To be registered as a managed investment scheme by ASIC, the responsible entity must adopt a compliance plan for the managed investment scheme. The compliance plan is usually overseen by a compliance committee.

An unregistered managed investment scheme is not required to, but may, have a compliance plan. The position is the same for the establishment of compliance committees for unregistered managed investment schemes.

The Corporations Act 2001 (Cth) prescribes certain matters which must be contained in a compliance plan for a registered scheme. The specified matters are reasonably extensive and there is a specific process to be followed when identifying the adequate measures to be implemented to ensure compliance with the Corporations Act 2001 (Cth) and the scheme's constitution. As such, when preparing a compliance plan, guidance should be sought from ASIC's regulatory guides. Care should be taken when drafting a compliance plan because the failure to have a compliance plan which meets the statutory requirements may lead to ASIC's refusal to register the scheme, or subsequently a deregistration of the scheme by ASIC. Where a responsible entity operates more than one scheme, it may incorporate by reference appropriate provisions in other scheme compliance plans that the responsible entity operates.

See Contents of a compliance plan.

Before that scheme can be registered the compliance plan of a scheme is subject to an assessment by ASIC as to whether it complies with the Corporations Act 2001 (Cth). If the compliance plan does not comply with the requirements, ASIC may require modifications to that plan. After it has been accepted by ASIC, the responsible entity may modify, or repeal and replace the scheme's compliance plan at any time in accordance with the provisions in the scheme's constitution or compliance plan.

An auditor of the compliance plan must be engaged for a registered scheme. The auditor of the compliance plan is required to examine the plan and conduct an audit of the responsible entity's compliance with the plan. For the purposes of the audit, officers of the responsible entity must provide access, books, information, explanation and assistance as required by the auditor of the compliance plan.

See Modifications and audit of compliance plan.

If more than half of the directors of the responsible entity are external directors (ie directors who have a requisite degree of separation from the management of, and interests in, the responsible entity and any related bodies corporate) then a compliance committee need not be established. In that case, the board can manage the compliance. However, most registered schemes have a compliance committee, even when not required.

An unregistered scheme may choose to establish a compliance committee but it is not required to do so. However, if an unregistered scheme decides to establish a compliance committee, consideration should be given to the fact that there are various provisions in the Corporations Act 2001 (Cth) relating to compliance committees, which (unlike other provisions in the Corporations Act 2001 (Cth) relating to managed investment schemes) have not been expressed as being applicable only to registered schemes. It is not clear whether these provisions would apply in those circumstances to the unregistered scheme. As such, if an unregistered scheme adopts a compliance committee, care should be taken to ensure that these provisions are adopted as closely as possible.

Functions of a compliance committee include monitoring the responsible entity's compliance with the compliance plan and reporting breaches to the responsible entity and ASIC where necessary. In performing its functions, the compliance committee may obtain independent external advice. Such advice would be obtained at the reasonable expense of the responsible entity.

Members of a compliance committee are also required to observe various statutory obligations which are similar to those imposed on directors and officers of a company. Additionally, members are also required to disclose their interests in appropriate circumstances.

The majority of members of a compliance committee must be external members. These external members must have a requisite degree of separation from the management of, and interests in, the responsible entity.

See When a compliance committee is required and its membership.

See Responsibilities of compliance committee.

Practice Tip:

• ensure the responsible entity adopts a compliance plan;

• ensure the ASIC regulatory guides are followed when preparing a compliance plan;

• ensure the responsible entity engages an auditor for the compliance plan;

• establish a compliance committee (if necessary) ensuring that the majority of members are external members; and

• ensure compliance with the Corporations Act 2001 (Cth) provisions for the compliance committee.