Corporations Regulations (Amendment) (Cth)

Statutory Rules 1998

No. 161 1

__________________

Corporations Regulations2 (Amendment)

I, WILLIAM PATRICK DEANE, Governor-General of the Commonwealth of Australia, acting with the advice of the Federal Executive Council, make the following Regulations under the Corporations Act 1989.

Dated 18 June 1998.

 WILLIAM DEANE

 Governor-General

By His Excellency’s Command,

 

IAN CAMPBELL

Parliamentary Secretary

to the Treasurer

for the Treasurer

____________

1.   Commencement

1.1   These Regulations commence on 1 October 1998.

2.   Amendment

2.1   The Corporations Regulations are amended as set out in these Regulations.

3.   New regulations 7.3.02B, 7.3.02C and 7.3.02D

3.1   Before regulation 7.3.03, insert:

Licence conditions—investment advice to retail investors

“7.3.02B. (1) For the purposes of subsection 786 (1) of the Corporations Law, a licence is subject to the condition that, if the licensee gives investment advice to a retail investor, the licensee must meet the requirements of subregulations (2), (4) and (5).

 “(2) Subject to subregulation (3), the licensee must give to a retail investor an Advisory Services Guide:

• (a)

  in the case of investment advice given in person—not later than when that advice is given; or

• (b)

  in the case of an execution-related telephone advice—at the earliest practicable opportunity after the licensee (or a representative of the licensee) gives the advice but not later than 3 days after the trading following the advice; or

• (c)

  in any other case—at the earliest practicable opportunity after the licensee (or a representative of the licensee) gives investment advice. 

 “(3) Subregulation (2) does not apply if:

• (a)

  the licensee has given an Advisory Services Guide to the retail investor in relation to investment advice previously given to the investor; or

• (b)

  the investment advice given is general securities advice given, in accordance with regulation 7.3.02D, to persons generally in a non-personal context (for example, at an investment seminar, by means of brochures or newsletters or through advertisements). 

 “(4) The licensee must be a member of an external complaints resolution scheme approved by the Commission.

 “(5) The licensee must have in place at all times, to deal with complaints from retail investors, internal complaints-handling procedures that are in accordance with Australian Standard AS 4269 1995, Complaints Handling, as in force on 1 October 1998. 

 “(6) For subregulation (2), the Advisory Services Guide must contain information that a retail investor reasonably requires to:

• (a)

  clearly understand the nature of the investment advice service being offered; and

• (b)

  compare the services offered by the licensee with similar services offered by other licensees; and

• (c)

  clearly identify:

  • (i)

    the licensee; and

  • (ii)

    the individual representative (if any) of the licensee;

 responsible for the investment advice to be given to the investor; and

• (d)

  clearly understand the nature of, and method of calculating, in relation to the service:

  • (i)

    all charges payable to the licensee by the investor; or

  • (ii)

    any other amount payable to the licensee, including a commission payable by a third party; and

• (e)

  clearly understand the basic rights of the investor in relation to the licensee, and any representative of the licensee, giving investment advice to the retail investor; and

• (f)

  use available complaints procedures if dissatisfied with a service received from the licensee. 

 “(7) If a change occurs in relation to an item of information mentioned in subregulation (6) and the relationship between the licensee and the retail investor to whom the licensee has given an Advisory Services Guide under subregulation (2) is continuing, or the licensee has a reasonable expectation that the retail investor will seek further investment advice from the licensee, the licensee must give, at the earliest practicable opportunity after the change, an updated Advisory Services Guide to the retail investor. 

 “(8)Subject to subregulation (9), a person is not a retail investor if:

• (a)

  the person is the holder of a dealers licence; or

• (b)

  the person is the holder of an investment advisers licence; or

• (c)

  the person is an exempt dealer; or

• (d)

  the person is an exempt investment adviser; or

• (e)

  the person is a body corporate registered under the Life Insurance Act 1995; or

• (f)

  the person is a bank as defined in section 5 of the Banking Act 1959; or

• (g)

  the person is a bank constituted by or under a law of a State or Territory; or

• (h)

  the person is the trustee of a superannuation fund, an approved deposit fund or a pooled superannuation trust within the meaning of the Superannuation Industry (Supervision) Act 1993 that has more than 100 members; or

• (i)

  the person is the trustee or management company of a prescribed interest scheme and:

  • (i)

    the person has aggregate funds under its management that is not less than $50,000,000; and

  • (ii)

    in relation to each scheme under its management:

    • (A)

      the total amount of the funds under management is not less than $10,000,000; and

    • (B)

      the total number of members is not less than 50; or

• (j)

  the person is the trustee or management company of a prescribed interest scheme that has:

  • (i)

    net assets of not less than $10,000,000; and

  • (ii)

    more than 100 members; or 

• (k)

  the person is a financial institution, building society or credit union under a Financial Institutions Code; or

• (l)

  the person is a friendly society under a Friendly Society Code or the Friendly Societies Act 1894 (W.A.); or

• (m)

  the person is an exempt public authority; or

• (n)

  the person is an investment company as defined in subregulation 7.3.12 (3); or

• (o)

  the person is a listed company; or

• (p)

  the person is a company (other than a company mentioned in paragraph (n) or (o)) that is a large proprietary company:

  • (i)

    at the deadline for lodgement of the documents mentioned in subsection 317B (2) of the Corporations Law in relation to the last financial year; or

  • (ii)

    if section 317B of the Corporations Law does not apply to the company in relation to the last financial year, at the date when the company receives the advice from the licensee; or

• (q)

  the person is a related body corporate of a listed company; or

• (r)

  the person is a foreign entity that, if established or incorporated in Australia, would be a person described in paragraph (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o), (p) or (q).

 “(9)A person mentioned in paragraph (8) (a), (b), (c), (d) or (q) is a retail investor in relation to an investment advice given to that person by the licensee if:

• (a)

  the person has made a request, in writing, to the licensee to be treated as a retail investor in relation to the investment advice; and

• (b)

  the person has not revoked the request. 

 “(10) In this regulation:

execution-related telephone advice means investment advice relating to quoted securities:

• (a)

  that is given by a stockbroker or other dealer as an integral part of the execution of a transfer of, or order for, those securities; and 

• (b)

  for which no fee is charged in addition to the commission for the execution of the transfer or order. 

Friendly Societies Code means:

• (a)

  the Friendly Societies (NSW) Code; or

• (b)

  the Friendly Societies (Victoria) Code; or

• (c)

  the Friendly Societies (Queensland) Code; or

• (d)

  the Friendly Societies (South Australia) Code; or

• (e)

  the Friendly Societies (Tasmania) Code; or

• (f)

  the Friendly Societies (Northern Territory) Code.

general securities advice means advice or report on securities given to an investor or prospective investor without recommending (whether expressly or impliedly and whether directly or indirectly) that a particular transaction in those securities is appropriate to the particular investment needs, objectives and financial circumstances of the investor or prospective investor.

give, in relation to investment advice,includes make available (for example, by leaving brochures for an investor or prospective investor to peruse).

retail investor, in relation to investment advice, means:

• (a)

  a person other than a person that, under subregulation (8), is not a retail investor; or

• (b)

  a person who is a retail investor under subregulation (9). 

Licence conditions—personal securities recommendations to retail investors

“7.3.02C. (1) For the purposes of subsection 786 (1) of the Corporations Law, a licence is subject to the condition that, if the licensee gives a personal securities recommendation to a retail investor and the retail investor fails to give to the licensee relevant personal information, the licensee must give to the investor a clear warning that:

• (a)

  states that the licensee has not been able to undertake a comprehensive analysis of the investment objectives, financial situation and particular needs of the investor; and

• (b)

  sets out the limitations on the appropriateness of the recommendation because of the lack of relevant personal information about the investor; and

• (c)

  states that the investor needs to consider whether the recommendation is appropriate in light of the particular investment needs, objectives and financial circumstances of the investor. 

 “(2) In this regulation:

personal securities recommendation means a recommendation given to a person (whether expressly or impliedly and whether directly or indirectly) that certain securities transactions are appropriate to the person, having regard to the investment objectives, financial situation and particular needs of that person.

relevant personal information means information that is sufficient in order to have a reasonable basis, under section 851 of the Corporations Law, for making a securities recommendation.

retail investor has the same meaning as in subregulation 7.3.02B (10). 

Licence conditions—general securities advice to investor or prospective investor

“7.3.02D. (1) For the purposes of subsection 786 (1) of the Corporations Law, a licence is subject to the condition that, if the licensee gives general securities advice, the licensee must clearly warn an investor or prospective investor, at the time when the licensee gives the advice, that:

• (a)

  in preparing the advice, the licensee did not take into account the investment objectives, financial situation and particular needs of any particular person; and 

• (b)

  before making an investment decision on the basis of that advice, the investor or prospective investor needs to consider, with or without the assistance of a securities adviser, whether the advice is appropriate in light of the particular investment needs, objectives and financial circumstances of the investor or prospective investor. 

 “(2) If general securities advice is given in a document, the warnings mentioned in paragraphs (1) (a) and (b) must be contained in that document. 

 “(3) In this regulation:

general securities advice has the same meaning as in subregulation 7.3.02B (10).

give has the same meaning as in subregulation 7.3.02B (10).”. 

 

NOTES

1. Notified in the Commonwealth of Australia Gazette on 25 June 1998.

2. Statutory Rules 1990 No. 455 as amended by 1991 Nos. 218, 219, 281, 341, 453, 478 and 479; Act No. 200, 1991; Statutory Rules 1992 Nos. 230, 281, 364, 395 and 450; 1993 Nos. 135, 207 and 277; 1994 Nos. 35, 108, 153, 221, 251, 302 and 430; 1995 Nos. 222, 344, 345 and 398; 1996 Nos. 26, 51, 55, 90, 205, 218 and 343; 1997 Nos. 10, 81, 102 and 142; 1998 Nos. 9, 22, 109 and 128.