Superannuation Industry (Supervision) Regulations 1994

PART 4 - MANAGEMENT AND TRUSTEESHIP OF SUPERANNUATION ENTITIES

[ CCH Note: Pt 4 is to have effect, in relation to regulated superannuation funds, and their trustees, as if it were modified by inserting reg 4.08A - see Modification Declaration No 10 under reg 4.08A .]

Division 4.1 - Prescribed matters

REGULATION 4.02 COVENANTS IN GOVERNING RULES OF SELF MANAGED SUPERANNUATION FUND - BENEFICIARY INVESTMENT CHOICE

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4.02(1)
This regulation is made for paragraph 52B(4)(b) of the Act.

4.02(2)
The circumstances in which a direction, other than a subsequent direction, may be made by a specified beneficiary or class of beneficiaries are the following:

(a) the trustee:

(i) gives the beneficiary or class a choice of 2 or more strategies for investing the interest of the beneficiary or class in the fund; and

(ii) informs the beneficiary or class that the beneficiary or class may choose a strategy or combination of strategies;

(b) the beneficiary or class is fully informed of:

(i) the investment objectives of each strategy; and

(ii) anything else the trustee reasonably believes a person would need to know to understand the effect of, and any risk involved in, each strategy;

(c) the direction specifies:

(i) which strategy or combination of strategies the beneficiary or class has chosen; and

(ii) where applicable, matters related to the choice mentioned in subparagraph (i);

Example

The chosen strategy could be one that allows the beneficiary a choice in exposure to certain classes of asset. The beneficiary may choose 60% in fixed interest loans and 40% in shares. The choice of the level of exposure to the class of assets would be information for subparagraph (ii).

(d) the beneficiary or class is fully informed of the range of directions that can be given and the circumstances in which they can be changed.

4.02(3)
A subsequent direction may be given in the following circumstances:

(a) the beneficiary or class is given all the information the trustee believes a person would need to understand the effect of, and any risk involved in, giving the subsequent direction;

(b) the subsequent direction relates to the strategy for investing the beneficiary or class ' s interest in the fund.

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History

Reg 4.02 substituted by SLI No 155 of 2013, reg 4 and Sch 1 item 94, effective 1 July 2013. Reg 4.02 formerly read:

REGULATION 4.02 COVENANTS IN GOVERNING RULES OF A SUPERANNUATION ENTITY - BENEFICIARY INVESTMENT CHOICE
4.02(1)
For the purposes of paragraph 52(4)(b) of the Act, the circumstances in which a direction of the kind referred to in that paragraph (other than a subsequent direction of that kind) may be given are:

(a) in the case of a direction by a specified beneficiary who is, or a class of specified beneficiaries each of whom is, a standard employer-sponsored member - the circumstances stated in subregulations (2) and (3); and

(b) in any other case - the circumstances stated in subregulation (2).

4.02(2)
For the purposes of paragraphs (1)(a) and (b), the following circumstances are stated, namely that:

(a) the trustee gives to the beneficiary, or to each member of the class of beneficiaries, a choice of 2 or more investment strategies from which the beneficiary, or class of beneficiaries, may choose a strategy or combination of strategies; and

(b) the beneficiary, or each member of the class of beneficiaries, is given:

(i) the investment objectives of each of the strategies mentioned in paragraph (a); and

(ii) all information the trustee reasonably believes a person would reasonably need for the purpose of understanding the effect of, and any risk involved in, each of those strategies; and

(c) the beneficiary, or each member of the class of beneficiaries, is fully informed of the range of directions that can be given and the circumstances in which they can be changed; and

(d) the direction is given after compliance with the above paragraphs, and the direction specifies:

(i) which of the strategies or which combination of strategies referred to in paragraph (a) is to be followed in relation to investments of the beneficiary ' s, or class of beneficiaries ' , interest in the fund; and

(ii) where applicable, matters related to the choice referred to in that paragraph.

Example : A strategy could allow the beneficiary, or class of beneficiaries, a choice in exposure to certain classes of asset. The beneficiary may choose 60% in fixed interest loans and 40% in shares and the choice of the level of exposure to the class of assets would be a " matter " mentioned in subparagraph (ii).

Note Information regarding investment strategies is generally set out in a Product Disclosure Statement. However, a shorter Product Disclosure Statement may, in accordance with the modifications of the Corporations Act 2001 set out in Part 5B of Schedule 10A to the Corporations Regulations 2001 :

(a) provide some of the information by applying, adopting or incorporating a matter in writing; or

(b) refer to information that is set out in another document.

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History

Reg 4.02(2) amended by SLI No 146 of 2011, reg 3 and Sch 1 item 2, by inserting the note at the end, effective 9 August 2011.

4.02(3)
For the purposes of paragraph (1)(a), the following circumstance is stated, namely that the trustee clearly identifies to the beneficiary, or to each member of the class of beneficiaries, when giving to him, her or them a choice of 2 or more investment strategies in accordance with paragraph (2)(a), the strategy the trustee will adopt if no direction is given.

4.02(4)
Subregulation (3) does not apply in relation to a beneficiary or a member of a class of beneficiaries if it is a condition of membership for the beneficiary to choose a strategy or combination of strategies.

4.02(5)
For the purposes of paragraph 52(4)(b) of the Act, the circumstances in which a direction of the kind referred to in that paragraph, if it is a subsequent direction of that kind, may be given are that:

(a) the beneficiary, or each member of the class of beneficiaries, is given all information the trustee reasonably believes a person would reasonably need for the purpose of understanding the effect of, and any risk involved in, the subsequent direction; and

(b) the subsequent direction is given after compliance with paragraph (a), and relates to the strategy to be followed in relation to the investment of the interest in the fund of the beneficiary or class of beneficiaries.

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