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Choosing the right Australian Financial Service Licence


AFSL – The third article in the series about setting up a managed fund in Australia.

Investment managers have a goal in mind – to raise as much capital as possible and to deliver good performance to investors.

Choosing the wrong AFSL to work with can lead to loss of productivity, negative impact to capital raising efforts, reputation damage, incompetent or next-to-useless onboarding capabilities for new investors, and much more.

To ensure that good quality service across the board is provided to investment managers, investment managers should ask to see the full bells and whistle version of service that are available by the RE/Trustee. These services should be online, streamlined and cost effective. You should also look to see all operating systems are properly monitored and tested regularly.

The compliance guide below outlines the ways in which we think fund management licenses should monitor and manage the regulatory burden involved with providing high levels of service to investment managers


Monthly Compliance Obligations (a portion of the requirements)

Below is a short list of some of the responsibilities of a RE/Trustee as an AFSL who is also a Responsible Entity.

  • Review and, if necessary, modify the Compliance Plan.
  • Valuation of scheme assets is conducted at appropriate intervals and in an appropriate manner.
  • Unit prices are calculated in accordance with the Constitution and Offer Document.
  • Receipt and processing of application money and applications in accordance with the Offer Document, Constitution, Corporations Act and the Anti-Money Laundering and Counter-Terrorism Financing Act.
  • Purchases and sales of assets are in accordance with the Offer Document, Constitution and the Corporations Act.
  • Correctly record and explain transactions, financial position and performance, enabling true and fair financial statements to be audited and correct tax returns submitted.
  • Ensure records are maintained for a minimum of seven years.
  • Carry out adequate due diligence when appointing external service providers.
  • Monitor providers to ensure they comply with contractual obligations and service level agreements.
  • Staff recruited are competent and receive sufficient training to enable them to perform their duties and to be familiar with the requirements per the Compliance Plan.
  • Lodgement of replacement or supplementary Compliance Plan with ASIC.
  • Lodge further information with ASIC about the arrangements in the Compliance Plan, or lodge an amended or consolidated Compliance Plan at ASIC’s request.
  • Ensure the membership of the Compliance Committee is in accordance with the Corporations Act.
  • Appointment of auditor to audit compliance by the Responsible Entity with this Compliance Plan on an annual basis.
  • Appointment of Compliance Officer
  • Compliance by the Responsible Entity to cause Compliance Plan to be audited in accordance with the Corporations Act.
  • Review of compliance plan auditor’s annual report.
  • Confirming that in holding assets of the Fund the Custodian meets the requirements of the Responsible Entity’s AFS licence and the Corporations Act.

It is Global Merces opinion and experience that it is impossible for an investment manager seeking to start a fund, to successfully fulfil the duties of Trustee, deliver performance and raise capital to even half the potential they require compared to outsourcing the RE/Trustee service along with Administration and Custody. Having an RE/Trustee that also offers distribution services is a bonus and once the distribution channels have been confirmed as legitimate and useful, this level of alliance in services should be grabbed with both hands.

Your company’s culture is a potent sales force. Who you are as a team, the promises you provide to investors and how you conduct business are powerful draw cards. Investors don’t invest in funds or investment strategies – they invest in people!

Finding an RE/Trustee who not only appreciates your company culture and attitudes but also wishes to enhance it and nurture it, should be the type of RE/Trustee you seek to work with.

In a market where big banks dominate, try and find an RE/Trustee who is willing to examine your investment plan, and will actually consider their appetite for the risk you present to their licence to then embrace you as a long-term partner.