A Guide to the Law of Securitisation in Australia - PRAC

1 A Guide to the Law of Securitisation in Australia Fourth Edition A Guide to the Law of Securitisation in Australia 1 General overview of the nature of securitised 8. Equity 8. Debt 8. Overview of debt securities in Australian 8. The issuers of debt The form of debt 8. The enforceability of registered 9. 9. 2 The Corporations Act 10. 10. The classification of securitised instruments under the Corporations Act .. 10. 10. Interests in a managed investment The extent to which securitisations involve debentures and interests in a managed investment 11. Offers that do not need disclosure: Their application to 12.

2 Bills of exchange and promissory 12. The regulation of participants in the securities 12. Financial services 12. When is a licence required?..13. What is a financial product?.. 13. Provision of a financial 14. Securitisation Class 14. Consequences of a failure to have an 15. 3 The disclosure and civil liability regimes for information 16. 16. The disclosure obligations of the Corporations 16. 16. Disclosure 16. Breach of the statutory disclosure 17. The application of the positive disclosure obligations to 17. Civil liability for a defective information 17. Legislative 17.

3 Misleading or deceptive 18. Omissions from an information Inadvertent 19. The consequences of a 20. Two classes of persons exposed to civil 20. The position of 20. 23. 23. 1. 4 Stamp duty and 24. 24. Duties Act: General 24. Creation of a Securitisation 24. Transfers of mortgages and other 25. Charge over 25. Issue of securities to Transfer of securities between investors and the secondary Relief for mortgage-backed securities in New South 26. Relief in other 27. 28. 5 Taxation issues relevant to 29. 29. Income tax issues for Securitisation 29. 29. Taxation issues relating to 29.

4 Taxation issues relating to 29. Trust loss Timing of interest receipts from underlying 31. Timing of interest Timing of swap transaction payments and Timing of gains and losses in respect of underlying 31. The taxation treatment of management 31. New collection Interest withholding tax and 32. 32. The current exemptions The public offer 3. Certain issues of debentures will always fail the public offer The non-resident borrowing subsidiary Anti-avoidance 34. Commentary on the revised IWT 3 5. 5. Debt/equity 6. Thin 3 6. Foreign exchange 6. 6. Goods and services tax issues relevant to 37.

5 37. Input tax 37. Types of Reverse 3 9. Registration under the GST 3 9. Typical GST outcomes in a Securitisation 40. 2. Future 40. New withholding tax Section 128F 41. 6 The Consumer Credit Code and 42. 42. The credit Failure to comply with the 42. Criminal 42. Part 6 Civil 42. General civil 43. Linked credit Unjust The credit provider indemnified for a breach of the 43. Licensing and registration 43. 43. 7 The regulation of the participation by authorised deposit-taking institutions in Australian Prudential Regulation Authority guidelines ..44. Separation and 44. Provision of facilities by Transfer of 45.

6 APRA's new conglomerate capital adequacy The grant of collateral by Australian 46. Covered 46. Basel 46. 47. 8 Set-off and Securitisation .. 48. 48. Statutory 48. Equitable 48. Contractual 49. Insolvency 49. 49. Contractual exclusion of 50. Customer's ability to set-off against an insolvent ADI .. 50. 51. 9 Insolvency and 52. 52. Insolvent 52. Definition of insolvent .. 52. The role of a 52. The role of an 5 3. 3. Insolvent trusts and 3. Insolvency of the 5 3. Insolvency of Secured Transactions void or voidable due to 5 5. Unfair 5 5. Uncommercial 5 5. Segregated 6.

7 Rating agencies 5 6. Commercial sale of 6. No mixing of 5 6. Limited powers of 6. Tax 57. Limited recourse of 57. 10 Issues relating to debt securities issued by 8. 5 8. Security trust deeds to secure trustee debt 8. 5 8. The nature of the trustee's liability under its debt 8. Shortcomings with the trustee's right of 5 8. Limitations on the trustee's 5 9. Promissory notes issued by 60. Can trustees purchase their own securities?.. 61. 62. 11 Listing of debt 3. 6 3. ASX requirements for listing of debt 6 3. Listing rules form contract between ASX and 6 3. Consequences of breach of the listing 12 An overview of the legal aspects of the Austraclear System.

8 6 5. 6 5. Austraclear, the Austraclear System and its 6 5. Membership of 6 5. The relationship between Austraclear and its 6. What types of securities can be lodged in Austraclear?.. 6 6. Paper 6. Non-Paper 67. 67. Dematerialised 6 8. Encumbrances over lodged 6 9. Uplift of 9. Paper 9. Non-Paper Securities .. 6 9. 4. 6 9. Dematerialised 6 9. The settlement of transactions through 9. Cash Account and Security 6 9. 70. Back-up settlement 70. 70. 13 Commercial mortgage backed Overview of Structural 71. Further indebtedness .. 71. Amortisation and Cross-collateralisation.

9 71. Right to deal in Other relevant considerations for 72. Capital 72. 14 Synthetic securitisations .. 73. 73. Insurance 73. 74. 74. 15 Conclusion ..75. 16 Clayton Utz ..76. 5. 6. Introduction A Guide to the Law of Securitisation in Australia Section 10 analyses a number of issues concerning trustee debt securities in Securitisation programs. Australia has one of the world's most active Securitisation markets. Over $160 billion of securities are outstanding and Section 11 considers a number of issues relating to the ASX. approximately $40 billion of securities are issued annually.

10 Listing Rules for debt securities. Almost all major issuers have established Euro and Global MBS. Section 12 provides an overview of the legal aspects of the programs and Australia is now reputed to be the third largest Austraclear System. MBS market in the world. Australia is also an exporter of its Securitisation expertise, with a number of prominent, Section 13 examines commercial mortgage-backed securities domestically-based investment banks arranging and structuring in Australia . Securitisation transactions in Asia and New Zealand. Section 14 reviews the rationale and processes of synthetic The law plays a pivotal role in the structure and regulation of securitisations.