Treasury’s managed investment scheme reforms: three structural changes fund managers need to watch
Treasury has released a consultation paper, Enhancing oversight and governance of managed investment schemes, seeking feedback on a suite of reforms aimed at lifting governance standards and strengthening ASIC’s oversight of the retail managed investment scheme (MIS) sector.
The policy direction in brief
The reforms follow the collapse of several high-profile schemes and reflect a clear regulatory pivot: away from disclosure-based conflict management and towards structural separation, stronger governance and enhanced financial resilience. Treasury’s position is that the existing framework, while conceptually sound, has proven inadequate in practice.
Set out below are the three key proposed reforms likely to impact fund managers:
- Related party transactions – from conflict management to prohibition
Currently, responsible entities (REs) can provide financial benefits to related parties where those benefits are on arm’s length terms or more favourable to the scheme, without member approval. This underpins many common group structures including feeder-to-master fund arrangements, internal investment management mandates and related-party service provider models.
Treasury now proposes prohibiting REs of registered MISs from engaging in related party transactions altogether, subject to limited (and, as yet, undefined) exceptions. The proposal is a direct response to governance failures alleged in recent collapses, including related-party lending and overlapping directorships between REs, investment managers and investee entities.
If implemented in its more restrictive form, the impact on vertically integrated structures, cross-investment pathways, internal service arrangements and conflict governance frameworks could be significant.
- Majority external directors – a structural governance reset
Under the current framework, an RE can avoid the majority external director requirement by establishing a compliance committee with a majority of external members. Treasury proposes to remove that flexibility entirely, mandating that all REs of registered MISs have a majority of external directors on their boards.
The change aligns the RE governance model with the retail CCIV regime and eliminates the compliance committee as an alternative. For tightly held or founder-led groups, this will not be a marginal adjustment as it requires board restructuring, additional external director appointments and a rethink of committee architecture.
Treasury acknowledges the practical constraints of higher director costs, a limited pool of suitably qualified candidates and the risk of increased demand for ‘RE-for-hire’ models (which ASIC has separately flagged as carrying governance risks of their own).
- Financial requirements – increasing NTA
The existing capital requirement for REs, minimum NTA of $150,000, is designed for operational continuity and orderly wind-up of the RE, not as prudential capital buffers. Treasury is now questioning whether that calibration remains appropriate.
Notably, Treasury is not consulting on specific NTA quantum (that is reserved for a separate ASIC process). The consultation instead focuses on whether more prescriptive or risk-based capital requirements should apply, whether REs should have greater ‘skin in the game’, and whether requirements should be elevated from ASIC instruments into primary legislation or regulations.
The downstream implications are significant, including higher barriers to entry for new REs, pressure on boutique and platform RE models, and increased group capital allocations to RE subsidiaries.
Strategic implications for industry
Collectively, the proposals represent a substantive recalibration of the MIS governance framework. The aim is clear, greater transparency, enhanced independence, tighter conflict controls and improved regulatory intelligence.
For REs, boards and service providers, this consultation paper presents an opportunity to proactively assess governance frameworks, compliance plan quality, related party arrangements and data capabilities against emerging regulatory expectations.
Submissions close on 27 February 2026 and we will continue to monitor developments and provide updates as the consultation progresses.
For further information regarding these proposals, please contact cmee@cnmlegal.com.au or jbauers@cnmlegal.com.au, or call 07 3211 4010.