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 first and second blogs.
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.
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