The concept of managed investment schemes was outlined in July 1998, by the Managed Investments Act (Cth)(Act), and has been defined as a scheme in which people contribute money to acquire interest to benefits produced by the scheme.
The contributions are used to further the scheme, and the members do not have control over the day to day operations.
The Managed Investments Act (Cth)(Act) replaces the old prescribed interests regime, and its most significant change is the replacement of the roles of trustee and manager with the single Responsible Entity role. The Act also introduced new measures to ensure adequate investor protection.
A managed investment scheme must be registered with the Australian Securities and Investments Commission (ASIC) if;
1. The scheme has 20 or more members; or
2. The scheme is promoted by a person who is in the business of promoting managed investment schemes.
Where a scheme is required to be registered, the following must be addressed;
Appointment of a responsible entity
-Responsible Entity must be an Australian public company holding a licence to act as a Responsible entity
-This is a dual role, of both trustee and scheme manager
-Must have minimum net tangible assets of $50,000 or 0.5% of the value of the schemes assets, up to $5 million
Custodians must be appointed in some cases
A Constitution, similar to a trust deed, must be made
A Compliance plan must be made, setting out the measures which a Responsible Entity is to apply in operating the scheme to ensure compliance with the constitution.
Compliance committee is to be created if the board of directors of the RE does not consist of at least half external directors
As recommended in reviews of the superannuation system, all super schemes established by private sector employers are established as trusts. Superannuation schemes for public servants are established under Acts of Parliament, and most, but not all, are run as trusts. Trusts are currently seen as the most appropriate legal structure for superannuation schemes in Australia.
Trusts have been in existence (as a legal concept), for nearly a thousand years. In their earliest days, people could transfer their land to others, under trust that the receiving person would hold the land to the use of the transferor.
A traditional trust vests title to property in a person or persons on behalf of another person or persons. The legal owner of the property is the trustee, and the other party is the beneficiary.
The person who provided the trust property is called the settlor, who may be the trustee, the beneficiary or some third party.
In a trust, the trustee owes a fiduciary duty to the beneficiaries. This duty means that the trustee must not place their personal interest above or in conflict with the interest of the beneficiaries, and not use the trustee position to acquire any other advantage. A trustee may be a beneficiary, but not the sole beneficiary.
Trusts are often used to overcome the problem of unincorporated groups not being able to own property. In such a case, the trustees hold property for the group, on terms established by the trust deed. Superannuation generally uses the trust form.
Trusts are used in superannuation investment schemes to enable a wide range of investments to be created for beneficiaries. Superannuation schemes sometimes employ professional trustees, which operate under State and Territory legislation.