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ASIC Relief for Frozen Funds

As we foreshadowed in our article in May, ASIC have announced industry-wide hardship relief for members of frozen funds under legislative instrument ASIC Corporations (Hardship Withdrawals Relief) Instrument 2020/778.

The relief instrument has been enacted by ASIC to ease some of the statutory restrictions on responsible entities during the COVID-19 pandemic and improve members’ access to withdrawals in cases of hardship.

Who can rely on the relief?

The relief applies to responsible entities of registered managed investment schemes which have suspended or cancelled redemptions, commonly referred to as frozen funds. 

However, the responsible entities of mortgage schemes, IDPS-like schemes, registered litigation funding schemes, and registered time-sharing schemes are excluded from the relief.  Responsible entities of these schemes will have to consider applying for individual ASIC relief.  Details of what ASIC considers in assessing individual relief applications for frozen funds are set out in our earlier article ASIC redemption relief for non-liquid schemes.

How to rely on the relief?

Responsible entities seeking to rely on the relief must:

  • notify ASIC and scheme members of its intention to rely on the relief;
  • before making a hardship withdrawal, be satisfied that it has adequate cash to fulfill future hardship withdrawal requests and continue the day-to-day operations of the scheme for the next six months;
  • provide quarterly data to ASIC as required; and
  • comply with all other conditions of the relief.

Assessing hardship withdrawals: eligibility criteria for members

To be eligible to make hardship withdrawals from a frozen fund, a member must meet at least one ‘hardship criteria’1

Type of Hardship Criteria
Severe financial hardship The member needs the amount requested to meet reasonable and immediate living expenses for themselves or their dependants.

Unemployment for over three months

The member has not been in gainful employment for at least three months and has no other means of financial support (except government assistance, such as unemployment benefits).
Compassionate grounds

The member (or their dependant, as applicable) needs the amount requested to:

  • Pay for medical costs (including related transport costs) to treat a life-threatening illness or injury, to alleviate acute or chronic pain, or to alleviate an acute or chronic mental disturbance. A medical practitioner must provide a certified statement confirming the medical condition.
  • Pay for specific modifications to a principal place of residence or vehicle to accommodate a severe disability of the person or their dependant.
  • Pay for funeral expenses and other expenses related to the death of the member or their dependant.
  • Enable the member to provide care for another person who is dying from a terminal illness, including home care.
  • Prevent the member’s mortgagee (lender) from selling the person’s principal place of residence.
  • Meet a binding financial obligation entered into by the member before the responsible entity suspended withdrawals.

The member or their dependant must not otherwise have the financial capacity to meet the expense.

Permanent incapacity The member has ceased gainful employment due to mental or physical ill health. You are satisfied that the member is unlikely to ever again commence the type of employment for which they are reasonably qualified by education, training or experience.
 

 

If you need our assistance

Our Funds and Financial Services Team is well placed to assist you if you need assistance assessing hardship withdrawal requests or applying for ASIC relief.  Please contact Brendan Ivers, Justin Gross, Jack Peterson or Nick Huett for more information.
 

1 ASIC Info Sheet 249.