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Compliance Committee Membership

A responsible entity of a registered managed investment scheme must have a compliance committee unless at least half of its directors are external directors. I sit as an external member on compliance committees for responsible entities of registered schemes.

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What the law requires

Section 601JA of the Corporations Act 2001 requires the compliance committee where fewer than half of the responsible entity's directors are external. The committee must have at least three members, and a majority of them must be external. An external member is a person who is not, and has not in the previous two years been, an officer or employee of the responsible entity or a related company, and who has no material interest in it.

The committee's functions are set by section 601JC. It must:

  • monitor how far the responsible entity complies with the scheme's compliance plan, and report its findings to the responsible entity;
  • report to the responsible entity any breach of the Corporations Act or the scheme's constitution that it becomes aware of or suspects;
  • report to the regulator if it believes the responsible entity has not taken, or does not propose to take, appropriate action on a breach it has reported;
  • assess at regular intervals whether the compliance plan is adequate and recommend changes.

A member who fails to carry out these functions can face civil penalties. In June 2026 the regulator began court proceedings against two former compliance committee members of the Shield Master Fund, alongside three former directors. The case is a reminder that the role carries personal responsibility.

Why Treasury looked at the committee model

In February 2026 Treasury consulted on removing the compliance committee option and requiring every responsible entity to have a majority of external directors. In August 2026 the Government announced it would not proceed with that change. The committee model stays, but Treasury has made clear that it expects committees to be active and well informed. The Government will also give the Auditing and Assurance Standards Board power to set mandatory standards for auditors of compliance plans, which will raise the quality of the audits that committees rely on.

What I bring to a compliance committee

  • Experience as a managing director and responsible manager of funds management businesses, so I understand how the scheme operates, not only what the compliance plan says.
  • Knowledge of property, mortgage and securities schemes, including valuation, liquidity and related party issues, which are the areas where schemes most often fail.
  • A Chartered Accountant's reading of financial statements, audit reports and net tangible assets calculations.
  • Independence. I have no interest in the responsible entity or its related companies.

How the engagement works

Most committees meet quarterly. Before each meeting I review the compliance reports, breach and complaints registers, valuation reports and any regulator correspondence. I ask questions before the meeting so that management can prepare answers. After the meeting I check that the minutes record the committee's findings and the actions agreed.

Call me on 0418 998 677 to discuss a compliance committee appointment.

This page contains general information only. It is not legal advice.

Frequently Asked Questions

It monitors the responsible entity’s compliance with the scheme’s compliance plan, reports suspected breaches, considers whether appropriate action is being taken, and regularly assesses whether the compliance plan remains adequate.

An external member brings independent scrutiny to compliance reports, breach and complaints registers, valuation reports, audit material and regulator correspondence, without an interest in the responsible entity or its related companies.

Committees commonly meet on a regular cycle. David reviews the papers before each meeting, raises questions for management, participates in the meeting and checks that the minutes record the findings and agreed actions.