Federal Register of Legislation - Australian Government

Primary content

SLI 2010 No. 86 Regulations as made
These Regulations amend the Australian Securities and Investments Commission Regulations 2001 to support the national regulation of trustee companies which was implemented by Schedule 2 of the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009.
Administered by: Treasury
Made 06 May 2010
Registered 06 May 2010
Tabled HR 12 May 2010
Tabled Senate 12 May 2010
Date of repeal 09 Aug 2013
Repealed by Treasury (Spent and Redundant Instruments) Repeal Regulation 2013

EXPLANATORY STATEMENT

Select Legislative Instrument 2010 No. 86

Issued by the Authority of the Minister for Financial Services, Superannuation and Corporate Law

 

Corporations Act 2001

Corporations Amendment Regulations 2010 (No. 3)

 

 

Australian Securities and Investments Commission Act 2001

Australian Securities and Investments Commission Amendment Regulations 2010 (No. 1)

 

The Corporations Act 2001 (the Corporations Act) and the Corporations Regulations 2001 (the Corporations Regulations) provide for the regulation of corporations, financial markets, products and services, including in relation to licensing, conduct, financial product advice and disclosure.

 

The Australian Securities and Investments Commission Act 2001 (the ASIC Act) and the Australian Securities and Investments Commission Regulations 2001 (the ASIC Regulations) establish the Australian Securities and Investments Commission (ASIC), define the scope of ASIC’s powers of investigation and prescribe certain consumer protections in relation to financial services.

 

Subsection 1364(1) of the Corporations Act and subsection 251(1) of the ASIC Act provide that the Governor-General may make regulations prescribing matters required or permitted by those Acts to be prescribed by regulations, or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to those Acts. 

 

The Regulations make a number of amendments to the Corporations Regulations and the ASIC Regulations related to the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (the Amendment Act), which received the Royal Assent on 6 November 2009.

 

Schedule 2 to the Amendment Act inserts a new Chapter 5D - Licensed trustee companies into the Corporations Act.  Chapter 5D implements the transfer of certain regulatory responsibilities from the states and territories to the Commonwealth.  It creates a national licensing system for trustee companies, since they will be required to hold an Australian financial services licence covering the provision of ‘traditional trustee company services’.  Licensed trustee companies will be subject to the consumer protection and disclosure requirements of the Corporations and ASIC Acts. 

 


 

The Regulations amend the Corporations Regulations to include:

                transitional arrangements for unlicensed trustee companies, charging of fees, dispute resolution and compensation, and established common funds;

                definitions of “trustee company”, “traditional trustee company services”, “estate management functions” and “mortgage-backed security”;

                obligations on trustee companies to provide annual returns, and the information to be included in such returns;

                regulation of fees charged by licensed trustee companies;

                a Schedule which lists licensed trustee companies within Australia;

                Schedules which list prescribed state and territory laws in each jurisdiction; and

                additional provisions for the regulation of trustee company common funds.

 

The Regulations also amend the ASIC Regulations to specify when a person is taken to be provided a traditional trustee company service. 

 

Details of the Regulations are set out in Attachments A and B.

 

Under the Corporations Agreement 2002 (the Corporations Agreement), the state and territory governments referred their constitutional powers with respect to corporate regulation to the Commonwealth.  Under subclauses 506(1) and 507(1) of the Corporations Agreement, the Commonwealth is required to consult with, and obtain the approval of state and territory Ministers of the Ministerial Council for Corporations (the Council) before making a regulation under the national law.  The Commonwealth has received approval of the Council for the Regulations as required by the Corporations Agreement.

 

The Corporations Act and the ASIC Act specify no other conditions that need to be satisfied before the power to make the Regulations may be exercised.

 

The Regulations are legislative instruments for the purposes of the Legislative Instruments Act 2003.

 

The Regulations have two different commencement dates.  Regulations 1 to 6 and Schedule 1 to the Regulations amending the Corporations Regulations and the Regulations amending the ASIC Regulations will commence on the same day as Schedule 2 to the Amendment Act.  Regulation 7 and Schedule 2 to the Regulations amending the Corporations Regulations will commence on 1 July 2010.  The different commencement date of 1 July 2010 for the common fund provisions is to give the industry additional time to comply with the new rules. 

 


 

ATTACHMENT A

 

Details of the Corporations Amendment Regulations 2010 (No. 3)

 

Regulation 1 – Name of Regulations

 

This regulation provides that the title of the Regulations is the Corporations Amendment Regulations 2010 (No. 3)

 

Regulation 2 – Commencement

 

This regulation provides that the Regulations will commence as follows:

                Regulations 1 to 6 and Schedule 1 will commence on the same date as the commencement of Schedule 2 of the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (the Amendment Act);

                Regulation 7 and Schedule 2 will commence on 1 July 2010.

 

Regulation 3 – Amendment of Corporations Regulations 2001

 

This regulation provides that the Corporations Regulations 2001 (the Corporations Regulations) are amended as set out in Schedules 1 and 2.

 

Regulation 4 – Transitional arrangements for charging of fees

 

Section 1496 of the Corporations Act allows regulations to deal with transitional matters prior to new provisions taking full effect.  This regulation states that licensed trustee companies may charge existing clients the fees which they were entitled to charge under the relevant state law in operation prior to the commencement of the Amendment Act.

 

Any new clients must be charged fees in accordance with the provisions in Part 5D.3 of the Amendment Act.

 

Regulation 5 – Transitional arrangements for unlicensed trustee companies

 

This regulation will also be made under section 1496 of the Corporations Act.  With the enactment of the Amendment Act, traditional trustee companies are required to hold an Australian financial services licence covering their trustee services.  Trustee companies listed in Schedule 8AA to the Regulations who did not hold an Australian financial services licence at the time that the Amendment Act was enacted are taken to have a deemed licence covering traditional trustee services until 30 April 2011.

 

Under a deemed licence, a deemed licensee will be required to maintain adequate resources.  To prove it holds adequate resources, a deemed licensee needs to maintain (for the period it holds a deemed licence) the level of net tangible assets it held at the commencement of the Regulations.

 

 

This regulation provides a methodology for licensees to calculate their net tangible assets, including defining assets which are excluded from such calculations.

 

Regulation 6 – Transitional arrangements about dispute resolution and compensation

 

This regulation will also be made under section 1496 of the Corporations Act.  With the enactment of the Amendment Act, traditional trustee companies which hold an Australian financial service licence must comply with dispute resolution and compensation arrangements.

 

This regulation provides that any trustee company listed in Schedule 8AA to the Regulations is exempt until 30 April 2011 from complying with dispute resolution and compensation arrangements which generally apply to Australian financial service licensees.  This allows trustee companies time to put in place dispute resolution and compensation systems which comply with the law.

 

Regulation 7 – Application to established common funds

 

Paragraphs 5D.2.05(1)(a) to (g) and subregulation 5D.2.05(2) prescribe obligations attaching to common funds managed by licensed trustee companies.

 

This regulation deems non-compliance with paragraphs 5D.2.05(1)(a) to (g) and subregulation 5D.2.05(2) to be an offence if a trustee company has an established common fund before 1 July 2010. 

 

Schedule 1 – Amendments

 

Item [1] – Chapter 5D

Item 1 inserts new Chapter 5D into the Principal Regulations including new regulations 5D.1.01 to 5D.1.04, 5D.2.01, 5D.2.02 and 5D.3.01. 

Regulation 5D.1.01

Subsection 601RAB(1) of the Corporations Act states that a trustee company is a company: (a) that is a corporation to which paragraph 51(xx) of the Constitution applies; (b) that is prescribed by the regulations as a trustee company for the purpose of the Act.  Subsection 601RAB(2) states that companies may (for example) be prescribed by setting out a list of companies in the regulations. 

Subregulation 5D.1.01(1) provides that a company is prescribed as a trustee company if the company is listed in Schedule 8AA. 

Subregulation 5D.1.01(2) provides that a Public Trustee of any state or territory must only be listed in Schedule 8AA if: (a) the state or territory requests the Minister (that is, the Commonwealth Minister responsible for the administration of the Corporations Act) to prescribe the company as a trustee company; and (b) the Minister agrees to the request.


Regulation 5D.1.02

Subsections 601RAC(1) and (2) of the Corporations Act define traditional trustee company services and estate management functions as applicable to trustee companies under the Corporations Act.  Subsection 601RAC(3) excludes certain arrangements from the definition of traditional trustee company services and estate management functions, with paragraph 601RAC(3)(f) allowing regulations to prescribe other capacities which will not amount to traditional trustee company services or estate management functions.

This regulation excludes certain capacities which may be associated with trustees from the meaning of traditional trustee company services and estate management functions.  Such capacities include:

                trustees for holder of debt securities;

                trustees for trusts which issue debt securities or manage or service the assets of a trust;

                trustees for the benefit of creditors of another person when holding secure debts owing to that creditor;

                custodians for another trustee;

                trustees for managed investment schemes over real property;

                trustees for employee share or benefit schemes;

                trustees for trusts which mainly make loans to, or invest in companies;

                escrow agents;

                executors or power of attorneys who do not actively provide services; and

                providing a living will or advance directive of any kind. 

This regulation also provides definitions for custodian, debt security, employee share or benefit scheme, escrow agent, and loan-backed security.

Regulation 5D.1.03

This regulation provides a definition of mortgage-backed security.  A definition of mortgage‑backed security is important, as trustees of trusts established for the purpose of issuing debt securities are excluded from obligations relating to traditional trustee company services and estate management functions.


Regulation 5D.1.04

Subregulation 5D.1.04(1)

Paragraph 601RAE(4)(a) of the Corporations Act states that regulations may provide that the trustee company provisions (as defined in subsection 601RAE(1)) are intended to apply to the exclusion of prescribed state and territory laws, or prescribed provisions of state or territory laws.  

The purpose of subregulation 5D.1.04(1) is to ensure that the common fund provisions of the Amendment Act and the Regulations apply to the exclusion of trustee company common fund provisions in the state and territory trustee company legislation listed in Schedule 8AB. 

Subregulation 5D.1.04(2)

Paragraph 601RAE(4)(b) of the Corporations Act states that regulations may provide that the Commonwealth trustee company provisions (as defined in subsection 601RAE(1)) are intended not to apply to the exclusion of prescribed state and territory laws, or prescribed provisions of state or territory laws.

The purpose of subregulation 5D.1.04(2) is to ensure that matters relating to the role of trustee companies as guardians and administrators of estates (on behalf of persons not fully able to manage their own affairs) remain subject to state and territory laws (as listed in Schedule 8AC).  However, under Commonwealth law the trustee company is still (for example):

                obligated to fulfil its general Australian financial service licence obligations (except in relation to dispute resolution);

                prohibited from engaging in unconscionable conduct;

                regulated in relation to common funds that contain guardianship moneys; and

                subject to the general duties of officers and employees. 

Subregulation 5D.1.04(3)

Paragraph 601RAE(4)(b) of the Corporations Act states that regulations may provide that the trustee company provisions (as defined in subsection 601RAE(1)) are intended not to apply to the exclusion of prescribed state and territory laws, or prescribed provisions of state or territory laws. 

Subregulation 5D.1.04(3) provides that the trustee company provisions are intended not to exclude the state and territory laws listed in Schedule 8AD.  Schedule 8AD contains a list of laws which deal with the probate and administration of estates, as well as civil procedure rules, rules governing the legal profession, and other matters.


Regulation 5D.2.01

Section 601SAB of the Corporations Act provides that regulations may prescribe (amongst other things) additional powers, functions, liabilities and obligations of licensed trustee companies.

This regulation prescribes that licensed trustee companies are obliged to provide annual information returns under certain circumstances.  Failure to provide an information return when required to do so constitutes an offence.

The parties entitled to request an annual information return include:

                beneficiaries of the estate of a deceased person;

                a person under state or territory law who is or claims to be entitled to an interest in the estate of a deceased person;

                a person who has commenced proceedings to be included as a beneficiary to the estate of a deceased person;

                a settlor of a charitable trust or any other trust;

                a person who has power to appoint or remove a trustee or power to vary the terms of a charitable trust or any other trust;

                a person named as a person who may be consulted before the distribution of money or property under a charitable trust; and

                a beneficiary of any other trust.

This regulation also specifies how an entitled party may request an annual information return, and the obligations on the provider to provide a current return in a timely manner.

Regulation 5D.2.02

This regulation supplements regulation 5D.2.01 by specifying information which must be included in an annual information return provided by a licensed trustee company.  Generally, those with an individual interest as a beneficiary under a will, a person with a claim to an intestate estate, or a beneficiary to a trust, are entitled to details of income earned on their interest, expenses incurred in operating the trust in relation to their interest, and the net value of their trust interest.  Other parties entitled to an annual information return are entitled to details of income earned on the trust’s assets, expenses incurred in operating the trust’s assets, and the net value of the trust’s assets.

If the terms of the trust require an audit report and annual financial statements, these also need to be included in any annual information return.


Regulation 5D.3.01

Paragraph 601YAB(1)(b) of the Corporations Act provides that regulations may omit, modify or vary the application of the Act to a specific person or class of persons.

Section 601TAB of the Corporations Act prescribes that, in the event of a trustee company changing the fees it will charge for the provision of services, it must, within 21 days of the change of fees taking effect, inform the client of the changed fees.

This regulation modifies section 601TAB by prescribing that licensed trustee companies are not required to comply with the obligation to inform clients of fee changes in relation to clients who are lost clients or agents who are lost agents.

Lost clients and lost agents are defined in this regulation as those who, at a particular time, are uncontactableUncontactable is also defined in this regulation and includes a client or agent for whom the licensed trustee company has no contact address; or a client or agent to whom the licensed trustee company has sent at least one written communication which was returned unclaimed.

Item [2]

Regulation 7.1.17C

Subsection 761G(6A) of the Corporations Act states that, unless otherwise provided, services provided by traditional trustee companies are taken to be provided to the person as a retail client.  The subsection also provides that regulations may prescribe circumstances when a person may not be classed as a retail client.

This regulation states that traditional trustee services are not provided to a person as a retail client where the service is provided to the person for use in a business that is not a small business; or where the person to whom the service is provided is a professional investor.  These exemptions mirror the exceptions to the “retail client” definition under the Corporations Act (paragraphs 761G(7)(b) and (d)). 

Small business is defined in subsection 761G(12) of the Corporations Act, and professional investor is defined in section 9 of the Corporations Act.

Item [3]

Regulation 7.1.28A

Subsection 766A(1B) of the Corporations Act provides that regulations may, in relation to traditional trustee company services, prescribe a person or persons to whom trustee services are provided.  This regulation deems that the following persons are taken to be provided a traditional trustee company service:

                a person who may request an annual information return under subregulation 5D.2.01(3); and

                a person who requests the preparation of a will, trust instrument, power of attorney, or agency instrument.

 

Item [4]

Subregulation 7.6.02(6)

Paragraph 926B(1)(a) of the Corporations Act allows regulations to exempt a person or class of persons from specific provisions of the Corporations Act.

Paragraph 912A(1)(g) of the Corporations Act states that holders of Australian financial service licenses, including traditional trustee companies, must have dispute resolution systems in place for all retail clients.

This regulation provides that traditional trustee companies do not need to comply with the dispute resolution requirements in section 912A of the Corporations Act if a complaints mechanism exists under the relevant state and territory law listed in Schedule 8AC.  Schedule 8AC contains a list of laws which deal with guardianship and administration of estates (on behalf of persons not fully able to manage their own affairs).  Many of the laws listed in this Schedule contain their own dispute resolution mechanisms.  This regulation ensures that there is no inconsistency between dispute resolution processes which may apply to guardianship by trustee companies.

Item [5]

Subregulation 7.7.04(3)

This subregulation modifies the existing subregulation 7.7.04(3) contained within the Corporations Regulations.  Subregulation 7.7.04(3) currently states that if such information is able to be ascertained, remuneration, commissions and other benefits must be stated in a Financial Services Guide, which must be provided to all clients of Australian financial service licensees.

Upon the making of this subregulation, Australian financial service licensees who are licensed trustee companies may provide such information on remuneration, commissions and other benefits as an absolute figure, or as a percentage of the capital value to the trust estate.  All other Australian financial service licensees remain obligated to express remuneration, commissions and other benefits as an absolute figure.

Item [6]

Subregulation 7.7.04(4)

This subregulation is a technical amendment to the current subregulation 7.7.04(4) of the Corporations Regulations. Subregulation 7.7.04(4) applies where remuneration is not ascertainable at the time a Financial Services Guide is to be provided to a client, and the providing entity believes personal advice will be given. However, the words “is required” are missing.  This amendment corrects this error.


Item [7]

Subregulation 7.7.04(5)

This subregulation is a technical amendment to the current subregulation 7.7.04(5) of the Corporations Regulations.  Subregulation 7.7.04(5) applies where remuneration is not ascertainable at the time a Financial Services Guide is to be provided to a client, and the providing entity believes personal advice will not be given.  However, the words “is required” are missing. This amendment corrects this error.

Item [8]

Subregulation 7.7.07(3)

This subregulation modifies the existing subregulation 7.7.07(3) contained within the Corporations Regulations.  Subregulation 7.7.07(3) currently states that if such information is able to be ascertained, remuneration, commissions and other benefits must be stated in a Financial Services Guide, which must be provided to all clients of Australian financial service licensees.

Upon the making of this subregulation, authorised representatives of Australian financial service licensees who are licensed trustee companies may provide such information on remuneration, commissions and other benefits as an absolute figure, or as a percentage of the capital value to the trust estate.  All other Australian financial service licensees remain obligated to express remuneration, commissions and other benefits as an absolute figure.

Item [9]

Subregulation 7.7.07(4)

This subregulation is a technical amendment to the current subregulation 7.7.04(4) of the Corporations Regulations. Subregulation 7.7.04(4) applies where remuneration is not ascertainable at the time a Financial Services Guide is to be provided to a client, and an authorised representative of the providing entity believes personal advice will be given. However, the words “is required” are missing. This amendment corrects this error.

Item [10]

Subregulation 7.7.07(5)

This subregulation is a technical amendment to the current subregulation 7.7.04(5) of the Corporations Regulations. Subregulation 7.7.04(5) applies where remuneration is not ascertainable at the time a Financial Services Guide is to be provided to a client, and an authorised representative of the providing entity believes personal advice will not be given. However, the words “is required” are missing. This amendment corrects this error.


Item [11]

Schedule 8AA

Schedule 8AA provides a complete list of trustee companies (within the meaning of section 601RAB of the Corporations Act).

Section 601RAB of the Corporations Act states that a trustee company is a company: (a) that is a corporation to which paragraph 51(xx) of the Constitution applies; and (b) that is prescribed by the regulations as a trustee company.

Schedule 8AA is inserted into the Corporations Regulations in order to list entities which can provide traditional trustee company services.

Schedule 8AB

Paragraph 601RAE(4)(a) of the Corporations Act states that the regulations may provide that the trustee company provisions (as defined in subsection 601RAE(1)) are intended to apply to the exclusion of prescribed State and Territory laws, or prescribed provisions of state or territory laws.

Schedule 8AB provides a list of state and territory provisions relating to trustee company common funds which do not apply to licensed trustee companies because the Commonwealth trustee company provisions apply exclusively.

Schedule 8AC

Paragraph 601RAE(4)(b) of the Corporations Act states that the regulations may provide that the trustee company provisions (as defined in subsection 601RAE(1)) are intended not to apply to the exclusion of prescribed state and territory laws, or prescribed provisions of state or territory laws.

Schedule 8AC provides a list of estate administration state and territory laws relating to guardianship, and administration of estates on behalf of persons not fully able to manage their own affairs, which continue to apply to licensed trustee companies, despite the Commonwealth trustee company provisions.

Schedule 8AD

Paragraph 601RAE(4)(b) of the Corporations Act states that the regulations may provide that the trustee company provisions (as defined in subsection 601RAE (1)) are intended not to apply to the exclusion of prescribed state and territory laws, or prescribed provisions of state or territory laws.

Schedule 8AD provides a list of state and territory laws which continue to apply to licensed trustee companies despite the Commonwealth trustee company provisions.

 

 

Schedule 2 – Amendments commencing 1 July 2010

 

Item [1] – Division 2.2

Item 1 inserts a new Division 2.2 into Chapter 5D of the Principal Regulations including new regulations 5D.2.03 to 5D.2.09.

Regulation 5D.2.03

Section 601SCC of the Corporations Act provides that regulations may include provisions relating to the establishment of operation of common funds.  This regulation states that Division 2.2 under Chapter 5D of the Corporations Regulations is made for the purpose of section 601SCC.

Regulation 5D.2.04

This regulation allows licensed trustee companies the option of establishing common funds for the estate investments of relevant clients.  A common fund may be established on the basis of units or another suitable basis. 

The regulation states that all money held by a licensed trustee company on behalf of a client in a common fund is deemed to be held on trust for the person on whose behalf the money is invested.

Regulation 5D.2.05

This regulation places a number of obligations on the Board of licensed trustee companies who run a common fund.  At the time of establishing a common fund, the Board needs to state in writing:

                any limitations on the amount of money that will form the common fund;

                the investment strategy for the fund, including class of investments, procedure for calculation, and any expert investment advice which will be sought;

                the amount of fees to be paid by the fund for the provision of trustee services;

                the amount of fees which will be paid by each account within the fund;

                the manner in which withdrawals can be made;

                the procedure for auditing the fund;

                the duration of the life of the fund; and

                the minimum amount which may be invested in the fund on account of each estate.

The regulation states that the Board of a licensed trustee company must inform the Australian Securities and Investments Commission of any decision, and publish a copy of the decision on its website within 14 days of any decision being made.

 

Clients entitled to request an annual information return under subregulation 5D.2.01(3) of the Regulations may also request a copy of any decision in writing.  A copy of the decision must be provided to the client within 30 days of the request being made.

Regulation 5D.2.06

This regulation specifies rules governing the operation of common funds administered by licensed trustee companies.  It also creates penalties for breach of the rules. 

Subregulation 5D.2.06(1)

Subregulation 5D.2.06(1) provides that licensed trustee companies may credit or debit amounts to or from a common fund in accordance with the Corporations Act and the Regulations.

Subregulations 5D.2.06(2) and (3)

Subregulations 5D.2.06(2) and (3) provide that a licensed trustee company may withdraw an amount from a common fund for a purpose relating to a trust that is part of the fund.  A licensed trustee company may also withdraw an amount at credit from a common fund, provided it is invested in a separate account on behalf of the client.

Subregulation 5D.2.06(4)

Subregulation 5D.2.06(4) generally provides that licensed trustee companies may not use common funds to enter derivatives, except where the derivatives are used to manage the financial risk associated with the fund.  Any derivative arrangement must be in accordance with the trustee company’s duties as a trustee under the relevant state or territory provisions set out in Schedule 8AE. 

Subregulations 5D.2.06(5) and (6)

Subregulations 5D.2.06(5) and (6) provide that any income generated by a common fund may only be paid to the licensed trustee company as payment for fees and in proportion to the value of work done by the licensed trustee company.  Income may also be allocated in accordance with subregulation (6) in relation to the accounts from which the fund is derived, in which case the allocation must be made at intervals not exceeding 6 months, and must be divided between each amount in the common fund in proportion to the amounts invested from those accounts and the period of investment.

Subregulation 5D.2.06(7)

Subregulation 5D.2.06(7) provides that any investment committed to administration and management fees must be made in accordance with a decision of the Board of the licensed trustee company, and with the relevant state and territory provisions set out in Schedule 8AE.

 

Subregulations 5D.2.06(8) and (9)

Subregulations 5D.2.06(8) and (9) require that a licensed trustee company must determine the value of investments in any common fund each month.  These subregulations also prescribe rules for determining the value of investments. 

Subregulation 5D.2.06(10) and (11)

Subregulations 5D.2.06(10) and (11) provide that, if a licensed trustee company wishes to realise or sell any investments belonging to the common fund, it must credit or debit any profit or loss to the account within 14 days of the sale.

Regulation 5D.2.07

Subregulation 5D.2.07 requires licensed trustee companies to maintain a register of investments in each common fund it operates.  The register must identify each investment, and detail all amounts held to the credit of the common fund.

Regulation 5D.2.08

Subregulation 5D.2.08(1)

Subregulation 5D.2.08(1) provides that licensed trustee companies must keep accounts and financial reports for all common funds which are not registered schemes.

Subregulation 5D.2.08(2)

Subregulation 5D.2.08(2) provides that, for all common funds held by a licensed trustee company, accounts must be kept that record and explain all transactions and the fund’s financial performance.  The accounts must be such as to enable financial statements of the common fund to be prepared and audited.

Subregulation 5D.2.08(3)

Subregulation 5D.2.08(3) provides that at the end of each financial year, licensed trustee companies must submit their financial statements to be audited by a registered company auditor. 

Subregulation 5D.2.08(4)

Subregulation 5D.2.08(4) provides that audited financial reports must then be lodged with the Australian Securities and Investments Commission within 3 months of the end of the financial year.

Subregulations 5D.2.08(5), (6) and (7)

Subregulations 5D.2.08(5), (6) and (7) provide that clients who are entitled to request an annual information return under subregulation 5D.2.01(3) of these regulations may request a copy of the common fund’s financial statements, audit reports, investment strategy, classes of investments and division of funds between classes.  A copy of the relevant financial information must be provided to the client within 30 days of the request being made.

Regulation 5D.2.09

This subregulation generally prevents a licensed trustee company from giving a financial benefit, in relation to a common fund, to a related party.

The rule does not apply if the financial benefit is given on terms that:

(a)     would be reasonable in the circumstances if the company and the related party were dealing at arm’s length; or

(b)     are less favourable to the related party than the terms in paragraph (a).

Related party is given the same meaning as it has in section 228 of the Corporations Act.

Item [2]

Schedule 8AE

Paragraph 601RAE(4)(b) of the Corporations Act states that regulations may provide that the trustee company provisions (as defined in subsection 601RAE(1)) are intended not to apply to the exclusion of prescribed state and territory laws, or prescribed provisions of state or territory laws.

Schedule 8AE provides a list of provisions of state and territory Trustee Acts which relate to investment in common funds, and which continue to apply to licensed trustee companies, despite the trustee company provisions in the Corporations Act.


 

ATTACHMENT B

 

Details of the Australian Securities and Investments Commission Amendment Regulations 2010 (No. 1)

 

Regulation 1 – Name of Regulations

This regulation provides that the title of the Regulations is the Australian Securities and Investments Commission Amendment Regulations 2010 (No. 1)

 

Regulation 2 – Commencement

This regulation provides for regulations 1 to 3 and Schedule 1 of the Regulations to commence on the same day as Schedule 2 to the Amendment Act. 

 

Regulation 3 – Amendment of Australian Securities and Investments Commission Regulations 2001

This regulation provides that the Australian Securities and Investments Commission Regulations 2001 are amended as set out in Schedule 1.

 

Item [1] Regulation 2D                     

Circumstances in which a person is taken to be provided a traditional trustee company service

This regulation clarifies, for the purpose of Part 2, Division 2 of the Australian Securities and Investments Commission Act 2001, the circumstances in which a person is taken to be provided with a traditional trustee company service.  The regulation mirrors regulation 7.1.28A of the Corporations Amendment Regulations 2010 (No.  ).

For the purpose of this regulation, a person is taken to be provided with a traditional trustee company service if:

(a)          they are a person who may request an annual information return under   subregulation 5D.2.01(3); or

(b)         they are a person who requests the preparation of a will, a trust instrument, a     power of attorney or an agency arrangement.

This regulation is needed so that the Australian Securities and Investments Commission Act 2001 requirements in relation to financial products and services apply to providers of traditional trustee company services.