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Rules of Practice 1994 (S.R. 1994, No. 229)
Requested:  22 Jul 2017
Consolidated as at:  17 Mar 2006

Division 2 - Controlled fund operators

67. Controlled fund operator

(1) A fund operator must not operate as a controlled fund operator unless it is registered with the Society.
(2) A fund operator may apply to the Society to register a fund operator as a controlled fund operator.
(3) An application is to be –

(a) in writing; and

(b) lodged with the Executive Director.

(4) The Society is to register a fund operator as a controlled fund operator if it is satisfied that the fund operator will comply with the provisions of this Part.

68. Control of fund operators by practitioners

(1) A legal practitioner must not allow a fund operator to –

(a) carry on business in that legal practitioner's office; or

(b) be represented by a member of that legal practitioner's firm in any dealing with an investor.

(2) Subrule (1) does not apply to a fund operator that is exempt from or complies with the provisions of the Corporations Act in relation to its activities.

69. Controlled fund operators that are corporations

If a controlled fund operator is a corporation –

(a) each practitioner who is a member of the related firm is to be a director of the corporation; and

(b) only a practitioner who is a member of the related firm may be a director of the corporation; and

(c) the corporation's articles of association are to provide that only a practitioner who is a member of the related firm may be a shareholder of the corporation; and

(d) the controlled fund operator must have its accounts and records audited at least once a year by a trust account inspector.

70. Controlled fund operators that are not corporations

If a controlled fund operator is not a corporation –

(a) each practitioner who is a member of the related firm is to be a member of the controlled fund operator; and

(b) only a member of the related firm is to be a member of the controlled fund operator.

71. Investments by controlled fund operators

(1) A controlled fund operator must not –

(a) invest money for investment other than –

(i) with an approved institution; or

(ii) in a first mortgage or second mortgage; or

(iii) in a loan to a short-term money market dealer in accordance with the conditions specified in section 5(1)(h) of the Trustee Act 1898; or

(b) pledge or charge money for investment or securities held by the controlled fund operator.

(2) Subrule (1)(a) does not apply to –

(a) money invested by a controlled fund operator and secured by mortgage securities before 31 December 1994; or

(b) money invested in substitution for any money referred to in paragraph (a).

(3) A controlled fund operator may take or acquire additional collateral security in respect of a loan that is secured by a first mortgage or second mortgage.
(4) A controlled fund operator must not accept money for investment unless, at or before the time the money is accepted, the investor is given a notice in writing signed –

(a) by or on behalf of the firm; or

(b) if the firm is not the controlled fund operator, by or on behalf of the controlled fund operator.

(5) A notice is to specify –

(a) the amount or identity of the money; and

(b) the nature of the securities in which the money may be invested; and

(c) how the rate of interest payable to the investor is to be determined and any condition under which the interest is payable; and

(d) the expenses to be paid by the investor; and

(e) the conditions under which the investor is entitled –

(i) to redeem the money; or

(ii) in the case of a contributory mortgage, to a transfer of the security in which the money is invested; or

(iii) in the case of any other security, to a transfer of a security equivalent in value to the money.

72. Deregistration of controlled fund operators

(1) The Society, by notice in writing, may suspend or revoke the registration of a fund operator as a controlled fund operator if it is reasonably satisfied that the fund operator or the related firm has contravened the provisions of this Part.
(2) A suspension or revocation does not take effect until 14 days after the day on which the notice is given to the fund operator.
(3) At any time while the registration of a fund operator as a controlled fund operator is suspended, the Society may –

(a) cancel the suspension; or

(b) reduce or extend the period for which the registration is suspended.

(4) While the registration of a fund operator as a controlled fund operator is suspended, that registration remains in effect for the purposes of rules 69, 70, 73 and 74.


CURRENT VIEW: 31 Dec 1994 - 1 Oct 2016
VIEW THE AS MADE VERSION