Union redundancy funds in ASIC's sights

ASIC has released a consultation paper to seek feedback on whether the Corporations Act should apply to trade union redundancy funds.

Consultation Paper 384, Employee redundancy funds, will seek feedback on whether ASIC should have the power to regulate the multi-billion-dollar funds, which it said were growing significantly.

Fund operators have been granted relief from the licensing, managed investment and associated provisions of the Corporations Act since the year 2000, but this is set to expire on 1 April 2026.

ASIC said it considers it "an appropriate time to re-assess" the relief afforded to employee redundancy funds and the requirements suitable for fund operators given the significant growth in funds under management, and the range of activities now undertaken by fund operators beyond redundancy entitlements.

It is also based on feedback received during prior consultation in 2024, at which time ASIC had proposed extending the relief for a further period of five years.

The regulator said that in 2003 fund operators had approximately $500 million under management, but that this had grown to $2 billion by 2015.

"ASIC is now aware that some funds individually have close to or over $1 billion under management," ASIC said.

"Some funds are now also involved in activities beyond the provision of redundancy entitlements, including raising money for long service leave entitlements."

In response, the regulator said it is seeking feedback on changes to the definition of "employee redundancy funds" to provide guidance on any ongoing relief it may grant the sector.

ASIC said it is considering three options: to allow the relief to expire and require full compliance with the Corporations Act; grant relief from specific obligations in the Corporations Act; and remake the existing relief with additional conditions.

ASIC intends to announce its final position on its approach to regulation of these funds under the Corporations Act by late 2025.

Employee redundancy funds are arrangements established to accept contributions from employers made on behalf of employees for the purpose of providing redundancy and incidental benefits for those employees. They primarily operate for the benefit of employees in the construction and other allied services industries.