Financial Services Reform Act 2001
Act No. 122 of 2001 as amended
This compilation was prepared on 18 July 2005
[This Act was amended by Act No. 146 of 2001; No. 100 of 2005]
Amendments from Act No. 146 of 2001
[Schedule 5 (item 6) amended subsection 2(2)
Schedule 5 (item 7) repealed subsection 2(7)
Schedule 5 (item 8) repealed Schedule 1 (item 250)
Schedule 5 (items 6 to 8) commenced on 15 December 2001]
Amendment from Act No. 100 of 2005
[Schedule 2 (item 13) amended heading to item 334 of Schedule 1
Schedule 2 (item 13) commenced immediately after 11 March 2002]
Prepared by the Office of Legislative Drafting and Publishing,
Attorney‑General’s Department, Canberra
Contents
1 Short title [see Note 1]
2 Commencement [see Note 1]
3 Schedule(s)
Schedule 1—Financial Services and Markets
Part 1—Main amendments
Corporations Act 2001
Part 2—Consequential amendments
Australian Securities and Investments Commission Act 2001
Corporations Act 2001
Reserve Bank Act 1959
Schedule 2—Continuous disclosure
Corporations Act 2001
Schedule 3—Other miscellaneous amendments
Part 1—Technical and other minor amendments
Australian Securities and Investments Commission Act 2001
Corporations Act 2001
Part 2—Telephone monitoring during takeovers
Corporations Act 2001
Notes
An Act to amend the law relating to financial services and markets, and for other purposes
1 Short title [see Note 1]
This Act may be cited as the Financial Services Reform Act 2001.
2 Commencement [see Note 1]
(1) The following provisions:
(a) this section and section 1;
(b) Part 1 of Schedule 3;
commence:
(c) unless paragraph (d) applies—on the day on which this Act receives the Royal Assent; or
(d) if that day is the day on which the Corporations Act 2001 commences or an earlier day—immediately after the commencement of that Act.
(2) Subject to subsections (3) to (6), the remaining provisions of this Act commence on a day or days to be fixed by Proclamation.
(3) A day fixed by a Proclamation under subsection (2) cannot be a day before the day on which the Corporations Act 2001 commences.
(4) If a day fixed by a Proclamation under subsection (2) is the same day as the day on which the Corporations Act 2001 commences, the provisions of this Act to which that Proclamation applies are taken to commence immediately after the commencement of the Corporations Act 2001.
(5) The following provisions must commence on the same day:
(a) all the provisions of Schedule 1;
(b) all the provisions of Schedule 2.
(6) If a provision of this Act to which subsection (2) applies does not commence under that subsection within the period of 12 months beginning on the day on which the Corporations Act 2001 commences, it commences on the first day after the end of that period.
3 Schedule(s)
Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any…
Overview
The Financial Services Reform Act 2001, as amended, was introduced by the Australian Parliament to address significant gaps and problems in the financial services sector, aiming to provide comprehensive regulation that enhances consumer protection and market integrity. This Act, which amends the Corporations Act 2001, establishes a robust framework for the oversight of financial services, markets, and products, ensuring that they are conducted fairly, efficiently, and transparently. The Act's policy objective is to safeguard consumers by promoting informed decision-making, while also ensuring that financial markets operate with integrity and transparency. It addresses issues such as the need for licensing in financial markets and clearing and settlement facilities, stringent operational requirements, and clear obligations for financial service providers, including handling client money and property with due care. The Act further imposes limitations on ownership and control within licensees to mitigate conflicts of interest and mandates comprehensive disclosure requirements to ensure transparency. It also outlines penalties for non-compliance, thereby reinforcing the regulatory framework.
Scope and Application
The Financial Services Reform Act 2001, as amended, applies to a broad range of entities and individuals within the financial services sector in Australia, including financial service providers, financial markets, clearing and settlement facilities, and the officers and agents of these bodies. The Act’s jurisdiction extends across the Commonwealth, impacting entities operating within Australia and those dealing with Australian-regulated financial products. The legislation sets out specific exclusions and exemptions, such as the exclusion of officers or agents of a body corporate from insider trading prohibitions if they became aware of non-public information in the course of their duties, provided no advice was given to them regarding the information. The Australian Securities and Investments Commission (ASIC) also has the authority to grant exemptions for certain financial products, ensuring the interests of financial product holders are protected and the transfer of those products is efficient. The Act’s application is further extended through subordinate instruments, which may detail specific operational requirements and additional regulatory measures to ensure compliance with the overarching objectives of promoting informed decision-making, fairness, and transparency in the financial sector.
Key Provisions
- The Financial Services Reform Act 2001, as amended, significantly modifies the Corporations Act 2001 by introducing comprehensive changes to the financial services and markets sector. Section 1 of the Act (section 1) defines essential terms such as "financial product," "financial service," and "financial market," aiming to ensure a common understanding and consistent application across the sector. The Act mandates licensing for financial markets and clearing and settlement facilities, with strict guidelines for licensing and operational requirements, including conflict resolution and risk management (section 911A). Licensing of financial service providers is also addressed, imposing obligations such as providing efficient, honest, and fair services, and establishing a dispute resolution system (section 912A).
- The Act imposes several obligations on the parties it governs. Financial service providers must ensure that their operations are conducted efficiently, honestly, and fairly (section 911A(1)(a)). They must also establish and maintain a dispute resolution system that is effective, efficient, and fair (section 911A(1)(b)). Additionally, the Act mandates that financial service providers handle client money and property in a manner that ensures their segregation and protection (section 911A(1)(c)). The Act further requires financial service providers to comply with comprehensive disclosure requirements, including the provision of Financial Services Guides and Product Disclosure Statements (section 1012A). It also imposes ongoing disclosure obligations for issuers of financial products (section 1013A).
- Non-compliance with the provisions of the Financial Services Reform Act 2001 can lead to severe civil and criminal consequences. For instance, the Act imposes penalties for insider trading, including fines and imprisonment (section 12AA). The maximum penalty for insider trading can be up to five years imprisonment or a fine of up to $275,000, or both, for individuals, and up to $1.375 million for bodies corporate (section 12AB(2)). The Act also allows for compensation orders in cases of insider trading, enabling harmed parties to recover damages (section 12AG). Furthermore, the Act prohibits certain conduct such as market manipulation, false or misleading statements, and insider trading, with penalties for breach including fines and imprisonment (section 12AE). The Act reinforces its regulatory framework by outlining these penalties, ensuring adherence to its provisions.
- Area of Law
- Commercial Law
- Financial Services & Markets
- Instrument
- Act
- Concepts
- Definitions & Interpretation
- Licensing & Registration
- Reporting & Disclosure Obligations
- Enforcement Powers
- Civil Penalty Provisions
- Prohibited Conduct
