Document ID: chunk:federal_register_of_legislation:F2020L01591:body:0:p10
Version: federal_register_of_legislation:F2020L01591
Segment Type: other
Provision Reference: 
Character Range: 24037–26837

which exposes the ADI to step-in risk. In identifying step-in risk entities, the factors that an ADI must consider include, but are not limited to:
(a)          the nature and extent of the ADI's sponsorship of the entity, including whether the ADI manages or advises the entity, places its securities into the market, or provides the entity with liquidity facilities or credit enhancements;
(b)          whether investors expect the ADI to support the entity during a stress scenario;
(c)          whether business arrangements with the entity (e.g. distributing or marketing of the other entity's products) expose the ADI to reputational contagion;
(d)          whether the entity has a limited capacity to access liquidity when facing an unanticipated increase in redemption requests;
(e)          whether the ADI is a major provider of assets, or is perceived to be a major provider of assets, or other financial services to the entity;
(f)           whether the entity carries the ADI's brand; and
(g)          whether there have been past instances of the entity receiving support from the ADI beyond the ADI's legal or contractual obligation.
4.             Where an ADI has identified a step-in risk entity, the ADI must determine the materiality of the step-in risk through an assessment of the potential impact on the capital and liquidity of the ADI if it were to step-in to support the entity.

Attachment B — Funds management
     1. The requirements in this Attachment apply to an ADI's associations with a funds management vehicle that is a related entity of the ADI. Where an ADI has an exposure to a funds management vehicle that is an unrelated entity, the ADI must meet the requirements in APS 221 with respect to exposure limits and look-through requirements for structured vehicles.

Separation
2.             An ADI must not act as a manager, responsible entity, approved trustee, trustee or any similar role in relation to funds management.
3.             An ADI must deal with a funds management vehicle and its investors on an arm's- length basis and on market terms and conditions.
4.             An ADI must not:
(a)          have any ownership or beneficial interest in a funds management vehicle;[9] or
(b)          allow any of the ADI's directors, officers or employees to sit on the Board of a funds management vehicle unless the Board is made up of at least four members. The ADI may be represented by one director on a Board of four to six directors and by no more than two directors on a Board of seven or more directors.
5.             The requirements in paragraph 4 do not apply to an ADI's ownership or beneficial interest in, or seats on the Board of:
(a)          a custodian;
(b)          a life insurance company and its statutory funds regulated by APRA