Under the Corporations Act, a responsible entity is the single legal entity responsible for operating a registered managed investment scheme. The responsible entity must hold an appropriate Australian Financial Services Licence, act in the best interests of scheme members and ensure the scheme complies with its legal and regulatory obligations.
Expanded Answer
A responsible entity is the public company appointed to operate a registered managed investment scheme under Chapter 5C of the Corporations Act. Unlike many other investment structures, a registered managed investment scheme does not have separate trustees and managers. Instead, the responsible entity assumes responsibility for both the operation and governance of the scheme. ASIC expects the responsible entity to maintain adequate compliance systems, manage scheme property appropriately and ensure the scheme operates in accordance with its constitution and compliance plan.
The responsible entity has ongoing obligations to act honestly, exercise the degree of care and diligence expected of a reasonable person, act in the best interests of members and give priority to members’ interests where conflicts arise. It is also responsible for implementing compliance arrangements, appointing a compliance committee where required, maintaining required records and ensuring disclosure and reporting obligations are met throughout the life of the scheme.
Key responsibilities:
- Operate the registered managed investment scheme in accordance with the Corporations Act.
- Act in the best interests of scheme members and manage conflicts appropriately.
- Maintain effective compliance, governance and risk management arrangements.
Why it matters
The responsible entity is accountable for the lawful operation and governance of a registered managed investment scheme. Failure to discharge these responsibilities can expose the responsible entity to ASIC enforcement action, civil penalties, member claims and significant operational risk.
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Practical guidance
- Confirm whether your managed investment scheme is required to appoint a responsible entity.
- Ensure the responsible entity holds the appropriate AFSL authorisations before operating the scheme.
- Review governance, compliance and conflict management arrangements on an ongoing basis.
Further reading
Managed Investment Schemes and AFSL Requirements
What are the requirements for an AFSL? A Practical Guide for Prospective Licensees