ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024/16

This ASIC legislative instrument inserts minimum, legally binding standards into Chapter 5C of the Corporations Act 2001 governing how responsible entities must hold scheme property and assets. Mechanically, the instrument does two things.

First, it inserts a new section 601FCAA (titled Minimum standards for asset holders) and related definitions and obligations before existing section 601FD. Those provisions impose detailed duties on responsible entities to ensure that scheme property or assets are held on trust for the responsible entity by a custodian, to require written policies and procedures, to separate custodial activities from investment and trading functions, to require staff training and resources, to require record keeping for seven years and to require processes for monitoring, auditing and certifying custodian and sub‑custodian performance (see 601FCAA(1)-(5), (7)-(11), (13)-(14)). The new section also stipulates arrangements for transfers of holdings between responsible entity and custodian (601FCAA(6)), and sets out how the duties apply to sub‑custodians (601FCAA(4)). It contains a statutory cross‑takeover: compliance with the new section will be taken to satisfy any AFSL conditions that refer to ASIC Policy Statement 133 or Regulatory Guide 133 on a certain date, except where the condition arises because the entity is a trustee company (601FCAA(12)).

Second, the instrument inserts a new section 601FCAB (Arranging for another person to hold scheme property or assets). That section requires written agreements between responsible entities and custodians, and between custodians and any persons they engage, containing specific contractual terms. These mandatory contractual terms include rights for ongoing review and monitoring, a written certification by the custodian at least every 13 months that obligations are being met (601FCAB(2)(b)), daily reconciliation procedures (601FCAB(2)(g)), auditor access (601FCAB(2)(h)), termination and transfer mechanics (601FCAB(2)(j), (k)), restrictions on encumbrances and security interests (601FCAB(2)(e), (4)), obligations on notification of sub‑custodians (601FCAB(2)(i), (m)), business continuity arrangements (601FCAB(2)(n)), confidentiality (601FCAB(2)(o)) and an obligation for custodians to report to ASIC if they suspect the responsible entity has failed to report a reportable situation (601FCAB(2)(p)).

meta-content-style-type: text/css meta-content-type: application/xhtml+xml; charset=utf-8 title: ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024-16

Commonwealth Coat of Arms and ASIC logo

ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024/16

I, Kate Metz, delegate of the Australian Securities and Investments Commission, make the following legislative instrument.

Date 21 March 2024

Kate Metz

Contents

Part 1—Preliminary

1 Name of legislative instrument

2 Commencement

3 Authority

Part 2—Declaration

4 Minimum standards for holding scheme property or assets

Part 1—Preliminary

1 Name of legislative instrument

This is the ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024/16.

2 Commencement

This instrument commences on the day after it is registered on the Federal Register of Legislation.

Note: The register may be accessed at www.legislation.gov.au.

3 Authority

This instrument is made under paragraphs 601QA(1)(a) and (b) of the Corporations Act 2001.

Part 2—Declaration

4 Minimum standards for holding scheme property or assets

Chapter 5C of the Act applies to a responsible entity as if Part 5C.2 were modified or varied by before section 601FD inserting:

“601FCAA Minimum standards for asset holders

(1) The responsible entity must:

(a) do all things necessary to ensure that a custodian holds the scheme property or assets on trust for the responsible entity (whether directly or by holding a beneficial interest in scheme property or assets held by a sub-custodian) except where any of the following apply:

(i) where both of the following apply:

(A) the property or assets are located in a place outside of this jurisdiction where trusts are not known to the law;

(B) it is reasonable for the property or assets to be held in accordance with the law in that place;

(ii) where both of the following apply:

(A) the property or assets are located in a place outside of this jurisdiction and it is not reasonable for the property or assets to be held on trust in accordance with the law in that place;

(B) the responsible entity has documented in writing that:

(I) it is satisfied that the property or assets are held in a manner that, having regard to the relevant laws, provides reasonably effective protection in case of insolvency of the person holding the property or assets; and

(II) the basis on which the responsible entity is satisfied;

(iii) the property or assets are held by a member of the scheme or the responsible entity; and

(b) have reasonable procedures for giving instructions to the custodian or where there is no custodian, custodial staff in relation to the scheme property or assets that include how the instructions are given and reasonable controls to ensure that the instructions are properly authorised and carried out; and

(i) as far as practicable identifies the property or assets as held on behalf of the responsible entity in relation to the scheme; and

(ii) holds the property or assets separately from property in which the responsible entity or the custodian has an interest and from the property of any other person or scheme except where the responsible entity is exempted from holding the property separately under section 601QA and complies with the conditions of the exemption.

(2) The responsible entity must do all things necessary to ensure that the custodian or, if there is no custodian in relation to particular scheme property or assets that are not held by a member, the responsible entity:

(a) has an organisational structure that supports compliance with paragraph (1)(c)(ii) or subparagraph 601FC(1)(i)(ii) (as applicable); and

(b) segregates custodial staff from persons performing other functions, in a way that minimises the potential for conflict, if a conflict of interest exists or might arise between:

(i) their duties as custodial staff; and

(ii) the interests served or advanced by persons who perform duties to make investment decisions, trading decisions or other discretionary decisions resulting in the transfer or disposal of scheme property or assets other than discretionary decisions in relation to holding a deposit account with a corporation that is regulated for the taking of deposits where the balance of the deposit account is payable on demand and discretionary decisions relating to buying or selling foreign currency; and

(i) approved by its directors or governing body, or a senior manager authorised to give approval on behalf of the directors or governing body or, in the case of a custodian that is a foreign company that is carrying on business in this jurisdiction or registered under Division 2 of Part 5B.2, its most senior officer or employee in this jurisdiction with responsibility for managing the functions performed by custodial staff; and

(ii) designed to ensure that custodial staff are not influenced because of a conflict mentioned in paragraph (b) to act other than in accordance with their duties; and

(d) undertakes reasonable checks to find out and document if there has been any attempt to inappropriately influence custodial staff and take reasonable action in the event this happens; and

(e) structures its business so that:

(i) custodial staff can report to the directors of the responsible entity or the compliance committee for the scheme directly or through other custodial staff; and

(ii) the duties of:

(A) direct managers of custodial staff; and

(B) indirect managers of custodial staff that are not the most senior officer of the responsible entity or the most senior officer or employee of the custodian in this jurisdiction or, for a custodian, the jurisdiction in which the custodian is based; and

do not extend to other functions that may create conflicts of interest including that custodial staff and those managers are not responsible for investment decisions, trading decisions or other discretionary decisions resulting in the transfer or disposal of scheme property or assets other than discretionary decisions in relation to holding a deposit account with a corporation that is regulated for the taking of deposits where the balance of the deposit account is payable on demand and discretionary decisions relating to buying or selling foreign currency; and

(iii) custodial staff and persons involved in investment decisions, trading decisions or other discretionary decisions resulting in the transfer or disposal of scheme property or assets are located sufficiently separately during the performance of their duties to reduce, so far as reasonably practicable, the risk of inappropriate influence on decisions relating to holding of scheme property and assets.

(3) The responsible entity must, for its custodial staff ensure that, and for custodial staff of any custodian do all things necessary to ensure that the custodian ensures that:

(a) custodial staff have the knowledge and skills necessary to perform their duties properly; and

(b) ongoing training and educational programs are provided to custodial staff that provide reasonable assurance they have knowledge that remains at a level necessary for performing their duties including knowledge of the responsible entity’s obligations under this Chapter to the extent relevant to enable the custodial staff to perform their duties; and

(d) resources are made available to custodial staff to the extent necessary for them to adequately perform their duties.

(4) The responsible entity must also comply with paragraph (1)(c) and subsections (2) and (3) as if any sub-custodian were the custodian except to the extent that, in relation to assets outside of this jurisdiction, it is not reasonably practicable for the responsible entity to do all things necessary to ensure that the sub-custodian does a particular thing.

Note: For example, if the custodian engaged a sub-custodian, the responsible entity would need to do all things necessary to ensure that the requirements of paragraph (1)(c) and subsections (2) and (3) were satisfied in relation to the custodian, the sub-custodian and their custodial staff, subject to the exception in relation to assets outside this jurisdiction.

(5) The responsible entity must keep for 7 years records demonstrating how it complies with subsections (1) to (4).

(6) If:

(a) a custodian is appointed to hold scheme property or assets that had previously been held by the responsible entity; or

(b) a custodian or the responsible entity commences to hold scheme property or assets that had been held by a custodian;

the responsible entity must obtain a report from a person with relevant knowledge who is not a related party of the custodian or the responsible entity confirming that all property and assets to be transferred have been identified and transferred as required unless it reasonably believes that it is not in the best interests of members to do so, and if the report is not obtained, keep for 7 years a record in writing as to its grounds for that belief.

(7) The responsible entity must set out in writing and implement a reasonable process to monitor and assess any custodian’s performance of its obligations as a custodian and do all things necessary to ensure that a custodian it engages sets out in writing and implements a reasonable process to monitor and assess the performance of its obligations by any sub-custodian.

(8) The responsible entity must not permit a custodian or a sub-custodian to be involved in discretionary decisions concerning a deposit account, unless the responsible entity is satisfied that the custodian or sub-custodian has set out in writing and implements reasonable processes for:

(a) determining which account to use; and

(b) monitoring performance by the issuer of the account of the issuer’s obligations in relation to that account; and

(c) taking action in case of failure of the issuer of the account of the issuer’s obligations in relation to that account.

(9) The responsible entity must ensure that it keeps records of scheme property and assets in a way that enables the holding of the property and assets to be conveniently and properly audited by the auditor of the scheme and do all things necessary to ensure that any custodian or sub-custodian keeps such records in relation to any property or asset that the custodian holds or that is held by the sub-custodian.

(10) The responsible entity must set out in writing and implement a reasonable process for determining if it should hold scheme property or assets or engage a custodian and if it is to engage a custodian which person will be the custodian and on what terms. The process must involve the application of a reasonable written policy approved by the directors which addresses potential conflicts of interest and any other considerations relevant to the best interests of members.

(11) The responsible entity must:

(a) review the appropriateness of the written policies and processes it is required to have or do all things necessary to ensure exist under subsection (7), (8) and (10) at least once in every 13 months; and

(b) as directed by ASIC in writing, arrange for a report on the effectiveness of or the reasonableness of any of the processes or policies to be prepared and given to ASIC.

The written direction may specify who is to prepare the report and the time by which it must be given to ASIC.

(12) A responsible entity that complies with this section is taken to comply with conditions (if any) of its Australian financial services licence to the extent that the conditions:

(a) refer to ASIC Policy Statement 133 or ASIC Regulatory Guide 133 as applying on a certain date; and

(b) are not conditions that apply to the responsible entity because it is a trustee company.

(13) In this section and section 601FCAB:

custodian means a person engaged by the responsible entity to hold scheme property or assets on behalf of the responsible entity.

custodial staff means natural persons who, whether under an arrangement with the responsible entity or a custodian, have duties relating to holding scheme property or assets, record keeping relating to scheme property or assets, checking authorisations for instructions to transact or functions incidental to these functions other than making investment decisions, trading decisions or other discretionary decisions resulting in the transfer or disposal of scheme property or assets other than discretionary decisions in relation to holding a deposit account with a corporation that is regulated for the taking of deposits where the balance of the deposit account is payable on demand and discretionary decisions relating to buying or selling foreign currency.

sub-custodian means a person directly or indirectly engaged by a custodian to hold scheme property or assets.

(14) For the purposes of this section and section 601FCAB:

(a) a person (first person) engages another person if the first person engages or authorises the other person; and

(b) a person (first person) indirectly engages another person (second person) if:

(i) the first person engages a person and that person engages the second person; or

(ii) a person who is indirectly engaged by the first person under subparagraph (i) or this subparagraph (ii) engages the second person.

601FCAB Arranging for another person to hold scheme property or assets

(1) A responsible entity that engages a custodian to hold scheme property or assets on behalf of the responsible entity must:

(a) ensure that it has a written agreement with the custodian that meets the requirements of subsections (2) to (5); and

(b) do all things necessary to ensure that the custodian has a written agreement with each person that the custodian engages to hold the scheme property or assets and the written agreement meets the requirements of subsections (2) to (5) (but not including paragraph (2)(p)) as if the person were the custodian and the custodian were the responsible entity except:

(i) to the extent that, in relation to scheme property or assets held outside of this jurisdiction, the responsible entity holds documents that demonstrate that it is not reasonably practicable to engage another person to hold the scheme property or assets who is willing to include such matters in the agreement; or

(ii) where the person is controlled by the custodian the custodian is liable to the responsible entity for the acts and omissions of the person as if they were the acts or omissions of the custodian.

(2) The agreement with the custodian must have provisions:

(a) specifying reasonable rights that the responsible entity has for the ongoing review and monitoring of the custodian and any sub-custodian and the standards against which their performance will be assessed; and

(b) to the effect that the custodian must certify to the responsible entity in writing at least every 13 months that the custodian believes on reasonable grounds that the custodian and each sub-custodian have met since the date of the previous statement in writing or the commencement of the agreement, and the custodian has no reason to believe that the custodian and each sub-custodian will not continue to meet:

(i) in the case of the custodian, the terms of the agreement; and

(ii) in any case, the requirements that the responsible entity must do all things necessary to ensure under paragraph 601FCAA(1)(c) and subsections 601FCAA(2) to (4), (7) and (9) are met by the custodian or the sub-custodian in relation to scheme property or assets held by the custodian or a sub-custodian (except to the extent that the responsible entity is not complying with a requirement to comply with the conditions of an exemption under section 601QA and the custodian is not aware of any non-compliance);

other than in relation to matters:

(iii) that:

(A) are disclosed in writing to the responsible entity; or

(B) the custodian reasonably believes are trivial; and

(iv) for which the custodian acknowledges that it or the sub-custodian must continue to meet the relevant obligations; and

(c) to the effect that the custodian must acknowledge to the responsible entity on request that the scheme property or assets to which the agreement relates are held for the responsible entity and notify any other person where the custodian is aware to do so might protect the beneficial interest of the responsible entity that the property or assets are so held unless the responsible entity directs in writing otherwise; and

(d) specifying how instructions will be given by the responsible entity to the custodian; and

(e) to the effect that the custodian must not take or grant a security interest, mortgage, lien or other encumbrance over, or in relation to, the scheme property or assets held under the agreement unless it is accordance with the agreement and does not cover unpaid fees of the custodian; and

(f) specifying how the custodian will maintain records of the scheme property or assets to which the agreement relates and the transactions in relation to that property and assets, including by whom, when and how transactions were authorised; and

(g) specifying procedures for reconciliation each business day or, if it is ordinary and reasonable commercial practice to reconcile certain property less frequently, in accordance with that practice, by checking information the custodian is given as to the existence and quantity of the scheme property or assets against the records of the custodian and for reporting by the custodian concerning the outcomes of the reconciliation in case of any unreconciled matter; and

(h) to the effect that the custodian must provide all reasonable access and assistance to any auditor engaged to audit the responsible entity’s financial statements or the scheme’s financial statements; and

(i) to the effect that the custodian will provide the responsible entity with written notice of, and contact information for, any other person holding scheme property or other assets appointed or to be appointed by the custodian:

(i) as soon as reasonably practicable; and

(ii) in any event before the property or assets are held, except in exceptional circumstances identified in the agreement; and

(j) to the effect that the responsible entity may terminate the agreement without:

(i) payment other than in relation to entitlements previously accrued or the reasonable expenses involved in transfer of the scheme property and assets to the responsible entity or another custodian; and

(ii) limiting any right to damages the responsible entity may have under the agreement, including recovering expenses referred to in subparagraph (i) if the custodian is in breach;

if the responsible entity has reasonable grounds for believing that:

(iii) there is or has been an act or omission of the custodian or a sub-custodian that results in the custodian being in breach of the agreement; and

(iv) as a result of the act or omission, to a material extent the custodian or a sub-custodian is not complying with or is unlikely to comply with the requirements that the responsible entity must do all things necessary to ensure under paragraph 601FCAA(1)(c) and subsections 601FCAA(2) to (4), (7) and (9) are met by the custodian or the sub-custodian in relation to scheme property or assets held by the custodian or that the custodian arranged to be held, having regard to any remedy provided or that may be expected to be provided by the custodian or the sub-custodian; and

(k) to the effect that on termination of the engagement, the scheme property or assets must be transferred to the responsible entity, or as the responsible entity directs, within a reasonable period subject to reasonable provisions for the obligations of the parties at termination, including the payment of outstanding fees and charges to the custodian and any costs of the transfer; and

(l) to the effect that the custodian must notify material or systemic breaches of the agreement by it or by the responsible entity in writing to the board of directors of the responsible entity or the compliance committee of the relevant scheme within a reasonable time of becoming aware of the breach; and

(m) specifying the terms on which the custodian is authorised to engage another person to hold the scheme property or assets to which the agreement relates and providing that any such engagement must be either:

(i) under a written agreement meeting the requirements of subsections (2) to (5) (including this subparagraph and subparagraph (ii), but not including paragraph (2)(p)) as if the person engaged were the custodian and the custodian were the responsible entity except to the extent that, in relation to assets held outside of this jurisdiction, the custodian has provided written reasons to the responsible entity as to why it reasonably considers that it is not practicable to engage a person that is willing to include such matters in the agreement; or

(ii) an arrangement with a related body corporate of the custodian, where the custodian has a written agreement with the responsible entity that it is liable to the responsible entity for the acts and omissions of the related body corporate relating to the scheme as if those acts and omissions were the acts or omissions of the custodian; and

(n) to the effect that the custodian must establish and maintain business continuity arrangements that are reasonable for a business of the nature, scale and complexity of the custodian’s business; and

(o) to the effect that the custodian must not disclose any confidential information relating to the scheme, apart from any disclosure to ASIC or as required or permitted by law or by the responsible entity in writing; and

(p) to the effect that the custodian must establish and maintain adequate arrangements to ensure that it will report to ASIC in writing within 10 business days if it suspects that the responsible entity has breached its obligations to report a reportable situation in relation to the responsible entity as required by [section 912DAA].

(3) The responsible entity must ensure that the agreement with the custodian has reasonable liability provisions and does not include provisions that exclude the liability of the custodian for direct loss that it would have if the exclusion were not included except in particular circumstances that the responsible entity considers to be reasonable and contains, if appropriate, reasonable indemnity provisions in relation to losses caused to the responsible entity as responsible entity of the scheme by the custodian’s acts and omissions that relate to that agreement.

(4) A responsible entity who arranges for a custodian to hold scheme property or assets must not permit, under the agreement with the custodian or otherwise, the granting of a security interest, mortgage, lien or other encumbrance in favour of the custodian or its associates unless the responsible entity reasonably believes for reasons it has recorded in writing that any conflict that may arise as a result of the security interest, mortgage, lien or encumbrance will not materially increase the risks that the custodian will fail to meet its obligations and the responsible entity must keep the written record of reasons for 7 years after the security interest, mortgage, lien or encumbrance has ceased.

(5) The responsible entity must ensure that no agreement it has with a custodian contains any provision that would require the custodian to disclose to the responsible entity or another person that it has communicated with ASIC concerning a suspicion of contravention of a financial services law or that it is considering doing so.

(6) A responsible entity that complies with this section in relation to an arrangement with a custodian is taken to comply with any condition on its Australian financial services licence concerning the arrangement.”.

Part 3—Exemption

5 Omnibus accounts

(1) A responsible entity does not have to comply with subparagraph 601FC(1)(i)(ii) of the Act for scheme property that comprises:

(a) Australian or foreign currency; or

(b) a deposit taking facility of a body carrying on a business of accepting money on deposit including rights under that facility; or

(d) derivatives.

Conditions

(2) A responsible entity that relies on the exemption in subsection 5(1) must do all of the following:

(a) put in place and keep for 7 years after it was last relied on, a written policy in relation to not holding scheme property separately in reliance on the exemption which sets out its reasons why that policy is appropriate having regard to any extent to which it might expose its members of the scheme to the risks arising from the property not being held separately or there is reason to believe that applying the policy might not be in the best interests of the members;

(b) ensure that the policy is reviewed at least every 13 months, prepare a written record of the outcome of the review and keep that record for 7 years;

(c) do all things necessary to ensure that adequate records are kept at all times showing the scheme’s entitlement to property that includes the scheme property not held separately;

(d) do all things necessary to ensure reconciliation procedures are performed on each business day in relation to the scheme property not held separately or if because of the nature of the property, it is ordinary and reasonable commercial practice to reconcile property of that kind less frequently, as frequently as would be performed in accordance with that practice;

(e) do all things necessary to ensure that not holding the scheme property separately does not restrict the capacity of the responsible entity to exercise rights in relation to the property including in relation to voting rights;

(f) do all things necessary to ensure that if the property that includes the scheme property is not sufficient to meet the entitlements of all persons in relation to that property, the insufficiency ceases by the second business day after the insufficiency arises whether through the provision of additional property by the person holding the property or otherwise;

(g) do all things necessary to ensure that the scheme property is held separately from property in which the person holding the property or the responsible entity has an interest other than as a trustee for a person that is not the responsible entity except where property is not held separately to comply with paragraph (f).

Part 4—Repeal

6 Repeal

This instrument is repealed at the start of 1 April 2029.

meta-content-style-type: text/css meta-content-type: application/xhtml+xml; charset=utf-8 title: ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024-16

ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024/16

I, Kate Metz, delegate of the Australian Securities and Investments Commission, make the following legislative instrument.

Date 21 March 2024

Kate Metz

Contents

Part 1—Preliminary

1 Name of legislative instrument

2 Commencement

3 Authority

Part 2—Declaration

4 Minimum standards for holding scheme property or assets

Part 1—Preliminary

1 Name of legislative instrument

This is the ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024/16.

2 Commencement

The instrument rests on several primary regulatory concepts introduced by statutory text rather than guidance alone. These concepts structure the duties and the compliance architecture.

Custody as trust: The central concept is that scheme property or assets should be held on trust for the responsible entity by a custodian, whether directly or by a beneficial interest in assets held by a sub‑custodian (601FCAA(1)(a)). The instrument recognises two narrowly defined exceptions where trusts are not practicable because of foreign law, but in those cases requires written documentation that reasonable protection against insolvency has been achieved (601FCAA(1)(a)(i)-(ii)).

Separation and identification: Custodians must, as far as practicable, identify scheme assets as held on behalf of the responsible entity and hold them separately from other property unless an exemption applies (601FCAA(1)(c)(i)-(ii)). That concept flows through to the contractual standards in 601FCAB which require procedures for reconciliation, record keeping and daily checks (601FCAB(2)(f)-(g)).

Functional segregation and conflict control: The instrument distinguishes custodial staff from persons making investment, trading or other discretionary decisions and requires organisational structures to minimise conflicts of interest (601FCAA(2)(b)-(e)). Custodial staff must not perform functions that could influence transfer or disposal decisions; custodial staff must be physically or operationally separated where practicable (601FCAA(2)(e)(iii)).

Policy, governance and oversight: Responsible entities must adopt documented policies (board or senior manager approved) for custodial arrangements, and review those policies at least every 13 months (601FCAA(2)(c)(i) and (11)(a)). The entity must monitor custodians and ensure custodians monitor sub‑custodians (601FCAA(7), 601FCAA(10)).

Knowledge, training and resourcing: The instrument requires custodial staff to possess and maintain the requisite knowledge and skills, to receive ongoing training, and to be given sufficient time, authority and resources to perform their duties (601FCAA(3)(a)-(d)).

Contractualisation of standards: The statutory regime prescribes minimum contract terms custodians must enter with responsible entities and with any sub‑custodians they engage (601FCAB(1)-(2)). This converts many operational requirements into contractual obligations enforceable under the agreement.

Certification and auditability: Custodians must certify in writing at least every 13 months that they and their sub‑custodians meet the required standards, with certain limited exceptions (601FCAB(2)(b)). Responsible entities and custodians must keep records that enable auditors to perform proper audits (601FCAA(9), 601FCAB(2)(h)).

Limited flexibility for international practice: The instrument recognises practical limits when assets are held outside Australia. Where compliance is not reasonably practicable because of foreign legal or commercial practice, the instrument accepts alternative arrangements but requires documented reasons and evidence (601FCAA(1)(a)(i)-(ii), 601FCAB(1)(b) and (2)(m)(i)).

Omnibus exemption with conditions: The instrument creates a narrowly drawn operational exemption for omnibus accounts and similar pooled arrangements, but requires strict controls including daily reconciliation (or widely accepted commercial frequency), written policies, frequent reviews and a rule that any insufficiency be remedied by the second business day (cl 5(1) and (2)(a)-(g)).

Time‑limited instrument: The instrument has an express expiry date (cl 6), which places a built‑in sunset on these statutoryised standards.

Definitions and record retention: Important definitional choices shape scope and operation. For example, custodial staff are defined narrowly to exclude those making discretionary investment decisions except in limited circumstances (601FCAA(13)). Record retention obligations are explicit and set at seven years (601FCAA(5), cl 5(2)(a) for omnibus policy retention).

Directly affected parties

Responsible entities: The instrument places primary legal obligations on responsible entities that manage registered managed investment schemes. Those obligations include ensuring custody arrangements meet the trust and segregation requirements, establishing policies and processes, monitoring custodians, arranging contractual terms, maintaining records for seven years, and commissioning or retaining reports when custodians change (601FCAA(1)-(11), 601FCAB(2)). Responsible entities decide whether to hold scheme property themselves or engage custodians and must implement written selection and oversight processes (601FCAA(10)).
Custodians: Persons engaged by responsible entities to hold scheme property are directly subject to the contractual requirements the instrument mandates. While the statutory text imposes the obligations on the responsible entity to ensure those contractual terms exist, the instrument requires custodians to provide certifications, daily reconciliations, access to auditors and business continuity arrangements and creates reporting expectations to ASIC in specified circumstances (601FCAB(2)(b), (g), (h), (n), (p)).
Sub‑custodians and persons engaged by custodians: The instrument treats sub‑custodians substantially as custodians for many duties and requires custodians to ensure sub‑custodians enter into agreements that meet the statutory standards (601FCAA(4), 601FCAB(1)(b), (2)(m)). Where a custodian engages a related body corporate to hold assets, the custodian remains contractually liable to the responsible entity for the acts and omissions of that related body corporate (601FCAB(1)(b)(ii)).

Indirectly affected parties

Auditors: The instrument requires custodians provide reasonable access to auditors and requires records be kept so auditors can conveniently and properly audit holdings (601FCAA(9), 601FCAB(2)(h)). Auditors will therefore face changes in the quantity and type of documentation and access they can reasonably expect.
Scheme members: While not direct parties to the custodian agreements, members are the ultimate beneficiaries of the protections. They may experience indirect effects via scheme fees, changes to custodial counterparties, or decisions about holdings in certain jurisdictions where trust structures are not available (601FCAA(1)(a)(i)-(ii), 5(2)(a)-(g)).
Banks and deposit takers: Where scheme property comprises deposit accounts or cash held in omnibus or pooled arrangements, deposit takers will have to accommodate daily reconciliation, confirmation procedures and potentially increased disclosure demands from custodians and responsible entities (5(1) and 5(2)(d), (e)).

Who decides and who implements

Responsible entities decide whether to use an internal holding arrangement, which custodian to appoint, and the contractual terms on which custodians and sub‑custodians are engaged (601FCAA(10), 601FCAB(2)(a), (m)). They must also decide whether an independent report is required on transfers (601FCAA(6)) and whether to rely on the omnibus exemption (cl 5(1)).
Custodians implement the operational controls demanded by the agreements and by the standards, including reconciliation, segregation, certification and business continuity (601FCAB(2)(b), (g), (n)).

Scope limits and exclusions

The statutory text allows specific exceptions where trusts are not recognised or not practicable across foreign jurisdictions, but only if the responsible entity documents written reasons and concludes that assets are held with reasonable protection against insolvency (601FCAA(1)(a)(i)-(ii)). The definition of custodial staff narrows the set of people to whom some protections apply, excluding those making investment or trading decisions except for limited deposit account or FX decisions (601FCAA(13)).
The omnibus exemption targets particular asset types: currency, deposit facilities, securities and derivatives (cl 5(1)). The exemption requires additional governance, record retention and reconciliation safeguards (cl 5(2)).

Statutory duties imposed on responsible entities

Ensure assets are held on trust by a custodian: Responsible entities must do everything necessary to ensure a custodian holds scheme property or assets on trust for the responsible entity, whether directly or by beneficial interest in assets held by a sub‑custodian (601FCAA(1)(a)). This duty includes ensuring that property is identified and separated (601FCAA(1)(c)(i)-(ii)).
Exceptions and documentation: Where trusts are not recognised locally or not reasonably practicable, the responsible entity must document in writing the legal basis on which it is satisfied that the assets are held in a manner providing reasonably effective protection in case of insolvency and record the basis of that satisfaction (601FCAA(1)(a)(i)-(ii)).
Procedures for instructions and authorisations: The responsible entity must have reasonable procedures setting out how instructions are given to the custodian or custodial staff, and controls to ensure authorisation and proper execution (601FCAA(1)(b)).
Organisational and conflict controls: The responsible entity must ensure the custodian or, where no custodian is involved, its own custodial staff have an organisational structure supporting compliance with segregation and must segregate custodial staff from persons performing investment or trading functions to minimise conflicts (601FCAA(2)(a)-(b), (2)(e)(i)-(iii)).
Policies and reporting lines: The entity must have a documented policy, approved by its directors or specified senior officers, designed to ensure custodial staff are not improperly influenced (601FCAA(2)(c)). The entity must arrange reporting lines enabling custodial staff to report to the board or compliance committee directly or via other custodial staff (601FCAA(2)(e)(i)).
Training, resourcing and competence: The responsible entity must ensure custodial staff have the necessary knowledge and skills, ongoing training, time, authority and resources to perform duties properly (601FCAA(3)(a)-(d)).
Records and auditability: Responsible entities must ensure they and any custodians/sub‑custodians keep records for seven years enabling convenient and proper audit by scheme auditors (601FCAA(5), (9)).
Monitoring and review: The responsible entity must set out and implement processes to monitor custodian performance and to ensure custodians similarly monitor sub‑custodians. Written policies and processes must be reviewed at least once every 13 months (601FCAA(7), (11)(a)).
Engagement and contractual standards: When engaging custodians, responsible entities must ensure written agreements contain specified terms addressing rights of review, certification, reconciliation, limitations on encumbrances, termination rights and notification obligations (601FCAB(2)(a)-(p)).
Limitations on encumbrances and security interests: Responsible entities must not permit custodians to take encumbrances over scheme assets except in accordance with the agreement and not covering the custodian’s unpaid fees; where a security interest is granted, the entity must keep written reasons for seven years showing why any conflict will not materially increase risk (601FCAB(2)(e), (4)).
Certification and transfer reports: When a custodian is appointed or assets transfer, the responsible entity must obtain an independent report confirming identification and transfer of assets unless it reasonably believes obtaining the report is not in members’ interests and documents reasons for that belief (601FCAA(6)).

Specific duties required in custodian agreements (rights of responsible entity)

Ongoing review and monitoring rights: Agreements must specify reasonable rights for ongoing review and monitoring of the custodian and sub‑custodians and the standards for performance assessment (601FCAB(2)(a)).
Certification by custodian: Agreements must require the custodian to certify in writing at least every 13 months that it and any sub‑custodians have met agreement terms and statutory requirements, except for trivial matters or those previously disclosed (601FCAB(2)(b)).
Access to auditors and reporting of breaches: Agreements must require custodians to provide auditors with reasonable access and to notify the board or compliance committee of material or systemic breaches in a reasonable time (601FCAB(2)(h), (l)).
Reconciliation and records: Agreements must specify how custodians will maintain records and implement reconciliation procedures each business day or at a commercially reasonable frequency (601FCAB(2)(f), (g)).
Termination and transfer mechanics: Agreements must permit termination without payment other than accrued entitlements where the responsible entity has reasonable grounds to believe the custodian breached the agreement and the custodian is materially not complying with obligations (601FCAB(2)(j), (k)).

Duties and protections for custodians (as contractually required)

Certification, reconciliation, audit access and business continuity: Custodians must provide written certification every 13 months, perform reconciliation, provide auditors with access and maintain business continuity arrangements proportional to the nature, scale and complexity of their business (601FCAB(2)(b), (g), (h), (n)).
Confidentiality and whistleblowing boundaries: Custodians must not disclose confidential scheme information except to ASIC, as required by law or as directed by the responsible entity in writing. Responsible entities cannot include provisions in agreements that would require a custodian to disclose to the responsible entity that it has communicated with ASIC regarding a suspected contravention (601FCAB(2)(o), (5)).
Reporting obligation to ASIC: Custodians must establish arrangements to report to ASIC within 10 business days if they suspect the responsible entity has breached its obligations to report a reportable situation under section 912DAA of the Corporations Act (601FCAB(2)(p)).

Liability and indemnity controls

Liability provisions must be reasonable and must not exclude liability for direct loss absent specific reasonable circumstances; the responsible entity must ensure the agreement contains reasonable indemnity provisions where appropriate (601FCAB(3)).

Omnibus exemption conditions and duties

Responsible entities relying on the omnibus exemption must adopt a written policy recording reasons, review it every 13 months, maintain records demonstrating entitlement, perform daily reconciliation or commercial practice frequency, ensure rights such as voting are unimpaired, remedy insufficiencies by the second business day and keep the scheme property separate from the holder’s property other than as a trustee (cl 5(2)(a)-(g)).

The instrument itself sets statutory obligations by modifying the application of Chapter 5C of the Corporations Act and prescribing contractual minimums, but it does not specify new bespoke civil penalties, criminal sanctions or administrative penalties within its text. The available statements in the instrument that bear directly on enforcement are procedural or supervisory rather than punitive. The most concrete enforcement‑adjacent features in the instrument are the following.

ASIC's supervisory levers

Directions for reports: ASIC may direct a responsible entity in writing to arrange for a report on the effectiveness or reasonableness of any of the processes or policies to be prepared and given to ASIC; the direction may specify the preparer and the time for delivery (601FCAA(11)(b)). This provision gives ASIC a statutory route to require independent assessment and to compel information and third‑party review.
Custodian reporting to ASIC: The instrument requires custodians to establish arrangements to report to ASIC within 10 business days if they suspect that the responsible entity has breached its obligations to report a reportable situation under s 912DAA (601FCAB(2)(p)). This creates an information pipeline from custodians to the regulator and places an expectation of custodial escalation of reportable events.

Licence condition interaction

Statutory "take‑over" of certain licence conditions: A responsible entity that complies with the new section is taken to comply with licence conditions that refer to ASIC PS 133 or RG 133 as applying on a certain date (601FCAA(12)). That is a compliance equivalence, which reduces ambiguity and makes compliance outcomes relevant when AFSL conditions are enforced. ASIC may therefore assess licence compliance against these standards.

Contractual enforcement

Most operational enforcement will occur via contractual rights and obligations. The statutory text requires responsible entities to ensure agreements with custodians include rights to monitor, audit and terminate in prescribed circumstances (601FCAB(2)(a), (j)-(k)). Those contractual rights create remedies for breaches by custodians.

Recordkeeping and auditor access

The instrument requires seven years' retention of records demonstrating compliance (601FCAA(5), 601FCAB(2)(f)), and requires custodians to provide reasonable access to auditors (601FCAB(2)(h)). Those requirements make it easier for auditors and ASIC to detect non‑compliance and trigger regulatory or civil proceedings based on failures evidenced in the records.

What the instrument does not do within its text

The instrument does not itself create new civil penalty provisions, infringement notices, or criminal offences. It does not specify pecuniary penalties, imprisonment, enforceable undertakings or administrative fines. It also does not specify a particular supervisory regime other than the report direction power in 601FCAA(11)(b). Therefore, enforcement remedies would be exercised under the broader Corporations Act framework and ASIC's general enforcement powers rather than by a bespoke penalty schedule within this instrument. The instrument is made under 601QA(1)(a) and (b) of the Corporations Act (cl 3) so non‑compliance will sit within the Act's general enforcement architecture.

Practical enforcement implications

Responsible entities face practical enforcement risk through licence condition assessments, ASIC directions to commission reports, auditor findings and contractual termination rights. Custodians face reputational and contractual enforcement risk, amplified by the statutory requirement to report suspected failures to ASIC in certain circumstances. The instrument therefore channels enforcement into supervisory review, contractual remedies and ASIC investigative and licence enforcement powers rather than creating an independent new penalty regime in the instrument itself.

Interaction with the Corporations Act 2001

Legal basis and embedding in Chapter 5C: The instrument is made under paragraphs 601QA(1)(a) and (b) of the Corporations Act (cl 3) and modifies the application of Chapter 5C by inserting sections 601FCAA and 601FCAB. Those sections now form part of the statutory custody and scheme property framework for registered managed investment schemes.
Relation to AFSL conditions that refer to ASIC PS 133 or RG 133: The instrument provides that a responsible entity that complies with 601FCAA will be taken to comply with any Australian financial services licence conditions that refer to ASIC Policy Statement 133 or ASIC Regulatory Guide 133 as applying on a certain date, except if the condition applies because the entity is a trustee company (601FCAA(12)). This substitutes statutory standards for earlier guidance‑based compliance expectations.
Interaction with reporting obligations under s 912DAA: The instrument references s 912DAA in 601FCAB(2)(p) by requiring custodians to report to ASIC within 10 business days if they suspect the responsible entity has breached obligations to report a reportable situation under s 912DAA. This creates an explicit operational link between custodial arrangements and the Corporations Act chapter on reporting obligations.

Contract law and contractual obligations

Mandatory contractual content: The instrument compels responsible entities to ensure that custodian agreements and agreements between custodians and sub‑custodians contain specified terms (601FCAB(2)). This blends statutory duty and contract law by prescribing the minimum contractual text and therefore affects the negotiation space, enforceability and remedies available under those agreements.

Cross‑border law and foreign legal regimes

Foreign legal impossibility and alternative protections: The instrument recognises situations where trusts are unknown or not reasonably practicable in foreign jurisdictions and allows alternative approaches provided the responsible entity documents its satisfaction that the alternative provides reasonably effective protection in case of insolvency (601FCAA(1)(a)(i)-(ii), 601FCAB(1)(b), (2)(m)(i)). This explicit accommodation interacts with private international law and local property law in foreign jurisdictions. It requires responsible entities to document the legal basis for foreign custody arrangements and to weigh insolvency protection under foreign law.

Privacy, confidentiality and whistleblowing interactions

Confidentiality obligations and ASIC communications: Custodians must not disclose confidential information except as required by law or to ASIC or where the responsible entity directs in writing (601FCAB(2)(o)). At the same time, responsible entities must not include agreement provisions that would require the custodian to disclose to them that the custodian has communicated with ASIC about a suspected contravention (601FCAB(5)). These provisions interact with whistleblowing, ASIC reporting duties and any applicable privacy law; they protect custodial communications with ASIC from being contractually withheld or disclosed.

Regulatory overlap with banking and deposit‑taking laws

Deposit accounts and regulated deposit takers: The instrument permits certain discretionary decisions in relation to holding deposit accounts with regulated deposit‑taking corporations, where balances are payable on demand, to sit within the narrow exceptions for custodial staff who may make certain limited discretionary decisions (601FCAA(2)(b), (13)). The omnibus account exemption specifically contemplates deposit taking facilities (cl 5(1)(b)). These interactions will require coordination between custodians, deposit takers and responsible entities to ensure compliance with both the custody standards and banking regulatory requirements.

Auditing and accounting law

Audit access and records: The instrument requires that records are kept to enable convenient and proper audit by the scheme auditor and that custodians must provide auditors with reasonable access (601FCAA(9), 601FCAB(2)(h)). This places a statutory minimum on documentation and access requirements that interact with auditing standards and financial reporting obligations.

Other potential touchpoints

Insolvency law: The requirement that responsible entities document that assets are held in a way that provides reasonably effective protection in case of insolvency (601FCAA(1)(a)(ii)) creates an explicit nexus with insolvency rules in foreign jurisdictions. Responsible entities must consider insolvency prioritisation and the legal form of holdings when assessing compliance.
Business continuity and operational risk regimes: The mandate for custodians to maintain business continuity arrangements proportionate to the nature, scale and complexity of their business (601FCAB(2)(n)) dovetails with obligations under prudential or operational resilience regimes where these apply to custodians or to financial market infrastructures.

This instrument, ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024/16, contains an explicit commencement and sunset timeline and shows no earlier amendments within the provided text.

Made date and commencement: The instrument is made by a delegate of ASIC, dated 21 March 2024 (front page), and it commences on the day after it is registered on the Federal Register of Legislation (clause 2).
Authority: It is made under paragraphs 601QA(1)(a) and (b) of the Corporations Act 2001 (clause 3).
Repeal (sunset): The instrument is repealed at the start of 1 April 2029 (clause 6). The repeal clause makes this a time‑limited instrument with a fixed expiry slightly more than five years after the date shown on the instrument.
No prior amendments recorded in the instrument: The instrument text itself is framed as a stand‑alone insertion into Part 5C.2 and does not contain any internal amendment history or references to earlier versions of the same instrument.
Relationship to prior ASIC guidance: The instrument contains an express statutory equivalence to compliance with certain AFSL licence conditions that refer to ASIC Policy Statement 133 or Regulatory Guide 133 as applying on a certain date (601FCAA(12)). That clause indicates an intent to migrate obligations previously articulated in ASIC policy or regulatory guides into statutory provisions, but the instrument itself does not record the date of those guidance documents or an amendment trail for them.

Practical implications of the amendment framing

Time‑limited nature suggests review: The scheduled repeal gives a bounded regulatory window. Responsible entities and custodians should expect that the statutory regime is intended to be reviewed or reconsidered before that date, and that ASIC may use the statutory period to assess practical outcomes under the inserted provisions.
Transition considerations: The instrument does not include transitional provisions in the text provided. Responsible entities must therefore read the commencement clause (clause 2) and assess the need to implement policies, agreements and processes promptly following commencement, unless ASIC issues transitional guidance elsewhere. The absence of transitional clauses in the instrument itself means that existing contractual arrangements may need to be amended to meet the new statutory minima.

The instrument text does not record any cases, judicial interpretations, or litigation history. There are no named court decisions, tribunal determinations, or precedent authorities in the instrument. Consequently:

No reported cases interpret the newly inserted sections within the instrument text.
There is no judicial history or administrative tribunal guidance included in or attached to the instrument.

Practical consequences

First movers and enforcement: Because this is novel statutory text replacing or supplementing ASIC guidance, disputes over interpretation (for example, what constitutes "reasonably effective protection in case of insolvency", or when it is "not reasonably practicable" for a sub‑custodian to comply) will likely be litigated or settle in commercial disputes, contractual proceedings or be subject to ASIC enforcement action. Those disputes will create the first instances of litigation history that practitioners will need to follow.
Contract drafting uncertainty: Absent litigation or authoritative regulatory guidance, parties must be cautious when drafting agreements to implement these obligations. Responsible entities and custodians should document the intended operation of clauses such as the 13‑monthly certification, reconciliation frequency, and termination mechanics to reduce contestable ambiguity.
ASIC directions and reports: The instrument allows ASIC to direct reports on the effectiveness of processes (601FCAA(11)(b)). ASIC's use of that power may produce evidence that later informs litigation or regulatory proceedings.

Because the instrument is new and time‑limited, expect early disputes over interpretation to be resolved either by ASIC enforcement and guidance or, over time, by court decisions which will establish the litigation history not supplied in the instrument.

The instrument creates a detailed regulatory framework with many specific obligations that produce several practical pitfalls. Below are concrete items practitioners and compliance teams should watch for, each tied to the statutory text.

Trust versus alternative structures in foreign jurisdictions

Pitfall: Assuming a simple written explanation suffices where local law does not recognise trusts. The instrument permits exceptions where trusts are not known to the law or not reasonably practicable, but it requires the responsible entity to document that it is satisfied the holding provides "reasonably effective protection in case of insolvency" and to record the basis of that satisfaction (601FCAA(1)(a)(i)-(ii)). This is a fact‑specific assessment likely requiring legal opinion and business evidence. Skimping on documentation will leave the responsible entity exposed.

Narrow definition of custodial staff and permitted discretionary decisions

Pitfall: Misclassifying employees and allowing investment staff to perform custodial tasks. The definition of custodial staff excludes persons making investment or trading decisions except for narrow discretionary decisions relating to holding deposit accounts payable on demand and FX decisions (601FCAA(13)). Firms that blur functional lines without formal segregation risk non‑compliance with the organisational and conflict frameworks in 601FCAA(2).

Reconciliation frequency and operational burden

Pitfall: Treating "commercial practice" as a blanket excuse for less frequent reconciliation. The instrument requires reconciliation each business day or, where ordinary and reasonable commercial practice justifies less frequent reconciliation, that practice must be applied (601FCAB(2)(g); cl 5(2)(d) for omnibus). Firms that adopt less frequent reconciliations need contemporaneous evidence of industry practice and must document the rationale.

Seven year retention and 13 month review cadence

Pitfall: Missing the retention or review windows. Policies must be retained for seven years and reviewed no less frequently than every 13 months (601FCAA(5), (11)(a); cl 5(2)(a)-(b)). Reviews timed to a calendar year without attention to the 13 month window may inadvertently create compliance gaps.

Limitations on encumbrances and restrictions on unpaid fees

Pitfall: Accepting custodian security that covers unpaid fees. Agreements must prevent custodians from taking security that covers their unpaid fees (601FCAB(2)(e)), and any permitted security interest requires a written record of reasons kept for seven years (601FCAB(4)). Firms that accept such encumbrances without contemporaneous written justification will breach the statutory requirement.

Termination mechanics and possible stranded assets

Pitfall: Overlooking transfer mechanics or costs on termination. The agreement must provide that, on termination, scheme property is transferred within a reasonable period and permit termination without payment other than accrued entitlements if the entity reasonably believes the custodian has materially breached (601FCAB(2)(k), (j)). Responsible entities must prepare for the operational reality of transferring holdings and associated costs; failing to plan materially increases execution risk.

Custodian certification and disclosure exceptions

Pitfall: Misinterpreting the certification carve‑outs. Custodian certifications every 13 months must attest compliance except in relation to matters disclosed in writing to the responsible entity or matters the custodian reasonably believes are trivial (601FCAB(2)(b)). Relying too readily on the "trivial" carve‑out without objective criteria invites disagreements and may undermine reliance on the certification.

Confidentiality and reporting interplay

Pitfall: Including contractual terms that inadvertently restrict custodial communications with ASIC. Responsible entities cannot include provisions requiring custodians to disclose to them that the custodian has communicated with ASIC about suspected contraventions (601FCAB(5)). Firms must avoid drafting nondisclosure clauses that have this effect.

Omnibus exemption operational constraints

Pitfall: Treating the omnibus exemption as permission to ignore segregation risks. The exemption allows certain pooled holdings not to be held separately, but it comes with strict conditions including daily reconciliation or commercially reasonable frequency, voting rights protection, and remedying insufficiencies within two business days (cl 5(2)(d)-(f)). Responsible entities relying on this exemption must document the policy, review it every 13 months, and retain records for seven years (cl 5(2)(a)-(b)).

Cross‑border enforcement and impracticability

Pitfall: Assuming custodial protections accepted in one jurisdiction will be judged adequate by ASIC. The instrument allows alternatives where compliance is not reasonably practicable abroad, but they must be documented and justified (601FCAA(4), 601FCAB(1)(b)). Firms that rely on foreign practice without robust legal and insolvency assessments risk post‑hoc regulatory dispute.

Record adequacy for auditors

Pitfall: Underestimating auditability requirements. The instrument requires records be kept so holdings can be conveniently and properly audited (601FCAA(9), 601FCAB(2)(h)). Poorly structured or inaccessible record systems will frustrate auditors and invite findings of non‑compliance.

Temporal scope and repeal

Pitfall: Treating the instrument as permanent. The instrument is repealed on 1 April 2029 (cl 6). Firms should not assume these statutory minima are immutable and must plan governance and contract cycles keeping the sunset in mind.

Below is a practical compliance checklist and recommended implementation steps that map directly to each core statutory obligation. Use this as a working roadmap for responsible entities and custodians.

Legal mapping and gap analysis (immediate)

Map current custody arrangements against each statutory clause in 601FCAA and 601FCAB.
Identify assets held directly by the responsible entity, by custodians, and by sub‑custodians.
Identify any assets held in jurisdictions where trusts are not recognised or where practical compliance is constrained.

Documentation for foreign law exceptions (if applicable)

For any assets in jurisdictions where trusts are not known or practical, obtain a legal opinion and document in writing the basis on which the responsible entity is satisfied that the holding provides reasonably effective protection in insolvency (601FCAA(1)(a)(i)-(ii)).
Retain these documents for seven years and ensure they form part of the entity’s compliance file.

Custodial agreements and amendments (contracting)

Amend or replace existing custodian agreements to include the mandatory provisions in 601FCAB(2)(a)-(p). Key required clauses include:
- Rights for ongoing review and monitoring and performance standards (2(a)).
- Custodian certification every 13 months (2(b)).
- Acknowledgement that scheme assets are held for the responsible entity (2(c)).
- Clear instruction protocols (2(d)).
- Prohibition on encumbrances covering unpaid fees and reasons for any permitted encumbrances recorded and retained for seven years (2(e), (4)).
- Records and transaction authorisation procedures (2(f)).
- Reconciliation processes (daily or commercial frequency) and reporting on unreconciled items (2(g)).
- Auditor access clauses (2(h)).
- Advance notice of sub‑custodian appointments (2(i)).
- Termination rights and transfer mechanics (2(j), (k)).
- Notification of material breaches to board/compliance committee (2(l)).
- Sub‑custodian engagement standards and liability cascading for related bodies corporate (2(m)).
- Business continuity obligations (2(n)).
- Confidentiality limits and protection for ASIC communications (2(o), (5)).
- Custodian obligation to report to ASIC if it suspects a breach of s 912DAA by the responsible entity (2(p)).

Internal governance policies and board approvals

Draft a custody policy that addresses:
- Why the holding approach is in members’ best interests and the factors considered (601FCAA(10)).
- The process for selecting custodians, monitoring performance, and dealing with conflicts of interest.
- Segregation of custodial staff and investment functions, reporting lines and escalation protocols (601FCAA(2)(b)-(e)).
Obtain board or authorised senior manager approval and retain signed approvals as part of records (601FCAA(2)(c)(i)).

Organisational segregation and role definitions

Define and document roles that qualify as custodial staff consistent with the statutory definition (601FCAA(13)).
Implement structures ensuring custodial staff are separated from investment decision makers, including physical or operational separation during performance of duties (601FCAA(2)(e)(iii)).

Training, competence and resourcing

Implement training programs to ensure custodial staff have necessary knowledge and maintain ongoing education (601FCAA(3)(a)-(b)).
Provide custodial staff with necessary time, authority and resources to carry out duties (601FCAA(3)(c)-(d)).

Reconciliation, record keeping and audit readiness

Establish reconciliation procedures to be performed each business day for assets that require daily reconciliation, or document commercial practice where less frequent reconciliation is ordinary and reasonable (601FCAB(2)(g); cl 5(2)(d) for omnibus accounts).
Ensure records are maintained so holdings can be conveniently and properly audited by scheme auditors, and keep records for seven years (601FCAA(5), (9); 601FCAB(2)(f), (h)).

Policies for omnibus accounts (if applicable)

If relying on the omnibus exemption, prepare and retain a specific written policy setting out reasons and risk analysis, review it at least every 13 months, and retain review records for seven years (cl 5(2)(a)-(b)).
Ensure daily reconciliation (or documented commercial frequency), entitlement records, voting rights preservation, and procedures to remedy insufficiencies by the second business day (cl 5(2)(c)-(f)).

Monitoring, certification and independent reporting

Require custodians to provide the 13‑monthly certification described in 601FCAB(2)(b).
Implement a process to monitor custodian performance, ensure custodians monitor sub‑custodians, and obtain written evidence of monitoring (601FCAA(7), (11)).
When appointing a custodian or transferring holdings between responsible entity and custodian, obtain an independent report confirming identification and transfer of assets unless the responsible entity reasonably believes obtaining the report is not in members’ best interests and documents reasons for that belief (601FCAA(6)).

Contractual liability and indemnity review

Ensure agreements contain reasonable liability provisions and do not exclude liability for direct loss other than in reasonable circumstances; include indemnities where appropriate (601FCAB(3)).

Breach reporting and escalation

Ensure custodian arrangements include clauses requiring notification of material or systemic breaches to the board or compliance committee within a reasonable time (601FCAB(2)(l)).
Establish internal procedures to respond to ASIC directions requiring reports on the effectiveness or reasonableness of processes (601FCAA(11)(b)).

Business continuity and operational resilience

Ensure custodians have business continuity arrangements reasonable for the nature, scale and complexity of their activities (601FCAB(2)(n)).

Review schedule and record retention

Implement a 13 month review cycle for policies and processes, and maintain all relevant documentation for seven years (601FCAA(11)(a); 601FCAA(5)).

Practical transitional checklist

Audit existing custody contracts against the mandated clauses and plan amendments, including negotiation with custodians and sub‑custodians.
Budget for potential increased costs from custodians to meet certification, reconciliation and business continuity demands.
Coordinate with auditors to ensure access protocols and documentation formats meet auditability requirements.

Evidence trail and defensibility

For every material decision (appointment, termination, reliance on foreign law exceptions, acceptance of encumbrances), create contemporaneous written records showing the reasons, approvals and, where relevant, legal advice. Retain these for seven years per the statute (601FCAA(5), 601FCAB(4)).

By structuring programme activities around the statutory provisions cited above, responsible entities and custodians will create a clear audit trail aligned with the new statutory minima. The instrument places heavy emphasis on documented policies, procedural controls, frequent review and demonstrable monitoring, so the compliance approach should prioritise documentary evidence and operational routines.

ASIC Corporations (Asset Holding Standards for Responsible Entities) Instrument 2024/16

Plain English Summary

Deep Dive

What it does

Current sections