On Wednesday, the Albanese government announced it would ask Treasury to review the managed investment schemes (MIS) regulatory framework.
Minister for Financial Services Stephen Jones said the review would help ensure there are strong investor protections across the financial sector.
“The regulatory framework for MIS was introduced more than twenty years ago, since that point we’ve seen a number of significant scheme failures, including the Sterling Income Trust, Trio Capital and Timbercorp,” Mr Jones stated.
The review will examine whether the regulatory framework is fit for purpose, will identify potential gaps, and consider what enhancements can be made to reduce undue financial risk for investors. It will consider reform options, focusing on:
- Whether the thresholds that determine whether an investor is a retail or wholesale client remain appropriate.
- Whether certain MIS investments should be able to be marketed and sold to retail investors.
- The various roles and obligations of responsible entities and whether the governance, compliance and risk management frameworks for MIS are appropriate.
- Interactions between Commonwealth and State laws when regulating real estate investments by MIS (including issues arising in relation to the failure of the Sterling Income Trust).
The SMSF Association has welcomed the announcement and plans to make a submission.
SMSF Association chief executive Peter Burgess noted that over the years, SMSF members have lost millions of dollars via failed managed investment schemes.
“Any review and subsequent recommendations that strengthen investor protections must be a positive not only for SMSFs but the entire superannuation sector,” said Mr Burgess.
“Certainly, we believe it’s appropriate for the review to consider reform options surrounding wholesale investor thresholds and whether certain MIS should be permitted to be marketed to retail clients.”
Some of the other issues the association would like to see addressed in the review, he stated, are an examination of the classes and types of management investment schemes and where applicable, consider changes to the regulation of certain classes of MIS, and the regulatory framework, including the approval of product disclosure statements.
“The gaps between State and Commonwealth regulations, including those identified in the Sterling Income Trust Inquiry, also need to go under the microscope,” he added.
The Association is encouraging the government to reconsider the review’s terms of reference and allow the review to consider whether MIS should be included in a compensation scheme of last resort for retail investors.
Treasury will release a public consultation paper by mid-2023 and consult with industry before reporting its findings to the government by early 2024.
