Financial System Legislation Amendment (Resilience and Collateral Protection) Regulation 2016 (F2016L00724)

Schedule 1   Facilitating access to derivatives for superannuation funds and life insurance companies

Superannuation Industry (Supervision) Regulations 1994

8   After subregulation 13.15A(1)

Insert:

(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.

(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.

(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 thederivative;

(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.

(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.

(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.

(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).

(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.