CCIVs and AFSLs

CCIVs and AFSLs. Corporate Collective Investment Vehicles & Australian Financial Services Licenses

What are the AFSL requirements for operating a CCIV?

• Financial services may be provided by the corporate director or the CCIV itself (being a legal entity).
• A Corporate Director will be required to hold an AFSL. This combination authorises the Corporate Director to ‘operate the business and also conduct the affairs of a CCIV’. This is irrespective of whether or not the corporate director will be operating either a retail or wholesale CCIV. Any Financial services which are provided by the CCIV are covered by the corporate director’s AFSL and thus, the CCIV is exempt from the existing requirement to hold an AFSL itself.
• Even though a CCIV as a separate legal entity itself does not hold an AFSL, the CCIV is deemed through the legislation to be a professional investor (and thus, a wholesale client as described in the Corporations Act) for a period so long as the corporate director still holds an AFSL. 

So what about Retail and Wholesale? What is the story there?

• Retail investors are the reason many regulations exist. They need to be protected. CCIVs that are Retail only are subject to a regulatory framework that encompasses additional regulatory protections deemed necessary for retail investors, while there is a much lighter-touch regulatory approach to CCIVs dealing with wholesale investors only .
• Notification must be given to ASIC as to whether a CCIV is retail or wholesale. A CCIV that is not a retail CCIV is a wholesale CCIV.

• Just one of the following three tests will be necessary to satisfy the regulator if the CCIV is retail: 
  • if at least one member of the CCIV is a ‘protected retail client’. A person is a “protected retail client” if as a retail client they acquire securities in the CCIV, unless the person is ‘associated’ with the CCIV, or where the person acquires the security under the small-scale offering personal offer exemption;
  • at least one person is a ‘protected client under a custodial arrangement; 
  • or at least one member is a ‘protected member of a passport fund’