Corporations Amendment Regulations 2010 (No. 3) (88 of 2010)

Schedule 2   Amendments commencing on 1 July 2010

[1]   After regulation 5D.2.02

insert

Division 2.2 Common funds

5D.2.03 Common funds

This Division is made for section 601SCC of the Act.

5D.2.04 Establishment of common funds

(1) A licensed trustee company may:

(a) establish accounts within a common fund; and

(b) establish a common fund on the basis of units or another suitable basis.

(2) If the common fund includes money that is not estate money and that is not otherwise held in trust, the licensed trustee company is taken to hold the money in trust for the person on whose behalf the money is invested in the common fund.

5D.2.05 Deciding details about common funds

(1) A licensed trustee company that is establishing a common fund commits an offence if, at the time of establishing the fund, it does not ensure that its Board makes a decision, in writing, about the following:

(a) any limitation on the amount of money that will form the common fund;

(b) the investment strategy for the common fund, including the following:

(i) the class of investments in which the common fund may be invested;

(ii) the procedure for valuing the investments;

(iii) if the trustee company is to seek expert advice about proposed investments - the type of expert advice to be sought;

(c) the amount of fees that are to be paid by:

(i) the common fund for the provision of traditional trustee company services; and

(ii) each account in the common fund;

(d) the manner in which a withdrawal can be made from the common fund;

(e) the procedure for auditing the common fund;

(f) if the common fund is to have a limited life - the duration of the common fund;

(g) if the common fund is to have a minimum amount that may be invested in the fund on account of each estate - the minimum amount.

Penalty: 50 penalty units.

(2) The licensed trustee company commits an offence if it does not:

(a) within 14 days of making the decision:

(i) send a copy of the decision to ASIC; and

(ii) publish a copy of the decision on its website; and

(b) if requested by a person entitled to request an annual information return under subregulation 5D.2.01 (3), make a copy of the decision available to the person within 30 days of the request being received.

Penalty: 50 penalty units.

5D.2.06 Operation of common funds

Compliance with the Act and regulations

(1) A licensed trustee company may, from time to time and without liability for breach of trust, pay into or withdraw an amount from a common fund in accordance with the Act and these Regulations.

Note Payments into a common fund may be prohibited where this is contrary to the conditions on which the company holds the money: see subsection 601SCB (3) of the Act.

Withdrawals

(2) A licensed trustee company may do the following:

(a) withdraw an amount from a common fund for a purpose relating to a trust or estate that is part of the fund and is managed or administered by the company;

(b) withdraw from a common fund an amount at credit in the fund on account of a trust matter or a managed estate and invest the amount on the separate account of the matter or estate.

(3) A licensed trustee company commits an offence if it pays interest from the common fund on withdrawn amounts on or after the day of the withdrawal.

Penalty: 50 penalty units.

Derivatives

(4) A licensed trustee company commits an offence if:

(a) when managing and administering a common fund, the trustee company enters into a derivative; and

(b) at the time of entering into the derivative:

(i) the trustee company did not do so for the purpose of managing a financial risk arising from:

(A) variations in the expenses of the common fund; or

(B) variations in the revenue obtainable from investments made by the common fund; and

(ii) the arrangement was not in accordance with the trustee company’s equitable and other duties as a trustee under the relevant State or Territory provisions set out in Schedule 8AE.

Penalty: 50 penalty units.

Applying income from investment

(5) A licensed trustee company commits an offence if it applies income from investment of a common fund other than for:

(a) payment of the company’s fee for the proper administration and management of the fund under the Act, regulations and terms of the common fund, proportionate to the value of the work done or the services rendered; and

(b) allocation in accordance with subregulation (6) in relation to the accounts from which the fund is derived.

Penalty: 50 penalty units.

(6) For paragraph (5) (b), the allocation must:

(a) be made at intervals not exceeding 6 months; and

(b) be divided between each account in the common fund in proportion to the amounts invested from those accounts and the period of investment.

Investments

(7) A licensed trustee company commits an offence if:

(a) the trustee company invests money committed to its administration or management; and

(b) the investment is:

(i) not in accordance with a decision of the Board made for the purpose of regulation 5D.2.05; and

(ii) not made in a manner in which trust funds may be invested by a trustee under the relevant State or Territory provisions set out in Schedule 8AE.

Penalty: 50 penalty units.

Valuation of investments

(8) A licensed trustee company commits an offence if it does not comply with the following requirements about the valuation of investments of common funds:

(a) by the third business day of each month, the trustee company must decide the value of the investments in each common fund as at the first business day of the month;

(b) subject to subregulation (9), in deciding the value of securities listed on a financial market for a month, the trustee company must take the last sale price of the first business day of the month published by the market operator as the value of the listed securities;

(c) the trustee company must make withdrawals from the common fund and further investments on the basis of the last valuation of investments made by the company.

Penalty: 50 penalty units.

(9) The requirement in paragraph 8 (b) does not apply if, in a particular month, the licensed trustee company decides it is in the best interests of each account in the common fund that a sale price used for the valuation be one taken later in that month.

Realising investments

(10) A licensed trustee company may sell investments belonging to a common fund.

(11) A licensed trustee company that has realised an investment in a common fund commits an offence if it does not, within 14 days of the realisation, credit or debit any profit or loss between each account in the common fund in proportion to the amounts invested from those accounts at the time of the realisation.

Penalty: 50 penalty units.

5D.2.07 Register of investments

(1) A licensed trustee company commits an offence if it does not maintain a register of investments for each common fund in accordance with subregulation (2).

Penalty: 50 penalty units.

(2) The register must contain:

(a) a record identifying each investment made by the common fund; and

(b) details of amounts held to the credit of the common fund.

Note For other obligations relating to common funds: see section 601SCB of the Act.

5D.2.08 Financial reports

(1) A licensed trustee company must comply with this regulation in relation to each common fund established by the company that is not a registered scheme.

Account keeping

(2) The licensed trustee company commits an offence if it does not keep accounts that:

(a) correctly record and explain its transactions for the common fund and the fund’s financial position and performance; and

(b) would enable true and fair financial statements to be prepared and audited.

Penalty: 50 penalty units.

Auditing

(3) The licensed trustee company commits an offence if it does not:

(a) have the financial statements for a financial year for the common fund audited by a registered company auditor; and

(b) obtain an auditor’s report for the financial statements.

Penalty: 50 penalty units.

Lodging financial statements with ASIC

(4) The licensed trustee company commits an offence if it does not lodge the audited financial statements for the fund with ASIC within 3 months of the end of the financial year.

Penalty: 50 penalty units.

Request for financial information

(5) A person who is entitled to request an annual information return under subregulation 5D.2.01 (3) may request, in writing, that the licensed trustee company provide the information mentioned in subregulation (7).

(6) The licensed trustee company commits an offence if it does not provide the information mentioned in subregulation (7) to the person within 30 days of receiving the request under subregulation (5).

Penalty: 50 penalty units.

(7) The information that must be provided is:

(a) a copy of the common fund’s financial statements and audit report; and

(b) the classes of investments in which the common fund is invested and how the investment is divided between each class; and

(c) the trustee company’s investment strategy for the common fund.

5D.2.09 Arm’s length transactions

(1) This regulation applies to a licensed trustee company of a common fund if the fund is not a registered scheme to which Part 5C.7 of the Act applies.

(2) The licensed trustee company commits an offence if it gives a financial benefit in relation to the common fund to a related party.

Penalty: 50 penalty units.

(3) Subregulation (2) 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 referred to in paragraph (a).

(4) In this regulation, related party has the meaning given by section 228 of the Act, as if the references in that section to ‘public company’ were references to ‘licensed trustee company’.


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