Treasury consults on reforms to strengthen MIS governance and oversight.
Briefly
The Australian Treasury (“Treasury“) is consulting on proposals to reinforce the governance of registered managed funding schemes (MIS). Submissions shut on 27 February 2026. To supply a submission, consult with this website.
Key takeaways
On 10 February 2026, the Treasury launched the ‘Enhancing oversight and governance of managed funding schemes’ session paper (“Session Paper“). The Session Paper proposes to strengthen retail client protections and enhance stability and confidence within the superannuation and monetary companies sectors, predominantly by way of strengthening governance and capital holding necessities for registered MISs.
The Session Paper additionally considers measures akin to ready durations for superannuation switches and constraints on inappropriate recommendation‑associated charges.
In the end, the measures proposed within the Session Paper intention to stop hurt to retail customers stemming from poor governance practices, while sustaining investor confidence within the Australian monetary system.
In additional element
This comes after the collapse of two MISs, the Defend Grasp Fund (“Defend“) and the First Guardian Grasp Fund (“First Guardian“). Each Defend and First Guardian, and their alleged practices employed, have been the topic of ongoing investigations by the Australian Securities and Investments Fee (ASIC), and have intensified regulatory scrutiny and prompted consideration of reform choices.
The predominant regulatory situation is the governance and oversight of MISs. The Treasury observes that facets of the present framework might not adequately mitigate conflicts of curiosity or misconduct dangers and this has contributed to customers struggling losses. While all investments carry threat, the instances of Defend, First Guardian and different MIS collapses have been characterised by monetary misconduct, substantial governance shortcomings and conflicts of curiosity, slightly than merely unhealthy funding decisions.
The collapses of varied MISs, akin to Defend and First Guardian, have positioned elevated stress on the whole {industry}. This has positioned elevated stress on the industry-funded Compensation Scheme of Final Resort, which is now set to be reformed by the Authorities to make sure its long-term sustainability.
Enhancing MIS governance
Proposal 1: Improve the regulatory framework for compliance plans
Compliance Plan content material
The Treasury presents issues that present compliance plans comprise high-level content material which addresses minimal obligations, with out detailed procedures for making certain compliance. There may be at present no categorical statutory requirement for compliance plans to be scheme‑particular, past normal obligations of adequacy. The Treasury notes that this has, in some instances, resulted in using generic plans throughout a number of schemes, which can scale back their effectiveness.
The Treasury proposes introducing stricter compliance plan necessities, akin to extra detailed descriptions of the character of the scheme and its funding technique and outlining the administration technique of stricter dangers. Nonetheless, there’s a threat that this will likely make the framework much less versatile and improve regulatory burden throughout the {industry}.
One other proposal by the Treasury is to amend the legal responsibility framework to make sure legal responsibility attaches solely to materials contraventions of the compliance plan. The Treasury hopes that it will incentivise larger high quality plans.
Compliance Plan audit
Presently, compliance plans are required to be audited yearly by impartial, registered firm auditors, or audit companies. Nonetheless, in assessing whether or not the accountable entity has complied with the scheme’s compliance plan, auditors are usually not required to fulfill any minimal qualitative requirements beneath the Companies Act. The Treasury notes issues that this will likely contribute to compliance plan audits not offering the regulatory oversight anticipated. The Treasury has proposed that present audit and assurance requirements ought to be made obligatory for auditors of compliance plans.
Compliance committee
A compliance committee is required if lower than half of the administrators of a accountable entity are exterior administrators. The compliance committee assesses whether or not a compliance plan is enough, displays the accountable entity’s compliance with the compliance plan, stories any breaches to the accountable entity, and the place a accountable entity isn’t adequately coping with reported breaches, stories such issues to ASIC.
Whereas compliance committee members have duties to behave truthfully and train care and diligence, there aren’t any legislative necessities addressing the {qualifications} and expertise of compliance committee members. The Treasury has proposed that accountable entities ought to be required to inform ASIC of the appointment, elimination or resignation of committee members. The Treasury notes that it will help in supporting ASIC’s surveillance actions.
Proposal 2: Require majority of exterior administrators on accountable entity boards
The Treasury proposes requiring accountable entities of registered MISs to implement a majority of exterior administrators. The present choice of alternatively having a compliance committee can be eliminated. The Treasury considers that this will likely promote simpler oversight by way of impartial judgement and ‘indifferent’ supervision.
Proposal 3: Prohibit accountable entities of registered MISs from conducting associated social gathering transactions, with restricted exceptions
Associated social gathering transactions, akin to investing or lending to firms which might be managed by a member of the accountable entity’s board, or firms which might be associated our bodies company of the accountable entity, are at present permitted following member approval, or the place the profit offered to associated events is offered on an arms’ size foundation, or on phrases much less beneficial to the associated social gathering.
The Treasury has proposed to limit accountable entities of registered MISs from conducting associated social gathering transactions extra typically. The Treasury has acknowledged that restricted exceptions to such a associated social gathering transaction prohibition can be required in conditions the place there’s a official enterprise want for the associated social gathering transaction (akin to a retail scheme investing right into a wholesale fund run by the identical accountable entity) or the place the funding supervisor of an MIS is a associated social gathering of the accountable entity. The Treasury has not in any other case offered any detailed perception as to the scope or situations of any proposed exception.
Proposal 4: Amend the framework for setting monetary necessities for accountable entitles
The Companies Act prescribes sure necessities for Australian monetary companies licensees to carry enough sources, together with monetary sources. Presently, ASIC has imposed a minimal money requirement of AUD 150,000 and a minimal web tangible asset requirement of AUD 150,000 or AUD 10 million for accountable entities, pursuant to the ASIC Companies (Monetary Necessities for Accountable Entities, IDPS Operators and Company Administrators of Retail CCIVs) Instrument 2023/647 (Instrument 2023/647).
The Treasury is searching for suggestions on the framework beneath which ASIC units the related MIS monetary necessities and whether or not extra particular monetary useful resource necessities ought to be imposed on accountable entities, and if that’s the case, if this ought to be legislated, or imposed by means of regulation or ASIC’s powers. Separate to the session by Treasury, ASIC is anticipated to launch a session paper on capital necessities for accountable entities, IDPS operators and Administrators of Retail CCIVs in early 2026, together with potential will increase to NTA necessities.
Enhancing ASIC’s entry to MIS knowledge
Proposal 5: Enhance ASIC’s knowledge assortment powers on the retail MIS sector
The Treasury is of the view that ASIC’s means to carry out its regulatory position for the MIS sector is impacted by the restricted knowledge which is accessible in relation to the retail MIS sector. Particularly, ASIC is simply capable of accumulate recurrent knowledge on the retail MIS sector because the accountable entity holds most knowledge relating to the retail MIS.
The Treasury proposes to extend ASIC’s knowledge assortment powers on the retail MIS sector. The Treasury is hopeful that permitting entry to knowledge on flows into and out of MISs, alerts on sure forms of occasions and details about MIS sort and complaints knowledge, might allow extra environment friendly and efficient regulatory motion. Potential knowledge sharing between regulators might additionally scale back regulatory burden relating to the reporting of retail MISs, and streamline the general course of.
Enhancing ASIC’s visibility of superannuation switching
Proposal 6: Alerts to ASIC about superannuation switching
The Treasury notes that regulators take into account that the method of superannuation members transferring their present superannuation account from one fund to a different might permit superannuation trustees entry to knowledge from which they can determine suspicious or anomalous patterns of behaviour that could be indicators of misconduct.
The Treasury has proposed inserting an obligation on superannuation trustees to report back to ASIC any suspicious behaviours, which the trustee moderately considers might place their membership liable to important detriment.
Conclusion
The Treasury is accepting responses to the Session Paper till 27 February 2026 on how one can strengthen governance preparations and oversight by ASIC. It’s anticipated that ASIC might seek the advice of in early 2026 on potential adjustments to web tangible belongings requirement for accountable entities of MISs.
* * * * *
William Fuggle, Advisor, and Archit Dhillon, Affiliate, have contributed to this authorized replace.
Treasury consults on reforms to strengthen MIS governance and oversight.
Briefly
The Australian Treasury (“Treasury“) is consulting on proposals to reinforce the governance of registered managed funding schemes (MIS). Submissions shut on 27 February 2026. To supply a submission, consult with this website.
Key takeaways
On 10 February 2026, the Treasury launched the ‘Enhancing oversight and governance of managed funding schemes’ session paper (“Session Paper“). The Session Paper proposes to strengthen retail client protections and enhance stability and confidence within the superannuation and monetary companies sectors, predominantly by way of strengthening governance and capital holding necessities for registered MISs.
The Session Paper additionally considers measures akin to ready durations for superannuation switches and constraints on inappropriate recommendation‑associated charges.
In the end, the measures proposed within the Session Paper intention to stop hurt to retail customers stemming from poor governance practices, while sustaining investor confidence within the Australian monetary system.
In additional element
This comes after the collapse of two MISs, the Defend Grasp Fund (“Defend“) and the First Guardian Grasp Fund (“First Guardian“). Each Defend and First Guardian, and their alleged practices employed, have been the topic of ongoing investigations by the Australian Securities and Investments Fee (ASIC), and have intensified regulatory scrutiny and prompted consideration of reform choices.
The predominant regulatory situation is the governance and oversight of MISs. The Treasury observes that facets of the present framework might not adequately mitigate conflicts of curiosity or misconduct dangers and this has contributed to customers struggling losses. While all investments carry threat, the instances of Defend, First Guardian and different MIS collapses have been characterised by monetary misconduct, substantial governance shortcomings and conflicts of curiosity, slightly than merely unhealthy funding decisions.
The collapses of varied MISs, akin to Defend and First Guardian, have positioned elevated stress on the whole {industry}. This has positioned elevated stress on the industry-funded Compensation Scheme of Final Resort, which is now set to be reformed by the Authorities to make sure its long-term sustainability.
Enhancing MIS governance
Proposal 1: Improve the regulatory framework for compliance plans
Compliance Plan content material
The Treasury presents issues that present compliance plans comprise high-level content material which addresses minimal obligations, with out detailed procedures for making certain compliance. There may be at present no categorical statutory requirement for compliance plans to be scheme‑particular, past normal obligations of adequacy. The Treasury notes that this has, in some instances, resulted in using generic plans throughout a number of schemes, which can scale back their effectiveness.
The Treasury proposes introducing stricter compliance plan necessities, akin to extra detailed descriptions of the character of the scheme and its funding technique and outlining the administration technique of stricter dangers. Nonetheless, there’s a threat that this will likely make the framework much less versatile and improve regulatory burden throughout the {industry}.
One other proposal by the Treasury is to amend the legal responsibility framework to make sure legal responsibility attaches solely to materials contraventions of the compliance plan. The Treasury hopes that it will incentivise larger high quality plans.
Compliance Plan audit
Presently, compliance plans are required to be audited yearly by impartial, registered firm auditors, or audit companies. Nonetheless, in assessing whether or not the accountable entity has complied with the scheme’s compliance plan, auditors are usually not required to fulfill any minimal qualitative requirements beneath the Companies Act. The Treasury notes issues that this will likely contribute to compliance plan audits not offering the regulatory oversight anticipated. The Treasury has proposed that present audit and assurance requirements ought to be made obligatory for auditors of compliance plans.
Compliance committee
A compliance committee is required if lower than half of the administrators of a accountable entity are exterior administrators. The compliance committee assesses whether or not a compliance plan is enough, displays the accountable entity’s compliance with the compliance plan, stories any breaches to the accountable entity, and the place a accountable entity isn’t adequately coping with reported breaches, stories such issues to ASIC.
Whereas compliance committee members have duties to behave truthfully and train care and diligence, there aren’t any legislative necessities addressing the {qualifications} and expertise of compliance committee members. The Treasury has proposed that accountable entities ought to be required to inform ASIC of the appointment, elimination or resignation of committee members. The Treasury notes that it will help in supporting ASIC’s surveillance actions.
Proposal 2: Require majority of exterior administrators on accountable entity boards
The Treasury proposes requiring accountable entities of registered MISs to implement a majority of exterior administrators. The present choice of alternatively having a compliance committee can be eliminated. The Treasury considers that this will likely promote simpler oversight by way of impartial judgement and ‘indifferent’ supervision.
Proposal 3: Prohibit accountable entities of registered MISs from conducting associated social gathering transactions, with restricted exceptions
Associated social gathering transactions, akin to investing or lending to firms which might be managed by a member of the accountable entity’s board, or firms which might be associated our bodies company of the accountable entity, are at present permitted following member approval, or the place the profit offered to associated events is offered on an arms’ size foundation, or on phrases much less beneficial to the associated social gathering.
The Treasury has proposed to limit accountable entities of registered MISs from conducting associated social gathering transactions extra typically. The Treasury has acknowledged that restricted exceptions to such a associated social gathering transaction prohibition can be required in conditions the place there’s a official enterprise want for the associated social gathering transaction (akin to a retail scheme investing right into a wholesale fund run by the identical accountable entity) or the place the funding supervisor of an MIS is a associated social gathering of the accountable entity. The Treasury has not in any other case offered any detailed perception as to the scope or situations of any proposed exception.
Proposal 4: Amend the framework for setting monetary necessities for accountable entitles
The Companies Act prescribes sure necessities for Australian monetary companies licensees to carry enough sources, together with monetary sources. Presently, ASIC has imposed a minimal money requirement of AUD 150,000 and a minimal web tangible asset requirement of AUD 150,000 or AUD 10 million for accountable entities, pursuant to the ASIC Companies (Monetary Necessities for Accountable Entities, IDPS Operators and Company Administrators of Retail CCIVs) Instrument 2023/647 (Instrument 2023/647).
The Treasury is searching for suggestions on the framework beneath which ASIC units the related MIS monetary necessities and whether or not extra particular monetary useful resource necessities ought to be imposed on accountable entities, and if that’s the case, if this ought to be legislated, or imposed by means of regulation or ASIC’s powers. Separate to the session by Treasury, ASIC is anticipated to launch a session paper on capital necessities for accountable entities, IDPS operators and Administrators of Retail CCIVs in early 2026, together with potential will increase to NTA necessities.
Enhancing ASIC’s entry to MIS knowledge
Proposal 5: Enhance ASIC’s knowledge assortment powers on the retail MIS sector
The Treasury is of the view that ASIC’s means to carry out its regulatory position for the MIS sector is impacted by the restricted knowledge which is accessible in relation to the retail MIS sector. Particularly, ASIC is simply capable of accumulate recurrent knowledge on the retail MIS sector because the accountable entity holds most knowledge relating to the retail MIS.
The Treasury proposes to extend ASIC’s knowledge assortment powers on the retail MIS sector. The Treasury is hopeful that permitting entry to knowledge on flows into and out of MISs, alerts on sure forms of occasions and details about MIS sort and complaints knowledge, might allow extra environment friendly and efficient regulatory motion. Potential knowledge sharing between regulators might additionally scale back regulatory burden relating to the reporting of retail MISs, and streamline the general course of.
Enhancing ASIC’s visibility of superannuation switching
Proposal 6: Alerts to ASIC about superannuation switching
The Treasury notes that regulators take into account that the method of superannuation members transferring their present superannuation account from one fund to a different might permit superannuation trustees entry to knowledge from which they can determine suspicious or anomalous patterns of behaviour that could be indicators of misconduct.
The Treasury has proposed inserting an obligation on superannuation trustees to report back to ASIC any suspicious behaviours, which the trustee moderately considers might place their membership liable to important detriment.
Conclusion
The Treasury is accepting responses to the Session Paper till 27 February 2026 on how one can strengthen governance preparations and oversight by ASIC. It’s anticipated that ASIC might seek the advice of in early 2026 on potential adjustments to web tangible belongings requirement for accountable entities of MISs.
* * * * *
William Fuggle, Advisor, and Archit Dhillon, Affiliate, have contributed to this authorized replace.
