Responsible Entities and Managed Investment Schemes

The concept of managed investment schemes was introduced in July 1998, by the Managed Investments Act (Cth), and has been defined as a scheme in which people contribute money to acquire interests to benefits produced by the scheme.

The contributions are used to further the scheme, and the members do not have control over the day to day operations.

The Managed Investments Act replaced the old “prescribed interests” regime, and its most significant change was the replacement of the roles of trustee and manager with the single Responsible Entity role. It also introduced new measures to ensure adequate investor protection.  The provisions of the Managed Investments Act are incorporated in Chapter 5C of the Corporations Act. 

A managed investment scheme must be registered with the Australian Securities and Investments Commission if;

• The scheme has 20 or more members; or
• The scheme is promoted by a person who is in the business of promoting managed investment schemes.

Where a scheme is required to be registered, the following must be addressed;

• Appointment of a Responsible Entity:
  • Responsible Entity must be an Australian public company holding a licence to act as a Responsible Entity
  • This is a dual role, of both trustee and scheme manager
  • Responsible Entity must have minimum net tangible assets of $50,000 or 0.5% of the value of the scheme’s assets, up to $5 million
• Custodians must be appointed in some cases;
• A Constitution, similar to a trust deed, must be made;
• A Compliance Plan must be created, setting out the measures which a Responsible Entity is to undertake in operating the scheme to ensure compliance with the constitution and the Corporations Act;
• A Compliance Committee is to be created if the board of directors of the Responsible Entity does not consist of at least half external directors.