Superannuation Industry (Supervision) Regulations 1994

PART 13 - MISCELLANEOUS  

Division 13.2 - Various operating standards  

REGULATION 13.15A   CHARGES IN RELATION TO CERTAIN DERIVATIVES CONTRACTS  

13.15A(1)    
A trustee may give a charge over, or in relation to, an asset of a fund if:

(a)    

the charge is given in relation to a derivative to which either of the following is a party:

(i) the trustee;

(ii) another person (the agent ) acting on behalf of, on the instructions of, on account of or for the benefit of the trustee; and

(b)    

the charge complies with subregulation (1A) , (1B) or (1C) ; and

(c)    

the fund has in place a derivatives risk statement that sets out:

(i) policies for the use of derivatives that include an analysis of the risks associated with the use of derivatives within the investment strategy of the fund; and

(ii) restrictions and controls on the use of derivatives that take into consideration the expertise of staff; and

(iii) compliance processes to ensure that the controls are effective (for example, reporting procedures, internal and external audits and staff management procedures); and

(d)    

the investment to which the charge relates is made in accordance with the derivatives risk statement.

13.15A(1A)    

A charge complies with this subregulation if it is given in order to comply with a requirement, in either of the following, that the performance of obligations in relation to the derivative be secured:

(a)    rules governing the operation of an approved body (as defined in subregulation (2) );

(b)    a law of the Commonwealth, a State, a Territory or a foreign country (including a part of a foreign country) that applies to dealings in the derivative.

13.15A(1B)    

A charge complies with this subregulation if:

(a)    it is given in favour of the agent; and

(b)    the agent enters into an arrangement that is a derivative on behalf of, on the instructions of, on account of or for the benefit of the trustee; and

(c)    the agent is obliged under either of the following to keep the property of the trustee separate from the property of the agent:

(i) rules governing the operation of an approved body (as defined in subregulation (2) );

(ii) a law of the Commonwealth, a State, a Territory or a foreign country (including a part of a foreign country) that applies to dealings in the derivative; and

(d)    the agent is under an obligation, or but for a netting-off would be under an obligation, to transfer property to another entity in relation to the derivative; and

(e)    the charge is given over an asset or assets of the fund, to secure the performance of an obligation or obligations in relation to the derivative.

13.15A(1C)    

A charge complies with this subregulation if:

(a)    the asset over which the charge is given is financial property; and

(b)    the obligations secured by the financial property are any of the following:

(i) an obligation of the trustee that relates to the derivative;

(ii) an obligation of the trustee to pay interest on an obligation covered by subparagraph (i) ;

(iii) an obligation of the trustee to pay costs and expenses incurred in connection with enforcing a charge given in respect of an obligation covered by subparagraph (i) or (ii) ; and

(c)    the financial property is transferred or otherwise dealt with so as to be in the possession or under the control of:

(i) the secured person; or

(ii) another person (who is not the trustee), on behalf of the secured person, under the terms of an arrangement evidenced in writing.

13.15A(1D)    

For the purposes of paragraph (1C)(c) , financial property is taken not to be in the possession or control of a person mentioned in that paragraph if, under the charge, the trustee is free to deal with the financial property in the ordinary course of business until the person ' s interest in the financial property becomes fixed and enforceable.

13.15A(1E)    

Without limiting paragraph (1C)(c) , financial property is taken to be in the possession of a person for the purposes of that paragraph if:

(a)    in a case where there is an issuer of the financial property - the person is registered by, or on behalf of, the issuer as the registered owner of the financial property; or

(b)    in a case where the financial property is intermediated financial property - the person is the person in whose name the intermediary maintains the account.

13.15A(1F)    

Without limiting paragraph (1C)(c) , financial property is taken to be under the control of a person for the purposes of that paragraph if:

(a)    the financial property is intermediated financial property; and

(b)    the intermediary is not the trustee (but may be the secured person or any other person); and

(c)    there is an agreement in force between the intermediary and one or more other persons, one of which is the secured person or the trustee; and

(d)    the agreement has one or more of the following effects:

(i) the person in whose name the intermediary maintains the account is not able to transfer or otherwise deal with the financial property;

(ii) the intermediary must not comply with instructions given by the trustee in relation to the financial property without seeking the consent of the secured person (or a person who has agreed to act on the instructions of the secured person);

(iii) the intermediary must comply, or must comply in one or more specified circumstances, with instructions (including instructions to debit the account) given by the secured person in relation to the intermediated financial property without seeking the consent of the trustee (or any person who has agreed to act on the instructions of the trustee).

13.15A(1G)    

Without limiting paragraph (1C)(c) , the fact that the trustee retains a right of one or more of the following kinds does not of itself stop that paragraph from being satisfied:

(a)    right to receive and withdraw income in relation to the financial property;

(b)    right to receive notices in relation to the financial property;

(c)    right to vote in relation to the financial property;

(d)    right to substitute other financial property that the parties agree is of equivalent value for the financial property;

(e)    right to withdraw excess financial property;

(f) right to determine value of financial property.

13.15A(2)    

In this regulation:

approved body
means a body mentioned in Schedule 4 .

derivative
means any of the following:

(a) a derivative (within the meaning of Chapter 7 of the Corporations Act 2001 );

(b) a foreign exchange contract (within the meaning of that Act);

(c) an arrangement that is a forward, swap or option, or any combination of those things, in relation to one or more commodities;

but does not include any arrangement that is of a kind mentioned in subregulation 6(2) of the Payment Systems and Netting Regulations 2001 .

Note:

Subregulation 6(2) of the Payment Systems and Netting Regulations 2001 identifies obligations that are not eligible obligations in relation to a close-out netting contract. The arrangements mentioned include credit facilities, reciprocal purchase agreements (otherwise known as repurchase agreements), sell-buyback arrangements, securities loan arrangements, contracts of insurance and managed investment schemes.

derivatives contract
(Repealed by FRLI No F2016L00724)

financial property
has the same meaning as in the Payment Systems and Netting Act 1998 .

intermediary
has the same meaning as in paragraph (h) of the definition of financial property in section 5 of the Payment Systems and Netting Act 1998 .

intermediated financial property
has the same meaning as in the Payment Systems and Netting Act 1998 .