Getting ready for the CCIV regime: ASIC offers unilateral AFSL variations to licensees to facilitate the transition

By Vince Battaglia, Harry New and Mona Sukkar

In the most recent development to ASIC’s implementation of the new Corporate Collective Investment Vehicle (CCIV) regime, ASIC has started sending out letters to certain existing AFS licensees offering an ‘opt in’ licence variation, without AFS licensees being required to submit a variation application and accompanying proofs or pay an application fee.

What are CCIVs?

A CCIV is a new type of company limited by shares, which has a single ‘corporate director’ that is a public company holding an AFSL authorising it to operate the business and conduct the affairs of the CCIV. The CCIV itself is an investment vehicle designed to enhance the competitiveness of Australia’s managed funds industry to attract offshore investment, as it draws on the features of other equivalent vehicles internationally.

While the CCIV regime incorporates some aspects of the existing regulatory framework for managed investment schemes, CCIVs will have a number of distinct features including the ability to operate ‘sub-funds’ and to segregate assets and liabilities between sub-funds.

The CCIV regime will commence on 1 July 2022.

What is ASIC’s offer?

As contemplated in Consultation Paper 360 Corporate collective investment vehicles: Preparing for the commencement of the new regime (CP 360), ASIC has – of its own volition – written to certain holders of AFSLs offering to amend their AFSL to add additional financial product authorisations relating to advising on and/or dealing in securities in a CCIV, without the need for the AFS licensee to apply for an AFSL variation or to pay the usual fee for the AFSL variation application. A number of our clients have received such letters.

Specifically, the letters were sent to AFS licensees (about which ASIC does not have any regulatory concerns) who are not currently authorised to provide advice on and/or deal in securities (noting that interests in a CCIV are securities) but which have authorisations to advise on and/or deal in interests in managed investment schemes, offering such licensees an opportunity to accept ASIC’s offer to have their AFSL unilaterally varied to include authorisations to advise on and/or deal in ‘securities in a CCIV’.

The amendment extends only to securities in a CCIV, and not securities of any body corporate, as ASIC states in CP 360 that it is not conducting assessments of the organisational competence of AFS licensees to support granting a broader ‘securities’ authorisation to the licensee as part of this process.

The proposed amendment will also reflect the AFS licensee’s current authorisations with respect to advising on and/or dealing in interests in managed investment schemes (assuming the AFS licensee ‘opts in’ to the offer). For example, the new financial product authorisations will extend to either only wholesale clients or both wholesale and retail clients depending on the licensee’s current AFSL authorisations. Further, an AFS licensee that is only authorised to advise on but not deal in interests in managed investment schemes will only have their AFSL varied to add an authorisation to advise on securities in a CCIV.

Importantly, the proposal does not extend to offering the key authorisation required of a corporate director to operate the business and conduct the affairs of a CCIV. Therefore, the proposed additional financial product authorisations themselves are not sufficient to permit an existing AFS licensee who received ASIC’s proposal to operate a CCIV.

As is evident in CP 360, the rationale behind the ASIC initiated AFSL variation lies in ASIC’s recognition that there are similarities between CCIVs and managed investment schemes, and that ASIC considers that AFS licensees authorised to provide financial product advice on and/or deal in managed investment schemes should be able to readily transition to the CCIV regime.

What happens if you accept the proposal?

Under the current letters of offer, the AFS licensee must accept the offer by 3 May 2022. If ASIC does not receive an acceptance or rejection of the proposal by that date, the proposal will lapse.

If the AFS licensee accepts the proposal, ASIC will, subject to ASIC not subsequently becoming aware of any regulatory concerns about the licensee, make the licensee an offer to an AFSL variation from mid-May to mid-June 2022, and where the AFS licensee consents to the offer, ASIC will grant the licensee a varied licence on or around 30 June 2022.

If an AFS licensee intends not to accept the proposal, and they wish to vary their AFSL in the future for authorisations to advise on and/or deal in securities in a CCIV, the AFS licensee will need to apply for a licence variation in the normal manner (including by providing supporting documentation) and pay the normal application fee.

Should you accept?

While it may be tempting to accept a ‘free’ offer to add authorisations to your AFSL, we recommend that you consider any potential flow-on effects before the May 3 deadline, including:

• any requirement to notify your insurer of a change to your AFSL authorisations, and any potential changes to your insurance premium as a result;
• ensuring that your representatives have the competency to provide the financial services covered by the additional authorisations (although our view is that, based on ASIC’s policy positions in CP 360 and the fact it is an offer initiated by ASIC, ASIC is likely to consider this to be the case);
• updating any Financial Services Guide on issue to include the additional AFSL authorisations; and
• potential additional levies in accordance with ASIC’s industry funding arrangements for having the authorisations on your AFSL (although we consider that, based on the current ASIC levy regime, a levy is more likely to be charged in relation to the authorisation to operate the business and conduct the affairs of a CCIV, as opposed to the authorisations to advise on and/or deal in securities in a CCIV).