Alert – currently under review: regulation framework for managed investment schemes

Earlier this month, the Albanese Government announced that it is tasking the Treasury to review the managed investment schemes (MIS) regulatory framework to ensure that there are strong investor protections in place across the financial sector.

The MIS framework was introduced more than twenty years ago and is long overdue for change. The Treasury’s review will specifically examine whether the regulatory framework is fit-for-purpose, identify potential gaps, and consider what enhancements can be made to reduce undue financial risk for investors, and will particularly assess the following:

  • whether the thresholds that determine whether an investor is a retail or wholesale client remain appropriate;
  • whether certain MIS investments should be able to be marketed and sold to retail investors;
  • the various roles and obligations of responsible entities and whether the existing governance, compliance and risk management frameworks for MIS are appropriate;
  • interactions between Commonwealth and State laws when regulating real estate investments by MIS (including issues arising in relation to the failure of the Sterling Income Trust);
  • whether ‘investor rights’ for people who invest in MIS are appropriate;
  • liquidity requirements for MIS; and
  • whether an insolvency regime is required for MIS.

The Treasury’s review will not focus on the following:

  • whether MIS should be brought within the scope of the Compensation Scheme of Last Resort (CSLR);
  • litigation funding schemes;
  • time-sharing schemes;
  • issues relating to the tax treatment of MIS and investors;
  • any changes to the corporate collective investment vehicle regime; and
  • the rights and obligations of custodians.

An issue likely to be of particular interest to funds and their investors include the thresholds for retail and wholesale clients. The current thresholds (product value $500,000, $2.5m net assets, gross income $250,000 for 2 years) have not been revised for many years.

It is anticipated that Treasury will release a consultation by mid-2023 to take feedback from the industry, and it will also field recommendations by various bodies, including the former Corporations and Markets Advisory Committee and the Parliamentary Joint Committee on Corporations and Financial Services, before presenting its findings formally in early 2024.


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