Equity Trustees has responded to ASIC’s call for feedback on options for increasing the net tangible assets (NTA) requirement for responsible entities of registered managed investment schemes. 

Equity Trustees fully supports a review into the Net Tangible Assets (NTA) requirements for REs in light of recent scheme collapses. Major investment failures in the Australian market over the recent decades, including those involving superannuation, have primarily stemmed from failures of REs.

Those failures have typically involved REs that have not been independent by any ordinary definition, nor by substance, to the fund manager whose primary function is commercial. In addition, examination of these failures indicates that the RE function was not appropriately resourced for the roles and responsibilities an RE entails. Equity Trustees believes reform in this area is particularly important following the collapse of the Shield and First Guardian Master Funds. It is clear that the losses incurred was due to a critical point of failure – that is, the failure of the RE of both the schemes.

Equity Trustees strongly supports enhancements to NTA requirements for REs and believes that the way forward includes:

1. Concessional capital to the be greater of:

• Minimum capital $2 million
• 0.5% of FUM, or
• 10% of RE revenue.

2. Maximum capital for all RE’s to be:

• $20 million, which is equivalent to typical global standards.
• If $20 million is not acceptable to the Government, Treasury or ASIC, then an alternative overall maximum capital should be $150,000 per registered scheme.

3. Retaining current liquidity requirements.

4. A 12-month transition period.

Read our Submission here.