This is the final part of a blog series title 'Sleepers
Wake' about the regulation of religious charitable development
funds. Click on the links to check out the
The timing proposed by APRA in August 2013 was that the changes
would take effect from 30 June 2014 with a 6 month transition
period. No new exemptions would be granted as of 30 June 2014 and
existing RCDFs would need to comply with the new arrangements from
1 January 2015.
What this means for RCDFs is that a substantial amount of work
remains to be done by 1 January 2015. RCDFs will need to close any
product with a maturity date of less than 31 days and overhaul the
design of any product with no maturity date. Existing "at
call" accounts may need to be relaunched on the basis that any
withdrawal requires 31 days' notice. Given the historical
nature of some of these products and their organic place within
complex governance frameworks it may be necessary for some
denominations to consider revisions to underlying constitutional
documentation, either of the fund itself or the entity that manages
it. Internal procedures may need to be rewritten to manage and
track withdrawal requests. The potential changes in investor
behaviour and liquidity profile resulting from the necessary change
in product features, will need to be modelled and accommodated and
product pricing perhaps reconsidered accordingly. All marketing and
publicity material will need to be reviewed to excise the
prohibited words. At a customer level, RCDFs will need to give due
notice of the changes and determine how to treat customers that do
not respond to correspondence seeking their agreement (or
otherwise). These RCDF entities, which may have quite illiquid
investment profiles (as most exist for the purpose of church
lending), will need to provision for a proportion of their investor
base to withdraw their investment.
These implementation dates put forward by APRA in August 2013
have been missed, without public comment, and the sector awaits
clear direction and timeframes on which to plan and resource their
compliance implementation projects. The listed exempt RCDFs, like
most not for profits, are "shoestring operations" that
focus on their charitable aims rather than maximising returns to
investors. The exemptions, by their very existence, recognise this.
Delivering the fundamental changes to the basic investment products
that the RCDFs are built around, which in most cases will require
the product to be rebuilt and relaunched, is a substantial
undertaking that would stretch many financial institutions,
particularly if done under external time pressure. It becomes only
more challenging when the product concerned is the flagship, or
indeed the sole product of the entity, and the entity itself
operates with minimal overheads and due to its small scale relies
on external expertise to deliver the changes required. APRA has set
its course as a matter of policy but the "devil is in the
detail" when it comes to implementation and the conversion of
these statements of broad policy intent into law. It is to be hoped
the APRA makes due allowance for the limited resources of sector
participants and allows sufficient time for RCDFs to implement a
cost-effective and orderly transition.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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