What ASIC’s consultation on NTA requirements means for fund managers
ASIC's focus on the 'gatekeepers' to the financial services industry continues to sharpen. Following landmark enforcement actions against superannuation trustees, the regulator has now turned its attention to the financial requirements of responsible entities (REs) of registered managed investment schemes.
On 18 March 2026, ASIC released Consultation Paper 388 (CP 388), which consults on options to potentially increase the net tangible assets (NTA) requirement that applies to REs and other fund operators. We explore what CP 388 proposes, what it means for existing REs and what you should be doing now.
Need to know
- ASIC is consulting on potentially significant increases to the NTA requirement for REs.
- Three options are on the table:
- a CPI-linked increase to all financial thresholds from 2013;
- an increase to the $150,000 concessional minimum; and
- an increase to the $5 million cap on the average value of fund assets limb of the concessional NTA requirement.
- ASIC is questioning whether the concessional NTA requirement – which allows REs using an external custodian to hold significantly less capital – remains appropriate.
- Any changes adopted for REs would be extended to investor directed portfolio service (IDPS) operators and corporate directors of retail corporate collective investment vehicles (CCIVs) to maintain regulatory parity.
- If ASIC adopts any of the proposals covered in CP 388, it proposes a transition period of six months. With submissions on the consultation paper closing on 17 April 2026 and ASIC's final position expected by 31 July 2026, the window for both engagement and preparation is narrow.
Why now?
ASIC has produced CP 388 following the recent scheme collapses of First Guardian and Shield, which exposed deficiencies in the financial resilience of certain REs. ASIC makes clear in the consultation paper that REs must be entities of substance, capable of meeting their obligations and facilitating orderly transitions when things go wrong.
The NTA requirement is one of the key mechanisms through which ASIC seeks to achieve this. Its established objectives are to:
- ensure an RE has adequate financial resources to meet operating costs;
- align the RE's interests with those of scheme members by requiring it to maintain sufficient equity in the business;
- provide a financial buffer for orderly transition or wind-up if the RE fails; and
- impose a liquidity component so the RE can meet immediate and unexpected expenses.
However, the financial thresholds underpinning these objectives have not been updated since 2013. ASIC believes now is the time to ensure the policy intention of the requirement continues to be upheld.
The current NTA framework
Before examining the proposed changes, it is worth recapping the existing framework. An RE that does not qualify for any exception must comply with the non-concessional NTA requirement, which requires it to hold NTA of the greater of $10 million or 10 per cent of average revenue. Where an exception applies – broadly, where the fund assets are held by an external custodian meeting certain financial standards, or where the fund holds specified asset types – the RE may instead rely on the concessional NTA requirement, which requires NTA of the greater of $150,000, 0.5 per cent of the average value of fund assets (capped at $5 million), or 10 per cent of average revenue. In both cases, a liquidity component requires at least 50 per cent of the NTA requirement to be held in cash or cash equivalents (with a minimum of $150,000) and 100 per cent in liquid assets.
What is ASIC proposing?
CP 388 sets out three options, which may be adopted individually or in combination.
Option 1 – CPI-linked increase across all thresholds.
Under this option, ASIC would adjust all financial thresholds in the NTA requirement to reflect cumulative CPI growth since 2013. In approximate terms, this would raise the $150,000 minimum to $200,000, the $500,000 minimum (for Tier $500,000 class assets) to $700,000, the $5 million cap to $6.9 million, and the $10 million non-concessional minimum to $13.8 million. ASIC's rationale is straightforward: the thresholds have not changed since 2013 and should be restored to their real value. ASIC is also seeking feedback on whether it would be appropriate to introduce an ongoing indexation mechanism, such as a periodic CPI adjustment, so the thresholds do not become stale again.
Option 2 – Increase the $150,000 concessional minimum.
This option targets the floor of the concessional NTA requirement. ASIC proposes either raising the $150,000 minimum to a fixed amount of up to $1 million or applying the $150,000 minimum on a per-scheme basis so that an RE operating multiple schemes would need to hold $150,000 for each scheme. The per-scheme approach recognises that operating multiple schemes generates additional operating costs and risks, and that a flat $150,000 floor may be insufficient to facilitate the orderly wind-up of all schemes if the RE fails. ASIC notes that international comparators support a higher minimum – for instance, fund managers of collective investment schemes offered to non-accredited investors in Singapore must hold approximately AU$1.2 million in minimum capital.
Option 3 – Increase the $5 million cap on the fund assets limb.
The $5 million cap on the average value of fund assets limb of the concessional NTA requirement has been in place since 2002. ASIC has previously acknowledged that this cap may be inadequate, on the basis that operational risk does not cease to grow once a certain threshold of funds under management is reached. While the average revenue limb of the NTA calculation is uncapped, the fund assets limb has remained capped, and ASIC considers it may be appropriate to increase this cap to ensure REs with significant funds under management hold adequate NTA.
Is the concessional NTA requirement still fit for purpose?
Beyond the three options above, ASIC is querying whether it remains appropriate for REs to be subject to a concessional NTA requirement when they use a custodian. The original rationale for the concession was to ensure the person holding the client assets is an entity of substance, and to recognise that the RE's own financial substance was less critical where a qualified custodian held the assets. However, ASIC now observes that the overarching purposes of the NTA requirement extends beyond ensuring there is sufficient money available to transition assets to a new custodian – they include ensuring the RE itself has adequate resources to meet operating costs and is an entity of substance.
This is a significant signal. If ASIC moves to narrow or remove the concessional NTA requirement, the impact on the industry would be substantial. REs that currently rely on the concession to hold as little as $150,000 in NTA could find themselves subject to the non-concessional requirement of $10 million (or more, if the thresholds are also increased under Option 1). While ASIC has not made a formal proposal to remove the concession, it is clearly testing the waters.
The liquidity component and transition period
ASIC is also seeking feedback on whether the cash or cash equivalents and liquid assets requirements remain appropriate. If ASIC adopts Option 1, for example, it is asking whether the $150,000 cash minimum should also be increased to reflect CPI growth. Similarly, if Options 2 or 3 are adopted, ASIC wants to know whether consequential changes to the liquidity component are warranted.
If any proposals are adopted, ASIC proposes a transition period of six months. ASIC acknowledges that, depending on the proposal(s) adopted, some REs may need to hold a significantly higher level of NTA, and that a transition period would be necessary and appropriate. Six months is not a generous lead-time, particularly for REs that would need to raise substantial additional capital.
Extension to IDPS operators and corporate directors of retail CCIVs
REs, IDPS operators and corporate directors of retail CCIVs perform functionally similar roles as operators of retail collective investment schemes, and ASIC has traditionally imposed equivalent NTA requirements on all three categories. Consistent with this approach, ASIC proposes to apply any changes to the NTA requirement for REs, including changes to the liquidity component and the concessional NTA requirement, to IDPS operators and corporate directors of retail CCIVs as well.
Implications for existing REs – what you should be doing now
The potential impact of these proposals should not be underestimated.
For existing REs, the time to act is now. You should assess your current NTA position by determining which requirement – concessional or non-concessional – currently applies and modelling the capital impact of each of the three options. If you rely on the concessional NTA requirement by virtue of using a custodian, you should seriously consider the risk that this concession may be narrowed or abolished. You should also quantify the downstream effects on your business, including any potential increases to fees charged to scheme members.
Given the short consultation window, engagement with ASIC's process is important. ASIC has specifically asked for quantitative and qualitative data on compliance costs, competition impacts and other costs and benefits. This information will help ASIC develop its policy on the appropriate NTA requirements for REs. Submissions close on 17 April 2026.
With ASIC's final position expected by 31 July 2026 and a proposed transition period of only six months, REs that may be affected should not wait for the final outcome before ‘war-gaming’ some potential outcomes. Coupled with Treasury's parallel review of governance and financial requirements for REs, the regulatory landscape for fund operators is shifting rapidly. Proactive engagement and early preparation will be critical to navigating what lies ahead.
Reach out to the HW Funds team who can help with navigating ASIC’s consultation process, provide tailored advice on the potential requirements, and support REs through the transition.
