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Chapter 9 - Proposals for change
Introduction
9.1
Commenting on the findings of the Turnbull
Review and the single RE structure, the Department of the Treasury, said:
[The Turnbull Review’s] conclusion is that the existing
arrangements, which provide some flexibility for ASIC to put conditions on
licenses which could include the appointment of a third-party custodian,
provide sufficient protection [for investors]...[A] third-party custodian would
sit at odds with the underlying rationale for the Managed Investments Act,
which was to replace the old dual structure with a trustee and a fund manager
with a single responsible entity.[1]
9.2
In earlier chapters, the Committee reviewed the
extensive compliance framework which is the principal mechanism under which the
MIA seeks to protect investors’ interests. The checks and balances within this
framework are intended to detect non-compliance before it affects the
viability of a scheme.
9.3
These checks and balances consist of up-front
registration and licensing requirements to ensure every scheme has the proper
investor-protection measures in place, and the RE has adequate financial
and other resources to run the scheme. Besides registration and licensing, the
RE’s compliance with requirements is regularly monitored by in-house compliance
monitors and by an independent compliance plan auditor on an annual basis.
Additional controls are exerted by ASIC’s ongoing surveillance and enforcement
activities.
9.4
In this chapter, the Committee will examine
claims that two interwoven aspects of the former dual-party regime not
adopted by the MIA, namely, real-time monitoring of the scheme manager’s
activities and mandatory third-party custodianship of scheme property,
offered investors a level of protection that the MIA has failed to provide.
The Committee will consider proposals for change as part of its examination.
9.5
Those in favour of preserving the basic
framework of the single RE model have argued that it offers the following
advantages:
- a ‘structurally flexible and very robust regulatory regime’
comprising a single RE—‘a “trustee” in the true sense of that word’, in place
of a structure having ‘fundamental legal and commercial contradictions’;[2]
- five lines of defence which work well to protect investors, and
‘to revert to the position where a trustee and manager were both involved (at
least theoretically) in investment decisions’ would not be in the interests of
investors;[3]
and
-
‘a system which provides a high degree of investor protection.’[4]
9.6
Disadvantages cited by those critical of the model
were that:
- the abolition of the independent trustee/custodian meant that:
- the scheme manager was no longer subject to real-time
monitoring by an independent trustee; [5]
- there was insufficient protection for scheme property;[6]
- investors were less likely to receive fair compensation in the
event of a fund’s collapse;[7]
and
- a detached trustee would be better placed to monitor and report
on an RE’s activities.[8]
9.7
Critics also claimed that the MIA diverges from
global best practice in not requiring mandatory third-party custodianship
and point to this as further evidence of the MIA’s inferiority.
9.8
The Committee will now consider arguments for
and against the single RE model.
The single RE model—supporters and detractors
The protection offered by independent trustees
9.9
The Investment and Financial Services
Association Ltd (IFSA) argued in its submission to the Turnbull Review that the
single RE model was a substantial improvement on the dual-party
structure. IFSA claimed that the protection offered to investors by the
independent trustee had been ‘largely illusory’ and referred to the ‘fiction
that trustees were able to supervise the activities of the managers who had
appointed them in the first place.’ In this regard, IFSA concluded that the
MIA created a regime with ‘clear statutory duties and clear lines of
responsibility for entities managing other peoples’ money’ and added that:
...IFSA would strongly oppose any suggestion that might compromise
this most important aspect of MIA. The imposition of external compliance
entities, in the form of ‘supervisory’ boards or custodians, for example, would
achieve little or nothing in terms of boosting compliance while undermining the
integrity of the MIA regime.[9]
9.10
Mr Michael Shreeve, National Director
of the Trustee Corporations Association of Australia (TCAA) rejected IFSA’s
characterisation of the protection offered by the independent trustee as
‘largely illusory’.[10]
He countered that the protection afforded by the independent trustee was not
illusory but ‘real and tangible’, manifesting as a dollar for dollar reduction
in investor risk. He elaborated:
The facts are these. The former system was reviewed as a result
of a 1991 collapse of property prices and criminal fraud by some fund managers
which led to the failure of the Aust-Wide and Estate Mortgage funds. In these
cases, investors would have recovered nothing if they had only the fund manager
to pursue—or what is now the single responsible entity. It was the trustee
corporations and their insurers that provided investors a return of 100 cents
in the dollar for Aust-Wide and between 60 and 80 cents in the dollar for
Estate Mortgage. The total outlay was many hundreds of millions of dollars.[11]
9.11
Mr Shreeve concluded that while the MIA regime
had introduced efficiencies for big business, which wanted to make quick
investment decisions without the interference of the trustee, it did so at the
expense of having appropriate checks and balances.[12]
Commercial Nominees of Australia—a case
study
9.12
In its submission
to the current review, IFSA again expressed support for the single RE model and
commented that it had produced ‘spillover’ benefits for the superannuation
industry as a result of the ‘more focused and compliance-centred
operations of MIA regulated schemes’. Elaborating on this point, IFSA
commented that:
Superannuation has been a
major beneficiary of this development, meaning as it does that superannuation
fund members have the trustee benefits of SIS and MIA operating in concert to
protect their moneys.
In this regard, the comments
of the Senate Select Committee on Superannuation and Financial Services, in its
second Report on Prudential Supervision and Consumer Protection for
Superannuation, Banking and Financial Services, are highly relevant.
The Committee examined a
number of case studies, including one on the activities of Commercial Nominees
of Australia Ltd, in relation to which it concluded:
‘In the view of the
Committee, one of the main problems associated with CNA and its trusteeship of
the ECMT was the investment approach undertaken by the trustees. The Committee
considers that the underlying problem of CNA’s investments is that they were
operating under the old trustee manager regime. Had the investments been made
under the MIA, the problems may not have occurred, because of the controls that
exist under that Act.’[13]
9.13
The views expressed about CNA’s collapse by the
Senate Select Committee on Superannuation and Financial Services (Senate Select
Committee) which IFSA cited in its submission, attracted criticism from the Trust
Company of Australia Ltd (TCAL) and the Trustee Corporations Association of
Australia (TCAA).
9.14
The TCAL commented that, contrary to the Senate
Select Committee’s conclusions, there would have been nothing under the MIA
regime to prevent CNA’s investment in the mushroom farm had it been a
registered scheme and, if it had not been registered, ‘[t]he investment could
nonetheless be executed as there would be no third-party scrutiny of the
purchase process.’[14]
9.15
Mr Shreeve, TCAA, claimed at the hearing that the
Senate Select Committee’s conclusions were ‘misleading’ in suggesting that the
investments associated with CNA’s collapse were made under the ‘old trustee-manager
regime’.
9.16
Mr Shreeve said that CNA’s investments had not
operated under the old dual-party structure. He suggested that, if the
enhanced cash management trust in which CNA had invested, had operated under
the old regime, there would have been real-time monitoring under which
the failed investment in the mushroom farm could have been prevented. If this
had not been the case, he said, investors would at least have had recourse to
compensation through the trustee’s insurers.[15]
9.17
Mr Shreeve argued that, contrary to the Senate
Select Committee’s conclusions, had CNA been regulated under the MIA, the outcome
would have been no different for the following reasons:
- CNA, as the RE, would not have prevented the related party
transaction because it was the related party;
- hindsight monitoring by the MIA’s board, compliance committee,
auditors or the regulator would not have picked up the wrongdoing in time;
- based on the history of the case, it is unlikely that the board
or compliance committee would have been sufficiently independent to have acted
in the interests of investors.[16]
Real-time monitoring
9.18
One of the principal shortcomings of the single
RE model, according to the TCAL and the TCAA, is that it does not provide for
real-time monitoring of the RE’s activities.
9.19
In this regard, Mr Jonathan Sweeney, Managing
Director of the TCAL, said that the previous dual-party structure had
provided ‘an effective layer of independent supervision’ with ‘real-time
prior approval of fund transactions by an independent third-party
trustee’. This was contrasted with the single RE model which comprised:
- self-regulation by the RE;
- after-the-event semi-annual financial auditing;
and
- periodic compliance plan review and annual compliance plan review
typically conducted by a partner of the financial auditor’s firm. [17]
9.20
Mr Donald Christie, Managing Director of Equity
Trustees Ltd, and appearing with the TCAL at the hearing on 12 July 2002,
referred to the Tricontinental Royal Commission and said ‘the real issue coming
out of that is the power than an executive has in dealing with a board’.
Commenting that the trustee or custodian-trustee provided an extra layer
of protection for investors, he said that:
...[trustees] had the reins over the assets; we had the cash.
When somebody came along to us to say, ‘Send out a cheque for a mushroom farm,’
we had the power and the ability to ask the real-time question: ‘Why?
It’s not an appropriate investment for the fund. It’s not in the terms of the
investments that can be undertaken under the deed.’ The process that is now
being undertaken—and in the case of Commercial Nominees perhaps not at all—is,
at best, retrospective.[18]
9.21
The TCAA argued that the absence of an
independent body charged with real-time monitoring of the RE’s activities
was ‘a fundamental structural flaw’ that would allow the exploitation of
conflicts of interest and disadvantage investors. Although it agreed there
were benefits in increased compliance awareness in the industry, it considered
that ‘awareness alone [did] not provide adequate protection, even when coupled
with after-the-event surveillance by regulators and auditors’.[19]
9.22
Mr J McAuley, an independent licensed investment
adviser, characterised the managed investment market as lacking in transparency
and ill-informed, and thought there was a need for an independent body to
oversee the RE’s activities. He said:
[In the current market environment] it seems irrational to
deprive the market of the services of some specialised agency such as detached
trustees, who could be better placed to criticise, observe and publicise
inappropriate behaviour in the handling of managed funds. The SRE concept is
one which therefore leaves investors even more exposed than ever.[20]
9.23
Not all submitters thought that the trustee’s
real-time, independent monitoring of the scheme manager’s activities
under the old regime provided better investor protection than the arrangements
under the MIA regime.
9.24
IFSA argued at the hearing that real-time
monitoring had been cumbersome and suggested that it militated against
effective funds management in times of market stress. IFSA considered that the
MIA’s credibility had been established by the effective and timely action taken
by funds in response to the September 11 crisis. The MIA had facilitated
this, IFSA said, by allowing for more streamlined and responsive decision-making
than had existed under the old regime.[21]
Evidence on this point is discussed in more detail in Chapter 3.
Mandatory third-party custodianship
9.25
The Turnbull Review had received submissions
about the relative advantages or otherwise of mandatory third-party
custodianship of a scheme’s assets.[22]
On evaluation of the evidence, the review determined:
While arguments favouring the appointment of mandatory
third-party custodians may carry some merit, such a requirement would not sit
easily with the rationale for replacing the dual trustees/fund manger structure
with a single RE. This is particularly so as the introduction of mandatory
third-party custodians could potentially compromise and confuse the special
position of the RE with respect to scheme members.[23]
9.26
Contrary to these findings, a number of
witnesses to the current inquiry considered that mandatory third-party
custodianship of scheme property was essential to protect investors’ interests.
9.27
Dr Shann Turnbull, Principal of MAI Services Pty
Limited, was critical of the Turnbull Review’s failure ‘to even consider that
the [MIA] was fundamentally flawed’ in not requiring mandatory third-party
custodianship. He commented that, in doing so, the review:
...perpetuated the myth of non-executive directors (NEDs) and
compliance committees providing safeguards.
and added that:
...this myth has been exposed by empirical research into UK
companies by leading international corporate governance researchers...
[and that] One-Tel, FAI and HIH, etc, provide local examples...[24]
9.28
The TCAL proposed the mandatory use of an ‘adequately
capitalised and insured external, third-party custodian’ and asked:
Why should we wait for a substantial failure before implementing
a sensible reform that involves no additional cost or inconvenience?[25]
9.29
At the hearing on 12 July 2002, Mr Shreeve,
TCAA, was critical that third-party custodianship of scheme property was
not mandatory under the MIA even though it was ‘a fundamental requirement for
sound investor protection overseas’.[26]
9.30
The TCAA’s submission referred to comments made
by Standard and Poor’s in this regard that:
The failure to mandate that fund assets must be held in
safekeeping by an independent custodian is of concern and is in contrast to all
other major financial centres in the world, where an independent custodian is a
minimum standard.[27]
9.31
The TCAA also referred to a survey cited during
the gestation of the MIA regime which showed that, out of 43 countries, only
two jurisdictions—British Virgin Islands and the Nederland Antilles—did not
require an independent trustee or equivalent. The submission reported that the
British Virgin Islands had subsequently moved to require an independent
custodian.[28]
9.32
The TCAA and the TCAL both argued that the MIA
did not comply in practice or theory with core global standards, referring in
particular to the International Organisation of Securities Commission’s
(IOSCO’s) standards on regulation of collective investments. The TCAA stated
that:
It might be noted that the core principles issued by the
International Organisation of Securities Commission (IOSCO) for the regulation
of collective investment schemes require that the assets of a scheme be clearly
separated from other assets. IOSCO points out that this is usually achieved by
appointing an independent trustee, custodian or depositary.
IOSCO further notes that in the unusual situation where assets
are held in the name of the scheme operator, additional protective conditions
are required. For example, in the US the scheme assets are to be deposited in
the safekeeping of a bank or other company whose functions and facilities are
supervised by federal or state authorities; further, these arrangements must be
independently examined three times a year.[29]
9.33
Of those in favour of the single RE model, Mr
Russell Stewart, Partner, Minter Ellison Lawyers, thought the MIA had lifted
standards. At the hearing, he discussed what he considered were the five lines
of defence provided by the MIA to protect investors. These were:
- the promises made by the responsible entity in the constitution
and prospectuses;
- having assets held by a custodian;
- the compliance plan and the compliance committee;
- the restriction on the ability to invest in unregistered schemes;
and
- ASIC’s supervision of registered schemes and the licensing
requirement for REs.[30]
9.34
With regard to his comment concerning
custodianship of scheme assets, Mr Stewart added:
...I think the fact that the assets are held by an independent
entity does operate as a practical protection in a lot of cases, because if you
do have a total failure of the responsible entity at least there is somebody
there who still has the assets. But I do not agree that it is necessary to
make that mandatory for all responsible entities, because ASIC has very strict
requirements for those who self-custody and in effect they have to have a virtual
independent custody operation within their own organisation.[31]
9.35
In contrast to Mr Stewart’s view, the TCAL
was not satisfied that conferring a discretion on ASIC to require appointment
of a custodian was enough. In addition, the TCAL considered this would only
open the door for extensive litigation against ASIC for lost investments if a
fund did not appoint a custodian as directed and had subsequently failed. The
submission asked:
What do scheme members lose by requiring an independent
custodian for all managed investment schemes?[32]
9.36
When asked by the Committee what he considered
to be the key investor-protection mechanism missing from the MIA regime,
Mr Sweeney, TCAL, nominated the mandatory independent custodian. He
explained to the Committee that:
If you are looking at disaster scenarios, then to me the
independent custodian...is the most important because...you are not going to have a
fund manager standing...If you have an independent custodian, you have someone
holding the assets...and, if there have been any mistakes or whatever by the
custodian, you have got someone to sue. You obviously cannot sue the
responsible entity because they are gone...
and in relation to the advantages of the custodian’s
independence from the RE:
It is much more difficult to cooperate with an external party,
to be brutal, than with an internal party in pushing the envelope.[33]
9.37
The TCAA agreed with the TCAL that the MIA’s
failure to require mandatory third-party custodianship of scheme property
had seriously jeopardised investors’ interests.
9.38
However, the TCAA proposed a revised, ‘fully
responsible entity’ framework under which the RE would be fully responsible for
its own actions and those of agents but not ‘solely’ responsible. Other
parties involved in the running and oversight of the scheme would be expressly
accountable to investors.
9.39
In addition, the new framework would involve the
elimination of the in-house compliance committee and the expansion of the
compliance plan auditor’s function:
- to include more frequent and timely monitoring;
-
to provide for quarterly reporting to the RE and annual reporting
to ASIC and scheme members; and
-
to act as the investors’ representative in pursuing remedies
against the relevant parties for scheme losses due to compliance breaches.
9.40
The TCAA also proposed opening up the compliance
auditing role to other qualified and approved professionals. In this regard,
the TCAA referred to recommendations by the Productivity Commission in its
superannuation legislation review that the Australian Prudential Regulation
Authority should examine whether there was a need to confine compliance audits
to financial auditors. The TCAA believed that widening access to the
compliance monitoring function beyond financial auditors would address conflict
of interest concerns and ensure more commercially sound pricing.[34]
9.41
In a supplementary submission to the inquiry,
the TCAA referred to Canada’s recent proposal for mutual funds to establish an
independent ‘governance agency’ to monitor a fund’s business practices and
compliance with the law. Commenting on this proposal, the TCAA stated that:
Canada, like all advanced economies except Australia, requires
separate custody arrangements for managed funds.
However, the regulators have stated that in addition to this, it
is one of the few countries in the world that does not have an independent
compliance monitor to address the potential conflicts of interest that are
inherent in most mutual fund structures. It is proposing that mutual funds be
required to establish a ‘governance agency’ to oversee the actions of the fund
manager.
The governance agency...would...be directly responsible to the
investors...and have wide investor protection responsibilities...[35]
9.42
When asked by the Committee whether the MIA
would be improved if ASIC were to have a much greater involvement in
independence and integrity issues regarding compliance, Mr Shreeve, TCAA,
commented that:
We think that there is a fundamental structural problem in that
the idea of self-regulation, even if people are approved by ASIC and even if
they have codes of conduct, will be very difficult to make work effectively.
We believe there is an inherent conflict of interest that needs an alternative
buttressing force—that is, a genuinely independent compliance monitor.[36]
The Committee’s views
9.43
Mr David Knott, Chairman, ASIC, when commenting
on the spate of recent corporate failures in Australia, suggested that one
contributing factor had been a growing complacency towards corporate
governance. This, he proposed, had been nurtured by sustained economic growth
during the ‘90s and Australia’s ‘remarkable’ survival of the Asian financial
crisis so that corporate governance ‘lost momentum as an effective program for
corporate risk management’.[37]
9.44
Among the other factors proposed by Mr Knott as
contributing to recent corporate failures were:
- the changing market conditions in 2000 which brought ‘buried
problems to the surface’ which could be more easily hidden in more buoyant
times with easy access to debt and equity;
- management neglect or misconduct; and
- a failure of accounting and auditing to deliver acceptable
outcomes.
9.45
In relation to this last point, Mr Knott
referred to:
...the paradox that auditors are expected to reconcile a
commercial service provider/client relationship with a watchdog/whistleblowing
responsibility.
and added that:
All of the commercial incentives support their service
provider/client relationship; and there is very little legislative or other
incentive to support their public responsibility role.[38]
9.46
There is no doubt that the corporate collapses
in the US and Australia have shaken market confidence and focussed attention on
corporate governance, particularly with regard to the independence of company
directors and auditors.
9.47
The United States has made significant changes
to its corporate governance regime in the Sarbanes-Oxley Act of 2002
which the Committee has already referred to. In Australia, the Government has
commenced the process of corporate governance reform, particularly in the area
of auditor independence, with its CLERP 9 issues paper released in September
2002.
9.48
Against this background, questions raised about
corporate governance and, in particular, the effectiveness of internal and
external compliance monitoring and self-regulation under the MIA take on
an added resonance.
9.49
The Committee notes that the MIA’s regulatory
framework was devised following several years of sustained buoyancy and
confidence in Australia’s financial markets. The framework places considerable
confidence in the independence and integrity of its compliance monitors which,
in view of HIH, One-Tel, Harris Scarfe and the corporate debacles in the
United States, may have been misplaced.
9.50
Evidence presented to the Committee has raised
concerns that the key investor-protection elements under the MIA may not
be delivering the level of protection that investors are entitled to expect
and, indeed, which is needed to maintain confidence in the managed funds sector
among domestic and overseas investors.
9.51
The Committee has made recommendations about
licensing requirements for REs, specifically, that ASIC review NTA and
insurance requirements for REs. In this regard, the Committee’s main objective
is to ensure that an RE has a sufficient financial buffer to enable it to ride
out the consequences of poor investment decisions or otherwise to guard against
the risk of a disorderly wind-up if the business fails.
9.52
The Committee is also concerned about start-up
and on-going costs imposed on managed funds by the MIA and whether they
have translated into lower fees for investors. Tied in with this is the effect
of the MIA on market structure and competition which ultimately has an impact
on investor protection.
9.53
Although important, these matters should not
divert attention from the fundamental objective of the MIA—to ensure that
scheme property will be protected in the event of a scheme’s collapse or an
RE’s malfeasance.
9.54
As a start, it is essential that in-house
and external compliance monitors have the requisite degree of independence to
enable them to carry out their role so that conflicts of interest are promptly
identified and successfully managed before they threaten the viability of a
fund.
9.55
On the basis of the evidence heard during its
inquiry, the Committee questions whether the Act makes adequate provision for
the independence of the key players in the compliance framework—the RE’s board,
the compliance committee, and the compliance plan auditor.
9.56
Indeed, the Committee’s recommendations put
forward in earlier chapters of this report reflect the Committee’s concern and
seek to strengthen the independence of the compliance framework by:
-
tightening the definition of ‘external’ to enhance the
independence of the compliance board and compliance committee;
- requiring the RE to advise ASIC of appointments, retirements or
dismissals of compliance board or committee members;
- conferring powers on ASIC to remove non-performing
compliance monitors;
- placing members of the compliance board under the same duties and
obligations as compliance committee members;
- developing guidelines for competency and integrity for in-house
compliance monitors;
- requiring the compliance plan to include minimum standards of
competency and integrity for compliance monitors;
- allowing a corporate entity to be a member of a compliance
committee; and
-
imposing additional reporting obligations on the compliance
auditor including a requirement that the auditor report to scheme members.
9.57
However, the Committee is not persuaded that
strengthening the integrity of compliance monitoring and ensuring that REs have
adequate financial backing—without more—will deliver the optimum protection for
scheme property.
9.58
In the United States, the United Kingdom and
Canada, scheme property must be held by an independent custodian.
9.59
There is no question that, in not requiring
mandatory third-party custodianship of scheme property, Australia has
chosen to deviate from what is considered to be global best practice.
9.60
Clearly there are two distinct schools of
thought on the new MIA regime. Those belonging to one hold serious doubts about
the wisdom of dispensing with a mandatory third-party custodian. They
believe that a third-party custodian of scheme property is crucial to
protect investors’ interests and strongly advocate a return to the dual-party
structure. They point to global best practice and suggest that Australia is
out of step with the major financial centres of the world where an independent
custodian is a minimum standard.
9.61
The other is convinced that the safeguards built
into the new regime, such as the statutory duties imposed on the RE, the
rigorous compliance obligations and ASIC’s surveillance role, offer sound
investor protection. They see great strength in having a single responsible
entity which is designed to provide clear accountability and cost savings.
9.62
The Committee understands the concerns of those
looking to return to the old dual-party structure with a trustee and a
fund manager. It appreciates that there is no precedent for the RE system.
Further, the Committee acknowledges that the new arrangements for protecting
investor interests have yet to be genuinely tested by market conditions—that it
is still early days and some sectors of the business community harbour
lingering uncertainty about the soundness of the MIA.
9.63
The Committee sought the Department of the
Treasury’s view on whether a requirement for an independent custodian would
provide better protection for investors. Mr Nigel Ray, Executive Director from
the Department, commented that the Turnbull Report had found no support for
claims that the single RE model was wrong.[39]
9.64
When asked to comment on the view expressed by
Standard and Poor’s that the MIA’s failure to require mandatory third-party
custodianship of fund assets was contrary to requirements in all other major
financial centres of the world, Mr Ray responded that:
The government’s position is that it would prefer Australia to
be leading the world and have best practice in regulation. Just because we do
something that is different does not mean that it is wrong or weaker.[40]
9.65
The evidence presented to the Turnbull Review
and the Committee’s current inquiry, has failed to establish a convincing case
that the MIA’s regulatory framework would benefit from the imposition of
mandatory or optional third-party custodianship or any other major
structural changes. The Committee is satisfied that the framework currently in
place, together with the measures recommended by the Committee to ensure that
conflicts of interest are properly managed, is delivering a high standard of
protection to investors in managed funds.
9.66
The Committee consequently does not intend to
make any recommendations regarding structural changes to the regulatory
framework. Having said this, the Committee stresses that there are areas of
concern with the MIA’s management of conflicts of interest. The Committee
therefore strongly urges the adoption of its recommendations to deal with
these.
9.67
However, in acknowledgement of the arguments put
in favour of optional third-party custodianship, the Committee believes
that the current provisions of the Act in this regard should be monitored by
ASIC.
Recommendation 16
The Committee recommends that the
current provisions of the Managed Investments Act 1998 relating to third-party
custodianship, should be monitored by ASIC with regular reports being made to
the Parliamentary Joint Committee on Corporations and Financial Services with
particular regard to:
- the number of entities opting into third-party
custodianship; and
- providing some qualitative comparative analysis of the
performance of those entities with, and those without, third-party
custodians.
The Committee
further recommends that on the basis of these reports, the Committee should
regularly review the efficacy of the current opt-in provisions in the Act
compared with an alternative opt-out provision regarding optional third-party
custodianship.
Senator
Grant Chapman
Chairman
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