ETFs in Australia are regulated by the Australian Securities and Investments Commission (“ASIC”) as registered “managed investment schemes” (“MIS”) which means ETF issuers are governed by a detailed and strict set of regulations regarding the management of assets. To understand how safe ETF assets are, we need to understand the MIS rules – the laws which apply not only to ETFs but also to most traditional managed funds, and the fund’s constitution or governing rules.
A strict set of standards
MIS rules impose strict controls on what the fund provider can do with the MIS assets including only being able to buy and sell assets in accordance with the investment rules set out in the fund’s constitution and Product Disclosure Statement (“PDS”).
As an investor, this means once your money has been deposited to the investment manager, it can only be used for the specific purpose outlined in the PDS.