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Managed Investment Scheme

Managed Investment Scheme (MIS) is defined in section 9 of the Corporations Act 2001 (Cth). In plain terms, three elements must be present: people contribute money or money's worth to acquire rights to benefits, those contributions are pooled or used in a common enterprise to produce benefits for members, and the members do not have day to day control over the operation of the scheme. Most pooled mortgage funds and contributory mortgage funds are managed investment schemes.

Why It Matters

Whether an arrangement is an MIS determines the entire regulatory perimeter around it, including licensing, registration, disclosure, and who can be offered an interest. Property syndicates, pooled mortgage funds and contributory mortgage funds routinely fall within the definition even where the operator did not set out to create a fund. An interest in an MIS is a financial product, which is why the wholesale client test rather than the sophisticated investor test is usually the relevant one.

How It Works

  • A scheme generally must be registered with ASIC where it has more than 20 members, or is promoted by a person in the business of promoting schemes, and is offered to retail clients.
  • A registered scheme must have a responsible entity: a public company holding an Australian Financial Services Licence authorising it to operate the scheme. The responsible entity holds scheme property and operates the scheme, and owes duties to members.
  • A scheme offered only to wholesale clients may be operated as an unregistered scheme, which is the structure used by most wholesale private credit and mortgage funds.
  • Unregistered does not mean unregulated. Operating an unregistered wholesale scheme still ordinarily requires an appropriate AFS licence authorisation or a valid exemption.

Common Use Cases

Related Switchboard Resources

For ASIC guidance on managed investment schemes, visit asic.gov.au.

Are mortgage funds managed investment schemes?
Generally yes. Both pooled mortgage funds and contributory mortgage funds usually satisfy the section 9 elements, because investors contribute money, the money is used to produce benefits, and investors do not control day to day operations.
What does the responsible entity do?
The responsible entity operates a registered scheme, holds scheme property, and owes statutory and fiduciary duties to members. It must be a public company holding an AFS licence with the relevant authorisation.
Does a wholesale scheme need to be registered?
Generally not. Schemes offered only to wholesale clients can usually operate unregistered. Licensing obligations still apply to the operator, and structuring a scheme as wholesale only does not remove the need to classify each investor correctly.
General information only. This page explains a term used in Australian financial services law. It is general information, not legal or financial product advice, and does not take account of your objectives, financial situation or needs. Definitions and thresholds change. Confirm the current position on the Federal Register of Legislation or with a qualified professional before relying on it.