CCIV is real - what now? ASIC is inviting views on the proposed ‘day one’ licensing issues
25 March 2022
In brief
The Corporate Collective Investment Vehicle Framework and Other Measures Act 2022 that implements the legislative regime for Corporate Collective Investment Vehicles (CCIVs) was passed by the federal parliament on 10 February 2022. The CCIV regime will commence on 1 July 2022. In our fourth LegalTalk alert, we summarised the key features of a CCIV. Some of the key issues we have previously highlighted related to the licensing and regulatory implications that would apply to CCIVs and corporate directors.
On 17 March 2022, the Australian Securities and Investments Commission (ASIC) released Consultation Paper 360 (CP 360) seeking feedback on ASIC’s proposed guidance on CCIVs. ASIC’s guidance includes proposals on how ASIC will:
- assess Australian financial services (AFS) licence applications from corporate directors seeking to operate a CCIV;
- assess AFS licence applications from persons seeking to provide financial product advice on and/or deal in CCIV securities; and
- administer the licensee obligations that will apply to corporate directors.
In this fifth LegalTalk alert, we look more closely at some of ASIC’s guidance proposals.
In detail
To recap - what is a CCIV?
A CCIV is an umbrella investment structure set up as a company limited by shares which can hold multiple sub-funds. Each sub-fund has its own allocated assets and liabilities, and operates as a separate business to any other sub-fund within the CCIV.
Unlike traditional companies, a CCIV cannot hire any employees, officers or directors. A public company with the requisite AFS licence authorisation must be appointed as a “Corporate Director” of the CCIV and will essentially be responsible for operating the CCIV.
To understand more about the features of CCIVs, please refer to our fourth LegalTalk alert.
Proposed licensing requirements in relation to a CCIV
CCIV
A CCIV itself is exempt from the requirement to hold an AFS licence.
Corporate Director
The Corporate Director must hold an AFS licence authorising it to provide the financial services of ‘operating the business and conducting the affairs of a CCIV’. Therefore, an entity wishing to operate a CCIV must apply to ASIC for either a new AFS licence or to vary an existing AFS licence to include this authorisation. Note that a Corporate Director can operate multiple CCIVs provided they have the requisite authorisation.
Corporate Director and Others engaged in provision of services in relation to CCIVs
In addition to this, Corporate Directors and other persons providing financial services in relation to CCIVs must hold an AFS licence with the authorisation to provide financial product advice on and/or ‘deal in securities’.
Because CCIV securities are legally defined as ‘securities’, AFS licensees who are already authorised to advise on and/or deal in securities will not be required to apply for a separate authorisation to advise on or deal in CCIV securities.
ASIC considers that an AFS licensee authorised to provide financial product advice on and/or deal in managed investment schemes (MIS Authorisations) should be able to readily transition to the CCIV regime, given the similarities between managed investment schemes and CCIVs. To that end, ASIC is proposing an ASIC-initiated licence variation where it will write to AFS licensees who currently hold MIS Authorisations, and ask them whether they would like to opt in to a similar authorisation in respect of ‘securities in a CCIV’.
Proposed licensing requirements in summary
| Corporate Director | Others engaged in provision of financial services in relation to CCIVs | |
| Authorisation required? | Yes. Authorisation to: ‘operate the business and conduct the affairs of a CCIV’ (Corporate Director Authorisation) |
Yes. Authorisation to: 'provide financial product advice on and/or deal in securities. However, not required if an AFS licensee already holds an authorisation to advise on and/or, deal in securities. AFS licensee with existing MIS Authorisations must opt-in to 'securities in a CCIV'. |
| Information specific to CCIVs that are required when applying for the authorisation(s) |
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| Potential condition(s) specific to CCIVs that may be imposed by ASIC | Limitation on the number of CCIV or sub-funds the Corporate Director can operate when the Corporate Director fails to demonstrate that it had the organisational competence and capacity. |
Proposed additional proofs and other requirements for Corporate Director Authorisation
| Retail & Wholesale CCIVs | |
|---|---|
| Additional C class proofs | ASIC is proposing to include two additional proofs in the AFS licensing Kit - C13 CCIV Operating Capacity Statement and C13 CCIV Asset Statement. Entities applying for the Corporate Director Authorisation will need to include these two additional proofs in their applications. In summary, ASIC will require these proofs to illustrate:
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| Requirements specific to Retail CCIVs | |
| Compensation and insurance arrangements | ASIC is proposing to impose specific AFS licence conditions with respect to Professional Indemnity (PI) insurance requirements for Corporate Directors of retail CCIVs. This condition will require a Corporate Director of a retail CCIV to:
When calculating the total value of assets in a retail CCIV, ASIC proposes that the following principles would apply:
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| Financial requirements | ASIC is proposing that the following financial requirements will apply to Corporate Directors of retail CCIVs:
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| Requirement specific to Wholesale CCIVs | |
| Financial requirements | ASIC is proposing that the base level financial requirements (set out in ASIC Regulatory Guide 166) will apply to Corporate Directors of wholesale CCIVs. |
Organisational Competency for CCIVs
ASIC has proposed a new set of guidelines to assess organisational competency of an entity seeking to operate a CCIV, and/or to ‘advise on’ or ‘deal in’ CCIV securities. A summary is set out below.
Applicants who apply for the relevant CCIV authorisations (with the exception of ASIC-initiated variations) will need to satisfy ASIC that they meet these new organisational competency requirements in addition to the existing organisational competency requirements.
| Corporate Director Authorisation | Authorisation to ‘advise on’ and/or ‘deal in’ CCIV securities |
|---|---|
ASIC is proposing that it will assess the applicant’s competence based on the following:
When assessing an individual responsible manager’s knowledge and skills, ASIC has proposed that they will consider the following:
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When assessing individual responsible manager’s relevant knowledge and skills, ASIC has indicated that they will consider each of their qualification and prior experience in:
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Next Steps?
Submissions to ASIC are due 14 April 2022. If you have any concerns about the proposal ASIC has made in the CP 360, share your feedback to ASIC before the deadline. ASIC plans to make updates to relevant regulatory guides, legislative instruments, and pro formas in preparation for the commencement date of 1 July 2022.
