The Albanese Government is taking further steps to ensure there are strong investor protections in place across the financial sector tasking the Treasury to review the managed investment schemes (MIS) regulatory framework.
The regulatory framework for MIS was introduced more than twenty years ago, since that point we’ve seen a number of significant scheme failures, including the Sterling Income Trust, Trio Capital and Timbercorp.
The review will 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. It will consider reform options, focusing on:
- 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 governance, compliance and risk management frameworks for MIS are appropriate; and
- 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).
Treasury will also consider:
- whether ‘investor rights’ for people who invest in MIS are appropriate;
- liquidity requirements for MIS; and
- whether an insolvency regime is required for MIS.
As part of the review, Treasury will consider the recommendations by various bodies, including the former Corporations and Markets Advisory Committee and the Parliamentary Joint Committee on Corporations and Financial Services.
The review will not consider:
- 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.
Treasury will release a public consultation paper by mid-year and consult with industry before reporting findings to Government by early 2024.
The Government encourages interested stakeholders to engage with the consultation process.
