This is an area where it is probably fair to say that close enough is not good enough.

There is a central regulatory pre-condition that regulates the ability to claim retail regulatory treatment in relation to cash. This is set out in APRA Prudential Standard APS 210 Liquidity.

The requirement is expressed is APS 210 (which we will call the Member Control Issue) as follows:

“Where a person places funds with an intermediary, which then places those funds with an ADI, the deposit with the ADI is considered to be a deposit from a financial institution unless, during the next 30 days:

    1. the person retains all legal rights regarding the withdrawal or other movement of the funds;
    2. the person exercises these rights in practice and cannot transfer these rights to the intermediary;
    3. there is clear and prominent disclosure to the person that the funds will be placed with the ADI; and
    4. the intermediary or an associated entity can neither make investment decisions on behalf of the person regarding the deposit, nor withdraw funds from the ADI in the absence of specific directions to do so from the person (other than miscellaneous items such as fees, expense reimbursements, taxes).”

In other words, the central requirement for obtaining retail treatment for cash deposits under APS 210 is to limit the investment discretion held by the platform (ie the institutional intermediary for the purposes of APS 210). By limiting this discretion, it can be said that the ultimate beneficiary (ie the retail client) retains control of the cash deposits, ensuring that the deposit is retail, rather than institutional.

But this seemingly simplistic requirement belies some need for deeper consideration at the level of the specific superannuation product in which the retail cash categorisation is sought, as explored in more detail below.


As mentioned, it flows from the above that the central key for obtaining retail treatment for superannuation platform cash is that the relevant member retains control over that cash and that control not be surrendered to, or vested in, the superannuation trustee.

But what does this mean in practice?

It is submitted that because:

  • a superannuation trustee generally retains overarching control and management of the assets of the fund under general trust law and the typical terms of the trust instrument; and
  • a trustee of a regulated superannuation entity is subject to further restrictions under the governing rules of the fund in particular, in accordance with sections 58 and 59 of the SIS Act,

that some care and consideration needs to be given as to how to ensure the retail categorisation of superannuation cash is properly obtained and maintained.


If a superannuation trustee retains its usual control of trust assets, including cash on platform, then the retail categorisation would not seem to be available under APS 210.

In other words, if one were to simply conclude or assume that retail treatment applied to cash without addressing this Member Control Issue, then the retail cash treatment may well not be obtained. And this is what we typically refer to as a “Regulatory Rinkle”.

Rather, certain tweaks or mechanical steps should be considered, and could be implemented to obtain such retail treatment.

We address this overarching issue in the format of 7 principles, as follows:

  • Principle 1: The member should have the power under the trust instrument to direct the superannuation trustee to acquire and hold the requisite cash on his or her account.

This is an important first step, as without such a threshold direction, the superannuation trustee’s acquisition/holding of the relevant cash would be at its discretion (and therefore contrary to the Member Control Issue).

The issue then becomes how to rely on such a member direction power.

Fortunately, the SIS Act already contemplates that a direction given by a beneficiary “to take up, dispose of or alter the amount invested in an investment option” (section 58(2)(d)) is a permissible exception to the general prohibition on the trustee of a superannuation entity being subject to direction under the governing rules of the entity.

So making the cash option an investment option is a good start.

The form of the investment direction would normally be built into the relevant paperwork associated with the product disclosure statement for the fund.

But is this enough?

  • Principle 2: The trustee should not be able to deal with the cash once acquired, except pursuant to the instructions of the relevant member. Again, the wording of the SIS Act subsection canvassed above is very helpful in this regard, as it allows an investment direction to, not just deal with the initial acquisition, but also the disposal or alteration of the investment option.

So again, it is important that the terms of the relevant direction encompass these aspects of disposal and alteration.

  • Principle 3: Accommodation of Principles 1 and 2 in the governing rules of the relevant fund is important, if not crucial, for the whole retail cash categorisation to work.

As we know, the investment option direction exception referred to above does not apply automatically under the SIS Act. Rather, it will be required to be initiated by the trustee. This usually involves a combination of specifications in both the relevant product disclosure statement (already canvassed above) as well as the trust deed. Such specifications incorporated into the trust instrument can bind the trustee.

So what specifications would one seek to see incorporated in the trust deed? In our view:

    1. First specification: That the trustee will hold and dispose of the cash subject to instructions of the relevant member.
      This status of the holding of the cash by the trustee would not be inconsistent with applying the cash in accordance with the terms of the cash facility, provided that the member’s authority (standing instructions) is sought through the PDS or otherwise forms part of the terms of the cash facility which the member agrees to.
    2. Second specification: That the trustee will otherwise not dispose of the cash, except in accordance with the relevant member’s standing or specific instructions.
  • Principle 4: We often get asked to consider and advise on a scenario where the trustee envisages, or has experienced, a scenario where the cash facility becomes disrupted by extraordinary or unusual circumstances, often by market conditions.

In this scenario, the trustee often wants advice on whether it can dispose of cash attributable to a member or take some other ostensibly prudent action, such as even freezing redemptions.

In our paradigm, the trust deed should normally provide that the trustee would seek instructions from the relevant member as to what action it should take in relation to the cash in the facility attributable to the relevant member where the relevant market wrinkle occurs.

There are arguments for and against whether such a power to freeze redemptions would contravene the Member Control Issue. A possible resolution of the issue is to include a power of the trustee to freeze redemptions as part of a standing instruction of the investor, defined by particular circumstances (eg an investor authority to temporarily freeze if the cash portfolio becomes vulnerable to market disruption and that this would harm the interests of the constituency of cash members in the facility).

  • Principle 5: Amendments to the trust instrument may be required to ensure the integrity of the Member Control Issue, and consideration would need to be given as to whether such amendments fall within the power of the trustee and the scope of the amendment power contained in the trust instrument.
  • Principle 6: The level of retail treatment sought should also be considered, with the potential to implement contractual arrangements between the superannuation platform and the underlying bank holding the cash deposits.

Under APS 210, retail deposits are divided into 3 categories – stable, less stable and higher run-off less stable. Retail deposits maturing within one year, or which can be redeemed early, are more likely to be treated as less stable, subject to certain other characteristics for the purposes of the Net Stable Funding Ratio. In contrast, where a retail deposit matures after one year or more, which cannot be redeemed early, the deposit would receive an “available stable funding” status of 100% as it is treated as long term stable (see APRA APG 210 Liquidity). This is sometimes referred to as “full retail treatment” under APS 210.

  • Principle 7: Disclosure of the terms of the cash facility (including the clear obtaining of instructions both initially and at any subsequent stage as required by the terms of the facility) is crucial.

This principle, above all, is about clear and adequate disclosure.

Finally, it should be noted that, flowing from section 55(5) of the SIS Act, where the trustee complies with various specified requirements of the SIS Act in relation to the making of the cash investment on behalf of a member (including the statutory covenants contained in section 52 of the SIS Act), the trustee will enjoy statutory protection from any action for loss or damage suffered by a person as a result of the making of the investment.


It is beyond the ambit of this edition of Regulatory Rinkles to explore this last part relating to statutory protection under the SIS Act in any detail.

But should you require any clarification or elaboration on this point, or any of the above discussion, please feel free to contact one of the HSF FSR team members listed below.


Michael Vrisakis
Michael Vrisakis
+61 2 9322 4411
Tamanna Islam
Tamanna Islam
Senior Associate
+61 2 9225 5160