Corporations and Other Legislation Amendment (Corporate Collective Investment Vehicle Framework) Regulations 2022 (F2022L00469)
Schedule 1 Main amendments
Corporations Regulations 2001
25 After Chapter 8A
Insert:
Chapter 8B - Corporate collective investment vehicles
Part 8B.4 - Corporate finance and financial reporting for CCIVs
Division 1 - Shares
8B.4.10 Cross investment between sub-funds of a CCIV - restriction for circular cross-investment
For the purposes of subsection 1230R(1) of the Act, a CCIV must not acquire, in respect of a sub-fund of the CCIV (the acquiring sub-fund ), one or more shares referable to another sub-fund of the CCIV (the issuing sub-fund ) if, at the time of the proposed acquisition, the assets of the issuing sub-fund:
(a) directly include; or
(b) indirectly include, through one or more interposed sub-funds of the CCIV;
one or more shares referable to the acquiring sub-fund.
Note: Paragraph (b) applies if, for example, at the time of the proposed acquisition:
(a) the assets of the issuing sub-fund include shares referable to sub-fund C of the CCIV; and
(b) the assets of sub-fund C include shares referable to sub-fund D of the CCIV; and
(c) the assets of sub-fund D include shares referable to the acquiring sub-fund.
In this example, sub-funds C and D are each interposed sub-funds.
8B.4.15 Cross investment between sub-funds of a CCIV - requirements and restrictions on membership rights
(1) For the purposes of paragraph 1230T(3)(b) of the Act, a CCIV's entitlement, as described in subsection 1230T(2) of the Act, to vote:
(a) in respect of each share that the CCIV has acquired in respect of a sub-fund of the CCIV (the first sub-fund ) and that is referable to another sub-fund of the CCIV (the second sub-fund ); and
(b) as a member of the second sub-fund on a resolution (the relevant resolution ) at a meeting of the members of the second sub-fund;
is subject to the requirement and restriction mentioned in subregulation (2).
(2) For the purposes of subregulation (1), there is:
(a) a requirement that the CCIV must vote, in respect of each such share, on the relevant resolution in the way determined by resolution of the members of the first sub-fund; and
(b) a restriction that the CCIV must not vote, in respect of each such share, on the relevant resolution if a resolution that determines the way the CCIV must vote on the relevant resolution is not made by the members of the first sub-fund.
Division 4 - Financial reports and audit of CCIVs
8B.4.40 Keeping financial records for sub-funds - further requirement for cross-investment
(1) For the purposes of paragraph 1232A(1)(c) of the Act, the written financial records that a CCIV must keep, for each sub-fund of the CCIV, must comply with the further requirement set out in subregulation (2).
(2) Those records must correctly and clearly identify and explain all cross-investment between the sub-fund and any other sub-fund of the CCIV.
8B.4.45 Annual financial reports for sub-funds - further requirement for cross-investment
(1) For the purposes of subsection 1232D(3) of the Act, a retail CCIV's financial report for a sub-fund (the reporting sub-fund ) for a financial year must comply with:
(a) the further requirements set out in subregulation (2) to the extent that the assets of the reporting sub-fund include shares in the CCIV referable to another sub-fund of the CCIV; and
(b) the further requirements set out in subregulation (3) to the extent that the assets of another sub-fund of the CCIV include shares in the CCIV referable to the reporting sub-fund.
Requirements for the reporting sub-fund as an investor sub-fund
(2) The report must ensure that disclosures of the following are included in the notes to the financial statements of the reporting sub-fund for the financial year:
(a) the total number of shares in the CCIV that:
(i) are assets of the reporting sub-fund; and
(ii) are referable to other sub-funds of the CCIV at the end of the financial year;
(b) the total valueof those shares at the end of the financial year and expressed in Australian dollars;
(c) so much of each of the totals in paragraphs (a) and (b) as relates to the shares referable to each of those other sub-funds.
Requirements for the reporting sub-fund as an investee sub-fund
(3) The report must ensure that disclosures of the following are included in the notes to the financial statements of the reporting sub-fund for the financial year:
(a) for the shares in the CCIV referable to the reporting sub-fund of the CCIV:
(i) the total number of those shares that are assets of other sub-funds of the CCIV at the start of the financial year; and
(ii) the total number of those shares that become assets of one or more other sub-funds of the CCIV at any time during the financial year; and
(iii) the total number of those shares that cease to be assets of one or more other sub-funds of the CCIV at any time during the financial year; and
(iv) the total number of those shares that are assets of other sub-funds of the CCIV at the end of the financial year;
(b) all of the following:
(i) for the shares covered by subparagraph (a)(i) - the total value of those shares at the start of the financial year and expressed in Australian dollars;
(ii) for the shares covered by subparagraph (a)(ii) - the total value of those shares, worked out using the value of each share at the time the share becomes an asset as mentioned in that subparagraph, and expressed in Australian dollars;
(iii) for the shares covered by subparagraph (a)(iii) - the total value of those shares, worked out using the value of each share at the time the share ceases to be an asset as mentioned in that subparagraph, and expressed in Australian dollars;
(iv) for the shares covered by subparagraph (a)(iv) - the total value of those shares at the end of the financial year and expressed in Australian dollars;
(c) so much of each of the totals in paragraphs (a) and (b) as relates to the shares that are assets of each of those other sub-funds of the CCIV.
8B.4.50 Combining financial reports, and directors' reports etc., for sub-funds of the same CCIV
(1) This regulation deals with how the provisions (the reporting provisions ) of Part 2M.3 of the Act (as modified by Chapter 8B of the Act) apply to a retail CCIV.
(2) For the purposes of section 343 and subsection 1243A(1) of the Act, this regulation modifies the operation of the reporting provisions to the extent that, apart from those modifications, the reporting provisions could not alternatively apply to:
(a) a single financial report for a financial year covering one or more sub-funds of the CCIV; or
(b) a single directors' report for a financial year covering one or more sub-funds of the CCIV; or
(c) a single financial report for a half-year covering one or more sub-funds of the CCIV; or
(d) a single auditor's report on the financial report referred to in paragraph (a) of this subregulation; or
(e) a single concise report (see paragraph 1232H(1)(b) of the Act) for a financial year covering one or more sub-funds of the CCIV.
Note 1: Not all of the sub-funds of the CCIV need to be covered by one of these single reports if the CCIV chooses. The reporting provisions will continue to apply, unmodified by this regulation, for any sub-funds not covered by the report.
Note 2: All of the sub-funds covered by one of these single reports must be sub-funds of the same CCIV. The report cannot cover sub-funds of different CCIVs, even if the CCIVs share the same corporate director.
(3) The report referred to in paragraph (2)(d) must be prepared by a single auditor, audit firm or audit company.
(4) Each single report referred to in subregulation (2) must be prepared so that each of the matters covered by the report is shown so that the matter is clearly identifiable for each of the sub-funds covered by the report.
Part 8B.5 - Operating a CCIV
8B.5.10 Who may hold CCIV assets - minimum standards and other requirements
(1) For the purposes of subsection 1234G(2) of the Act, the money and property of a CCIV may be held by a person other than the CCIV if:
(a) the corporate director of the CCIV is satisfied that the minimum standards in subregulation (2) are met:
(i) for the person; and
(ii) for the period in which the person is engaged to perform the function of holding the money and property of the CCIV; and
(b) the corporate director monitors the person's compliance with the minimum standards during that period; and
(c) the corporate director undertakes a review of the person's compliance with the minimum standards every 13 months starting on the day the person is engaged to perform the function of holding the money and property of the CCIV; and
(d) the corporate director makes available to ASIC, on request, the outcomes of the review.
(2) For the purposes of subregulation (1), the minimum standards for holding the money and property of a CCIV are met for a person and a period if:
(a) during the period, the person has adequate capacity and resources to hold the money and property of the CCIV; and
(b) in the case that the person performs other functions for the CCIV at any time during the period - the person has in place, at that time, adequate arrangements for the management of conflicts of interest that may arise wholly, or partially, in relation to activities undertaken by the person in performing the other functions.
8B.5.15 Holding money and property of a CCIV on trust - exception
(1) For the purposes of subsection 1234K(1) of the Act, subsection 1234H(1) of the Act does not apply to the class of assets that is the money or property of a CCIV that is held outside of Australia in another jurisdiction in the circumstance mentioned in subregulation (2)
(2) For the purposes of subregulation (1), the circumstance is that:
(a) it is not reasonable for the money or property of the CCIV to be held on trust under the laws in force in the other jurisdiction; and
(b) there are adequate safeguards in place for protecting the money or property of the CCIV, including if the person holding the money or property of the CCIV becomes insolvent.
8B.5.20 Holding money and property of a CCIV separately - exception and other requirements for certain classes of assets
(1) For the purposes of subsections 1234K(1) and (2) of the Act, subsections 1234J(1) to (3) of the Act do not apply in relation to the class of assets of a sub-fund of a CCIV that consists of assets that:
(a) are of any of the following kinds (the prescribed assets ):
(i) Australian or foreign currency;
(ii) rights to Australian or foreign currency that is held in a deposit-taking facility made available by an ADI (within the meaning of the Banking Act 1959);
(iii) rights to Australian or foreign currency that is held in a deposit-taking facility made available by a body corporate that is authorised to carry on a banking business (within the meaning of that Act) in a foreign country;
(iv) securities;
(v) derivatives; and
(b) are held in accordance with the requirements mentioned in subregulation (2).
(2) For the purposes of subregulation (1), the following requirements apply in relation to the holding, by a person, of assets of a sub-fund of a CCIV that are prescribed assets:
(a) a requirement that the person holds the prescribed assets separately from any money or property of the person;
(b) a requirement that there are adequate safeguards in place for the protection of the prescribed assets, including if the assets of another sub-fund of the CCIV or the assets of another entity are subject to external administration;
(c) a requirement that the person do all things necessary to ensure that not holding the prescribed assets in accordance with subsections 1234J(1) to (3) of the Act does not restrict the CCIV's capacity to exercise any rights in respect of the prescribed assets;
(d) a requirement that the person do all things necessary to ensure that a reconciliation of the prescribed assets occurs:
(i) each business day; or
(ii) if it is ordinary and reasonable, in commercial practice, to reconcile assets of the same class less frequently - as frequently as reconciliation of assets of that class would occur in accordance with that practice;
(e) if there is a discrepancy in the reconciliation of the prescribed assets - a requirement that the person do all things necessary to rectify the discrepancy within the period of 2 business days starting after the day the person identifies, or becomes aware of, the discrepancy;
(f) a requirement that the person:
(i) keep adequate records of the prescribed assets; and
(ii) provide reasonable assistance to the corporate director of the CCIV.
Note: For the purposes of paragraph (e), one of the ways a discrepancy may be rectified is through the provision of additional property by the CCIV at the request of the person holding the property.