THE QUICK ANSWER:
A retail fund is required to be registered with ASIC and a PDS must be issued. A wholesale fund can be registered or unregistered and it is advisable to issue an IM to prospective investors setting out sufficient information so that an investor may make an informed decision about whether to invest.
1. A Product Disclosure Statement (PDS) is a document required under the Corporations Act 2001 to be issued to prospective investors, which must contain sufficient information so that a retail investor may make an informed decision about whether to invest.
2. Retail funds are required to be registered with ASIC and a PDS must be issued to prospective investors.
3. There are exemptions from the requirement to provide a PDS to a ‘retail investor’:
- The 20/12/2 Exemption. If less than $2m is raised by the AFS Licensee from fewer than 20 ‘retail investors’ in a rolling 12-month period, an exemption applies to effectively treat them as ‘wholesale investors’. Note that this is not a test applied on a fund by fund basis. Each element of 20/12/2 applies to the AFS Licensee and its associates.
- The ‘Sophisticated Investor’ Exemption. This applies if the issuer of the disclosure document is an AFS Licensee that is satisfied, on reasonable grounds, that the proposed investor has experience in using financial services and investing in financial products.
- These exemptions permit investors who are ‘retail investors’ to invest in a wholesale unregistered fund without having been provided with a PDS. The exemptions enable a fund to have an array of investors who do not otherwise meet the definition of a ‘wholesale investor’. Note that the exemptions are from the requirement to provide the ‘retail investor’ with a PDS; they are not exemptions from the requirement to have an AFS licence.
4. Wholesale funds are not required to be registered with ASIC and a PDS is not required to be issued to prospective investors in unregistered ‘wholesale funds’. However, the common law and provisions in the Corporations Act 2001 dealing with false and misleading statements dictate that it is commercially-sensible to issue an Information Memorandum (IM).
5. An IM:
- Is not regulated and is not lodged with ASIC or notified to ASIC as being marketed.
- Has no specific content requirements.
- Will generally contain the information found in a PDS as a matter of good practice. Any forecast financial information in the IM must be based on reasonable grounds.
