On 19 March 2015, APRA made Banking exemption No. 1 of 2015 which imposes a number of new conditions designed to clearly distinguish products offered by registered financial corporations (RFCs) to retail investors from banking products.
A RFC is a registered entity under the Financial Sector (Collection of Data) Act 2001 which is not an authorised deposit-taking institution (ADI) under the Banking Act.
The new or modified conditions include:
- restricting the use of certain terms, including ‘deposit’ and ‘at-call’ by registered entities in connection with investment products offered, issued or sold;
- requiring all debentures offered, issued or sold by registered entities to have a minimum 31-day maturity for new business written from 1 July 2015. For existing at-call debentures issued or sold prior to that date, the debentures will need to adhere to the conditions in the 2015 Exemption by not later than 1 January 2016;
- on maturity of a debenture, a registered entity may roll the investment into another debenture with a term to maturity of at least 31 days. Rollovers may occur even in the absence of a statement from the investor concerning the proceeds of their investment. Where an investor requests to redeem their funds on maturity of their investment, they will be able to have their money paid to them as cash, cheque or direct credit to an account at an ADI;
- registered entities will not be allowed to provide certain ‘transactional banking facilities’, namely, Automatic Teller Machine (ATM) access, BPAY, Electronic Funds Transfer at Point of Sale (EFTPOS) and cheque account facilities.
The new conditions only apply with respect to products offered to retail investors; there will be no change with respect to products marketed to wholesale investors.