Corporations Act 2001

CHAPTER 5C - MANAGED INVESTMENT SCHEMES  

PART 5C.5 - THE COMPLIANCE COMMITTEE  

SECTION 601JA   WHEN IS A COMPLIANCE COMMITTEE REQUIRED?  

601JA(1)    
The responsible entity of a registered scheme must establish a compliance committee if less than half of the directors of the responsible entity are external directors.

601JA(2)    
A director of the responsible entity is an external director if they:

(a)    are not, and have not been in the previous 2 years, an employee of the responsible entity or a related body corporate; and

(b)    

are not, and have not been in the previous 2 years, a senior manager of a related body corporate; and

(c)    are not, and have not been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

(d)    are not a member of a partnership that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

(e)    do not have a material interest in the responsible entity or a related body corporate; and

(f)    are not a relative of a person who has a material interest in the responsible entity or a related body corporate.

601JA(3)    
The responsible entity must establish the compliance committee within 14 days after it is required to do so by subsection (1) or within any longer period that ASIC has agreed to in writing.

601JA(3A)    

A person must not intentionally or recklessly fail to comply with subsection (3) .

601JA(4)    
In agreeing to a longer period under subsection (3) , ASIC may impose conditions to be complied with and the responsible entity must comply with them.

601JA(4A)    

An offence based on subsection (4) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

SECTION 601JB   MEMBERSHIP OF COMPLIANCE COMMITTEE  

601JB(1)    
A scheme ' s compliance committee must have at least 3 members, and a majority of them must be external members.

601JB(2)    
A member of the compliance committee is an external member if they:

(a)    

are not, and have not been in the previous 2 years, a non-external director, a senior manager or an employee of the responsible entity or a related body corporate; and

(b)    are not, and have not been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

(c)    are not a member of a partnership that is, or has been in the previous 2 years, substantially involved in business dealings, or in a professional capacity, with the responsible entity or a related body corporate; and

(d)    do not have a material interest in the responsible entity or a related body corporate; and

(e)    are not a relative of a person who has a material interest in the responsible entity or a related body corporate.

601JB(3)    
For the purposes of paragraph (2)(a), a person who is a director of a related body corporate, but not of the responsible entity itself, is an external director of the related body corporate if they would have been an external director of the responsible entity under subsection 601JA(2) had they been a director of the responsible entity.

601JB(4)    
A person who is, or has been, either:

(a)    an external director of the responsible entity; or

(b)    a member of a compliance committee for the scheme or another registered scheme operated by the responsible entity;

is not, merely because of that directorship or membership, taken to be, or to have been, substantially involved in business dealings, or in a professional capacity, with the responsible entity.

601JB(5)    
If the membership of the scheme ' s compliance committee ceases to satisfy subsection (1) , the responsible entity must make appointments to the committee to satisfy that subsection within 14 days or within any longer period that ASIC has agreed to in writing.

601JB(6)    
In agreeing to a longer period under subsection (5) , ASIC may impose conditions to be complied with and the responsible entity must comply with them.

601JB(7)    

An offence based on subsection (5) or (6) is an offence of strict liability.

Note: For strict liability , see section 6.1 of the Criminal Code .

SECTION 601JC   FUNCTIONS OF COMPLIANCE COMMITTEE  

601JC(1)    
The functions of a scheme ' s compliance committee are:

(a)    to monitor to what extent the responsible entity complies with the scheme ' s compliance plan and to report on its findings to the responsible entity; and

(b)    to report to the responsible entity:

(i) any breach of this Act involving the scheme; or

(ii) any breach of the provisions included in the scheme ' s constitution in accordance with section 601GA ;

of which the committee becomes aware or that it suspects; and

(c)    to report to ASIC if the committee is of the view that the responsible entity has not taken, or does not propose to take, appropriate action to deal with a matter reported under paragraph (b); and

(d)    to assess at regular intervals whether the compliance plan is adequate, to report to the responsible entity on the assessment and to make recommendations to the responsible entity about any changes that it considers should be made to the plan.

601JC(2)    
In carrying out its functions, the compliance committee may commission independent legal, accounting or other professional advice or assistance, at the reasonable expense of the responsible entity.

SECTION 601JD   DUTIES OF MEMBERS  

601JD(1)    
A member of a scheme ' s compliance committee must:

(a)    act honestly; and

(b)    exercise the degree of care and diligence that a reasonable person would exercise if they were in the member ' s position; and

(c)    not make use of information acquired through being a member of the committee in order to:

(i) gain an improper advantage for the member or another person; or

(ii) cause detriment to the members of the scheme; and

(d)    not make improper use of their position as a member of the committee to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme.

601JD(2)    
A member of the compliance committee is to take all reasonable steps to assist ASIC in carrying out a check under subsection 601FF(1) .

601JD(3)    

A person who contravenes, or is involved in a contravention of, subsection (1) contravenes this subsection.

Note 1: Section 79 defines involved .

Note 2: Subsection (3) is a civil penalty provision (see section 1317E ).

601JD(4)    

A person must not intentionally or recklessly contravene, or be involved in a contravention of, subsection (1) .

601JD(5)-(6)    
(Repealed by No 117 of 2001, s 3, Sch 1 [ 189] and [ 190].)

SECTION 601JE  

601JE   COMPLIANCE COMMITTEE MEMBERS HAVE QUALIFIED PRIVILEGE IN CERTAIN CASES  

A member of a scheme ' s compliance committee has qualified privilege in respect of a statement concerning the operation of the scheme made by or on behalf of the committee, or a member of the committee, to the responsible entity or to ASIC.

SECTION 601JF   WHEN CAN RESPONSIBLE ENTITY INDEMNIFY COMPLIANCE COMMITTEE MEMBERS?  

601JF(1)    
A scheme ' s responsible entity or a related body corporate must not:

(a)    indemnify a person who is or has been a member of the scheme ' s compliance committee against a liability incurred by the person as a member; or

(b)    exempt the person from such a liability.

601JF(2)    
A provision of the scheme ' s constitution or a body corporate ' s constitution is void in so far as it provides for the responsible entity or a related body corporate to do something that subsection (1) prohibits.

601JF(3)    
Subsection (1) does not prevent a person from being indemnified against a liability to another person (other than the responsible entity or a related body corporate) unless the liability arises out of conduct involving a lack of good faith.

601JF(4)    
Subsection (1) does not prevent a person from being indemnified against a liability for costs and expenses incurred by them:

(a)    in defending proceedings, whether civil or criminal, in which judgment is given in favour of them or in which they are acquitted; or

(b)    in connection with an application, in relation to such proceedings, in which the Court grants relief to them under this Act.

601JF(5)    
In this section:

indemnify
includes indemnify indirectly through one or more interposed entities.

SECTION 601JG   WHEN CAN RESPONSIBLE ENTITY PAY INSURANCE PREMIUMS FOR COMPLIANCE COMMITTEE MEMBERS?  

601JG(1)    
A scheme ' s responsible entity or a related body corporate must not pay, or agree to pay, a premium in respect of a contract insuring a person who is or has been a member of the scheme ' s compliance committee against a liability:

(a)    incurred by the person as a member; and

(b)    arising out of conduct involving a wilful breach of a duty referred to in section 601JD .

601JG(2)    
If subsection (1) is contravened, the contract is void in so far as it insures the person against the liability.

601JG(3)    
Subsections (1) and (2) do not apply to a liability for costs and expenses incurred by a person in defending proceedings, whether civil or criminal and whatever their outcome.

601JG(4)    
In this section:

pay includes pay indirectly through one or more interposed entities.

SECTION 601JH   PROCEEDINGS OF COMPLIANCE COMMITTEE  

601JH(1)    
Subject to the requirements of the compliance plan, a scheme ' s compliance committee may regulate its proceedings as it thinks appropriate.

601JH(2)    
The committee must keep:

(a)    minutes of its meetings; and

(b)    records of its reports and recommendations.

601JH(3)    
A committee meeting may be held using any technology agreed to by all the members.

SECTION 601JJ   DISCLOSURE OF INTERESTS  

601JJ(1)    
A member of a scheme ' s compliance committee must disclose to the committee a direct or indirect pecuniary interest that they have in a matter being considered, or about to be considered, by the committee if their interest could conflict with the proper performance of their duties in relation to the consideration of the matter.

601JJ(2)    
A disclosure under subsection (1) must occur at the first meeting of the committee after the relevant facts have come to the member ' s knowledge and must be recorded in the minutes of the meeting.