Treasury puts MIS governance under the microscope
The high-profile collapses of Shield Master Fund and First Guardian Master Fund have shone a spotlight on the governance and regulatory framework around managed investment schemes (MISs). In response, Treasury released a consultation paper earlier this week outlining six key reform proposals:
- Strengthen the regulatory framework for compliance.
- Require a majority of external directors on the boards of responsible entities.
- Prohibit responsible entities (REs) of registered MISs from conducting related party transactions (with limited exceptions).
- Amend the framework for setting financial requirements for REs.
- Increase ASIC’s data collection powers on the retail MIS sector.
- Alerts to ASIC about superannuation switching.
The proposals aim to prevent harm stemming from poor governance practices, and bolster consumer confidence in the superannuation and financial services sector generally.
Key issues at a glance
Here is a brief summary of the proposals and the key issues and outcomes for each:
| Proposal | What does it do? | Key issues identified | Intended outcome |
|---|---|---|---|
| 1. Enhance the regulatory framework for compliance | Introduces stricter compliance plan content requirements; limits liability to material breaches; makes audit standards mandatory; requires ASIC notification of compliance committee member changes. | Widespread deficiencies in compliance plans, generic content, inadequate audits, poor oversight of compliance committees. | Improve scheme‑level governance, ensure compliance plans reflect actual risks, strengthen assurance and regulatory visibility. |
| 2. Require majority external directors on RE boards | Mandates that RE boards must have a majority of external directors; removes ability to rely on an external compliance committee instead. | Conflicts of interest, insufficient independent oversight, inconsistent governance standards across the sector. | Strengthened independence in decision‑making, improved investor protection, reduced governance failures. |
| 3. Prohibit related party transactions (with limited exceptions) | Prevents REs from entering related party transactions unless they fall within limited permitted categories (to be defined). | Misconduct in schemes like Shield, First Guardian, Avestra, and Endeavour –non‑arm’s length transactions harming investors. | Minimise conflicts of interest; ensure investment decisions serve members’ best interests; improve integrity of scheme operations. |
| 4. Amend framework for setting financial requirements for REs | Considers whether more specific capital or resource requirements should be legislated instead of set solely by ASIC; explores risk‑sensitive requirements. | Current net tangible assets requirements may not ensure operational resilience; reliance on ASIC instruments may lack transparency and consistency. | Ensure REs have adequate financial strength to manage risks, support orderly transitions or wind‑ups, and better align interests with members. |
| 5. Increase ASIC’s data collection powers on retail MIS sector | Introduces recurrent reporting and event‑based alerts to give ASIC deeper, scheme level visibility over MIS operations. | Data gaps, fragmented reporting, limited visibility over scheme level risks, delayed detection of misconduct. | Earlier identification of risks, improved supervision, reduced duplication across regulators, enhanced transparency. |
| 6. Alerts to ASIC about superannuation switching | Imposes obligation on superannuation trustees to report suspicious switching patterns that may signal misconduct. | High‑risk switching linked to adviser misconduct, lead generation, and schemes like Shield and First Guardian; current reporting thresholds too high to capture early warnings. | Earlier detection of harmful switching behaviours, enhanced consumer protection, stronger governance in superannuation. |
Next steps
The discussion paper sets out some questions for consideration, with the closing date for submissions being 27 February 2026.
We are taking a close look at each of the items and preparing our view on each which we will share with you in the coming weeks.
If you have any questions or would like to discuss how this may impact your business, please reach out to a member of HW Funds, Hall & Wilcox’s investments funds team.
This article was prepared with the assistance of Law Graduate Patrick McMullin.
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