Corporations Regulations (Amendment)

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Corporations Regulations (Amendment) 1998 No. 186

EXPLANATORY STATEMENT

STATUTORY RULES 1997 No. 186

Issued. by the authority of the Treasurer

Managed Investments Act 1998

Corporations Regulations (Amendment)

Section 601QB of the Corporations Law, inserted by the Managed Investments Act 1998, empowers the Governor-General to make regulations that may modify the operation of Chapter 5C of the Corporations Law or any provisions of the Law relating to securities in relation to a managed investment scheme. or all managed investment schemes of a specific class.

Section 4 of the Acts Interpretation Act 1901 provides the power for the Governor-General to make regulations following Royal Assent of the Managed Investments Act 1998 but prior to the commencement of this Act.

The Regulations:

*       amend some of the existing Corporations Regulations relating to prescribed interests so

       that their requirements apply to a managed investment scheme;

*       omit some existing Corporations Regulations relating to prescribed interests as they impose

       requirements which are now included in the Managed Investments Act 1998, or are no longer

       applicable; and

*       make a number of new Regulations required to facilitate the operation of the Chapter 5C of

       the Corporations Law.

Details of the proposed Regulations appear in the Attachment.

The Regulations commence on 1 July 1998 coinciding with the commencement of the Managed Investments Act 1998.

ATTACHMENT

Regulation 1 Commencement

This regulation sets the commencement date for the regulations to be the same as the commencement date for the Managed Investments Act 1998.

Regulation 2 Amendment

This is a formal regulation giving effect to the amendments made by the amending regulations.

Regulation 3 Regulation 1.02 (Interpretation)

This regulation omits a number of definitions in the Corporations Regulations that are no longer applicable once the Managed Investments Act 1998 commences.

Regulation 4 Regulation 1.07 (General requirements for documents)

This regulation amends subparagraphs 1.07 (f) (i) and (ii) by replacing "corporation" with "managed investment scheme", and corrects a typographical error.

Regulation 5 Regulation 1.07A (Information to accompany documents etc years for half-years)

This regulation amends regulation 1.07A (c) by including references to a managed investment scheme, a responsible entity and an Australian Registered Scheme Number (ARSN) as defined in the Corporations Law.

Regulation 6 Regulation 1.07B - (Information to accompany documents etc years for half-years)

This regulation amends regulation 1.07B (c) by including references to a managed investment scheme, a responsible entity and an ARSN.

Regulation 7 Regulation 1.07C (Continuous disclosure notices)

This regulation amends regulation 1.07C (b) by including references to a managed investment scheme, a responsible entity and an ARSN.

Regulation 8 Regulation 1.12 (Certification of a document)

This regulation omits regulation 1.12 and inserts a new regulation, which has the same effect of regulation 1.12.

Regulation 9       Regulation 1.13A (Participation interests: agreements in relation to limited Partnerships.

This regulation repeals regulation 1.13A. The substance of regulation 1.13A has been moved into paragraph (c) of the definition of "managed investment scheme" inserted in the Corporations Law by the Managed Investments Act 1998.

Regulation 10 Regulation 1.15 (Copies of orders to be lodged)

This regulation changes the reference in regulation 1.15 from subsection 1074(5) to the corresponding new provisions of the Corporations Law (section 601ND and subsection 1457(2)).

Regulation 11 New regulation 2C.1.02

This regulation requires the notice to be lodged under subsection 172(2) of the Corporations Law to be in the approved form.

Regulation 12 New Part 2M.4

This regulation requires the responsible entity to lodge a notice with the Australian Securities Commission (ASC) informing them, of the appointment of an auditor of a registered managed investment scheme in a form prescribed by the ASC within 14 days of appointment.

Regulation 13 New Chapter 5C

This regulation adds the following new regulations.

*        A regulation that an application to register a managed investment scheme must be in the approved form. This form must state the name of the managed investment scheme, and this name must not be the same as any other name of a registered scheme or a scheme that is subject of an application for registration.

*        A regulation to facilitate changing a name of a managed investment scheme. The name can be changed provided that the new name is not the same as any other name of a registered scheme or a scheme that is subject of an application for registration.

*        A regulation to require agents of a responsible entity to take all reasonable steps to assist the responsible entity and the ASC when the ASC is carrying out checks on whether the responsible entity is complying with the scheme's constitution and compliance plan.

*        A regulation to allow the ASC or a member of a scheme to apply to a court seeking the appointment of a temporary responsible entity if the ASC or member reasonably believes that the appointment is necessary to protect scheme property.

*        A regulation indicating that a notice lodged under subsection 601FL (2) or 601FM (2) of the Corporations Law must be in the approved form.

*        In the event the court appoints a temporary responsible entity on application of a member, a

       regulation to require the member to lodge a notice in the approved form informing the ASC of the appointment.

*        A regulation indicating that a notice lodged under subsection 601FP(3) of the Corporations Law must be in the approved form.

*        A regulation to allow authority holders to sign on behalf of directors of the responsible entity if a verified copy of the authority is attached in the case of lodging a compliance plan, or a modification to the compliance plan, with the ASC.

*       A regulation to require an agent of the responsible entity and the officer of the agent to allow the auditor of the scheme's compliance plan to have access to the books of the scheme, provide information or an explanation to the auditor and assist with the audit.

*       A regulation to require the responsible entity and agents as well as officers of those bodies to allow the compliance committee to have access to the books of the scheme, provide information or an explanation to the compliance committee and assist the compliance committee in the performance of its functions.

*       A regulation prohibiting the responsible entity, entities controlled by the responsible entity, agents and persons appointed by the responsible entity and related parties giving a financial benefit (except as permitted by law) out of scheme property to a person or a related party if the benefit could diminish or endanger scheme property, or adversely affect the interests of members. This does not prevent the person or related party from being paid fees, or exercising rights to an indemnity, in accordance with the scheme's constitution under subsection 601GA(2) of the Corporations Law as amended by the Managed Investments Act 1998.

*       A regulation to require the responsible entity to lodge a notice with the ASC informing them that the winding up of the scheme has commenced, or has been completed, within 14 days of commencement or completion.

*       A regulation indicating that Chapter 5C of the Corporations Law does not apply to:

-       the issue by a financial institution of withdrawable shares; or

-       deposit taking by a financial institution; or

-        something else done by a financial institution in the ordinary course of its banking business; or

-        the provision by a special services provider of a service mentioned in subparagraph 36 (2) (b) (i), (ii), (iii), (iv) or (v) of any of the AFIC Codes; or

-        the issue of shares to a building society by a building society special services provider, or to a credit union by a credit union special services provider.

*       A regulation indicating that the register of members of a registered managed investment scheme does not need to contain information about a member whose only interest in the scheme is the holder of an option.

*       A regulation indicating that the related party provisions applying to a managed investment scheme commence at the time of the commencement of the regulation.

*       A regulation to prevent the possibility of compensating the managed investment scheme twice for an act or omission by an agent appointed by the responsible entity.

*       A regulation indicating that a reference in section 1325 to Part 7.12 of the Corporations Law is taken to include a reference to Chapter 5C of the Law.

*       A regulation indicating that the trustee, representative or management company is not liable for civil action or civil proceeding for deciding to retire, or giving a retirement notice, under section 1455 of the Corporations Law.

Regulation 14 Regulation 7.1.02 (Prescribed interests: exemption of franchise rights or interests).

This regulation repeals regulation 7.1.02, which is now covered by paragraph (f) of the definition of "managed investment scheme" inserted in the Corporations Law by the Managed Investments Act 1998.

Regulation 15 Regulation 7.2.02 (Compliance monitoring - section 770A stock markets)

This regulation replaces "management company" with "responsible entity".

Regulation 16 Regulation 7.3.02A (Conditions to which a licence issued to the management company of a property trust is subject)

Consistent with the repeal by the Managed Investments Act 1998 of the prescribed interest provisions of the Corporations Law, this regulation repeals regulation 7.3.02A dealing with licences issued to a management company of a property trust.

Regulation 17 Regulation 7.3.11 Exemptions from licensing etc.: of prescribed interests)

This regulation amends regulation 7.3.11 to take account of the changes to the Corporations Law reflected by the Managed Investments Act 1998. Regulation 7.3.11 (1) is amended to refer to managed investment schemes rather than trust deeds and prescribed interests, while the provisions relating to the Superannuation Industry (Supervision) Act 1993 are retained.

Regulation 18 Regulation 7.3.12 (Exemption from licensing - dealings in own securities and subunderwriting)

This regulation amends regulation 7.3.12 by replacing "other than prescribed interests" with "except an interest in a managed investment scheme".

Regulation 19 Regulation 7.3.17 (Application of certain provisions of the Law to section 770A stock markets)

This regulation amends regulation 7.3.17 by replacing "management company in relation to unquoted prescribed interests" with "responsible entity in relation to unquoted interests in a managed investment scheme".

Regulation 20 Regulation 7.3.18 (Supervisors have qualified privilege in certain circumstances)

This regulation amends regulation 7.3.18 by replacing "management company" with "responsible entity".

Regulation 21 Regulation 7.4.02 (Exemption of certain securities)

This regulation replaces references to "prescribed interests" in regulation 7.4.02 with references to "interests in a managed investment scheme" and includes a reference to Chapter 5C of the Law.

Regulation 22 Regulation 7.12.01 (Definitions for Part 7.12)

This regulation omits a number of definitions in the Corporations Regulations that are no longer applicable and amends a number of other definitions in light of changes to the Corporations Law effected by the Managed Investments Act 1998.

Regulation 23 Regulation 7.12.04 (Exempt rights or interests: definition of prescribed interest in section 9 of the Corporations Law)

This regulation repeals regulation 7.12.04 as the substance of this regulation has been moved into the definition of "managed investment scheme" inserted in the Corporations Law by the Managed Investments Act 1998.

Regulation 24 Regulation 7.12.05 (Excluded issues (Corporations Law, paragraph 66(2)(n))

This regulation amends regulation 7.12.05 by omitting the reference to an "investment company" as this is no longer applicable.

Regulation 25 Regulation 7.12.06 (Excluded offers and invitations) (Corporations Law, paragraph 66(3)(k))

This regulation amends regulation 7.12.06 (f), (h) and (i) essentially by replacing references to "approved deed" with "constitution of the scheme", and "prescribed interests" with "interests in a managed investment scheme".

Regulation 26 Regulation 7.12.08C (Section 1043B notice - other sales).

This regulation amends regulation 7.12.08C by replacing references to "prescribed interests" with "interests in a managed investment scheme", "trustee, representative or management company" with "responsible entity", and "deed governing the scheme" with "the scheme's constitution". Parts of regulation 7.12.06 are no longer applicable, while other parts have been combined.

Regulation 27 Regulation 7.12.10 (Modifications of Corporations Law to apply to securities that are prescribed interests)

This regulation amends regulation 7.12.10 by replacing the reference to "subsection 1063(2)" with "section 601QB" of the Corporations Law. The reference to regulation 7.12.13 is omitted because it has been repealed.

Regulation 28 Regulation 7.12.11 (Section 1.21 (Specific provisions applicable to all prospectuses))

This regulation amends regulation 7.12.11 by replacing references to "arrangement, common enterprise, financial or business undertaking, investment contract or scheme" with "scheme", "trustee, representative or management company" with "responsible entity", "prescribed interests" with "interests in a managed investment scheme" and "approved deed" with "scheme's constitution". Paragraph (6)(c) is omitted as it is no longer applicable.

Regulation 29 Regulation 7.12.12 (Section 1022 (General provisions applicable to all prospectuses))

This regulation amends regulation 7.12.12 by replacing references to "arrangement, common enterprise, financial or business undertaking, investment contract or scheme" with "scheme", "trustee, representative or management company" with "responsible entity", and "prescribed interests" with "interests in a managed investment scheme". The regulation also requires disclosure in a prospectus how scheme property is to be held.

Regulation 30 Regulation 7.12.12A (Exemption from Division SA of Part 7.12 of the Corporations Law: unlisted property trusts)

This regulation repeals regulation 7.12.12A as it is no longer applicable.

Regulation 31 Regulation 7.12.14A (When financial year reports must be sent)

This regulation repeals regulation 7.12.14A as it is no longer applicable.

Regulation 32 Regulation 7.12.15 (Prescribed covenants: paragraph 1069(1)(n) of the Corporations Law)

This regulation omits regulation 7.12.15 and substitutes a new regulation drawing on the substance of subparagraph 7.12.15 (6) (ba). In the event that a responsible entity receives money without an application form relating to a prospectus, the responsible entity must return the money to the person, or attempt to obtain a completed application form from the person. However, this regulation does not apply in relation to an excluded issue under paragraph 66 (2) (da), or an excluded offer or invitation under paragraph 66 (3) (da), of the Corporations Law. If the moneys accrue interest, the responsible entity is required to ask the person whether they want the interest to be added to the principal or to be paid to the person.

Regulation 33 Regulation 7.12.15A (Prescribed covenants - liquidity of unlisted property trusts)

This regulation repeals regulation 7.12.15A as it is no longer applicable.

Regulation 34 Regulation 7.12.15B (Management companies - period within which returns must be lodged)

This regulation repeals regulation 7.12.15B as it is no longer applicable.

Regulation 35 Regulation 7.12.16 (Return to be lodged under subsection 1071 (1) of the Corporations Law)

This regulation repeals regulation 7.12.16 as it is no longer applicable.

Regulation 36 Regulation 7.12.16A (Conditions for passing a special variation proposal otherwise than at a special variation meeting)

This regulation repeals regulation 7.12.16A as it is no longer applicable.

Regulation 37 Regulation 7.12.16B (Exemption from paragraph 1076T of the Corporations Law)

This regulation repeals regulation 7.12.16 as it is no longer applicable.

Regulation 38 Regulation 7.13.01 (Marketable securities: subsection 1097(1) of the Corporations Law)

This regulation amends regulation 7.13.01 by replacing "a prescribed interest" with "an interest in a managed investment scheme" and referring to the new provision (section 60lEB) inserted in the Corporations Law by the Managed Investments Act 1998.

Regulation 39 Regulation 8.3.02 (Exemption: Part 8.3 - certain futures contracts)

This regulation amends regulation 8.3.02 to omit references to a prescribed trustee corporation as this is no longer applicable and to amend the subparagraphs to refer to a responsible entity and a managed investment scheme.

Regulation 40 Regulation 9.1.01 (Prescribed registers)

This regulation amends regulation 9.1.01 by replacing the reference to "the register of deeds" with "the register of managed investment schemes".

Regulation 41 Regulation 9.1.02 (Prescribed information)

The regulation amends regulation 9.1.02(h) so that it applies to a register of a management investment scheme rather than register of deeds. The ASC is required to record the scheme's ARSN, the name of the scheme (if any), the date of registration, the name and address of the registered office of the scheme's responsible entity, the name and address of the scheme's auditor, the name and address of the auditor of the scheme's compliance plan, date of any amendment to its constitution, date of any amendment to its compliance plan, any winding up or deregistration of the scheme.

Regulation 42 Regulation 9.4A.01 (Definitions for Part)

This regulation amends the definition of register in regulation 9.4A.01 refer to a register of members of a registered managed investment scheme of the corporation.

Regulation 43 New Part 9.11

This regulation inserts a new heading. It also requires notices lodged under section 1455 (2) or 1456 (1), paragraph 1456 (2) (c) or 1457 (1) (b), subsection 1460 (5) or paragraph 1460 (6) (c) of the Corporations Law as amended by the Managed Investments Act 1998 must be in the approved form.

Regulation 44 Schedule 1 (List of forms in Schedule 2)

This regulation omits items that are no longer applicable.

Regulation 45 Schedule 2 (Forms)

This regulation omits forms no linger applicable.

Regulation 46 Schedule 4 (Prescribed amounts)

This regulation inserts a new item in Schedule 4 to prescribe a $10 fee for the purposes of subsection 601GC(4) of the Corporations Law. 9 Regulation 47 Transitional This regulation indicates that the transitional provisions that apply to these regulations.

 

Overview

The Managed Investments Act 1998 was enacted by the Australian Parliament to address the gap in regulation and oversight of managed investment schemes, particularly in relation to their governance and disclosure requirements. The Act aimed to ensure that these schemes operate in a transparent and efficient manner, providing protection to investors. The policy objective was to create a regulatory framework that balances the need for innovation and growth in the financial sector with the protection of investors. The Corporations Regulations (Amendment) 1998 No. 186 further elaborates on this objective by making amendments to existing regulations and introducing new ones to facilitate the operation of the new legislative framework established by the Managed Investments Act 1998. These regulations ensure that the Act's provisions are effectively implemented and enforced, thereby enhancing investor confidence and market integrity.

Scope and Application

The Corporations Regulations (Amendment) 1998 No. 186, as detailed in the Explanatory Statement, applies to managed investment schemes as defined under the Managed Investments Act 1998. These regulations modify the Corporations Regulations to align with the new legal framework established by the Managed Investments Act, ensuring that the governance, reporting, and compliance requirements for managed investment schemes are clearly defined and uniformly enforced. The regulations apply to responsible entities managing these schemes, including their agents and officers, as well as to Australian Registered Schemes, ensuring that all entities involved in the management of these schemes adhere to the prescribed standards and disclosures. The scope of these regulations is national, aligning with the broader Corporations Law under the Commonwealth jurisdiction. Specific exclusions from the application of these regulations include the issue by financial institutions of withdrawable shares, deposit-taking activities, and certain services provided by special services providers as outlined in the AFIC Codes. Additionally, the regulations specify that Chapter 5C of the Corporations Law does not apply to ordinary banking activities of financial institutions or to specific services rendered by building society and credit union special services providers. The application of these regulations can be further extended or restricted through subordinate instruments, allowing for adjustments and clarifications as needed to ensure effective implementation and compliance with the Managed Investments Act.

Key Provisions

The Corporations Regulations (Amendment) 1998 No. 186 amends existing regulations to align them with the Managed Investments Act 1998. Section 601QB of the Corporations Law allows for these amendments, which include modifications to existing regulations that apply to prescribed interests, the omission of certain regulations that are now covered by the Managed Investments Act, and the introduction of new regulations required for the operation of Chapter 5C of the Corporations Law. These regulations commence on 1 July 1998, coinciding with the commencement of the Managed Investments Act. These regulations impose various obligations on the parties involved in managed investment schemes. For instance, Regulation 12 mandates that the responsible entity must lodge a notice with the Australian Securities Commission (ASC) within 14 days of appointing an auditor. Regulation 1.07A and Regulation 1.07B require that certain information accompany documents related to a managed investment scheme, a responsible entity, and an Australian Registered Scheme Number (ARSN). Regulation 1.13A, which has been repealed, previously detailed agreements related to limited partnerships and is now incorporated into the definition of "managed investment scheme" in the Corporations Law. Breaching these regulations can lead to civil and criminal penalties. For instance, failing to lodge a required notice with the ASC within the stipulated timeframe could result in regulatory action. Similarly, providing incorrect or incomplete information in documents can lead to enforcement actions by the ASC. Regulation 1.15 requires copies of orders to be lodged with the ASC, and failure to do so can attract penalties. The precise penalties are not detailed in the explanatory statement but generally, breaches of the Corporations Act can result in substantial fines and, in severe cases, imprisonment. In summary, these regulations introduce specific requirements for managed investment schemes, impose obligations on responsible entities and other parties, and establish consequences for non-compliance. Understanding and adhering to these regulations is crucial for those involved in managing investment schemes to avoid legal repercussions.

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Corporate Law & Governance
Instrument
Regulation
Concepts
Definitions & Interpretation
Commencement Provisions
Repeal & Amendment
Compliance Obligations
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