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Australia Corporate Collective Investment Vehicle (CCIV) - regulation memo
Australia Corporate Collective Investment Vehicle (CCIV) - regulation memo
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Australia Corporate Collective Investment Vehicle (CCIV) - regulation memo

10/03/2019

Australia has the largest funds management industry in the Asia-Pacific region. Coinciding with the Asia Region Funds Passport (ARFP), the corporate collective investment vehicle (CCIV) could present a significant opportunity for the Australian fund management industry to export to the Asia-Pacific region.

About Corporate Collective Investment Vehicles

The Treasury of Australia has introduced these new corporate collective investment vehicles which are intended to:

  • Enhance the international competitiveness of the funds industry by enabling funds to use vehicles commonly used overseas
  • Expand the range of funds offered in Australia
  • Maximise the effectiveness of government initiatives, such as the ARFP

The CCIV regime has been structured with recognised features of international collective investment vehicles, such as Undertakings for Collective Investment in Transferable Securities (UCITS). It will be an optional alternative to the existing managed investment scheme (MIS) regime under the Australian Corporations Act.

Scope

The new CCIVs will primarily impact Australian fund management firms wishing to offer their investment products to foreign investors.

Industry implications

The CCIV will be implemented in Australia through the Treasury Laws Amendment (Collective Investment Vehicle) Bill 2017 (The Bill) and an additional Bill to enact amendments to other legislation, including the Corporations Act.

The CCIV has been designed to:

  • Offer shares and dividends, instead of units and distributions common to unit trust structures
  • Ensure smooth integration with the ARFP rules
  • Complement the existing regulatory framework to reduce regulatory arbitrage and compliance costs

Key features

It is anticipated to include both a retail and a wholesale CCIV, with the retail vehicle subject to stricter regulatory requirements (similar to the existing managed investment scheme regime).

A company intending to register as a CCIV must be limited by shares.

A CCIV must have an authorised corporate director (ACD), which must be a public company, and hold the necessary Australian Financial Services Licence (AFSL) authorising it to operate a CCIV.

The ACD of a CCIV must act in a similar way to a responsible entity under the existing management investment scheme (MIS) regime.

It introduces the depositary function which has three core duties including holding the assets of the CCIV on trust for the CCIV, executing the instructions of the ACD and supervising certain activities of the ACD.

Sub-funds

The new CCIV regime also introduces the concept of sub-funds to the Australian market:

  • A CCIV must operate at least one sub-fund and can have multiple sub-funds. These sub-funds will not be separate legal entities
  • Sub-funds can offer various investment strategies under the CCIV umbrella. This should provide scale and cost savings for fund managers compared to the managed investment scheme regime
  • New sub-funds must be registered with the Australian Securities and Investments Commission (ASIC)
  • Assets and liabilities of sub-funds must be kept separate in order to ensure investor protection from the activities of other sub-funds

Depositaries

The depositary requirement for retail funds has been broadly modelled on the UCITS regime where the depositary safeguards the fund assets and has prescribed oversight responsibilities. Some key features of the proposed depositary framework include:

  • A depositary is mandatory for a retail CCIV and discretionary for a wholesale CCIV
  • The depositary must be a registered public or foreign company, hold an AFSL (authorising it to act as a depositary) and be independent of the ACD
  • The depositary is responsible for supervising the corporate director’s conduct in relation to prescribed activities including issuing, redeeming and cancelling shares in the CCIV, valuing shares, allocating assets and liabilities to the sub-funds, and allocating and distributing income
  • Introduction of a depositary independence test

BNP Paribas Securities Services’ view

Australia has the largest funds management industry in the Asia-Pacific region. Coinciding with the ARFP, should the CCIV Bill be passed, it could present a significant opportunity for the Australian fund management industry to export to the Asia-Pacific region.

BNP Paribas recognises the potential of the CCIV; however, given the scale of the Australian funds management market it is essential that the new CCIV regime is a commercially viable vehicle that existing industry participants are capable of servicing.

BNP Paribas, together with industry participants has been working with The Treasury to highlight areas of concern in order to assist The Treasury to create a successful and commercially viable CCIV capable of widespread adoption.

Key dates

September 2017 - Consultation on the first exposure draft legislation closed
December 2017 - ASIC released Consultation Paper 296 Funds management (CP 226), with comments closed
February 2018 - CCIV Tax framework consultation close
July 2018 - consultation on the first tranche of the revised legislation closed
August 2018 – consultation on the second tranche of the revised legislation closed.
October 2018 – consultation on the third tranche of the revised legislation closed.
2019 – Bill anticipated to be introduced to Parliament to implement the CCIV.

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