The Australian Government has released the long awaited consultation paper on the review of the regulatory framework for managed investment schemes. The consultation paper comes on the back of the Government’s announcement of the review earlier in March this year (see our previous update). The current regulatory regime for managed investment schemes commenced in 1998.

The consultation paper seeks feedback on the appropriateness of the existing regulatory settings for managed investment schemes including:

• whether the thresholds that determine whether an investor is a wholesale client remain appropriate given these are unchanged since 2001;
• whether certain managed investment schemes should be marketed and sold to retail clients;
• the roles and obligations of responsible entities;
• whether ‘investor rights’ relating to the removal of responsible entities are appropriate;
• liquidity requirements for withdrawal from managed investment schemes;
• whether an insolvency regime is required for managed investment schemes; and
• the interaction between Commonwealth and State laws when regulating real estate investments by managed investment schemes.

Consultation is now open and submissions close on 29 September 2023. Treasury is expected to report to the Government on the findings from the review by early 2024. We are involved in submissions being prepared by industry bodies.

The Government has stated that it is also seeking views on opportunities to reduce regulatory burden without detracting from consumer outcomes. At the same time it says that it “is continuing to strengthen regulatory settings in the financial services sector”.

It appears from the nature of the questions in the consultation paper that there will be further “strengthening” of the regulation of managed investment schemes in the above areas. In particular, any changes that result from the review’s findings will likely affect operators of both registered and unregistered managed investment schemes as schemes that are currently unregistered may need to become registered (eg if the wholesale client thresholds are increased) and there are potential changes to the requirements that apply to registered schemes.