Document ID: chunk:federal_register_of_legislation:F2020L01591:body:0:p11
Version: federal_register_of_legislation:F2020L01591
Segment Type: other
Provision Reference: 
Character Range: 26581–29539

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 or an equivalent regulator overseas;
(c)          an RSE licensee or custodian established under provisions of the Superannuation Industry (Supervision) Act 1993 or equivalent legislation overseas;
(d)          a licensed trustee company of a common fund, within the meaning of Chapter 5D of the Corporations Act; or
(e)          a responsible entity of a managed investment scheme, within the meaning of section 9 of the Corporations Act, or similar entities registered under like statutory provisions overseas.

Purchase of securities
6.             An ADI must not purchase more than 20 per cent of the outstanding value of a funds management vehicle's securities unless the purchase arises as part of an underwriting agreement.

Liquidity facilities
7.             An ADI must deduct the value of a liquidity facility provided to a funds management vehicle, from the ADI's Common Equity Tier 1 Capital, if any of the following conditions are met:
(a)          the facility is able to be drawn upon to fund additional assets held by the vehicle, to acquire assets of the vehicle, to fund the final scheduled repayment of investors or to cover against dilution of seller's risk (e.g. the cancellation of assets or breach of warranties);
(b)          the repayments of the facility to the ADI are subordinated to the interests of investors; or
(c)          the facility is provided without another facility being provided by an unrelated entity to the funds management vehicle, unless the ADI provides a liquidity facility that covers less than 10 per cent of outstanding securities and is used for the purpose of:
(i)            providing short-term funding for smoothing time differences in payment flows (excluding the retirement of securities at maturity or on roll-overs);
(ii)         meeting margin payments on futures transactions; or
(iii)       covering delays in settling asset transactions involving the vehicle.

Underwriting of funds management vehicles
8.             An ADI that acts as an underwriter or committed dealer for the issue of securities by a funds management vehicle must deduct the value of the facility from the ADI's Common Equity Tier 1 Capital if:
(a)          the funds management vehicle does not have an express right to select an alternative party to provide the facility;
(b)          the ADI does not have the ability to withhold payment, and to terminate the facility if necessary, upon the occurrence of events which would materially and negatively impact the soundness of the ADI; and
(c)          the ADI underwrites a significant proportion of the issue of securities and either of the following conditions exist:
(i)            the ADI cannot demonstrate