EXPLANATORY STATEMENT for
ASIC Corporations (IDPS – Relevant Interests) Instrument 2015/1067.
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (IDPS – Relevant Interests) Instrument 2015/1067 under sections 655A and 673 of the Corporations Act 2001 (the Act).
Section 655A provides that ASIC may exempt a person or class of persons from all or specified provisions of Chapter 6 of the Act. Section 673 provides that ASIC may exempt a person or class of persons from all or specified provisions of Chapter 6C of the Act.
1. Background
Investor Directed Portfolio Services (IDPS) are custodial, transactional and consolidated reporting services which operate as a master fund, master trust or wrap service. They are designed to allow clients to manage and retain control of their investment portfolios with consolidated tax, transaction and performance reporting.
IDPSs are operated by IDPS operators, which are defined in ASIC Class Order CO [13/763] Investor directed portfolio services as "a public company that is a holder of an Australian financial services licence that is authorised to operate an IDPS and who provides an IDPS or a function that forms part of the IDPS".
IDPS-like schemes operate similarly to IDPSs in that investment decisions are generally made in accordance with specific member instructions. They differ in that they are registered managed investment schemes and as a result the responsible entities that operate them have different, slightly wider powers than IDPS operators.
ASIC's policy on IDPSs and IDPS-like schemes generally is set out in RG 148 Platforms that are managed investment schemes.
IDPS operators have the power to deal with securities, but only on the instructions of their clients. Although they have very limited control over the securities held through the IDPS, without relief, operators of an IDPS will have a relevant interest in the securities held through the IDPS, which may lead to a technical breach of Chapter 6 of the Act.
2. Purpose of the instrument
ASIC Corporations (IDPS – Relevant Interests) Instrument 2015/1067 modifies section 609 so that the operator of an IDPS is taken not to have acquired a relevant interest in securities held through the IDPS merely because they are the operator of the IDPS. Instrument 2015/1067 only applies where the IDPS Operator has the benefit of Class Order CO [13/763].
The relief is appropriate because ASIC considers that operators of an IDPS have powers over securities held through the IDPS so limited that they should be treated in a manner similar to a bare trustee.
The relief is deliberately not extended to operators of IDPS-like schemes because operators of these schemes generally have wider powers over securities held through the schemes.
3. Operation of the instrument
ASIC Corporations (IDPS – Relevant Interests) Instrument 2015/1067 modifies section 609 of the Act so that the operator of an IDPS is not taken to have acquired a relevant interest in securities held through the IDPS merely because they are the operator of an IDPS.
4. Regulatory guidance
ASIC's policy on IDPS generally is set out in RG 148 Platforms that are managed investment schemes. This policy was updated in 2013 following the release of Class Order [CO13/763] Investor directed portfolio services.
5. Consultation
The relief given in ASIC Corporations (IDPS – Relevant Interests) Instrument 2015/1067 was the subject of public consultation in Consultation Paper 234 Remaking ASIC class orders on takeovers and schemes of arrangement (CP 234). CP 234 was published in August 2016 and is available on ASIC's website.
ASIC has determined that a Regulatory Impact Statement is not necessary for this instrument as it is a remaking of the previous Class Order 04/523, which was determined to be operating effectively and efficiently, and has thus been remade without significant changes.