Sub Advisory Agreement Template for Australia

A Sub Advisory Agreement is a crucial legal document that formalises the relationship between a primary investment advisor and a sub-advisor in Australia's financial services sector. Under this arrangement, the primary advisor delegates specific investment management responsibilities to a qualified sub-advisor while maintaining overall responsibility to underlying clients. This agreement ensures compliance with Australian regulatory requirements and protects all parties' interests through clearly defined obligations, performance standards, and risk management protocols.

When do you need this document?

You need a Sub Advisory Agreement when your investment management firm wants to leverage external expertise or expand service capabilities without directly hiring additional staff. This is particularly common when managing specialised asset classes, entering new markets, or requiring specific regional knowledge. The agreement becomes essential when you hold an Australian Financial Services License and need to delegate investment decisions while maintaining regulatory compliance. You'll also need this document when establishing white-label investment services, creating multi-manager investment products, or when capacity constraints require outsourcing certain portfolio management functions to qualified third parties.

Key legal considerations

Several critical legal considerations must be addressed in your Sub Advisory Agreement. The scope of delegated authority must be clearly defined, specifying which investment decisions the sub-advisor can make and any restrictions or limitations. Regulatory compliance clauses ensure both parties meet their obligations under Australian financial services laws, including ongoing monitoring and reporting requirements. Fee structures and payment terms need precise documentation to avoid disputes, including performance fees, management fees, and expense allocations. Confidentiality and data protection provisions are essential given the sensitive nature of client information and investment strategies. Termination clauses should specify notice periods, transition procedures, and protection of client interests during any change of sub-advisor. Risk management and liability allocation clauses protect against potential losses and define each party's responsibilities in different scenarios.

Legal requirements in Australia

Under Australian law, Sub Advisory Agreements must comply with the Corporations Act 2001, particularly Chapter 7 provisions governing financial services and markets. Both parties typically need appropriate Australian Financial Services Licenses, with the primary advisor remaining responsible for client relationships and regulatory compliance. The agreement must address Anti-Money Laundering and Counter-Terrorism Financing Act 2006 obligations, including customer identification and transaction monitoring responsibilities. Privacy Act 1988 compliance is mandatory for handling personal information, requiring specific data protection measures and client consent procedures. ASIC's regulatory guidance on outsourcing arrangements must be followed, ensuring adequate due diligence, ongoing monitoring, and risk management frameworks. The agreement should also address professional indemnity insurance requirements and ensure compliance with any relevant industry codes of conduct or professional standards applicable to investment management services in Australia.