ASIC today released a consultation paper proposing reforms for charities that raise investment funds.
The proposals do not affect fundraising by charities in the form of donations.
Consultation Paper 207 Charitable investment fundraisers (CP 207) proposes to either:
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remove existing exemptions available to charities that raise investment funds under Regulatory Guide 87 Charities (RG 87), or
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retain existing exemptions on the basis that they are only available to organisations that satisfy both existing and new conditions to the exemptions.
Examples of new conditions we are proposing include that charities must hold 75% of their assets in assets that directly relate to their charitable purpose; and where the fund is offered to retail clients:
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have an Australian financial services licence, and
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meet minimum capital and liquidity requirements.
ASIC Commissioner Greg Tanzer said the proposals aim to promote confident and informed investors in charitable investment products.
‘One of the challenges for financial regulators is narrowing the gap between community expectations regarding the level of regulation afforded to certain organisations and the actual degree of oversight. These proposals address some key risks associated with investments in charitable organisations, many of which are largely unregulated’, Mr Tanzer said.
ASIC has been increasing its focus on organisations which behave like banks and conduct bank-like activities, but which are not regulated like banks. ASIC’s proposals address the risks associated with some charitable investment fundraisers that may be operating in this way.
There are approximately 180 charitable organistions that rely on ASIC’s exemptions to raise investment funds. Some of these organisations also rely on APRA’s exemptions for Religious Charitable Development Funds. Those organisations are encouraged to also consider APRA’s proposed amendments in relation to its exemptions.
The amendments to the existing exemptions will be phased in over several years and be subject to a transition period.
Comments on CP 207 are due by 15 July 2013.
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Background
Charitable organisations which raise investment funds currently have exemptions from the licensing, fundraising, debentures and managed investment provisions of the Corporations Act 2001 under RG 87 if they comply with the conditions to the exemptions.
Some of these organisations also rely on APRA’s exemption for Religious Charitable Development Funds. On 19 April 2013, APRA published a discussion paper, Banking Act exemptions and section 66 guidelines, which proposes various amendments to that exemption. The discussion paper is available on APRA’s website. The consultation period for APRA’s proposals ends on 24 May 2013.
In February 2013, ASIC published Consultation Paper 199 Debentures: Reform to strengthen regulation (CP 199) which contained proposals in relation to regulated retail debenture issuers. If the current exemptions for charitable organisations under RG 87 are removed, the regulation that applies to regulated debenture issuers (including the proposals in CP 199, if they are implemented) will apply to charities that fundraise by issuing debentures to retail investors.