If you are providing advice on managed investment schemes (MIS) containing derivatives as an underlying asset, you may be wondering whether you need to vary your AFSL to include derivatives authorisation. The good news is that if your AFSL already contains an MIS advice authorisation, then you do not need to worry about applying separately for a derivative authorisation on the licence.
The Corporations Act 2001 (the Act) provides the authority for this principle. An MIS is not defined as a derivative within section 764A(1) of the Act. The definition of derivatives excludes all "financial products" which fall under this provision. MIS feature in this list and are therefore excluded from the definition of derivative. Whilst some managed investment schemes contain derivatives as an underlying asset, such schemes would still be defined as managed investment schemes, rather than as derivatives. On that basis, we consider that it is sufficient for an adviser to have managed investment scheme authorisation on their AFSL. This captures managed investment schemes containing derivatives as an underlying asset.
Of course, if you operate an MIS that invests in derivatives then you will need to have an authorisation to deal in derivatives (along with an authorisation to deal in any other financial products that the MIS invests in).
Please click on the mindmap below for general information on Managed Investment Schemes.
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