The Australian Prudential Regulation Authority (APRA) has released revised proposals on changes to the exemption order under the Banking Act 1959 for religious charitable development funds (RCDFs).

APRA will extend the RCDF Exemption Order from 1 July 2014, but subject to additional conditions.

RCDFs will continue to be able to raise funds from retail investors, but not on an at-call basis, to minimise the risk that investors in RCDFs confuse their investments with products provided by ADIs.

In particular, any product offered to a retail investor will have to have a minimum term or notice period of 31 days and the use of terms ‘deposit’ and ‘at-call’ will not be allowed in relation to retail products or in marketing to retail investors.

Notwithstanding the minimum term of 31 days, RCDFs would not be precluded from releasing funds from retail investments in cases of an investor’s exceptional circumstances that may lead to hardship. RCDFs will need to develop their own procedures for determining genuine investor hardship.

These proposed conditions would not relate to funding from wholesale investors. RCDFs may continue to offer at-call products to wholesale investors.

APRA will continue to allow RCDFs to use BPAY to transact between affiliates of the RCDF and to offer BPAY to wholesale investors.

RCDFs must ensure that advertising and marketing material of the RCDF contains clear and prominent disclosures to the effect that:
• neither the controlling entity or the Fund is prudentially supervised by APRA;
• contributions to the RCDF do not obtain the benefit of the depositor protection provisions of the Banking Act;
• the Fund is designed for investors who wish to promote the charitable purposes of the Fund; and
•an investment in an RCDF is not covered by the Financial Claims Scheme.

RCDFs would need to comply with the additional conditions from 1 January 2015. There will be no grandfathering of existing accounts if those accounts do not meet the conditions in the new Exemption Order.