ASIC Corporations (Financial Requirements for Responsible Entities, IDPS Operators and Corporate Directors of Retail CCIVs) Instrument 2023/647 (Cth)

ASIC Corporations (Financial Requirements for Responsible Entities, IDPS Operators and Corporate Directors of Retail CCIVs) Instrument 2023/647 I, Leah Sciacca, delegate of the Australian Securities and Investments Commission, make the following legislative instrument.

Date 30 August 2023

Leah Sciacca

Contents

Part 1—Preliminary 1 Name of legislative instrument 2 Commencement 3 Authority 4 Definitions Part 2—Declaration 5 Adequate financial resources for responsible entities, IDPS operators and corporate directors of retail CCIVs Part 3—Repeal 6 Repeal

Part 1—Preliminary

1 Name of legislative instrument This is the ASIC Corporations (Financial Requirements for Responsible Entities, IDPS Operators and Corporate Directors of Retail CCIVs) Instrument 2023/647.

2 Commencement This instrument commences on the day after it is registered on the Federal Register of Legislation. Note: The register may be accessed at www.legislation.gov.au.

3 Authority This instrument is made under paragraph 926A(2)(c) of the Corporations Act 2001.

4 Definitions In this instrument: Act means the Corporations Act 2001.

Part 2—Declaration

5 Adequate financial resources for responsible entities, IDPS operators and corporate directors of retail CCIVs Part 7.6 (other than Divisions 4 and 8) of the Act applies in relation to financial services licensees as if that Part were modified or varied by, in the appropriate position in Division 3 of that Part, inserting:

"912AA Adequate financial resources for responsible entities, IDPS operators and corporate directors of retail CCIVs (1) This section applies to a financial services licensee that: (a) holds an Australian financial services licence that authorises it to operate: (i) a registered scheme; or (ii) an IDPS; or (iii) a retail CCIV; and (b) is not: (i) a body regulated by APRA that is not required to comply with paragraph 912A(1)(d); or (ii) a market participant; or (iii) a clearing participant. (2) A financial services licensee covered by subsection (1) that complies with this section is taken to comply with conditions (if any) of its licence that relate to: (a) a cash needs requirement; and (b) net tangible assets that apply because it is a responsible entity or is authorised to operate an IDPS or retail CCIV; and (c) the obligation to lodge an opinion by a registered company auditor on the financial requirements for licensees that are authorised to operate a registered scheme, an IDPS or retail CCIV to the extent the opinion is for a part of a financial year or other period during which the licensee was covered by subsection (1). Note: The conditions on the licence may include other requirements in relation to having available adequate financial resources for the purposes of paragraph 912A(1)(d). (2A) This section applies to a financial services licensee (manager) that is covered by subsection (1) and holds an Australian financial services licence that: (a) authorises the manager to provide wholesale equity financial services (within the meaning of the ASIC Corporations (Wholesale Equity Scheme Trustees) Instrument 2017/849 (ASIC Instrument)); and (b) contains conditions to the effect of the conditions referred to in subparagraph 6(a)(ii) of the ASIC Instrument); as if the assets, liabilities, cash inflows and cash outflows of any eligible trustee were included in the assets, liabilities, cash inflows and cash outflows of the manager. (2B) In subsection (2A), eligible trustee means a person who is both: (a) an eligible trustee of a wholesale equity scheme (within the meaning of the ASIC Instrument); (b) a related body corporate of the manager. Tailored cash needs requirement (3) The licensee must: (a) prepare a projection of the licensee's cash flows over at least the next 12 months based on the licensee's reasonable estimate of what is likely to happen over this period; and (b) have the projection approved at least once a quarter by the licensee's directors as satisfying the requirements of paragraph (a); and (c) document the calculations and assumptions used in preparing the projection, and describe in writing why the assumptions are appropriate; and (d) update the projection of the licensee's cash flows if: (i) the projection ceases to cover at least the next 12 months; or (ii) there is reason to suspect that an updated projection would differ materially from the current projection or show that the licensee was not meeting the requirements in subparagraphs (i) and (ii) of paragraph (e); and (e) document whether, based on the projection of the licensee's cash flows, the licensee: (i) will have access when needed to enough financial resources to meet its liabilities over the projected term of at least the next 12 months; and (ii) will hold at all times during the period to which the projection relates in cash or cash equivalents, an amount equal to or greater than the current amount the licensee is required to hold in cash or cash equivalents under subsection (8). Net tangible assets (4) The licensee must hold at all times NTA of: (a) if subsection (5) applies or the licensee does not operate any registered schemes, IDPSs or retail CCIVs—at least the greatest of the following: (i) $150,000; (ii) an amount of up to $5 million, being 0.5% of the average value of fund assets of the registered schemes, IDPSs and retail CCIVs operated by the licensee; (iii) 10% of average revenue of the licensee; and (b) otherwise—at least the greater of: (i) $10 million; and (ii) 10% of average revenue of the licensee. (5) This subsection applies if at least one of the following is satisfied in relation to each registered scheme, IDPS and retail CCIV operated by the licensee: (a) all of the fund assets of the registered scheme, IDPS or retail CCIV, including in the case of a registered scheme, property of the scheme not held by members, are held by: (i) a custodian appointed by the licensee that: (A) is authorised to provide a custodial or depository service and that the licensee reasonably believes is not an incidental provider and complies with the requirements of section 912AC; and Note: Section 912AC is notionally inserted by ASIC Corporations (Financial Requirements for Custodians or Depository Service Providers) 2023/648. (B) otherwise—satisfies the requirements of subsection (7); or (ii) a sub-custodian appointed by such a custodian; or (iii) an eligible custodian; or (b) in relation to a registered scheme or retail CCIV—all the fund assets of the registered scheme or retail CCIV, including in the case of a registered scheme, property of the scheme not held by members, are Tier $500,000 class assets held by: (i) in the case of: (A) a registered scheme—the licensee; and (B) a retail CCIV—the retail CCIV; or (ii) a custodian appointed by the licensee; or (iii) a sub-custodian appointed by the custodian; provided that: (iv) where the person holding the fund assets is the licensee or the retail CCIV referred to in subparagraph (i), that person holds at least $500,000 NTA; or (v) where the person holding the fund assets is a custodian or sub-custodian—the custodian: (A) holds at least $500,000 NTA; or (B) is an eligible custodian; or (c) all fund assets of the registered scheme, IDPS or retail CCIV, including in the case of a registered scheme, property of the scheme not held by members, that are not held in accordance with paragraph (a) or (b) are special custody assets, each of which is held by: (i) in the case of: (A) a registered scheme or an IDPS—the licensee; and (B) a retail CCIV—the retail CCIV; or (ii) an eligible custodian; or (iii) a custodian that holds at least the NTA that the licensee would be required to hold under paragraph (4)(a) or a sub-custodian appointed by such a custodian; or (iv) a custodian or a sub-custodian appointed by the custodian if the only fund assets held are those mentioned in: (A) paragraph (a), (c) or (f) of the definition of special custody assets in subsection (11); or (B) paragraph (d) of the definition of special custody assets where the account is a regulated trust account. (6) If the licensee or retail CCIV has obtained a written assurance within the preceding 13 months from a custodian that holds an Australian financial services licence authorising it to provide a custodial or depository service that, at the time the assurance is given, the custodian complies with the requirements of section 912AC and is not an incidental provider, the licensee or retail CCIV is taken to have the reasonable belief referred to in sub-subparagraph (5)(a)(i)(A) in relation to the custodian. (7) A custodian satisfies the requirements of this subsection at a time (relevant time) if the licensee (in the case of a registered scheme or IDPS) or retail CCIV: (a) has obtained a written assurance from the custodian within the preceding 13 months that, at the time the assurance is given, the custodian complies with the following requirements as if the custodian were a financial services licensee that was authorised to provide a custodial or depository service and was not an incidental provider: (i) the requirements of subsections 912AC(3), (4) and (7) and paragraph 912AC(8)(a); and (ii) if the custodian would be required to lodge a report with ASIC under section 912DAA relating to a contravention of subsection 912AC(3), (4) or (7), it must immediately notify the licensee or retail CCIV; and (b) subject to subsections (7A) and (7B), has obtained a copy of a report from a registered company auditor in respect of a period of at least 12 months ending no more than 16 months before the relevant time, that states that: (i) in the auditor's opinion, the custodian complied with the requirements referred to in subparagraphs 912AC(10)(a)(i) to (iii); and (ii) the auditor has no reason to believe the matters referred to in subparagraphs 912AC(10)(b)(i) to (v) apply in relation to the custodian; other than to the extent that the requirements or matters deal with conditions of an Australian financial services licence that are not requirements under subsection 912AC(3), (4) or (7) or paragraph 912AC(8)(a), as if the custodian were a licensee authorised to provide custodial or depository services and was not an incidental provider; (7A) Paragraph (7)(b) does not apply in relation to a custodian that has not previously provided a copy of a report to any person for the purposes of paragraph (7)(b) until the earlier of: (a) 16 months after the date that the custodian first became a custodian of the scheme, IDPS or retail CCIV; and (b) the date that the custodian first provides the licensee or any other person with a copy of a report for the purposes of paragraph (7)(b). (7B) The first report obtained by a licensee or retail CCIV for the purposes of paragraph (7)(b) may cover a period of less than 12 months if it covers the period from the date that the custodian first provided a written assurance under paragraph (7)(a) to the licensee or any other person. (8) The licensee must hold at all times: (a) in cash or cash equivalents in an amount that is at least the greater of: (i) $150,000; and (ii) 50% of the amount of NTA that it is required to hold under subsection (4); and (b) liquid assets in an amount that is at least 100% of the required NTA. Money that is in an account held by the licensee for the purposes of section 981B cannot be counted towards either requirement. Other cash or cash equivalents that are also liquid assets can be counted for both paragraph (a) and (b). Audit opinion on financial requirements (9) The licensee must lodge with ASIC a report (audit opinion) by a registered company auditor addressed to the licensee and ASIC for each financial year of the licensee that states whether: (a) in the auditor's opinion, the licensee: (i) complied with paragraph (3)(b) and subsections (4) and (8) and other financial requirements in conditions on its licence; and (ii) had at all times a projection that purports to, and appears on its face to, comply with paragraph (3)(a); and (iii) correctly calculated the projection in paragraph (3)(a) on the basis of the assumptions the licensee used for the projection; and (b) the auditor has no reason to believe that: