Illegal managed investment schemes

Checklist for investor protection

It's generally illegal to offer units in a managed investment scheme unless it is registered with ASIC.

Here are some basic safety checks to help you confirm a managed investment is legal. 

Check the managed investment is offered by a public company

A registered managed investment scheme must be run by a public company that has registered with ASIC to do this.

You can see if the company exists by checking ASIC Connect and searching within 'organisation and business names.' It will also have 'Ltd' after its name (not the 'Pty Ltd' of a private company).

A public company must:

  • prepare financial statements
  • have its financial statements audited by a registered company auditor
  • lodge its financial statements with ASIC so that anyone can purchase a copy.

You can buy copies of these financial statements from information brokers.

Check the company holds a licence

A company running a registered managed investment scheme must have an Australian financial services (AFS) licence. That means the company holds a specific licence to operate a managed investment scheme.

You can check if the company holds an AFS licence by searching ASIC Connect's Professional Registers.

Having an AFS licence means the scheme operators (sometimes called 'managers') must meet a set of basic standards. For example, a licensee must carry professional insurance and have systems to deal with investor complaints if anything goes wrong. They must set up systems to run their scheme efficiently, honestly and fairly.

The managers of the scheme will have to: 

  • receive and account for investors' money
  • invest funds and check performance
  • distribute profits
  • return cash to investors if they wish to sell their units.

Find out more about what an AFS licence means.

Check the investment scheme is registered

Check if the scheme is registered as a managed investment scheme by checking ASIC Connect and searching within 'organisation and business names.' If it's not registered, it may be an illegal scheme and you will lose important legal protection.  

Smart tip

Always check that a managed investment scheme is registered before you invest. 

Every registered scheme is on ASIC's public database. Registering each scheme means ASIC can check that the manager operates only the kinds of schemes permitted under their licence.

Some exceptions exist for schemes that are only open to wholesale investors or for some schemes with fewer than 20 members. If you are offered the chance to put money into an unregistered scheme on the basis that it has a special exception, make sure you really understand it and that it's suitable for you. Otherwise, stick to registered schemes and take advantage of the protections in place.

If you're offered units in a managed investment, check that it is registered or you won't have important legal protections.

Related links

Last updated: 08 Apr 2019