AUSTRALIA Trends and Developments Contributed by: Michael Lawson, Nicole Brown, Lizzie White and Tamaryn Leach, MinterEllison
in accordance with the Corporations Act 2001 (Cth), including whether they comply with AASB S2. However, for the first three years, as a transi - tional measure, directors will be entitled to make a qualified declaration whereby they affirm that their entity has taken “reasonable steps” to com - ply with the regime. Non-compliance with the mandatory reporting requirements may result in a civil penalty. Nev - ertheless, ASIC has acknowledged the need for a transitional period and has indicated that it will “take a proportional and pragmatic approach to supervision and enforcement as the industry adjusts to these new requirements.” Unfair Contract Terms With the updated unfair contract term (UCT) regime in place, fund managers need to con - sider whether their contracts must comply with the regime, particularly given penalties of up to AUD50 million or more could be imposed for each contravention within a contract. It is important to note that while the constitution of a managed investment scheme is exempt from certain regulations, there may still be terms out - side of the constitution that could be affected. For instance, fund managers should consider whether their application forms or the terms and conditions on their website or investor portals contain any potentially unfair terms. In addition, potentially unfair terms could be discovered in service provider or other scheme-related agree - ments.
Irrespective of this, on 2 February 2024, ASIC issued a class no-action letter in respect of “sophisticated participants in financial markets”. The letter states that ASIC will not take action for a contravention of the unfair contract term provisions where: • each counterparty to the standard form contract is an “institutional investor”, which relevantly includes funds, trustees of funds, investment managers and unlisted investment companies, provided that the funds under management are at least AUD50 million, including any amount held or managed by an associate, and the funds are solely or prin - cipally engaged in the provision of financial services; or • where each counterparty to an “industry standard form contract” (such as an Inter - national Swaps and Derivatives Association (ISDA) Master Agreement) is a “wholesale client”, as defined by the Corporations Act 2001 (Cth), and the contract is used for the purpose of dealing in/related to dealing in financial markets. It is important to understand that the no-action letter is a policy decision, not a legal opinion, and ASIC has reserved the right to take legal action or withdraw the letter at any time. Further - more, the letter does not prevent third parties (including the Director of Public Prosecutions) from taking legal action in relation to the conduct that is the subject of the letter.
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