 Corporations and Market Advisory Committee (CAMAC discussion paper had noted that despite ASIC being required to actively consider each element specified in the legislation before registering a scheme, the regulator in practice had limited discretion to refuse to register a scheme if the specified requirements had been satisfied.

It said this included schemes that may be in breach of a different provision of the law, for instance, where a director of the proposed responsible entity had been disqualified from acting as a director.

Elsewhere in the Treasury discussion paper it canvasses whether a tailored insolvency regime for schemes would improve outcomes for scheme operators, scheme members and creditors.

“Should statutory limited liability be introduced to protect personal assets of scheme members in certain circumstances?” it asks. “If not, why not?”