ASIC proposes increased regulation of wholesale funds

On 5 November 2025, ASIC released REP 823 which summaries the feedback received from stakeholders in response to ASIC's February discussion paper Australia's evolving capital markets: A discussion paper on the dynamics between public and private markets.

In addition to the stakeholder feedback, the Report provides commentary on ASIC's proposed regulatory reform for private markets. The report has a significant focus on the lack of regulation of wholesale managed investment schemes, calling out Australia's lack of regulation in this space as being an outlier compared to jurisdictions such as Singapore, the UK, USA and Europe.

In this article, we review ASIC's recommended reforms which would have a material impact on how wholesale fund managers operate.

ASIC is once again pushing for changes to the test for classification as a 'wholesale client' under the Corporations Act, to raise the bar on who can be considered wholesale.

ASIC proposes the same changes in response to Treasury's 2023 review of the managed investment scheme framework, and 2024 Inquiry by the Parliamentary Joint Committee on Corporations and Financial Services. Under ASIC's proposed changes for the financial thresholds:

• the 'gross income test' would increase from $250,000 per annum in the last two financial years to $450,000 for the same period;
• the 'assets test' would increase from $2.5 million to approximately $4.5 million; and
• the 'product value' test, being the threshold price for securities that deems a person to be 'sophisticated', would increase from $500,000 to approximately $900,000.

In addition, the thresholds would be adjusted on an annual basis to reflect inflation, to prevent another situation where over 20 years of inflation hits at once.

ASIC has recommended extending the requirements for retail registered schemes to prepare, have audited and lodge annual financial reports to wholesale funds.

There is currently no statutory requirement for wholesale funds to prepare financial reports or have them audited (regardless of how large the wholesale fund may become on a funds under management (FUM) or number of investors basis). While many fund managers need to have fund accounts reviewed and signed off by an auditor, this would generally not be a Corporations Act compliant set of financial statements, unless required by particular investors. Imposing these requirements would increase compliance costs, and for managers with multiple wholesale funds this could consume significant finance team resources for extended periods. ASIC’s primary concern driving this proposal is the accuracy of valuations and the dependency of the market on what can currently be unaudited asset values. 

ASIC has proposed that wholesale fund operators be required to notify ASIC of the wholesale funds they have in operation.

While the notification requirement proposed is not akin to registration for retail funds, the policy objective to expediate ASIC's supervisory work by ensuring it already has access to fundamental information about wholesale managers and their funds suggests certain product features (including asset class) and potentially documentation (such as constituent documents) would need to be provided. It is not clear whether this information would be publicly available. However, if registration requirements for wholesale corporate collective investment vehicles (CCIVs) are indicative of what may be proposed, it would be.

In addition, ASIC has put forward the following as requiring ‘serious consideration’ and engagement with government:

Statutory duties for wholesale fund operators

ASIC has proposed extending the statutory duties applicable to the REs of registered schemes to wholesale fund managers.

Significant duties are already imposed on wholesale fund managers under general law and the Australian financial services licensing regime, for example through the conflicts of interest, client best interest and ‘efficiently, honestly and fairly’ obligations. Extending these statutory obligations to apply to wholesale schemes would be much more onerous and would expose not only the fund manager, but also its directors, officers and employees to additional statutory liability. 

Potentially, the most problematic of such duties would be the requirement to treat investors of the same class equally and of different classes fairly.  This obligation, which currently only applies to retail funds, imposes significant restrictions on the way managers can operate their products, raise capital, charge fees and offer liquidity. It would impose a significant burden on the operation of wholesale funds and take away much of the flexibility currently afforded those structures.

‘Significant event notice’ regime

ASIC has suggested fund managers be required to notify ASIC and investors of ‘significant events’ that occur in respect of wholesale funds.  ASIC has specifically called out the suspension of redemptions as a key significant event this would target. 

The significant events notification regime that currently applies to retail funds requires the RE to issue a ‘significant event notice’ to investors if there is any material change to a matter or a significant event that affects a matter, if it would have been required to be disclosed in a product disclosure statement for the fund hypothetically prepared on the day before the change or event occurs.  This currently only requires investors to be given a notice, but ASIC has proposed it also receive these notices from retail funds as part of the reforms. The obligation applies to all registered schemes and operates in addition to the continuous disclosure regime that only applies to ‘disclosing entities’. Imposing an equivalent obligation for wholesale funds would be problematic in circumstances where there are no prescribed disclosure or content requirements for disclosure documents issued for wholesale funds.  While there are general law and statutory prohibitions on misleading and deceptive conduct, and industry standards as to the content and form of wholesale fund disclosure documents, these are not prescriptive, and wholesale managers currently have significantly flexibility to tailor any disclosure documents to the sophistication of the target capital.