Major overhaul on the horizon for managed investment schemes. Read our latest insights



Financial Services Thinking - Issue 36

Read the latest edition of Financial Services Thinking where you’ll find a ‘hot tip’ about the new internal dispute resolution reporting requirements as well as all the latest news from the corporate regulators.


ASIC issues first DDO stop order for failure to take reasonable steps  

ASIC has announced its first interim stop order for contravention of the reasonable steps obligations regarding a financial product since the design and distribution obligations (DDO) took effect in October 2021.  ASIC issued the order against Mitrade Global (Mitrade) as it was concerned Mitrade was relying on a retail investor questionnaire with significant flaws as a key step for compliance with its obligations. Under DDO, issuers of financial products must take reasonable steps that will, or are reasonably likely to, result in distribution conduct to retail investors consistent with the product’s target market determination. [Postscript: ASIC subsequently revoked the stop order against Mitrade on 26 July 2023]

We offer a full spectrum of DDO services, from advice on documents you prepare to a comprehensive in-house review of the implementation of DDO into the operations of your business.

We have prepared this DDO Health Check to help you assess your target market determinations and product governance arrangements against ASIC’s current view of DDO good practice.

Contact Sean McMahonJeunesse Meldrum, or a member of our Funds Management team to understand what you need to do next.

Product providers urged to meet obligations for dealing with incoming money

ASIC is urging superannuation trustees to ensure they meet their legal obligations for dealing with incoming money from consumers if a new or increased interest in a super product cannot be issued by the next business day.  It is important to be aware that the requirements under section 1017E of the Corporations Act also apply to product providers who issue interests in a managed investment scheme. 

Under section 1017E, product providers which receive money to acquire or increase an interest in a financial product and do not immediately do so must hold application money in a trust account which meets certain requirements until—

  • the product is issued or increased for the consumer
  • the money is returned, or
  • the money is paid to ASIC as lost application money.

The money must be returned or the product issued before the end of one month starting on the day on which the money was received, unless it is not reasonably practicable to do so, in which case a longer period that is reasonable in the circumstances will apply.

There are also specific disclosure obligations that apply to interest earned on money while it is subject to section 1017E.

The announcement by ASIC follows a review of a sample of 12 superannuation trustees to understand how they met requirements for dealing with money received for a financial product.  ASIC noted all but one trustee failed to ensure their practices aligned with their obligations.  ASIC identified four main issues among the trustees:

  1. Using a non-compliant account to hold money.
  2. Not holding money for the required time.
  3. Failure to identify money subject to the requirement of section 1017E.
  4. Inadequate disclosures to consumers.

If you have any questions about your compliance obligations or need assistance to review your current practices, please contact a member of our Funds Management team.

Remaking sunsetting class orders on unit pricing discretions for MIS

ASIC proposes to remake the following managed investment scheme unit pricing class orders which are due to sunset on 1 October 2023:

  • [CO 13/655] – provisions about the amount of consideration to acquire interests and withdrawal amounts not covered by ASIC Corporations (Managed investment product consideration) Instrument 2015/84, and
  • [CO 13/657] – discretions affecting the amount of consideration to acquire interests and withdrawal amounts.

ASIC believes the class orders are operating effectively and, subject to feedback, intends to issue the new legislative instrument as drafted.

ASIC invites Australian entities to assess their cyber resilience

ASIC-regulated entities are invited to take part in the cyber pulse survey to measure cyber resilience in Australia’s corporate and financial markets. It will measure entities’ current cyber security and controls, governance arrangements, and incident preparedness.

Participation in the survey is voluntary and can be accessed via the ASIC Regulatory Portal. If you need help with your cyber security protocols, then please contact our Funds Management team.


Proposed reforms to AML/CTF regime

The first round of consultation on proposed reforms to the current anti-money laundering and counter-terrorism financing (AML/CTF) regime has drawn to a close. The consultation sought feedback on proposed changes affecting current reporting entities as well as certain higher-risk professions. These reforms aim to—

  • simplify and modernise the regime in line with international standards and best practice
  • reduce complexity and regulatory burden on industry
  • ensure the regime remains fit-for-purpose
  • harden Australian businesses and sectors against exploitation by serious organised criminals.

Are you meeting your AML/CTF obligations? Reach out to a member of our Funds Management team to understand more about AML/CTF compliance and how we can help.


APRA takes action against Medibank over cyber incident

APRA announced it took action against Medibank Private following its review of the major cyber incident in October 2022.  

Following APRA’s examination of the matters relating to the incident, APRA will impose an increase in Medibank’s capital adequacy requirement of $250 million, reflecting weaknesses identified in Medibank’s information security environment. It will remain in place until an agreed remediation program of work is completed by Medibank to APRA’s satisfaction. APRA will also conduct a targeted technology review of Medibank, with a particular focus on governance and risk culture.   

Where appropriate, APRA will take further action to ensure entities address gaps and weakness in controls.


Review of the ASIC Industry Funding Model

On 26 June 2023, the Albanese government released the Final Report on the Review of the ASIC Industry Funding Model (IFM). The review was led by Treasury in consultation with ASIC, the Department of Finance, and the Department of the Prime Minister and Cabinet to ensure the ASIC IFM settings remain appropriate in the long term.

Key recommendations directed to ASIC include:

  • Delegating the power to set fees to ASIC to ensure fee amounts continue to reflect full cost recovery.
  • ASIC to enhance its reporting, transparency and consultation arrangement on the IFM.
  • Further consultation to ensure sub-sector definitions, metrics, and formulas used to calculate levies remain fit for purpose.
  • Spreading the costs of some regulatory activities (taking action against unlicenced operators, regulating emerging sectors, and capital expenditure) either across a wider population or over time to recognise the wider benefits of those activities.

In total, the Review makes 10 recommendations. The Review found that the settings of the ASIC IFM remain broadly appropriate but refinements can be made within the existing framework to improve the way regulatory costs are recovered and to communicate IFM settings to industry more effectively.


Do you meet the new internal dispute resolution reporting requirements?

Legislative changes introduced in response to the Ramsay Review 2017 have significantly reshaped the AFS dispute resolution framework, including higher standards for financial firms dealing with consumer and small business complaints under their internal dispute resolution (IDR) procedures. The enhanced standards include a mandatory and ongoing IDR data reporting obligation for ‘in-scope’ financial firms.

All AFS licensees who provide financial services to retail clients and all Australian credit licensees are ‘in-scope’ and must lodge an IDR compliant report to ASIC every six months (regardless of any IDR complaints or not). The relevant reporting timeframes are:

  • Tranche 2––the 262 firms listed under Schedule 1 of ASIC Instrument 2022/25 as amended by ASIC Instrument 2023/282.

Second tranche firms will first report in the submission window from 1 July to 31 August 2023, covering the six-month reporting period 1 January to 30 June 2023.

  • Tranche 3––all other firms in scope for IDR data reporting to ASIC (estimated to be roughly 8,600 firms).

Third tranche firms will first report in the submission window from 1 January to 29 February 2024, covering the six-month reporting period 1 July to 31 December 2023.

IDR compliant reports have very stringent requirements.  Contact our Funds Management team for help with your lodgements.



Emma Donaghue

Emma Donaghue


Elliott Stumm

Elliott Stumm


Contact McMahon Clarke

T +61 7 3239 2900
A Level 7, 100 Creek Street, Brisbane Qld 4000