Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2019-2020-2021-2022
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
INVESTMENT FUNDS LEGISLATION AMENDMENT BILL 2021
SUPPLEMENTARY EXPLANATORY MEMORANDUM
Amendments and New Clauses to be Moved on Behalf of the Government
(Circulated by authority of the Minister for Finance,
Senator the Hon Simon Birmingham)
INVESTMENT FUNDS LEGISLATION AMENDMENT BILL 2021
OUTLINE
The Investment Funds Legislation Amendment Bill 2021 (the Bill) gives effect to a
range of amendments to streamline the operation of the Australian Government's
investment funds.
The Bill was introduced into the House of Representatives on 25 August 2021.
Amendments to the Bill will amend the Future Fund Act 2006 (Future Fund Act) to
apply new reporting requirements on the Future Fund Board of Guardians (Future
Fund Board). These amendments will enhance the reporting framework and increase
the level of transparency over investment holdings in Australian Government
investment funds (held by, or on behalf of, the Future Fund Board). The new
reporting requirements will add to the wide range of information already reported on
the Future Fund Board's investment activities, including through the Future Fund
website, Annual Reports and quarterly performance updates.
Under the amended Future Fund Act, the nominated Minister will be required to make
reporting rules requiring the Future Fund Board to publish periodic investment reports
online. The reports will require disclosure of portfolio holdings information relating to
the investments held by, or on behalf of, the Future Fund Board in relation to all of
the Australian Government investment funds managed by the Board.
The periodic investment reports will relate to the investments held at least 90 days
prior to the date of publication, unless the nominated Minister allows the Future Fund
Board to voluntarily publish the report earlier. This reporting lag is consistent with the
general intent that the information published is no longer considered commercially
sensitive to the Future Fund Board or its investment managers. The reporting rules
will require the Future Fund Board to publish up to two periodic investment reports in
any 12-month period, with successive reports being in respect of dates at least six
months apart.
The nominated Minister will be required to take all reasonable steps to make reporting
rules as soon as practicable after commencement of the changes and ensure reporting
rules are always in force thereafter. Before making or amending reporting rules, the
nominated Minister must consult the Future Fund Board and invite a submission. Any
submission made by the Future Fund Board will be tabled in the Parliament alongside
the reporting rules. The reporting rules will be a legislative instrument that is subject
to disallowance by the Parliament.
Financial Impact Statement
Nil.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011.
Investment Funds Legislation Amendment Bill 2021
Overview of Amendments
The amendments to the Bill will establish new reporting requirements in the Future
Fund Act for the Future Fund Board. The nominated Minister will make reporting
rules that require the Future Fund Board to prepare and publish periodic investment
reports online in relation to investment holdings in Australian Government investment
funds, held by, or on behalf of, the Future Fund Board.
Human rights implications
A detailed Statement of Compatibility with Human Rights was prepared for the Bill.
These amendments do not affect compatibility with any of the human rights or
freedoms identified in that Statement.
Conclusion
The amendments do not engage any human rights issues beyond those identified in
the original Statement of Compatibility of Human Rights prepared for the Bill.
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INVESTMENT FUNDS LEGISLATION AMENDMENT BILL 2021
NOTES ON AMENDMENTS
Item 1 would amend clause 2 of the Bill to provide that Schedule 1A commences the
day after the Royal Assent. Schedule 1A would insert the new reporting requirements
on the Future Fund Board into the Bill.
Item 2 would insert new Schedule 1A into the Bill, to establish new reporting
requirements for the Future Fund Board in relation to portfolio holdings in Australian
Government investment funds, held by, or on behalf of, the Future Fund Board.
Schedule 1A would provide for a new definition to be inserted into section 5 of the
Future Fund Act for "reporting rules". The term "reporting rules" would be defined as
rules made under section 55B, which is a new section to allow the nominated Minister
to make reporting rules via a disallowable legislative instrument.
Schedule 1A would also provide for the insertion of new Division 6A of Part 4 into
the Future Fund Act to establish the new reporting requirements for the Future Fund
Board. Under the new Division, the Finance Minister (as the nominated Minister
under the Future Fund Act) would make a legislative instrument (known as reporting
rules) to require the Future Fund Board to publish portfolio holdings information
online.
New section 55A would provide the legislative parameters for the periodic investment
reports that the Future Fund Board would be required to publish online.
New subsection 55A(1) would provide that the reporting rules may require the Future
Fund Board to prepare a periodic investment report for each reporting day and make
the report available on the internet throughout the publication period. The publication
period would be prescribed by the reporting rules, which would be made by the
nominated Minister under new subsection 55B(1).
New subsection 55A(2) would provide that a publication period must not begin until
at least 90 days after the end of the reporting day concerned. This means that the
nominated Minister could not make reporting rules that require the Future Fund Board
to publish information relating to portfolio holdings unless that information relates to
investments at a point in time that is at least 90 days prior to the time of publication.
This subsection will impose a minimum lag time for publishing a report, which is
consistent with the general intent that the information published is no longer
considered commercially sensitive to the Future Fund Board or its investment
managers.
New subsection 55A(3) would allow the reporting rules to empower the Future Fund
Board to publish a periodic investment report online before 90 days have elapsed
since the reporting day concerned. This means that the reporting rules could allow,
but not require, the publication of a periodic investment report before the publication
period begins.
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New subsection 55A(4) would define the term "periodic investment report" for the
purposes of section 55A. A periodic investment report for a reporting day would
relate to the investments held by, or on behalf of, the Future Fund Board (whether
under the Future Fund Act or any other Act) as at the end of the reporting day and
would set out the information specified in the reporting rules. This would allow the
nominated Minister to specify in the reporting rules the information that the Future
Fund Board must include in a periodic investment report.
Subsection 55A(4) would also ensure that a periodic investment report relates to the
investments held under the Future Fund Act or any other Act. This would ensure that
the reporting covers the investments for all of the Australian Government investment
funds managed by the Future Fund Board, and the reporting may be aggregated. The
Future Fund Board is currently responsible for six Australian Government investment
funds - the Future Fund, the DisabilityCare Australia Fund, the Medical Research
Future Fund, the Aboriginal and Torres Strait Islander Land and Sea Future Fund, the
Future Drought Fund and the Emergency Response Fund.
New subsection 55A(5) would require the information in a periodic investment report
to be set out in accordance with the prescribed way of setting out information (if any)
in the reporting rules.
New subsection 55A(6) would define the term "reporting day" as a day ascertained in
accordance with the reporting rules. This would allow the nominated Minister to
prescribe reporting days in the reporting rules, subject to the limitations in subsections
55A(7) and (8).
New subsection 55A(7) would provide that a reporting day must not occur before the
commencement of section 55B. This would ensure that the new reporting
requirements on the Future Fund Board relate only to reporting days that occur after
the commencement of the new reporting requirements.
New subsection 55A(8) would provide that reporting days must be at least 6 months
apart. This would mean that the reporting rules could only require the Future Fund
Board to publish up to two periodic investment reports in any 12-month period.
New subsection 55A(8) is designed to strike an appropriate balance between
increasing transparency over portfolio holdings while also considering the
administrative obligations involved with producing and publishing periodic
investment reports, and commercial sensitivity issues, given the Future Fund Board is
responsible for managing over $252 billion (as at 31 December 2021).
New section 55B would provide the nominated Minister with the legislative authority
to make reporting rules.
New subsection 55B(1) would allow the nominated Minister to make reporting rules,
by legislative instrument, to prescribe matters that are required or permitted to be
prescribed by Division 6A. This would provide legislative authority for the Finance
Minister (as nominated Minister under the Future Fund Act) to make reporting rules
for the Future Fund Board in relation to the investments held by, or on behalf of, the
Future Fund Board.
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New subsection 55B(2) would require the nominated Minister to take all reasonable
steps to make the first set of reporting rules as soon as practicable after
commencement of Division 6A. The period of time after commencement and before
the first set of reporting rules are made would include a reasonable period for the
nominated Minister to consult the Future Fund Board as required under new
section 55C.
New subsection 55B(3) would require the nominated Minister to take all reasonable
steps to ensure that reporting rules are in force at all times after the first set of
reporting rules have commenced.
In conjunction, subsections 55B(2) and (3) would require the nominated Minister to
take active steps towards ensuring that reporting rules are made (and continue to
apply) that require the Future Fund Board to publish information online in relation to
portfolio holdings in Australian Government investment funds held by, or on behalf,
the Future Fund Board. This will increase the level of public transparency over the
more than $252 billion in investments (as at 31 December 2021) managed by the
Future Fund Board on behalf of the Australian Government.
New section 55C would require the nominated Minister to consult the Future Fund
Board before making or amending reporting rules and consider any submission that is
received within a reasonable timeframe.
New subsection 55C(1) would require the nominated Minister to provide draft
reporting rules, or amendments to the rules, to the Future Fund Board inviting a
submission on the draft within a specified time limit and consider any submission
received within that time limit before making or amending reporting rules. This would
ensure that the Future Fund Board is given an opportunity to consider the draft
reporting rules or amendments and provide its views to the nominated Minister before
the reporting rules or amendments are made.
New subsection 55C(2) would require any submission received from the Future Fund
Board on draft reporting rules or amendments to be tabled in each House of the
Parliament with the reporting rules or amendments, to ensure that the views of the
Future Fund Board on the reporting rules or amendments are available to the
Parliament and the public.
The note to subsection 55C(2) refers readers to section 38 of the Legislation Act 2003
for information on the tabling of reporting rules or amendments.
New subsection 55C(3) would require any time limit specified under section 55C to
be reasonable. This would ensure that the Future Fund Board is given an appropriate
amount of time to make a submission on the draft reporting rules or amendments
before they are made.
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