Document ID: chunk:federal_register_of_legislation:F2022C00868:reg:44
Version: federal_register_of_legislation:F2022C00868
Segment Type: reg
Provision Reference: reg 44
Character Range: 97695–99557

44  Borrowing
 (1) A passport fund must not borrow unless all of the following conditions are satisfied:
 (a) the total amount of borrowings of the passport fund does not exceed 10% of the value of the passport fund assets at the time of borrowing;
 (b) the purpose of the borrowing is:
 (i) to enable payment of redemption requests that:
 (A) have been made; or
 (B) are reasonably expected to be made; or
 (ii) to enable payment of expenses properly payable by the passport fund other than:
 (A) fees payable from the fund to an operator; or
 (B) fees payable from the fund to the independent oversight entity; or
 (C) expenses associated with making an additional investment; or
 (iii) to enable payment of dividends or distributions to members;
 (c) there is a material risk that, without the borrowing, the passport fund will be unable to:
 (i) meet redemption requests; or
 (ii) pay expenses of the kind mentioned in subparagraph (b)(ii);
 (d) the borrowing is in the form of a trade credit, loan or overdraft from a financial institution licensed or regulated in the institution's principal place of business;
 (e) the passport fund intends to repay the amount:
 (i) in full in less than 31 days; and
 (ii) without relying on other borrowings or financed amount;
 (f) the operator of the passport fund has documented cash flow projections prepared on reasonable assumptions that show that the amount will be repaid within that period.
 (2)  For the purposes of paragraph (1)(a), any amount payable to the passport fund by the lender is not taken to reduce the amount borrowed.
 (3) A passport fund must not enter into a securities lending arrangement for the purpose of acquiring any collateral provided to the passport fund except to cover an unexpected shortfall of holdings in the collateral that is necessary to meet an obligation to another person.