AFSL for Managed Investment Scheme (MIS): Does it Need One & What Are Its AFSL Obligations?

Managed investment schemes (MISs) are used for structures ranging from property and mortgage funds to equity funds, agricultural schemes and exchange traded funds. However, the licensing requirements differ depending on whether the scheme is registered or unregistered, who its investors are and what financial services are being provided.

In this article, we explain when an MIS requires an Australian Financial Services Licence (AFSL), the authorisations its operator may need, and the key AFSL and responsible entity obligations involved in operating a managed investment scheme.

Interactive Tool: Check If Your Managed Investment Scheme Needs an AFSL

When Does a Managed Investment Scheme Need an AFSL?

Registered Managed Investment Schemes

For a registered MIS, Section 601FA of the Corporations Act 2001 (Cth) (‘Corporations Act’) requires its responsible entity to be a public company holding an AFSL authorising it to operate a managed investment scheme. Section 601FB(1) then makes the responsible entity responsible for operating the scheme and performing the functions imposed by the scheme constitution and the Corporations Act (Cth).

Strictly speaking, it is generally the responsible entity, trustee, or operator of the MIS, rather than the scheme itself, that holds the relevant AFSL. The licensing position also needs to be separated from the question of whether the MIS must be registered with ASIC.

When Must an MIS Be Registered?

Under Section 601ED of the Corporations Act (Cth), an MIS will generally need to be registered where it:

• has more than 20 members; or
• is promoted by a person who is in the business of promoting MIS,

subject to the exceptions in that section. A scheme may remain unregistered where, for example, all interests are issued only to wholesale clients in circumstances covered by Section 601ED(2).

This distinction is important because not needing registration does not necessarily mean not needing an AFSL.

Unregistered & Wholesale Managed Investment Schemes

Unregistered schemes are commonly used for wholesale investment funds.

ASIC’s INFO 251 states that a trustee issuing, varying or disposing of interests in an unregistered scheme will generally need an AFSL authorising it to deal in a financial product by issuing, varying or disposing of interests in an MIS. Other services connected with the scheme, such as custody, can require additional authorisations.

Specific licensing exemptions can apply in limited circumstances, including the authorised representative and intermediary authorisation exemptions in Sections 911A(2)(a) and 911A(2)(b) of the Corporations Act (Cth).

What AFSL Authorisations Does an MIS Operator Need?

Authorisation to Operate the Scheme

For registered schemes, ASIC identifies two broad forms of authorisation:

• an in-kind authorisation, which permits operation of registered schemes within a specified asset category; or
• a named-scheme authorisation, limited to a particular scheme.

ASIC currently identifies scheme categories including financial asset schemes, derivative schemes, mortgage schemes, direct real property schemes, listed property trusts, IDPS-like schemes and various primary production schemes. A scheme that does not fit an established category may require a tailored authorisation.

Additional Financial Service Authorisations

The responsible entity or trustee should also consider every other financial service provided through the structure. Depending on the model, additional AFSL authorisations may be required for:

• dealing in interests in the scheme;
• providing financial product advice;
• providing custodial or depository services; or
• other financial services involving the scheme’s underlying assets.

A proposed responsible entity should hold authorisations covering both operation of the scheme and other relevant financial services associated with it. This makes licence scoping particularly important where a fund changes asset classes, introduces new services or begins holding assets differently.

What Are the AFSL Obligations of an MIS Responsible Entity?

Provide Financial Services Efficiently, Honestly & Fairly

Section 912A(1)(a) of the Corporations Act (Cth) requires an AFSL holder to do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly.

The responsible entity must also comply with its AFSL conditions and applicable financial services laws under Sections 912A(1)(b) and (c). For an MIS operator, this obligation applies to the financial services business as a whole, including the way the scheme is operated and services are delivered to investors.

Manage Conflicts of Interest

Section 912A(1)(aa) of the Corporations Act (Cth) requires adequate arrangements for managing conflicts of interest.

Conflicts are particularly relevant to managed funds because the responsible entity may deal with related investment managers, custodians, service providers or other group entities.

In addition, Section 601FC(1)(c) of the Corporations Act (Cth) requires the responsible entity of a registered scheme to act in members’ best interests and give their interests priority where they conflict with the responsible entity’s own interests.

ASIC’s Regulatory Guide (RG) 181 further provides regulatory guidance on the broader AFSL conflicts obligation.

Maintain Adequate Resources & Organisational Competence

Sections 912A(1)(d) and (e) of the Corporations Act (Cth) require applicable AFSL holders to maintain adequate financial, technological and human resources and the competence necessary to provide their licensed financial services.

For a responsible entity, this includes ensuring that the business has sufficient expertise and operational capacity for the kinds of schemes covered by its licence.

A responsible entity moving from a relatively straightforward financial asset scheme into property, derivatives or another materially different asset class should therefore assess whether its licence authorisations, responsible managers and operational resources remain sufficient.

Meet Financial & NTA Requirements

Responsible entities of registered schemes must meet the applicable financial requirements under ASIC Corporations (Financial Requirements for Responsible Entities, IDPS Operators and Corporate Directors of Retail CCIVs) Instrument 2023/647 and ASIC’s RG 166. These include applicable net tangible asset (NTA), cash needs and audit requirements.

There is also an important upcoming change. On 30 July 2026, ASIC announced that it will increase the minimum NTA thresholds to reflect inflation and introduce annual indexation. The changes are scheduled to commence on 1 July 2027.

Responsible entities should therefore plan for the existing requirements while also assessing the effect of the 2027 increase on their capital position.

Maintain Adequate Risk Management Systems

Section 912A(1)(h) of the Corporations Act (Cth) requires applicable AFSL holders to maintain adequate risk management systems.

ASIC’s RG 259 provides specific regulatory guidance for fund operators and expects responsible entities to identify, assess and manage material risks at both the responsible entity and individual scheme level. ASIC identifies areas such as liquidity and cyber risk within that framework.

Report Reportable Situations

Section 912DAA of the Corporations Act (Cth) requires an AFSL holder to report specified reportable situations to ASIC where the statutory test is satisfied.

An MIS operator should therefore have systems for identifying whether operational failures, investor issues, valuation problems, disclosure failures or other compliance incidents may trigger the reportable situations regime.

What Additional Duties Apply to a Registered MIS?

Act in Members’ Best Interests

Section 601FC of the Corporations Act (Cth) imposes specific statutory duties on the responsible entity of a registered scheme.

These include requirements to:

• act honestly;
• exercise reasonable care and diligence;
• act in members’ best interests;
• give members’ interests priority over its own where they conflict;
• treat members of the same class equally and different classes fairly;
• ensure the constitution and compliance plan meet statutory requirements; and
• comply with the scheme’s compliance plan.

Contravention of Section 601FC(1) can engage the civil penalty provision in Section 601FC(5).

Properly Hold & Manage Scheme Property

Section 601FC(1)(i) of the Corporations Act (Cth) requires scheme property to be clearly identified and held separately from property belonging to the responsible entity or another scheme. Section 601FC(2) provides that the responsible entity holds scheme property on trust for members.

ASIC’s RG 133 separately provides regulatory guidance about asset-holding arrangements for responsible entities and licensed custody providers.

The responsible entity must also ensure scheme property is valued at intervals appropriate to the nature of the property and that payments from scheme property comply with the constitution and the Corporations Act (Cth): Sections 601FC(1)(j)–(k).

Maintain the Constitution & Compliance Plan

A registered MIS must have a constitution satisfying Sections 601GA and 601GB of the Corporations Act (Cth) and a compliance plan meeting Section 601HA as part of the scheme registration process.

Section 601HA requires the compliance plan to contain adequate measures for ensuring compliance with the of the Corporations Act (Cth) and scheme constitution, including arrangements dealing with scheme property, valuations, records and compliance-plan auditing.

Under Section 601HG of the Corporations Act (Cth), the responsible entity must ensure the compliance plan is audited. The audit must be completed and reported within three months after the end of the scheme’s financial year.

Meet Retail Disclosure & Distribution Requirements

Where interests are offered to retail clients, Chapter 7 can impose additional requirements.

ASIC identifies Product Disclosure Statement (PDS) obligations and the design and distribution obligations as key requirements applying to responsible entities of registered schemes.

Responsible entities providing financial services to retail clients must also maintain the applicable dispute resolution arrangements and compensation arrangements under Sections 912A and 912B of the Corporations Act (Cth).

Wholesale-only schemes may avoid some retail-specific obligations, but wholesale status does not by itself remove the underlying AFSL requirement.

Common AFSL Compliance Risks for MIS Operators

Assuming an Unregistered Scheme Does Not Need an AFSL

Registration and licensing are separate questions.

A wholesale scheme may be exempt from registration under Section 601ED of the Corporations Act (Cth) but its trustee may still require an AFSL to issue interests or provide other financial services.

Operating Outside Existing AFSL Authorisations

A responsible entity may already hold an AFSL but introduce a scheme involving an asset class or service not covered by its existing licence.

Replacement responsible entities can likewise need to vary their licences where an existing authorisation does not cover the relevant scheme or asset kind.

Treating Outsourcing as a Transfer of Responsibility

Responsible entities commonly use investment managers, custodians, administrators, and other external providers.

Outsourcing operational functions does not remove the responsible entity’s statutory obligations to operate the scheme consistently with its AFSL, the Corporations Act (Cth), the constitution, and the compliance plan.

Weak Conflicts, Valuation or Liquidity Controls

Conflicts, scheme-property valuations and risk management sit at the centre of a responsible entity’s statutory responsibilities. Sections 601FC and 912A of the Corporations Act (Cth) require these issues to be actively managed rather than dealt with only through disclosure.

When Should an MIS Operator Review Its AFSL Position?

An MIS operator should consider reviewing its licence and compliance framework when it:

• launches a new managed fund;
• moves from wholesale to retail investors;
• changes the scheme’s underlying asset class;
• begins providing additional advice, dealing or custody services;
• appoints or changes material service providers;
• materially changes how scheme property is held;
• identifies new liquidity, valuation or operational risks;
• becomes responsible entity of an existing scheme; or
• prepares for the increased NTA requirements commencing on 1 July 2027.

A review before the change takes effect can identify whether an AFSL variation, additional financial resources or changes to scheme documentation and compliance systems are required, and whether AFSL compliance services for MIS operators would assist.

Conclusion

For a registered MIS, Section 601FA of the Corporations Act (Cth) requires the responsible entity to be a public company holding an AFSL authorising it to operate the scheme. Unregistered wholesale schemes can also require their trustees to hold appropriate AFSL authorisations. Once licensed, the operator must manage both its Chapter 7 AFSL obligations and, for registered schemes, the additional Chapter 5C responsible entity duties.

Contact Click Legal for AFSL compliance services for fund managers and MIS operators to assess scheme registration and AFSL requirements, scope licence authorisations, review responsible entity structures and develop compliance arrangements aligned with their obligations under the Corporations Act (Cth).

Frequently Asked Questions