ASIC Corporations (Financial Requirements for Responsible Entities, IDPS Operators and Corporate Directors of Retail CCIVs) Instrument 2023/647

The instrument revolves around a small set of interlocking financial-safety concepts and precise definitional gates. Those main concepts are:

• Covered licensee (who the regime applies to). Section 912AA(1) defines the scope: an Australian financial services licence holder authorised to operate a registered scheme, an IDPS or a retail CCIV, excluding certain APRA-regulated bodies (where paragraph 912A(1)(d) does not apply), market participants and clearing participants. The exclusion of market/clearing participants recognises parallel regimes for market participants (subsection (1)(b)-(c)).

• Tailored cash needs requirement. Subsection (3) requires a projection of cash flows for at least the next 12 months, quarterly director approval, documented calculations and assumptions, update triggers (change to cover horizon or a material suspicion of deviation) and a written determination whether the licensee will have access to enough financial resources and will hold specified cash or cash equivalents during the projection period (subsection (3)(a)-(e)).

• Net tangible assets (NTA) floor. Subsection (4) prescribes NTA minima with two tiers:

  • If subsection (5) applies (or the licensee does not operate any of the relevant products), NTA must be at least the greatest of: $150,000; up to $5 million equal to 0.5% of average value of fund assets; and 10% of average revenue (subsection (4)(a)(i)-(iii)).
  • Otherwise (i.e. if not satisfying subsection (5) and operating such products), NTA must be at least the greater of $10 million and 10% of average revenue (subsection (4)(b)).

• Custodial and asset-location relief. Subsection (5) provides conditions under which the lower tier (the $150,000/0.5%/10% triad) applies. It does so by testing whether each scheme, IDPS or retail CCIV operated by the licensee has its fund assets held by custodians/sub-custodians/eligible custodians, or where assets are Tier $500,000 class assets held by specified parties, or where any remaining fund assets are special custody assets satisfying prescribed criteria. The text sets out precise requirements for custodians, including written assurances and auditor reports, and time limits (subsections (6)-(7B)).

• Minimum cash and liquid assets. Subsection (8) fixes liquidity requirements: cash or cash equivalents at least the greater of $150,000 and 50% of the required NTA under subsection (4); and liquid assets that are at least 100% of the required NTA. The instrument also specifies that money held in an account for purposes of section 981B cannot be counted towards these cash requirements (subsection (8)).

• Audit opinion and lodgement. Subsections (9)-(10) require an annual audit opinion by a registered company auditor addressed to both the licensee and ASIC. That opinion must state whether the licensee complied with the projection approval, NTA and cash/liquid assets requirements, and whether the auditor has reason to believe the licensee lacks adequate systems to manage the risk of insufficient financial resources. The opinion must be lodged with ASIC together with the balance sheet required by s 989B for each financial year (subsection (9)(a), (10)(a)).

• Counting and measurement rules. The instrument provides detailed definitions that determine what counts toward NTA, adjusted assets and liabilities, cash or cash equivalents, liquid assets, excluded assets, eligible undertakings, adequately secured assets and fund assets (subsection (11) and following definitions). For instance, excluded assets exclude intangible assets (including deferred tax assets) and receivables from associates, subject to narrow exceptions (definition of excluded assets).

• Scope inclusions for managers with wholesale equity trustees. Subsections (2A)-(2B) permit a manager who both holds an AFR licence for wholesale equity financial services and meets specified ASIC Instrument conditions to include the assets, liabilities, cash inflows and outflows of eligible trustees who are related bodies corporate in the manager’s calculations, effectively consolidating trustee balances for compliance.

The regime therefore interlocks measurement, documentary and audit obligations. Definitions calibrate which items may be used to meet requirements and which are excluded or only count in limited circumstances. Custodian assurances and external auditor reports play an enabling role when a licensee seeks to rely on custodial arrangements to reduce the NTA floor.

The instrument targets a defined sub-set of financial services licensees. The primary affected entities are licence-holders that:

• hold an Australian financial services licence that authorises them to operate a registered scheme, or an IDPS, or a retail CCIV (see s 912AA(1)(a)(i)-(iii)); and
• are not excluded because they are a body regulated by APRA that is not required to comply with paragraph 912A(1)(d), nor a market participant, nor a clearing participant (s 912AA(1)(b)(i)-(iii)).

Consequently, responsible entities of registered managed investment schemes, operators of IDPS product platforms and corporate directors of retail CCIVs fall squarely within the regime when they carry the relevant authorisation on their AFS licence. The instrument explicitly captures managers that provide wholesale equity financial services under the ASIC Corporations (Wholesale Equity Scheme Trustees) Instrument 2017/849 where conditions are met, but only where the manager is authorised and the assets/liabilities of eligible trustees are related bodies corporate (subsections (2A)-(2B)).

Excluded or indirectly affected parties include:

• Bodies regulated by APRA that are outside the 912A(1)(d) requirement, market participants and clearing participants, which the instrument expressly omits (s 912AA(1)(b)). The instrument therefore presumes parallel prudential or market-specific regulatory regimes apply to those entities and removes duplication.

• Custodians and sub-custodians. While not the primary addressees, custodians become consequentially affected because a licensee’s ability to rely on the lower NTA tier depends on custodial arrangements, written assurances and auditor reports about custodial compliance (subsections (5)-(7B)). Eligible custodians are defined and include Australian ADIs, market participants, clearing participants and approved sub-custodians (definition of eligible custodian).

• Auditors and providers of eligible undertakings. Registered company auditors are explicitly given a role in producing opinions about licensee compliance each financial year (subsection (9)). Eligible providers (for eligible undertakings) include Australian ADIs, governments, approved foreign deposit-taking institutions, approved entities or Australian CS facility licensees (defined under eligible provider), and undertakings by such providers can be counted as cash equivalents if they meet the instrument’s conditions (definition of eligible undertaking; definition of cash or cash equivalents paragraph (c)-(d)).

Who ultimately bears the financial burden: the licensees themselves. The instrument increases capital and liquidity requirements these licensees must demonstrate and document. It requires board-level sign-off on projections (subsection (3)(b)), audit evidence lodged with ASIC (subsections (9)-(10)), and potentially additional NTA or liquidity buffers where custodial protections are not present (subsection (4)). Custodians may face administrative burdens providing assurances and auditor reports under subsections (6)-(7B). ASIC will be the decision-maker for approvals tied to subordinated debt, eligible provider status for foreign institutions, and for any ASIC directions to lodge opinions for specific periods (subsection (10)(b) and definitions relating to eligible provider and approved foreign market).

Behavioural consequences likely to follow from the instrument’s structure are (1) licence-holders managing cash and liquidity proactively to satisfy the projection and holdings rules; (2) potential restructuring of custodial arrangements to qualify for lower NTA thresholds; (3) seeking eligible undertakings or approved subordinated debt to affect adjusted assets/liabilities; and (4) administrative changes to accounting, audit and reporting to be able to deliver the required audit opinion with the s 989B balance sheet.

The instrument establishes a set of affirmative duties and procedural rights for covered licence-holders and related parties. Duties flow principally from subsection 912AA and its constituent parts. Rights are mostly derivative, such as rights to rely on custodian assurances or to include eligible trustee balances where permitted.

Principal duties:

• Prepare, maintain and approve a 12‑month cash-flow projection. The licensee must prepare a projection of its cash flows over at least the next 12 months based on reasonable estimates of future events (subsection (3)(a)). Directors must approve that projection at least once a quarter as satisfying the requirement (subsection (3)(b)). The calculations and assumptions used must be documented with reasons (subsection (3)(c)). The projection must be updated if the projection no longer covers at least 12 months or there is reason to suspect material deviation (subsection (3)(d)). Based on the projection, the licensee must document whether it will have access to enough financial resources and whether it will hold in cash or cash equivalents at all times during the period an amount equal to or greater than the current cash requirement under subsection (8) (subsection (3)(e)).

• Maintain minimum NTA. The licensee must hold NTA at all times equal to either the graduated lower tier (greatest of $150,000; up to $5 million being 0.5% of average fund assets; and 10% of average revenue) where subsection (5) applies or the licensee does not operate any registered schemes, IDPSs or retail CCIVs (subsection (4)(a)); or at least the greater of $10 million and 10% of average revenue where subsection (5) does not apply (subsection (4)(b)).

• Maintain minimum cash and liquid assets. The licensee must hold at all times cash or cash equivalents at least the greater of $150,000 and 50% of the required NTA (subsection (8)(a)); and liquid assets of at least 100% of the required NTA (subsection (8)(b)). The instrument specifies that money held in an account for the purposes of section 981B is not countable towards these requirements (subsection (8)).

• Obtain and lodge an auditor’s opinion. For each financial year, the licensee must lodge with ASIC an audit opinion by a registered company auditor addressing compliance with the projection approval, NTA, cash holdings, and systems for managing the risk of insufficient resources, among other matters (subsection (9)). The audit opinion is to be lodged with the balance sheet required by s 989B (subsection (10)(a)).

• When relying on custodial relief, obtain custodian assurances and auditor reports. If subsection (5) is to be relied on to qualify for a lower NTA tier, the licensee must ensure custodians satisfy requirements in subsection (7) and obtain written assurance within the preceding 13 months that the custodian complies with subsection 912AC(3), (4) and (7) and paragraph 912AC(8)(a), plus obtain a copy of a registered company auditor’s report satisfying subsection (7)(b), subject to transitional carve-outs in (7A)-(7B).

• Document and update all calculations, assumptions and determinations as required by the tailored cash needs provision and relevant measurement rules (subsection (3)(c), (3)(d) and the definitions for adjusted assets/liabilities).

Rights and enabling mechanisms:

• Deemed compliance with licence conditions. A licensee that complies with section 912AA is taken to comply with licence conditions that relate to a cash needs requirement, net tangible assets applicable because it is a responsible entity or authorised operator of an IDPS or retail CCIV, and the obligation to lodge an auditor’s opinion insofar as the opinion covers a part of the period during which the licensee was covered by subsection (1) (subsection (2)). This creates a rights-like benefit: compliance with the specified framework is treated as satisfying certain licence conditions.

• Ability to include related eligible trustee balances. Managers authorised for wholesale equity services and meeting specified conditions can include assets, liabilities and cash flows of eligible trustees that are related bodies corporate in their compliance calculations (subsections (2A)-(2B)). This provides a consolidation right for qualifying groups.

• Ability to rely on eligible undertakings and approved subordinated debt. Definitions allow eligible undertakings (paragraphs in the definitions) and liabilities under approved subordinated debt (definition of adjusted liabilities paragraph (a)) to be treated favourably for adjusted assets/liabilities calculations where ASIC has approved subordinated debt or an undertaking meets the eligible-provider definition and relevant conditions.

• Discrete custodian pathways. Where custodial arrangements meet the detailed conditions in subsections (5)-(7B), a licensee can access the lower NTA tier, meaning custodial set-up is a lever a licensee can use to reduce capital-like requirements.

Operational duties for third parties:

• Custodian obligations to produce written assurances and auditors’ reports when needed by licensees seeking relief under subsection (5) (subsections (6) and (7)). The instrument allows transitional exceptions where a custodian has not previously provided a report (subsections (7A)-(7B)).

• Auditors must produce opinions that directly address the matters set out in subsection (9) and the custodian-auditor report matters in subsection (7)(b) when requested.

These duties are precise and procedural. They allocate responsibility to licensees to maintain minimum balance-sheet metrics, to secure custodian and audit evidence if they want to rely on custodial reliefs, to document projections and to obtain and lodge the required auditor opinions with ASIC. The deemed-compliance provision in subsection (2) operates as the primary right conferred: fulfil these duties and you will be treated as complying with certain licence conditions.

The instrument primarily operates by establishing licence-linked obligations, reporting obligations and audit gates; it does not itself specify new pecuniary penalties or criminal offences. Enforcement therefore occurs through the broader supervisory and enforcement architecture that applies to licence conditions and statutory reporting under the Corporations Act as modified by the instrument. The instrument embeds several mechanisms that create triggers and pathways for regulatory action and supervisory oversight:

• Audit-and-lodgement trigger. Licence-holders must lodge an annual auditor opinion with ASIC concurrently with the balance sheet required under s 989B (subsection (9)-(10)(a)). The auditor’s opinion must address compliance with the projection approval requirement (subsection (3)(b)), the NTA obligations (subsection (4)) and the cash/liquid asset requirements (subsection (8)), and must state whether the auditor has reason to believe the licensee lacks adequate systems for managing the risk of insufficient financial resources (subsection (9)(a)-(b)). A qualified or adverse audit opinion, or a failure to lodge the required opinion, provides ASIC with documentary grounds to investigate or take regulatory action under Part 7.6 as it applies to the licensee (the instrument applies Part 7.6 subject to the inserted section, s 5).

• Directions for additional lodgement. Subsection (10)(b) allows ASIC to direct that an audit opinion be lodged for any period and to set the lodgement date, which creates an enforcement lever for ASIC to require out‑of-cycle assurance where it considers it necessary.

• Custodian reporting link. The instrument requires custodians relied upon for NTA relief to provide written assurance within the preceding 13 months that certain requirements in section 912AC are met and to have an auditor’s report covering custodial compliance (subsection (7)). Subsection (7)(a)(ii) references that if the custodian would be required to lodge a report under section 912DAA relating to a contravention of subsections 912AC(3), (4) or (7), the custodian must immediately notify the licensee or retail CCIV. That cross-reference creates a notification pathway that will feed into supervisory oversight.

• Deeming and conditional compliance. Subsection (2) makes compliance with 912AA operate as compliance with corresponding licence conditions. By the same token, failing to comply with section 912AA means a licensee cannot rely on that deeming outcome; lack of compliance therefore exposes the licensee to ASIC action for contravention of licence conditions as they apply under Part 7.6 (the instrument itself does not recite the specific Part 7.6 powers, but it makes these obligations part of the regulatory fabric).

• ASIC approval gates. Several definitional or measurement concessions require ASIC’s prior written approval to be treated favourably. Examples include approval for subordinated debt to be excluded from adjusted liabilities (definition of adjusted liabilities paragraph (a)) and approval of eligible providers for undertakings (eligible provider and eligible undertaking definitions). Those approval powers create administrative control points where ASIC’s view will determine whether certain items can be relied upon for compliance.

What the instrument does not itself state about enforcement:

• It does not, in its text, specify penalty amounts, civil or criminal sanctions, or specific administrative penalties for breaches. Instead, enforcement is framed through the general supervisory framework of the Corporations Act insofar as the instrument makes Part 7.6 apply with the new section.

• It does not include express expedited enforcement processes in the text beyond enabling ASIC to direct lodgement of audit opinions for additional periods (subsection (10)(b)).

Practical enforcement risks and consequences that arise from the instrument’s mechanics include: the prospect of adverse audit opinions triggering regulatory scrutiny, the loss of the deemed compliance protection if the licensee misstates NTA or fails to maintain required cash/liquid asset levels, and the need for custodians to provide contemporaneous assurances and auditor reports if licensees wish to rely on custodial reliefs. The exact suite of civil penalties, administrative actions (such as licence condition variation, suspension or cancellation), or other remedies remains governed by the broader Corporations Act and ASIC’s exercise of powers under that Act rather than by a discrete schedule of sanctions inside this instrument.

This instrument operates by amending how Part 7.6 of the Corporations Act applies to certain licensees. Therefore its legal effect and practical operation are heavily cross-referenced to and dependent on several other statutory provisions and ASIC instruments. The key intersections identified in the text are:

• Part 7.6 of the Corporations Act. Section 5 expressly makes Part 7.6 (other than Divisions 4 and 8) apply in relation to certain licensees as if modified by inserting section 912AA. That means the enforcement and licence condition architecture of Part 7.6 applies to the new obligations, and compliance with 912AA is treated as compliance with corresponding licence conditions (subsection (2)). The instrument itself does not duplicate Part 7.6’s powers or penalties; it integrates with that Part.

• Section 912A(1)(d) reference and APRA-regulated bodies. The instrument excludes certain APRA-regulated bodies (s 912AA(1)(b)(i)) that are not required to comply with paragraph 912A(1)(d). This references existing regulatory distinctions under the Act and presumes APRA’s prudential framework may render these licence-linked requirements unnecessary or duplicative for those entities.

• Section 912AC (custodial requirements) and section 912DAA (reporting of contraventions). The custodian-related conditions in subsection (5) and the custodian assurance/auditor report requirements in subsection (7) are expressed with reference to subsection 912AC requirements (for example, subsection (7)(a) requires written assurance that the custodian complies with 912AC(3), (4) and (7) and paragraph 912AC(8)(a)). The instrument notes section 912AC is "notionally inserted" by a different ASIC instrument (ASIC Corporations (Financial Requirements for Custodians or Depository Service Providers) 2023/648), indicating interdependence among ASIC instruments. Subsection (7)(a)(ii) references a custodian’s obligation under s 912DAA to lodge a report with ASIC relating to contraventions and requires prompt notification to the licensee or retail CCIV where that applies.

• ASIC Corporations (Wholesale Equity Scheme Trustees) Instrument 2017/849. Subsections (2A)-(2B) allow certain managers authorised under that ASIC Instrument to include eligible trustees’ financials in the manager’s own calculations, subject to related-body-corporate tests and instrument conditions. This creates an interface with that 2017/849 instrument.

• ASIC Corporations (Definition of Approved Foreign Market) Instrument 2017/669. The definitions employ the term approved foreign market, noting that its meaning is provided by section 9 as notionally inserted by the 2017/669 instrument. This affects what financial products count as "regularly traded" in the adequately secured definition (subsection (11), adequately secured paragraph (a)(i)(A)(I)-(II)).

• Section 981B. Subsection (8) expressly disallows counting money in an account held by the licensee for the purposes of section 981B towards the cash or cash equivalents requirement. This is a direct interaction with provisions governing certain trust accounts or scheme money under the Act.

• Section 989B. Subsection (10)(a) requires the audit opinion to be lodged with the balance sheet that the licensee is required to lodge under section 989B. The instrument therefore ties the timing of the opinion to existing financial reporting lodgement regimes under Chapter 2M as reflected in s 989B.

• Definitions and accounting treatment under Chapter 2M. The definitions of adjusted assets, adjusted liabilities and value of fund assets repeatedly refer to how items "would appear on a balance sheet ... as part of a financial report under Chapter 2M if the licensee were a reporting entity." Thus the instrument borrows Chapter 2M accounting concepts even for non-reporting entities and instructs how to account for items in an adjusted-balance-sheet style calculation.

• Other licence/market rules. The instrument excludes market participants and clearing participants (s 912AA(1)(b)(ii)-(iii)) where those entities are already required to comply with market operating rules or ASX Clear etc. It also defines market participant and clearing participant by reference to section 761A and specific market operators, tying its scope to the market-regulatory field.

In short, this instrument does not operate in isolation. It imports and cross‑refers to other ASIC instruments and several Corporations Act provisions. That means its implementation requires coordination with: (a) custodial standards established elsewhere (912AC and the related custodian instrument); (b) existing financial reporting and lodgement schedules under Chapter 2M and s 989B; (c) definitions and approvals for foreign markets and eligible providers; and (d) the overarching Part 7.6 enforcement framework. Where the instrument uses the phrase "as if ...", it modifies the existing legislative scaffolding rather than creating a separate parallel compliance regime.

The instrument text itself contains the following discrete elements of amendment history and temporal operation:

• Instrument identity and making date. The instrument is the ASIC Corporations (Financial Requirements for Responsible Entities, IDPS Operators and Corporate Directors of Retail CCIVs) Instrument 2023/647 and was made on 30 August 2023 by Leah Sciacca as a delegate of ASIC (cover pages and initial paragraphs).

• Commencement. The instrument commences on the day after it is registered on the Federal Register of Legislation (s 2). The instrument text does not record the registration date beyond the making date; practitioners should check the Federal Register of Legislation to confirm the commencement date triggered by registration.

• Authority. The instrument is made under paragraph 926A(2)(c) of the Corporations Act 2001 (s 3). The instrument does not purport to amend primary legislation; it inserts an operative section into the application of Part 7.6 by way of an instrument made under the delegated power.

• Repeal. The instrument itself contains a repeal provision: it is repealed at the start of 1 October 2028 (s 6). The instrument is therefore temporary unless earlier superseded or extended. The mid‑to‑long‑term regulatory planning for affected licensees should therefore incorporate the 2028 sunset.

• Notional cross-insertions and related instruments. The instrument repeatedly notes that certain definitions or sections are "notionally inserted" by other ASIC instruments. For example, it notes that section 912AC is notionally inserted by ASIC Corporations (Financial Requirements for Custodians or Depository Service Providers) 2023/648 and that the definition of approved foreign market is notionally inserted by ASIC Corporations (Definition of Approved Foreign Market) Instrument 2017/669. These cross-references indicate contemporaneous amending instruments that complete the reform package, and that implementation is contingent on those instrumented changes taking effect.

• No further amendments recorded in the text itself. The instrument does not list later amending instruments or transitional amendments beyond the custodial transitional carve-outs in subsections (7A)-(7B) for first custodian reports.

Because the instrument is a standalone legislative instrument that inserts section 912AA into Part 7.6 application, its amendment history within the statutory record will be visible via the Federal Register of Legislation. The instrument itself contains a fixed repeal date, making its temporal limits explicit. It also presumes certain other ASIC instruments and inserted sections exist or will exist for full functionality, meaning that the effective practical regime is a set of coordinated instruments and statutory changes rather than this instrument alone.

The instrument as provided contains no references to any litigation, judicial determinations or case law. The text does not cite or rely upon judicial interpretation or specify any past disputes. Accordingly, within the source material there is no litigation history to report.

Practically, the instrument creates new compliance and reporting duties that are likely to be susceptible to future disputes,for example, disagreements about whether particular assets qualify as excluded assets, whether a custodian’s assurance met the subsection (7) standards, or whether an auditor’s opinion was properly qualified. However, such disputes and litigation would arise only in the future and are not recorded or exemplified in the instrument text.

Where future litigation occurs, the instrument links enforcement to Part 7.6 of the Corporations Act (s 5). Any judicial consideration would therefore occur against the statutory backdrop and existing case law governing licensing conditions, ASIC’s enforcement powers, the obligations of responsible entities and auditors’ duties under the Corporations Act and professional auditing standards. None of that case law or judicial history is included in this instrument and the text does not provide examples or precedent. For now, the instrument stands as a regulatory amending instrument without attached material litigation history.

The instrument contains numerous technical features and definitional traps that can create compliance pitfalls if not understood and operationalised precisely. The principal "gotchas" to watch for, with the governing textual pointers, are:

• Deeming is conditional and limited. Subsection (2) states that compliance with s 912AA is taken to be compliance with licence conditions relating to cash needs, NTA, and the obligation to lodge an auditor opinion "to the extent the opinion is for a part of a financial year or other period during which the licensee was covered by subsection (1)". This means the beneficial deeming is time‑limited and tied to the period the licensee actually fell within scope. If authorisations change mid-year or a licensee becomes excluded or included, the coverage of the auditor’s opinion and deemed compliance can be narrower than expected.

• Counting restrictions on cash. Money in an account held by the licensee for the purposes of section 981B cannot be counted toward cash or cash equivalents for the purposes of subsection (8). Licensees that hold scheme or client money in such accounts must therefore maintain additional cash resources outside those accounts (subsection (8)).

• Excluded assets carve-outs are complex. The definition of excluded assets disallows intangible assets (including deferred tax assets) and many receivables from associates being counted as adjusted assets. There are narrow exceptions (subparagraphs (e)(i)-(v)) permitting some receivables where adequately secured, or subject to percentage caps and other conditions. Misclassification of assets or reliance on associate receivables without satisfying the exceptions will overstate adjusted assets and therefore NTA (definition of excluded assets).

• Custodian reliance is evidentiary and time‑sensitive. To access the lower NTA tier under subsection (5), a licensee must have written assurances from custodians within the preceding 13 months that the custodian complies with requirements akin to 912AC, plus a copy of a custodian auditor report within a specified look-back period (subsections (6)-(7)). A custodian that cannot produce its auditor report within the required timeframe or that is a new custodian may still have transitional relief (subsections (7A)-(7B)), but the licensee must track these timing windows carefully. A custodian contravention that triggers 912DAA reporting can also trigger notification obligations to the licensee (subsection (7)(a)(ii)).

• The NTA tier boundary is discontinuous. If subsection (5) applies, the NTA floor can be as low as $150,000 (subject to the 0.5% up to $5m and 10% of revenue tests). If subsection (5) does not apply, the licensee must hold at least the greater of $10 million and 10% of average revenue (subsection (4)). A licensee that loses the custodial-relief conditions overnight could face a sharp, discontinuous jump in required NTA. Licence-holders should model this cliff risk.

• Cash vs liquid assets overlap and double-counting rules. Subsection (8) permits "other cash or cash equivalents that are also liquid assets" to be counted for both the cash and liquid asset requirements. But the definition of liquid assets excludes the commitments in paragraph (d) of cash or cash equivalents. The precise classification of an eligible undertaking or short term cash equivalent (for example, committed facilities) therefore matters materially. Errors will distort compliance positions (subsection (8); definition of liquid assets; cash or cash equivalents).

• Measurement relies on non-reporting accounting proxies. Adjusted assets and liabilities and value of fund assets are to be prepared "as they would appear on a balance sheet ... as part of a financial report under Chapter 2M if the licensee were a reporting entity." For non-reporting licensees, this requires construction of notional financial statements compliant with Chapter 2M accounting rules. Practitioners need to ensure that the proxy accounting treatment and any fair-value or market-value determination (for non-balance-sheet recognized items) are robust and documented (definitions of adjusted assets, adjusted liabilities, value of fund assets).

• Dependence on other ASIC instruments and notionally inserted sections. The instrument references section 912AC and the definition of approved foreign market as notionally inserted by other ASIC instruments. Implementation therefore requires confirming those other instruments are in force and consistent. If the other instruments are delayed or differ from expectations, practical compliance may be affected (subsection (7) cross-references and notes).

• Auditor opinion scope and timing. The auditor opinion must state whether the licensee "complied with paragraph (3)(b) and subsections (4) and (8) and other financial requirements in conditions on its licence" and whether the auditor has reasons to believe the licensee does not have adequate systems to manage the risk of insufficient resources (subsection (9)). Auditors may need access to forward cash-flow projections, director minutes recording quarterly approvals and custodian assurances; failure to provide this evidence may result in a qualified opinion or an inability to lodge the opinion with the balance sheet under s 989B (subsection (10)(a)).

• Interaction with fees and related-party receivables. The excluded assets definition contains specific carve-outs for receivables that arise from fees or reimbursements owed by superannuation entities, IDPSs, registered schemes, or retail CCIVs, but those carve-outs are tightly worded (for example, receivables by way of fees must represent no more than the amount of fees owing for the previous 3 months, subparagraph (e)(v)(F)). Non‑compliance with these temporal caps will cause receivables to be excluded.

• Manager consolidation rights have limits. Subsections (2A)-(2B) permit a manager to include eligible trustee balances if the trustee is both an eligible trustee under the ASIC Instrument and a related body corporate. This consolidation right does not extend to unrelated trustees or trustees that are not eligible trustee entities under the ASIC Instrument, limiting consolidation strategies.

Those points represent concrete operational traps where a failure to respect timing windows, definitional boundaries, accounting proxies or custodian/auditor evidence requirements can lead to a sudden and material compliance shortfall.

Complying with the new section 912AA requires programmatic changes across governance, treasury, custodial arrangements, accounting, and external audit. The following is a concrete step-by-step compliance checklist mapped to the instrument’s text:

1. Scope and registration review

   • Determine whether the licensee is captured by s 912AA(1)(a) and not excluded under s 912AA(1)(b). Confirm whether the licensee operates registered schemes, IDPSs or retail CCIVs and whether it is a market participant, clearing participant or an APRA-regulated body that is excluded.
   • If the licensee provides wholesale equity financial services and is seeking to include eligible trustee balances, verify the manager meets the conditions in subsections (2A)-(2B) and the ASIC Instrument 2017/849 requirements.

2. Prepare the 12‑month cash-flow projection process

   • Produce a standardised cash-flow projection template that covers at least 12 months and documents assumptions and calculations explicitly (subsection (3)(a)-(c)).
   • Establish a schedule for director consideration and sign-off at least once per quarter evidencing compliance with subsection (3)(b).
   • Define triggers for updating the projection: if it ceases to cover at least 12 months or if there is reason to suspect material divergence (subsection (3)(d)), and create a process to update and re-document.

3. Document the assessment of access to financial resources

   • Use the projection to produce the written document required under subsection (3)(e) that states whether the licensee will have access to enough financial resources to meet liabilities over the next 12 months and whether it will hold the required cash/cash equivalents during the projection period.

4. NTA calculation and monitoring

   • Build a NTA calculation model that follows the adjusted assets minus adjusted liabilities methodology (definition of NTA; adjusted assets; adjusted liabilities). Ensure the model applies the exclusions in the definition of excluded assets and includes only permitted receivables.
   • Calculate average revenue and average value of fund assets according to the definitions (average revenue; average value of fund assets), including forecasting rules for the first and subsequent financial years.
   • Identify whether subsection (5) applies for each scheme/IDPS/CCIV operated. If custodial or Tier $500,000 class assets or special custody assets apply, prepare the supporting evidence.

5. Custodian and asset-location steps to access relief

   • If relying on the lower NTA tier via custodial arrangements under subsection (5)(a)-(c), obtain written assurances from custodians within the preceding 13 months that they comply with subsection 912AC(3), (4) and (7) and paragraph 912AC(8)(a) (subsection (7)(a)).
   • Obtain the required registered company auditor report for each custodian covering a period of at least 12 months ending no more than 16 months before the relevant time (subsection (7)(b)), or rely on the transitional carve-outs in (7A)-(7B) if the custodian is new or first-time provider.
   • Maintain a register of custodians, assurance dates and auditor report dates to avoid failure of the 13- and 16-month windows.

6. Cash and liquid asset management

   • Maintain cash or cash equivalents at all times equal to at least the greater of $150,000 and 50% of required NTA (subsection (8)(a)). Ensure money held in s 981B accounts is excluded and avoid double counting those balances.
   • Maintain liquid assets at least 100% of required NTA (subsection (8)(b)). Ensure liquid assets are free from encumbrances and are realisable within six months (definition of liquid assets).

7. Eligible undertakings, subordinated debt and approvals

   • If relying on eligible undertakings as part of cash or asset measures, ensure undertakings meet the definition (eligible undertaking), are irrevocable, and are provided by eligible providers (eligible provider).
   • For subordinated debt to be excluded from adjusted liabilities, obtain ASIC written approval as required by the adjusted liabilities definition paragraph (a).
   • Maintain documentation for ASIC approvals for any eligible provider, subordinated debt or other instrument that requires ASIC written approval.

8. Auditor engagement and evidence

   • Engage a registered company auditor early and provide the auditor with the quarterly director approvals, the cash-flow projection, custodian assurances and all supporting accounting calculations so the auditor can form the opinion required under subsection (9).
   • Ensure the auditor’s opinion addresses the exact matters in subsection (9)(a)-(b). Where auditors raise systems or projection concerns, implement remediation promptly.

9. Reporting and lodgement timing

   • Lodge the auditor opinion with ASIC for each financial year concurrently with the balance sheet required under section 989B (subsection (10)(a)). Track s 989B lodgement dates and align audit deliverables.
   • Be prepared to respond to ASIC directions to lodge opinions for additional periods (subsection (10)(b)). Maintain an audit calendar to accommodate potential out-of-cycle requests.

10. Governance and record-keeping

    • Put in place board-level governance for quarterly approvals and maintain minutes evidencing director sign-off (subsection (3)(b)). Keep contemporaneous documentation of all assumptions, calculations and the reasons they are appropriate (subsection (3)(c)).
    • Maintain an internal compliance file of custodian assurances, custodial auditor reports, eligible undertaking documents, subordinated debt approvals and the NTA/cash/liquid asset monitoring outputs.

11. Stress testing and cliff risk planning

    • Model scenarios where custodial relief is lost to determine the immediate NTA step-up to the higher tier and plan capital or structural mitigants (subsection (4) and subsection (5) cliff risk).
    • Stress-test liquidity to ensure the licensee can meet the cash requirement without reliance on s 981B accounts.

12. Coordinate with related ASIC instruments and practitioners

    • Confirm the status and content of related instruments such as the custodial instrument (2023/648), definition instruments (e.g. 2017/669) and the wholesale equity instrument (2017/849) since reliance on custodians and trustee consolidation depends on them.
    • Coordinate with counsel and external auditors to interpret borderline assets (for example, whether a receivable qualifies under the limited exceptions in excluded assets).

13. Transitional and termination planning

    • Note the instrument’s repeal date (start of 1 October 2028) and plan accordingly, but do not assume regulatory relief upon repeal , watch for successor instruments or legislative changes.
    • If contemplating business changes (e.g. selling a scheme or migrating custodial arrangements), plan timing to avoid unintended non-compliance during transition windows.

Following these steps and documenting each judgment will create a defensible compliance trail for ASIC and external auditors. The compliance programme should emphasise the timing sensitivities (custodian assurances/audit windows and quarterly director approvals), the detailed definitions that affect counting rules (excluded assets, cash equivalents, eligible undertakings), and the potential cliff risk if custodial or other reliefs cease to apply.