ASIC Corporations (Managed Investment Product Consideration) Instrument 2025/629

The instrument is built around a small set of core legal and operational concepts that change the mechanics of pricing interests in certain managed investment schemes. Those concepts are: (1) authorised discretions in constitutions to set issue prices and withdrawal amounts, (2) specified transactional categories where the responsible entity may set prices, (3) limits on the content and exercise of discretion, (4) procedural and documentation obligations when discretions are exercised, (5) PDS content obligations, and (6) a limited exemption from the statutory equal treatment duty.

1. Authorised discretions: The instrument permits constitutions to contain a formula or method for pricing that gives the responsible entity discretion to decide matters affecting factors in the formula, aspects of a method or adjustments (601GAB(1); 601GAC(1)). However the base formula or method must be rooted in valuation of scheme property attributable to a class of interests or market price where the interests are traded (601GAB(2); 601GAC(2)). This creates a two-tier concept: a mandatory valuation basis and a permitted managerial flexibility to select inputs and make adjustments.

2. Specified transactional categories: Section 601GAA lists the circumstances in which the responsible entity may set the amount of consideration. These include placements (601GAA(2)), rights issues (601GAA(3)), interest purchase plans (601GAA(4)), distribution reinvestment plans (601GAA(5)), negotiated fee reductions with wholesale clients (601GAA(6)), schemes with limited/no pooling (601GAA(7)), sale of forfeited interests (601GAA(8)), stapled securities (601GAA(9)), and exclusions for foreign members and underwriting/associate placements under controls (601GAA(10) to (15)). Each category contains substantive qualifiers (for example the 15 per cent cap in placements or the requirement that all rights issue offers be to members in proportion to holdings and within constitutionally specified discount caps).

3. Limits on content and exercise: The formula or method must comply with the valuation basis and cannot be exercised to obtain a predetermined specific price (601GAB(2), 601GAB(3), 601GAC(2), 601GAC(3)). For traded classes, use of market price driven methods is required; for non-traded or certain AQUA/exchange traded products, valuation must be based on scheme property attributable to the class.

4. Procedural and documentation obligations: The instrument imposes mandatory standards for how discretions are exercised. The responsible entity must ensure exercises of discretion are, as far as practicable, consistent with ordinary commercial practice for valuing property or market pricing and yield values reasonably current at the time of issue or withdrawal (7(1AA)(a)-(c)). It must only exercise a discretion if it is reasonable to do so; unless exercised in accordance with a current written policy, it must prepare a written explanation of how and why exercise was reasonable; it must prepare documents identifying nominees where nominees exercise discretions; and retain records for seven years after they cease to be current (7(1AB)(a)-(d)).

5. PDS disclosure: The Product Disclosure Statement must include a statement that documents relating to discretions about pricing are available from the responsible entity at no charge (s 8 amending 1013D(2B)). This is an information-consequence concept: affected investors may access records about the exercise of pricing discretions.

6. Equality of treatment exemption: The instrument provides a carve-out from paragraph 601FC(1)(d), the equal treatment duty, to the extent necessary to allow the specified exclusions and differential treatment described in 601GAA(10)-(11), use of ASIC purchase plans under applicable rules, and staggered notification dates for wholesale clients under certain constitutional offers (s 9). The exemption is limited and subject to notes clarifying that it does not permit early issuance to institutional investors ahead of retail investors.

These concepts interact: the authorised discretion needs a compliant constitutional foundation, exercise must satisfy ordinary commercial practice and reasonableness with documentation and retention, and PDS and equal treatment exemptions are adjusted to align information flows and permitted differential treatment. The instrument pairs authorisation of practical pricing flexibility for responsible entities with procedural checks intended to make exercises traceable and contemporaneous.

The instrument applies to a circumscribed group of market participants and stakeholders. Primary impact is on responsible entities of registered managed investment schemes (REs) that were registered before 1 October 2013 and that have not published on their website a notice of reliance on ASIC Class Order CO 13/655 or ASIC Corporations (Discretions for Setting the Issue Price and Withdrawal Price of Interests in Managed Investment Schemes) Instrument 2023/693 (see s 10). Time-sharing schemes are expressly excluded throughout, see repeated caveat in s 6, s 8 and s 9.

Who decides and who pays:

• Responsible entities (decision makers): The instrument deliberately allocates more decision-making latitude to responsible entities of eligible schemes. They can set issue prices in the specific situations listed in 601GAA (for example placements, rights issues, DRP issues, purchase plans, negotiated wholesale fee arrangements), they can exercise discretions in constitutions that meet the statutory requirements (601GAB, 601GAC), and they must create, adopt and retain documentation and policies when exercising such discretions (7(1AB)). This shifts practical responsibility for pricing and documentation to responsible entities.

• Members and investors (economic actors who pay or benefit): Members (unit holders or investors) in affected schemes may experience different prices, timing and treatment under the specific permitted circumstances. For example, members may be excluded from offers on foreign member grounds (601GAA(10)-(11)), some members may be offered negotiated fee reductions where they are wholesale clients (601GAA(6)), and members in the same class may be given different acceptance time windows under constitutionally permitted rights offers (s 9(c)). Where members are put to bear costs, the instrument puts constraints that fees reductions must not adversely affect fees paid by others (601GAA(6)(d)) and that constitution must contain adequate provisions for stapled securities (601GAA(9)).

• Associates and underwriters: The instrument contemplates issues to associates in underwriting/sub-underwriting arrangements subject to arm’s length terms and specified AFSL conditions (601GAA(12)), and limited placements to associates that held interests prior to the issue subject to proportionate limits and eligible fiduciary capacity rules (601GAA(13)-(14)). These clauses affect the capacity of associates to participate in underwriting and placements while imposing conditions intended to constrain potential conflicts, for example restrictions on voting if a licensee-underwriter is an associate (601GAA(12)(b)(i)).

• Market operators and foreign markets: Where interests are quoted on ASX, Cboe Australia or an approved foreign market, the instrument ties permissible pricing methods to market price where the class is traded (601GAB(2)(b)), and it requires compliance with ASX listing rule treatment of foreign members where applicable (601GAA(10)(a)). Thus exchanges and their rules become relevant to what constitutes permissible action, especially regarding offers to foreign members.

• Advisers, auditors and nominees: The instrument creates documentary and recordkeeping tasks. Advisers and auditors may need to verify that valuations and the exercise of discretion comply with ordinary commercial practice and that written policies exist and are observed. Nominees who exercise discretions must be identified and their actions documented (7(1AB)(c)).

• Retail vs wholesale distinction: The instrument differentiates between wholesale clients (who may be offered individually negotiated fees, 601GAA(6)) and retail investors. Where discounts are negotiated for wholesale clients, the responsible entity must notify all members that fees may be negotiated with wholesale clients and must not adversely affect fees payable by others (601GAA(6)(b)-(d)). Section 9(c) permits differential notification windows for wholesale clients only where constitution permits; it explicitly does not permit issuing to institutional investors before retail investors (Note 1).

Constrained scope and temporal limit: Only schemes registered before 1 October 2013 and that have not published specified notices are caught (s 10). The instrument itself expires on 1 October 2030 (s 11). This confines the affected population and creates a sunset date, so responsible entities of older schemes must decide whether and how to act within a defined timeframe.

In sum, the instrument reallocates certain practical powers around issue and withdrawal pricing to responsible entities of older schemes, while imposing specific constraints and procedural duties. The primary actors who decide are responsible entities; investors bear potential economic consequences via price and treatment differences; associates and underwriters are affected by the permitted participation rules; and market rules and AFSL conditions continue to influence permissible conduct.

The instrument introduces, clarifies and conditions a set of statutory duties, discretionary rights and documentation obligations. Below are the principal duties and the rights it confers or modifies, tied to the specific notional sections inserted into the Corporations Act by s 6 and the modifications to 601FC in s 7 and to 1013D in s 8.

Duties imposed or clarified

• Compliance duty when exercising discretions: A responsible entity must ensure that the manner of exercising a discretion that affects issue or withdrawal pricing is, as far as practicable, consistent with ordinary commercial practice for valuing property or calculating market price as applicable, and produce values reasonably current at the relevant time (s 7, inserting 601FC(1AA)(a)-(c)). This is a performance standard requiring contemporaneous and commercially standard valuation practice.

• Reasonableness and documentation: If a discretion is exercised, the responsible entity must only exercise it if it is reasonable to do so; unless the discretion is exercised in accordance with a current written policy, the responsible entity must prepare a written explanation of how and why the discretion was exercised and reasonable. Where a nominee exercises a discretion, a document must identify that nominee and the discretion exercised. Records of these documents must be retained for seven years after they cease to be current (s 7, 601FC(1AB)(a)-(d)). These are mandatory procedural duties tied to traceability and auditability.

• PDS disclosure duty: The PDS for a managed investment product must include statements that documents relating to pricing discretions are available from the responsible entity at no charge (s 8 modifying 1013D(2B)). This is an information-provision duty aimed at investor access to documents.

• Constitutional content duty: Constitutions that provide for formulas or methods that confer discretions must ensure those formulas are based on the value of scheme property attributable to the class after relevant liabilities, divided by number of interests on issue; or, for quoted classes, be based on market price (601GAB(2); 601GAC(2)). This sets a baseline content duty for constitutional pricing mechanisms.

Rights conferred or clarified

• Right to set issue price in specified circumstances: The responsible entity is granted a right to set the amount payable to acquire interests in enumerated situations under 601GAA(2) to (9). Each instance is subject to the listed qualifiers. For example placements are permitted where the issue and any related issue in the previous year do not exceed 15% of the class immediately before the issue, or where members approve by placement resolution (601GAA(2)(c)). Rights issues are permitted with proportional offers and constitutionally contained discount caps (601GAA(3)). Negotiated fee reductions with wholesale clients are permitted subject to disclosure and non-adverse effect constraints (601GAA(6)).

• Right to include discretionary provisions in constitutions: Constitutions may provide a formula or method that complies with 601GAB(2) or 601GAC(2) while giving the responsible entity a discretion to decide matters affecting factors, aspects of methods or adjustments (601GAB(1); 601GAC(1)). This is a structural right for responsible entities to be empowered by constitution to exercise pricing discretion.

• Exemption from equal treatment duty in narrow circumstances: Section 9 provides that the responsible entity does not have to comply with paragraph 601FC(1)(d) to the extent that compliance would prevent specified actions described in the notional 601GAA(10)-(11), purchase plan treatment in 601GAA(4), or the staggered notice mechanism for wholesale clients under certain constitutionally framed offers (s 9(a)-(c)). This is a limited statutory relaxation of the equal treatment duty for defined operational needs.

Constraints on rights

• Prohibition on exercising discretion to reach a particular result: Both 601GAB(3) and 601GAC(3) state that a discretion of the kind referred to must not be exercised on the basis that it will result in a particular amount. That prevents discretion being used as a tool to engineer a pre-determined price.

• Limits on associate participation: Issues to associates as underwriters are permitted only where underwriting agreements are on terms no more favourable than arm’s length would require and the associate holds appropriate AFSL authorisations with conditions that prohibit voting on acquired interests and limit disposal options (601GAA(12)(a)-(b)). Placement to associates with eligible fiduciary capacity is permitted only where the associate held interests in the eligible fiduciary capacity before the issue and the issued proportion does not exceed the pre-issue proportion (601GAA(13)).

• Foreign member processes: The instrument allows exclusion of foreign members but conditions this on compliance with ASX Rule 7.7 where relevant (601GAA(10)(a)), appointment of a nominee for renounceable offers where not listed on ASX (601GAA(10)(b)), or a reasonableness assessment that must consider specified factors (601GAA(10)(c)). For DRPs, similar reasonableness criteria apply (601GAA(11)).

• Rate caps and approvals: For placements the 15 per cent cap applies unless a placement resolution is passed and related issues are taken into account (601GAA(2)(c)). For negotiated fee reductions a constitution must specify a relevant maximum percentage for discounting in rights issues and DRPs contexts (601GAA(3)(e); 601GAA(5)(f)).

Operational rights therefore come with contemporaneous valuation duties, documentary duties and concrete limits intended to constrain opportunistic or preordained outcomes. The instrument creates a statutory package of rights to set prices in certain commercial contexts coupled with duties of commercial practice, reasonableness, disclosure and recordkeeping.

The instrument itself modifies statutory duties and confers exemptions and does not create standalone new criminal or civil penalty regimes within its text. Its effect is to vary the operation of existing duties in Chapter 5C and Part 7.9 of the Corporations Act 2001 for eligible schemes, and to add specific statutory obligations expressed as "must" requirements, which become enforceable as part of the Act. The instrument is made under powers granted by subsections 601QA(1) and 1020F(1) of the Act (s 3), so enforcement and penalty mechanisms remain those provided in the Corporations Act, as modified by the instrument.

What the instrument specifies that is enforceable in practice

• Mandatory obligations: The instrument imposes mandatory wording such as the responsible entity "must ensure" that discretion is exercised consistent with ordinary commercial practice and that values are reasonably current (s 7, 601FC(1AA)). It also sets mandatory documentation duties "must prepare" written explanations unless the discretion was exercised under a current written policy, and mandates retention of documents for seven years after they cease to be current (7(1AB)(b), (d)). These are statutory obligations and non-compliance means the responsible entity is not performing statutory duties as modified by the instrument.

• PDS obligations: The requirement that Product Disclosure Statements include statements that documents relating to pricing discretions are available at no charge (s 8 modifying 1013D(2B)) is a statutory disclosure duty. PDS obligations in the Corporations Act carry civil and regulatory consequences under existing Act provisions.

• Exemptions are tightly defined: Section 9 provides an exemption from paragraph 601FC(1)(d) to a limited extent. That exemption operates only to the extent necessary and thus creates a narrow safe harbour; stepping outside that safe harbour could result in a failure to comply with the equal treatment duty as it stands in the Act.

ABIity of ASIC and other enforcement bodies

While the instrument does not itself create new enforcement powers, it changes the shape of the substantive duties to which ASIC and other interested parties may apply enforcement tools under the Corporations Act. The instrument creates standards and documentary obligations that are enforceable. Typical enforcement mechanisms under the Act include administrative action by ASIC, civil penalty proceedings, injunctions, disqualification and criminal sanctions for serious contraventions; however the instrument text does not set specific penalties or procedures and so one must look to the Act for the precise enforcement responses. The instrument’s authority provision (s 3) shows that ASIC acted pursuant to statutory delegation powers to vary the Act’s operation in the specified manner.

Practical enforcement risk and proof considerations

• Proof of breach will likely focus on documentary and process records because the instrument requires written explanations and retention of documents for seven years (7(1AB)(b), (d)). The statutory requirement to act consistently with ordinary commercial practice and to produce values reasonably current will invite evidentiary scrutiny of valuation methods, policies and contemporaneous records.

• Reasonableness is an explicit standard: the responsible entity must only exercise a discretion if it is reasonable to do so (7(1AB)(a)). That introduces an objective appraisal in any enforcement or review.

• Exemptions narrow but conditional: Acting under the exemptions in s 9 requires strict compliance with the notional subsections referenced; if an RE treats members differently outside the permitted bounds it may not be sheltered by the exemption and could be exposed to an equal treatment contravention.

In summary, the instrument creates statutory duties and procedural obligations that are enforceable as part of the Corporations Act framework. It does not insert new penalty clauses into this instrument, but the "must" duties, the PDS disclosure obligation and the documentation and retention requirements provide clear bases for regulatory or civil scrutiny under the Act’s existing enforcement architecture.

This instrument operates by modifying parts of the Corporations Act, and it explicitly cross-refers to existing ASIC instruments, ASX listing rules and other legislation. Its practical operation therefore intersects with: the Corporations Act frameworks (Chapter 5C, Part 7.9), ASIC class orders and instruments, ASX listing rules where relevant, AFSL conditions, the Life Insurance Act 1995 and Superannuation Industry (Supervision) Act 1993 by reference to eligible fiduciary capacities, and market operator rules for approved foreign markets.

Interactions expressly cited in the instrument

• Corporations Act: The instrument is made under subsections 601QA(1) and 1020F(1) (s 3). It modifies the effect of section 601GA, inserts 601GAA, 601GAB and 601GAC and varied section 601FC for responsible entities (s 6 and s 7). It also amends s 1013D in Part 7.9 for PDS disclosures (s 8). The modifications are therefore embedded into the existing statutory framework and must be read together with all remaining unmodified provisions of the Corporations Act.

• ASIC instruments and class orders: The instrument applies only to schemes registered before 1 October 2013 and only where the responsible entity has not published on its website a notice that it will rely on ASIC Class Order CO 13/655 or ASIC Corporations (Discretions for Setting the Issue Price and Withdrawal Price of Interests in Managed Investment Schemes) Instrument 2023/693 (s 4; s 10). The instrument thereby slots into a regulatory mosaic and creates a default treatment for schemes that have not opted to rely on those earlier instruments.

• ASX listing rules: When excluding foreign members under 601GAA(10)(a), the instrument requires compliance with Rule 7.7 of ASX listing rules as at 1 September 2025 for schemes included in ASX’s official list. That ties permissible conduct to market-specific distribution rules and their compliance obligations.

• Approved foreign markets: The instrument refers to interests quoted on "an approved foreign market" and imports the instrument-based notion of approved foreign market from the earlier ASIC instrument 2017/669 (s 601GAA(15) note). This creates an interaction where an external designation of a foreign market affects whether market price methods or quotation-based rules apply.

• AFSL and fiduciary roles: The instrument requires underwriters or sub-underwriters that are associates to hold an Australian financial services licence authorising underwriting and to have licence conditions that prohibit voting and constrain disposal options for underwritten interests (601GAA(12)(b)). It also defines "eligible fiduciary capacity" to include trustees/custodians for professional investors, responsible entities of other registered schemes, life insurers under Life Insurance Act 1995, or approved trustees under the Superannuation Industry (Supervision) Act 1993 (601GAA(14)). Thus the operation of the instrument interacts with licensing and trustee law.

• Other ASIC instruments: Note 2 references ASIC Corporations (Registered Schemes,Differential Fees) Instrument 2017/40 as providing relief for differential fee arrangements of the kind covered by notional subsection 601GAA(6). That means a responsible entity must coordinate between this instrument and the 2017/40 instrument when implementing negotiated fee reductions.

• PDS regime and disclosure law: The modification to s 1013D imposes an additional disclosure statement obligation in the PDS regime, which must be satisfied in addition to other PDS content obligations under the Act and associated regulations and guidance.

Potential friction points and areas requiring coordination

• Constitutional amendments: Responsible entities that do not already have constitutions with compliant formulas or methods must amend constitutions to comply with the inserted provisions, which may require member approvals under the Corporations Act and the scheme constitution. This creates interaction between the instrument’s permissions and the internal governance rules of schemes.

• Market trading rules and timing: For quoted classes the instrument requires pricing methods to be based on market price (601GAB(2)). Responsible entities must coordinate with market trading systems and market practice to ensure valuations are "reasonably current" at issue times (7(1AA)(c)). Interactions with settlement cycles, trading halts and market suspension rules will be operationally relevant.

• AFSL conditions and licensing compliance: Where an associate underwrites, licence conditions required by 601GAA(12)(b) will need to be put in place. That involves coordination with ASIC and may require licence variation or condition negotiation.

• Foreign law and regulatory requirements: Excluding foreign members invokes assessment of legal and regulatory costs of making offers in foreign jurisdictions (601GAA(10)(c)). A responsible entity must evaluate legal barriers and costs of compliance with foreign securities offering laws when deciding to exclude foreign members.

In summary, the instrument is a targeted modification of the Corporations Act that does not stand alone. Its operation depends on and interacts with ASIC class orders and instruments, ASX listing rules where applicable, AFSL licensing conditions, the fiduciary roles defined in other statutes, and the existing PDS disclosure and constitutional amendment regimes. Responsible entities must coordinate compliance across these regimes to implement pricing discretions lawfully.

The instrument itself is a discrete legislative instrument made by an ASIC delegate and contains internal references to earlier ASIC instruments and legislative provisions; it also has a built-in expiry. The instrument records its own commencement and repeal dates and situates itself against earlier instruments, but it does not contain a historical narrative of previous amendments to the Corporations Act. What follows is a source-grounded account of the instrument’s temporal and cross-instrument references as set out in the text.

• Commencement and repeal: The instrument commences the day after registration on the Federal Register of Legislation (s 2). It is expressly repealed at the start of 1 October 2030 (s 11). That creates a fixed statutory life ending on that date unless an extant statutory mechanism repeals or amends the instrument earlier under the usual legislative processes.

• Authority: The instrument is made under subsections 601QA(1) and 1020F(1) of the Corporations Act 2001 (s 3). That is the statutory delegation that permitted ASIC to make a legislative instrument varying the application of specified Act provisions to registered schemes in defined circumstances.

• Cross references to earlier instruments and class orders: The instrument’s simplified outline (s 4) and application clause (s 10) explicitly reference ASIC Class Order CO 13/655 and ASIC Corporations (Discretions for Setting the Issue Price and Withdrawal Price of Interests in Managed Investment Schemes) Instrument 2023/693. Section 10 limits application to schemes that were registered before 1 October 2013 and whose responsible entities have not published on their websites a notice that they will rely on either CO 13/655 or Instrument 2023/693. The instrument also contains a note in 601GAA(15) that the definition of approved foreign market is notionally inserted by ASIC Corporations (Definition of Approved Foreign Market) Instrument 2017/669. It also refers in Note 2 to ASIC Corporations (Registered Schemes,Differential Fees) Instrument 2017/40 for relief in relation to certain differential fee arrangements.

• Notional insertions and modifications to the Act: Section 6 of the instrument lays out the notional insertions and modifications to existing sections of the Corporations Act. It modifies section 601GA, inserts new sections 601GAA, 601GAB and 601GAC, and modifies the effect of section 601FC by way of s 7. Section 8 inserts a modification into s 1013D in Part 7.9. The instrument therefore effects textual changes to the Act, rather than amending the Act by parliamentary statute.

• Sunset and transition: The explicit repeal date in s 11 provides a transition horizon for responsible entities. The instrument does not specify transitional provisions beyond its commencement and repeal. Where schemes rely on this instrument within the active period, their rights and duties under these modifications will cease to have effect on the repeal date unless a further instrument or Act extends or replaces these provisions.

• No internal amendment history recorded in the instrument: The instrument text does not record any prior amendments to itself or provide a chaining history. It stands as a single enactment with commencement and repeal dates and internal cross-references to other instruments.

In practical terms, responsible entities that wish to benefit from the permissions in this instrument must act within the instrument’s operative window and be mindful of cross-referenced ASIC instruments and ASX listing rules. The fact that the instrument is time-limited to 1 October 2030 suggests that its policy effect is intended for a defined transitional or legacy cohort of schemes and that future regulatory action could extend, replace or remove these arrangements.

The instrument text does not record any litigation history. It is a legislative instrument made under the Corporations Act and contains no references to court decisions, judicial interpretations or legal challenges. As a newly made instrument (date given as 23 September 2025 in the instrument header), it does not itself bear a body of published case law within the text.

Potential for future litigation and typical dispute themes

Although the instrument contains no litigation history, the types of statutory changes it makes create plausible focal points for disputes once it is in force. These themes are drawn directly from the instrument’s text and the duties it imposes and therefore indicate the areas where litigation or regulatory action might be concentrated.

• Reasonableness and ordinary commercial practice: The instrument requires that discretions be exercised only if reasonable and in a manner consistent with ordinary commercial practice for valuing property or market pricing (7(1AA), 7(1AB)(a)). Disagreement about what constitutes "ordinary commercial practice" or whether a particular valuation was "reasonably current" could be grounds for regulatory scrutiny or litigation, where members or regulators contend the responsible entity breached statutory duties.

• Documentation and retention compliance: The instrument mandates written explanations unless a current written policy governs the exercise, identification of nominees where applicable, and record retention for seven years after documents cease to be current (7(1AB)(b)-(d)). Failure to prepare, maintain or produce such documentation could lead to enforcement action or civil claims alleging breach of statutory duties.

• Exemption scope and equal treatment: Section 9 provides a narrow exemption from 601FC(1)(d). Disputes could arise about whether particular conduct falls within the exemption's limited scope, especially where members contend they were treated unequally outside the specified permitted cases.

• Associate transactions and AFSL conditions: The instrument permits issues to associates in underwriting contexts subject to arm’s length terms and AFSL conditions restricting voting and disposition (601GAA(12)). Disputes could arise over whether terms were "no more favourable" than arm’s length or whether licence conditions were properly applied and complied with.

• Foreign member exclusions: The instrument permits exclusion of foreign members in certain circumstances subject to ASX Rule 7.7, appointment of nominees for renounceable offers, or reasonableness tests considering defined factors (601GAA(10)). Litigation could focus on whether exclusions were reasonable, or whether the cost and legal compliance analysis properly supported the exclusion decision.

Absent specific cases in the instrument text, any litigation history is necessarily future-facing. The instrument’s built-in documentary obligations and the reasonableness standard will create a recorded trail that can be examined in enforcement or court proceedings. Responsible entities and their advisers should anticipate that disputes about exercise of pricing discretions will look to the contemporaneous policies, explanations and valuation methodologies required by the instrument.

The instrument contains numerous technical limits, procedural requirements and cross-references that create practical pitfalls for responsible entities and advisers. Below are specific "gotchas" grounded in the instrument’s text that practitioners should watch for.

1. Limited scope of application: The instrument applies only to schemes registered before 1 October 2013 and only if the responsible entity has not published a notice of reliance on CO 13/655 or Instrument 2023/693 (s 4; s 10). A responsible entity that mistakenly believes the instrument applies when it does not will be exposed to mismatch between constitutional powers and statutory permissions. Confirm registration date and whether a notice has been published.

2. Constitutions must include the right kind of formula or method: The instrument permits constitutions to give discretions only if the formula or method complies with 601GAB(2) or 601GAC(2) and is based on scheme property value for non-traded classes or market price for traded classes. A constitution with an incompatible pricing method will not realise the instrument’s permissions.

3. Discretion cannot be used to guarantee a specific price: Both 601GAB(3) and 601GAC(3) state that a discretion of the kind referred to must not be exercised on the basis that it will result in a particular amount. Practitioners must avoid using the discretion as a tool to ensure a target outcome.

4. The 15 per cent placement cap and related issues construction: For placements, the instrument allows setting a price provided the issue and any related issue in the previous year do not immediately before the issue comprise more than 15% of the interests in that class, or members approve by placement resolution (601GAA(2)(c)). The definition of "related issue" is technical and includes issues at prices set by the responsible entity that have not been approved or ratified. Miscounting related issues or timing could breach the threshold.

5. Placement resolutions have specific voting materiality tests: A placement resolution requires votes cast only in respect of eligible interests and those eligible interests must represent at least 25% of the total value of eligible interests (definition of placement resolution). Failure to satisfy these procedural thresholds will void the placement pathway and necessitate reliance on the 15% cap.

6. Rights issue conditions are exacting: Rights issues must be offered in proportion to members’ interests not more than 20 business days before the offer (601GAA(3)(a)), to all members except excluded foreign members (601GAA(3)(b)), be in the same class, priced equally and within a constitutionally specified relevant maximum discount (601GAA(3)(d)-(e)). The timing and proportionality requirements are prescriptive.

7. Negotiated fees require disclosure and no adverse effect: Negotiated fee reductions with wholesale clients are permitted only if the responsible entity has given all members a statement explaining that fees may be negotiated with wholesale clients and the PDS contains that statement (601GAA(6)(b)-(c)). The fee reduction must not adversely affect fees paid by others (601GAA(6)(d)). Failing to update disclosures or introducing reductions that adversely affect others is prohibited.

8. Document and retention obligations are strict and carry evidentiary risk: If discretions are exercised, written explanations are required unless the discretion was exercised in accordance with a current written policy (7(1AB)(b)). Practitioners must ensure written policies exist and are current, and maintain documents for seven years after they cease to be current (7(1AB)(d)). Losing or failing to prepare contemporaneous explanations will be problematic in enforcement or member disputes.

9. Associate underwriter constraints: Issues to associates as underwriters require arm’s length terms and an AFSL authorisation with specified license conditions that prohibit voting and constrain disposal (601GAA(12)). Failure to secure the necessary AFSL conditions or to ensure arm’s length terms risks contravening the statutory limitations.

10. Foreign member exclusion tests require considered analysis: Excluding foreign members requires different procedural routes depending on ASX listing status and offer type, and includes a reasonableness test that must consider the number/value of members and the cost of complying with foreign legal requirements (601GAA(10)(a)-(c)). A careless exclusion decision without documentary analysis of those factors risks challenge.

11. PDS must be updated: The PDS must include statements that documents relating to pricing discretions are available at no charge (s 8 modifying 1013D(2B)). Failure to include that statement in PDS distributions where a discretion may be exercised breaches disclosure obligations.

12. Exemption limitations: Section 9 provides an exemption from the equal treatment duty only to the extent necessary to permit the specified actions. The instrument’s Note 1 confirms that it does not allow issuing to institutional investors before any retail investors. Use of the exemption beyond its narrow scope is not permitted.

13. Sunset date planning: The instrument is repealed on 1 October 2030 (s 11). Responsible entities must plan around that date. Actions taken late in the instrument’s life may have consequences once the instrument repeals, especially if constitutions or operational arrangements rely on the instrument’s permissions.

14. No new penalty regime in the instrument itself: While the instrument imposes "must" duties, it does not create independent penalties; enforcement will rest on the Corporations Act’s existing enforcement architecture. However failing the instrument’s duties will leave a responsible entity open to regulatory and civil consequences under the Act’s normal enforcement provisions.

These specific traps require careful pre-implementation checklisting: confirm scheme registration vintage and notices, review and if necessary amend constitutions to include compliant formulas, adopt and maintain written pricing policies, ensure contemporaneous documentation when discretions are exercised, update PDS material, verify AFSL conditions for associate underwriters, and assess foreign member exclusions against ASX rules and the reasonableness criteria. Missing any of these elements can convert an apparently permissible pricing action into a statutory breach.

Compliance under this instrument requires coordinated legal, governance and operational steps. The following practical checklist maps directly to the instrument’s statutory requirements and highlights actions responsible entities should take, with reference to the specific provisions.

1. Confirm applicability of the instrument

• Verify scheme registration date. The instrument applies only to schemes registered before 1 October 2013 (s 10).
• Confirm whether the responsible entity has published a notice on its website that it will rely on ASIC Class Order CO 13/655 or ASIC Instrument 2023/693. If such a notice has been published, the instrument does not apply (s 10).

2. Review and, if necessary, amend the constitution

• Ensure the constitution contains a formula or method that complies with the valuation basis mandated by 601GAB(2) or 601GAC(2): either based on scheme property attributable to the class (less any liabilities distributable against that property divided by number on issue) or, for quoted classes, based on market price.
• If the responsible entity wishes to have a discretion, ensure the constitution expressly permits the responsible entity to decide matters affecting factors or aspects of the method or to determine adjustments for transaction costs as contemplated by 601GAB(1) or 601GAC(1).
• Include constitution text that avoids permitting discretion to be exercised to produce a predetermined price, reflecting the prohibition in 601GAB(3) and 601GAC(3).

3. Adopt and maintain written pricing and valuation policies

• Draft a current written policy setting out: valuation methodologies, sources of pricing inputs, frequency of valuations, the ordinary commercial practices relied upon, escalation and approval procedures, scenarios where discretion may be exercised, conflict management procedures, and recordkeeping requirements.
• Ensure the policy is maintained and brought up to date. If a discretion is exercised under a current written policy, the requirement to prepare a separate written explanation is not triggered (7(1AB)(b)).

4. Establish contemporaneous documentation procedures

• Implement templates for written explanations of discretion exercises to be completed unless executed under the current policy. The template should record the facts, the valuation inputs, reasons why the exercise was reasonable, persons involved, and references to any supporting market data.
• Where a nominee exercises a discretion, ensure a document identifying the nominee and the discretion exercised is prepared and retained (7(1AB)(c)).

5. Record retention and governance

• Ensure all documents prepared in relation to any exercise of discretion are retained for seven years after they cease to be current (7(1AB)(d)).
• Assign responsibility for maintaining these records to a named governance function within the responsible entity, and ensure secure and retrievable storage.

6. Update Product Disclosure Statements and communications

• Amend the scheme’s PDS to include the statement required by s 8 (modifying 1013D(2B)) that documents relating to pricing discretions are available from the responsible entity at no charge.
• Where offers are made that rely on the instrument’s permissions, ensure notification materials to members also reference applicable processes and any required timeframes.

7. Follow specific procedural steps for the enumerated situations

• Placements: Monitor the 15% cap on issues and track any related issues in the previous year. If the cap would be exceeded, ensure a placement resolution meeting the defined voting test is convened and that the notice contains required particulars (601GAA(2)(c)).
• Rights issues: Verify proportionate offers within 20 business days before the date of offer, same-class pricing and constitutionally specified discount caps; manage foreign member exclusions consistent with 601GAA(10).
• Interest purchase plans and DRPs: Ensure compliance with ASIC Share and Interest Purchase Plans instrument 2019/547 for purchase plans (601GAA(4)) and ensure DRP discounts are within constitutionally relevant maximum percentages (601GAA(5)(f)).
• Negotiated fees: Where negotiating fees with wholesale clients, issue the required statement to all members that fees may be individually negotiated and ensure the negotiated fee does not adversely affect any other member (601GAA(6)(b)-(d)).

8. Manage associate underwriting and placements

• For underwriting by associates, ensure underwriting or sub-underwriting agreements are on no more favourable than arm’s length terms (601GAA(12)(a)(i)-(ii)).
• Confirm associate underwriters hold an AFSL authorising underwriting and that licence conditions restrict voting and constrain disposal consistent with 601GAA(12)(b)(i)-(ii).
• For placements to associates in an eligible fiduciary capacity, verify the associate held the interests in eligible fiduciary capacity prior to issue and that proportion issued does not exceed pre-issue holdings (601GAA(13)).

9. Assess and document foreign member exclusions

• If excluding foreign members, follow the specific route applicable: comply with ASX Rule 7.7 where listed (601GAA(10)(a)); appoint a nominee with appropriate sale and distribution mechanics where the offer is renounceable and not ASX-listed (601GAA(10)(b)); or make a documented reasonableness determination considering the number of members in the relevant place, the number and value of interests, and the cost of complying with foreign legal requirements (601GAA(10)(c)).
• Keep contemporaneous records of the analysis supporting any exclusion, because the instrument requires the reasonableness assessment to consider defined factors.

10. Coordinate AFSL conditions and regulatory liaison

• If associate underwriting is contemplated, liaise with the associate to ensure its AFSL contains the required conditions or that appropriate measures are in place. Monitor ASIC guidance and be prepared to demonstrate compliance with licence conditions.

11. Monitor related instruments and market rules

• Check whether CO 13/655 or Instrument 2023/693 would be preferable for the scheme and consider publishing a notice of reliance if the responsible entity wishes to opt out of this instrument’s regime (s 10).
• For ASX-listed schemes, ensure compliance with the operative ASX listing rules, particularly Rule 7.7 dealing with offers to members with registered addresses outside Australia and New Zealand.

12. Plan for the sunset date

• Recognise the instrument repeals on 1 October 2030 (s 11). Any constitutional or operational arrangements predicated on these permissions should have a plan for continuity beyond repeal, including potential reversion to pre-existing constitutional terms or pursuit of alternative relief.

13. Audit and training

• Incorporate the new duties into internal compliance programs, compliance manuals and staff training for those involved in pricing decisions, valuations and PDS preparation.
• Schedule periodic audits to confirm valuations were conducted in line with ordinary commercial practice and that documentation meets the seven-year retention requirement.

Following this checklist will align a responsible entity with the instrument’s legal requirements: ensure the constitution contains a compliant formula/method (601GAB/601GAC), exercise discretion only when reasonable and consistent with ordinary commercial practice (7(1AA)), prepare and retain required documentation (7(1AB)), update the PDS (s 8), and respect the narrow equal treatment exemption bounds (s 9).