In a discussion paper released by APRA late last month, a number of proposals are made that affect current exemption orders for Registered Financial Corporations (“RFCs”) and some Religious Charitable Development Funds (“RCDFs”), many of them operated by churches.
At present, these entities are exempt from the need to be authorised as deposit-taking institutions (“ADIs”). These exemptions are generally historical in nature according to APRA.
The main concern behind these proposals as expressed by APA, is to reduce the likelihood that an investor, particularly a retail investor would confuse investments with and RFC or an RCDF with and ADI deposit and would believe they have the same level of protection afforded under the Banking Act.
The proposals are as follows:
For RFC’s under Banking (Exemption) Order No 96
- Restricted use of terms such as “at call” and “deposit” by RFCs in describing products.
- Prohibiting use of certain transaction facilities such as ATM access, BPay and EFTPOS facilities.
- Debenture offerings to have a minimum maturity of 31 days.
These restrictions and prohibitions are proposed to apply from 1 July 2013 for all funds raised from that date. A transition period of up to three years is to be allowed for existing retail debenture issues.
For RCDFs:
- The current exemption from the need to be authorised under the Banking Act is proposed to be extended for another 12 months to 27 June 2014.
- From 28 June 2014, RCDFs have to register as an RFC or as a registered managed investment scheme, subject to exceptions where RCDFs do not take funds from retail investors.
More than 50 entities, with assets of more than $7 billion, will be affected.
In addition to the above proposals, APRA also proposed changes to guidelines under section 66 of the Banking Act including clarification of what is a financial business and the requirements for ADIs to operate as banks and credit unions. There are no major changes in this regard.
Submissions may be made until 24 May 2013.