mFund products are forward priced, that is the price of units is struck by the issuer at a time in the future (vs a share or ETF which is traded on the exchange at a price which is updated intra-day), therefore mFund requires a multi-staged messaging process for applications and redemptions.
In order to make an application, an investor or their adviser must instruct their authorised Trading Participant to place an application to purchase a dollar amount of units in an mFund product. The investor needs to be broker sponsored to apply for units in a fund.
Prior to submitting an application through the mFund service, a Trading Participant must give the client a copy of the the most recent Product Disclosure Statement or Combined Product Disclosure Statement (as applicable) (refer to FAQ’s below for further information about providing a PDS).
The Application Request cycle follows the following high-level stages:
1. Application submitted: Application request is sent from the investor to the PISP
2. Application accepted or rejected: Application is either accepted or rejection from a PISP
a. When accepted, the PISP must respond with a Unit Pricing Data and Unit Allotment Date.
i. When accepted by the PISP, CHESS schedules the Application Request for Batch Settlement and notifies both the PISP and the requesting Settlement Participant of the Settlement Date and payment instruction details.
b. When rejected, the PISP must include a rejection reason.
3. Unit Allotment: On the Unit Allotment Date, the PISP adjusts the investor holding on the CHESS sub-register to reflect the Application Request.
Section 28.6 of the ASX Settlement Procedure Guidelines contains step by step procedure of how an Application Request is processed.
The following documents also provide further information about the Rules and Procedures governing Application Requests.
There is a marked difference between the procedures required to be followed for an initial application as opposed to a subsequent application.
An initial application is an application for units in a Financial Product where the Holding balance of a Holder is zero at the time the application is made.
For Initial Applications, the participant must send all three application messages (726: Application Request, 735: Foreign Tax Status, 737: Investor Details). CHESS will ensure that all mandatory fields are completed prior to passing the application for units to the PISP. Where all 3 messages are not received by CHESS within 5 Business Days, CHESS will cancel the application request.
Step by step procedures for an initial application can be found in section 28.6.1 of the ASX Settlement Procedure Guidelines
A subsequent application is where an investor has an existing holding (Holding balance > zero) in the requested fund. A subsequent application does not require accompanying foreign tax status and investor details.
The Settlement Participant is required to confirm that the investor has received the current PDS.
Step by step procedures for a subsequent application can be found in section 28.6.2 of the ASX Settlement Procedure Guidelines
PISPs and Product Issuers rely on the information provided in CHESS messages to ensure they correctly accept or reject an application. Therefore, ASX strongly urges Participants to provide as much information as possible when submitting an application (initial or subsequent). This will help ensure your customers receive the best possible experience when making an mFund application and do not encounter any unnecessary delays or rejections.
The Foreign Tax Status message was introduced by ASX in 2018 after it became mandatory for Product Issuers to comply with Common Reporting Standards.
A foreign tax status determination is required to be performed by the investors sponsoring participant to accompany any ‘Initial’ application for mFund units, requests for transfer, and also as an ongoing requirement as an investor’s foreign tax status changes. Foreign tax status determination must be made for all mFund investors. The determination is to be based on, and applies to, both US FATCA and global CRS tax compliance regimes.
Section 28.6.5 of the ASX Settlement Procedure Guidelines provides detailed information on the information that is required to be collected on the Foreign Tax Status message and the procedures that are followed by CHESS.
Fund Application and Redemption requests (“Fund Request Cut-off”) must be received by 11.00am. This will allow at least 30 minutes for the Product Issuer Settlement Participant to either accept or reject the Fund requests prior to Settlement Cut-Off (11.30am).
The mFund service is not a T + 2 settlement regime.
For Application Order requests the Settlement Date will be set by ASX Settlement and will generally be the next Batch Settlement cycle after an application is accepted by the PISP. This is dependent on the timing of Application Order receipt and acceptance by the PISP.