Funds Update - 20 February 2026

In this Funds Update for 20 February 2026:

1. Treasury consultation on oversight and governance of managed investment schemes
2. Treasury consultation on sustainable investment product labelling
3. Federal Court imposes civil penalties on AFS licensee for cybersecurity failures

Treasury consultation on oversight and governance of managed investment schemes

On 10 February 2026, the Federal Government released a consultation paper on its proposed reforms to enhance the oversight and governance of managed investment schemes (MISs), following the high-profile collapse of the Shield and First Guardian funds, which had a $1.2 billion impact on 11,000 persons.

The consultation paper has set out the following proposals:

1. Strengthen the regulatory framework for compliance.
2. Require responsible entities of registered MISs to have a majority of external directors and remove the option of having a mandatory compliance committee instead.
3. Prohibit responsible entities of registered MISs from conducting related party transactions, with limited exceptions.
4. Amend the framework for setting financial requirements for responsible entities, such as setting more specific requirements.
5. Increase ASIC's data collection powers on the retail MIS sector.
6. Alerts to ASIC about superannuation switching.

Submissions to the consultation are open to the public until 27 February 2026.

You can find the consultation paper here.

Treasury consultation on sustainable investment product labelling

On 13 February 2026, the Federal Government released a consultation paper on its design for a sustainable investment product labelling regime, as part of its Sustainable Finance Roadmap to develop consistent labels and disclosure requirements for investment products marketed as "sustainable", including for managed funds and within the superannuation system.

The consultation paper seeks responses on the following issues:

1. Scope of Sustainable Investment Product Labelling – what products will be included?
2. Consumer-facing disclosures.
3. Use of thresholds for the proportion of assets in a labelling regime.

Submissions to the consultation are open to the public until on 13 March 2026.

You can find the consultation paper here.

Federal Court imposes civil penalties on AFS licensee for cybersecurity failures

On 13 February 2026, the Federal Court of Australia handed down a penalty judgment against an Australian financial services (AFS) licensee, which, for the first time, imposed civil penalties on an AFS licensee for cybersecurity failures.

The licensee, which specialised in fixed income investment products and custodial services, suffered a cyberattack resulting in sensitive personal client information on its system being compromised (with some of that data were later published on the dark web).

ASIC brought proceedings against the licensee, alleging that it had failed to implement and maintain cybersecurity measures that were adequate having regard to the nature, scale and risk profile of its business.

The Court declared that the licensee failed to meet its statutory obligations under the Corporations Act 2001 (Cth) as a holder of an AFS by:

• failing to provide financial services covered by the AFS licence efficiently, honestly and fairly (Corporations Act, s 912A(1)(a));
• failing to have available adequate resources (Corporations Act, s 912A(1)(d)); and
• failing to have adequate risk management systems (Corporations Act, s 912A(1)(h)).

The Court imposed a $2.5 million penalty for the licensee's contraventions, and ordered the licensee to implement a comprehensive cybersecurity compliance programme overseen by an independent expert approved by ASIC.

HSF Kramer has published an article about this case, which you can read here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.