media release

10-93AD Information for trustee companies providing traditional services

Published 7 May 2010

ASIC today released updated policy and regulatory guidance to assist trustee companies providing traditional trustee company services (traditional services) to comply with the licensing and conduct requirements under the Corporations Act. These traditional services include administering deceased estates and powers of attorney.

In March 2010, ASIC released Consultation Paper 132 Trustee companies: Financial requirements and conduct obligations (CP 132) seeking public comment on the financial requirements that should apply to trustee companies that provide traditional services. We also sought feedback on whether there are any other conduct obligations where specific guidance to trustee companies might be desirable. Our guidance released today reflects those matters where industry has indicated to us that some specific guidance would be of assistance.

ASIC will continue to work with trustee companies providing traditional services as part of our commitment to achieving a smooth transition for industry.

Policy and regulatory guidance

Under legislation enacted late last year, the provision of traditional services by trustee companies will be regulated as a financial service under the Corporations Act. Trustee companies providing traditional services will be required to hold an Australian Financial Services (AFS) licence, and will be subject to the licensing and conduct obligations under Ch 7 of the Corporations Act. Trustee companies that will have to comply with the Corporations Act requirements are specifically named in a Schedule to the Corporations Regulations.

A number of ASIC’s existing regulatory guides have been updated to take into account , among other things, the provision of traditional services by trustee companies as a financial service:

Regulatory Guide 1 AFS Licensing Kit: Part 1 – Applying for and varying an AFS licence (RG 1), Regulatory Guide 2 AFS Licensing Kit: Part 2 – Preparing your AFS licence application (RG 2) and Regulatory Guide 3 AFS Licensing Kit: Part 3 – Preparing your additional proofs (RG 3);
Regulatory Guide 166 Licensing: Financial requirements (RG 166); and
Pro Forma 209 Australian financial services licence conditions (PF 209).

We have also released INFO 106 Trustee companies: Minimum standards for trustee companies holding estate assets (INFO 106).

Further information about the updated regulatory guidance and INFO 106 is set out in the attachment to this advisory. ASIC also plans to issue regulatory guidance on compensation and dispute resolution requirements for trustee companies later this year.

ASIC’s existing policies and regulatory documents on financial services (except in relation to compensation and dispute resolution requirements), will apply to the provision of traditional services by trustee companies.

Copies of the existing and updated regulatory guides are available from the ASIC website at www.asic.gov.au.

Transition timeline

The Commonwealth regime for the regulation of the provision of traditional services by trustee companies commences on 6 May 2010.

Trustee companies which hold an AFS licence as at 6 May 2010 are taken to have a licence that covers the provision of traditional services for six months from the commencement date. They will need to apply to ASIC to vary their licence to cover traditional services if they intend to continue to provide traditional services after 6 November 2010.

Trustee companies which do not hold an AFS licence as at 6 May 2010 are deemed to have a licence covering only traditional services for 12 months. They will need to apply to ASIC to obtain a licence covering those services if they want to continue to provide traditional services after 30 April 2011. Further details are in the attachment to this Advisory.

For further assistance, trustee companies providing traditional services can contact ASIC’s Infoline on 1300 300 630 or by email at infoline@asic.gov.au.

Attachment to ASIC Advisory 10-93AD Information for trustee companies providing traditional services

Transition timetable

Updates to AFS Licensing Kit

Regulatory Guide 166 Licensing: Financial requirements

Minimum standards for trustee companies holding estate assets

Transition timetable

ASIC will accept AFS licence applications, or variations to existing AFS licences, from 6 May 2010.
Existing licensees should apply for a variation to their AFS licence by 5 September 2010. If an application is received after 5 September, we cannot guarantee that the application will be finalised by 6 November 2010.
Trustee companies providing traditional services which do not hold an AFS licence should apply for an AFS licence by 28 February 2011. If an application is received after 28 February 2011, we cannot guarantee that the application will be finalised by 1 May 2011.
For trustee companies which hold an AFS licence as at 6 May 2010, the requirement to disclose changed fees to clients and the financial services disclosure requirements in the Corporations Act will apply from 6 November 2010, and the dispute resolution and compensation requirements will apply from 1 May 2011. All other conduct and disclosure requirements apply from 6 May 2010.
For trustee companies which do not hold an AFS licence as at 6 May 2010, the requirement to disclose changed fees to clients, the financial services disclosure requirements and the dispute resolution and compensation requirements will apply from 1 May 2011. All other conduct and disclosure requirements, including the requirement to have adequate financial resources, apply from 6 May 2010. However, until the end of 30 April 2011, a deemed licensee will be taken to have available adequate resources to provide traditional services if it maintains the amount of net tangible assets (NTA) it held as at 6 May 2010.

Updates to AFS Licensing Kit (RGs 1, 2 and 3)

ASIC has updated Regulatory Guide 1 AFS Licensing Kit: Part 1 – Applying for and varying an AFS licence (RG 1), Regulatory Guide 2 AFS Licensing Kit: Part 2 – Preparing your AFS licence application (RG 2) and Regulatory Guide 3 AFS Licensing Kit: Part 3 – Preparing your additional proofs (RG 3) to assist trustee companies to apply for an AFS licence authorisation covering traditional services. Pro Forma 209 Australian financial services licence conditions (PF 209), which sets out the standard licence conditions that will usually be applied to licences authorising a person to provide financial services under an AFS licence, has also been updated.

Before trustee companies apply for an AFS licence or a variation to an existing AFS licence, please can contact ASIC’s Infoline on 1300 300 630 and ask to speak with a member of ASIC’s Registry Services and Licensing team.

ASIC has also updated RG 2 to reflect an extended range of sources from whom we will accept national criminal history checks about responsible managers of licensees and applicants.

Regulatory Guide 166 Licensing: Financial requirements

We have updated Regulatory Guide 166 Licensing: Financial requirements (RG 166) following consultation on the financial requirements for trustee companies that provide traditional services. The updated regulatory guide generally applies the following financial requirements to trustee companies providing traditional services:

the requirement to have risk management systems that address risk to financial resources as set out in Section A of RG 166;
the base level financial requirements in Section B of RG 166;
the net tangible assets requirement in Section C of RG 166; and
the surplus liquid funds requirement in Section E of RG 166.

ASIC has also released a report on feedback to the consultation process (download REP 197).

Minimum standards for trustee companies holding estate assets

Following public consultation, we have released INFO 106 Trustee companies: Minimum standards for trustee companies holding estate assets (INFO 106). INFO 106 gives guidance on the minimum standards trustee companies providing traditional services must meet at all times that they hold estate assets.

From 6 May 2010, we expect trustee companies providing traditional services involving estate assets to meet the same standards on organisational structure, staff capabilities and abilities, and resources to perform core administrative activities that custodians of scheme property of a managed investment scheme are required to meet in Regulatory Guide 133 Managed investments: Scheme property arrangements (RG 133). These requirements are as detailed in Section A of RG 133. As part of these obligations, we also expect that trustee companies should maintain proper records about the estate assets that they hold.