NCCP Regulations Amended - Trustees

The National Consumer Credit Protection Amendment Regulations 2010 (No.3) establishes a regime for trustees and other special purpose vehicles.

The regulations introduce two exemptions from holding a licence:

1. fund raising special purpose entity - reg 23B

2. securitisation entities - reg 23C

Fundraising special purpose entities

A fundraising special purpose entity is a company or trust that:

1. has the sole purpose of raising funds to be a credit provider or lessor

2. raises funds other than from natural persons (Treasury considers that when a lender of record holds assets as bare trustee/custodian for another company, it has raised funds in order to provide the relevant credit even though this activity would be outside the usual concept of 'raising funds')

3. only acts as a credit provider or lessor

4. does not have any employees, and

5. is not a licensee or registered person.

The entity will be exempt if:

1. it is a party to a servicing agreement

2. it is an EDR member

3. if a company, its directors and secretaries are not inappropriate persons, and

4. if a trust, no trustee is an inappropriate person.

The position in relation to trustees holding assets as custodian (for example under a mortgage trust or debenture scheme) is receiving further consideration as it does not fit into this exemption.

Securitisation entity

A securitisation entity is a company or trust that:

1. carries on the business of managing by way of a securitisation some or all of the economic risk associated with its assets, liabilities, or investments (Treasury considers that securitisation entities by issuing notes and running a securitisation program are conducting a business even though this activity would be outside the usual concept of 'carrying on business')

2. is an insolvency remote special purpose funding entity according to the criteria of an internationally recognised rating agency, and

3. raises substantially all of its funds by issuing securitisation products (a debt instrument or an interest in a managed investment scheme).

An securitisation entity is exempt if:

1. it is a party to a servicing agreement

2. from 1 October 2010, it is a member of an EDR

3. if a company, its directors and secretaries are not inappropriate persons, and

4. if a trust, no trustee is an inappropriate person.

Servicing agreement

A servicing agreement means an agreement between the trustee and a licensee or registered person under which the servicer performs obligations or exercises the rights of the trustee under the loans, leases, mortgages or guarantees.

Notification to ASIC by servicer

A licensee must notify ASIC that is a party to a servicing agreement with a trustee

• if the agreement is entered before 1 July 2010, within 30 business days after 1 July 2010

• if the agreement is entered after 1 July 2010, within 20 business days of entering the agreement.

A licensee who ceases to be a party to a servicing agreement must notify ASIC within 15 business days of ceasing.

A licensee must notify ASIC within 15 business days after a natural person in a position to control or influence the special purpose funding entity takes action that has or may have the effect of directing the servicer to act inconsistently with the servicer's licence conditions or any credit legislation.

EDR schemes

It will be most convenient if the trustees and the servicer are a member of the same EDR scheme as it would usually be the servicer who is running the EDR case. There is no reason why a trustee cannot be a member of more than one EDR scheme. Accordingly, the trustee can in respect of a specified pool be a member of the same EDR scheme as the servicer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.