Mortgage Funds

We are experts in the field of establishing and maintaining mortgage investment schemes. Our skills in drafting mortgage documentation dovetail with our skills in drafting constitutions, Product Disclosure Statements, Information Memorandums, lending manuals, compliance plans and other mortgage scheme documents to ensure that your mortgage scheme is efficient and compliant.

Wholesale fund

If an AFS licensee has a wholesale licence only, it can only raise money from wholesale investors.  The main categories of wholesale investors are:

  1. Those who invest $500,000 or more.
  2. Those who control $10m of assets or more.
  3. Those who can provide an accountant’s certificate stating that they meet one of the following:
  • They have net assets of $2.5m or more, or 
  • They have a gross income for the last 2 years of $250,000 or more.

Note – in certain circumstances entities controlled by a person that meets the asset or income test can be aggregated together.

Any investor that is not wholesale is retail. As noted above, a holder of a wholesale AFS licence can only raise money from wholesale investors.  But the NTA requirements for the licence are low (a mere surplus of assets over liabilities only is required).  The only other real solvency test is that the licensee shows it has necessary cash flow to meet its business needs over the next 6 months at all times.

A wholesale licensee cannot issue a PDS or Prospectus.  It can only issue information memoranda.

Retail fund

A full retail licence is usually referred to as a ‘responsible entity’ licence.  It’s still a form of AFS licence. This licence allows:

  • The licensee to be the responsible entity (trustee) of a registered managed investment scheme.
  • Raise unlimited $ amounts from both retail and wholesale investors via Product Disclosure Statements.

It carries with it onerous NTA requirements, which are the greater of:

  • $150,000,
  • 0.5% of the average value of scheme property of the registered schemes it operates (up to $5 million), and
  • 10% of the average responsible entity revenue (as defined) (with no maximum).

Also, registered managed investment schemes are higher cost than unregistered ones – they need a compliance committee and a full annual audit and potentially a six month audit review.

Hybrid fund

There is an AFS licence for clients that is basically wholesale but with limited ability to raise money from retail investors.

Sections 708/1012E of the Corporations Act allow a licensee to raise up to $2m every 12 months from up to 20 retail investors by way of ‘personal offers’ to retail investors (the 20/12/$2m rule).  Unlimited personal offers can be made but only 20 acceptances every 12 months.

The benefit of such a licence is that it does not carry the NTA requirements of a responsible entity AFS licence.  The downside is that the licence does not permit PDS’s or Prospectuses to be issued, only information memoranda.

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