Financial Services Reform (Consequential Provisions) Act 2001

Overview

The Financial Services Reform (Consequential Provisions) Act 2001 was enacted by the Parliament of Australia to address the gaps and issues arising from the implementation of the Financial Services Reform Act 2001. This Act provides for the amendment and repeal of certain provisions in various Acts to ensure a smooth transition to the new financial services regime. It aligns definitions and terminology with the new legislative framework, modifies enforcement and penalty provisions, and sets out transitional arrangements for different types of financial markets, clearing and settlement facilities, and financial services providers. The overarching policy objective is to facilitate the transition to a more streamlined and effective regulatory environment for financial services in Australia, while maintaining continuity and protecting consumers during the changeover period. The Act includes provisions for staggered commencement of different sections to manage the transition effectively and avoid legal uncertainties for market participants and regulators.

Scope and Application

The Financial Services Reform (Consequential Provisions) Act 2001 is a Commonwealth Act that amends various existing Acts to reflect the changes introduced by the Financial Services Reform Act 2001. The Act applies to a range of entities including financial institutions, market operators, clearing and settlement facilities, and individuals carrying out regulated activities. It also applies to certain conduct and transactions within the financial services sector. The Act operates on a national level, as it pertains to the Commonwealth of Australia. The application of the Act is broad, affecting numerous industries and areas of financial regulation, and it extends to both existing and new financial products and services. Certain provisions of the Act may commence at different times, contingent on the commencement of other specified Acts or items within those Acts, and some provisions may not commence at all under particular conditions. Subordinate instruments such as regulations and determinations can further extend or restrict the application of the Act, allowing for detailed and specific transitional arrangements that cater to the phased implementation of the new financial services regime. These instruments can address transitional, saving, or application matters, ensuring a smoother transition from the old regulatory framework to the new one. The Act also includes specific exclusions and exemptions, particularly in relation to the application of new legislation to existing financial products and activities during a transition period.

Key Provisions

• The Financial Services Reform (Consequential Provisions) Act 2001 (Act) makes various amendments and repeals to numerous existing Acts, reflecting the enactment of the Financial Services Reform Act 2001. Section 3 of the Act states that each Act specified in a Schedule is amended or repealed as set out in the applicable items of that Schedule, with any other item in the Schedule taking effect according to its terms. The key provisions of the Act involve amendments to the Australian Securities and Investments Commission Act 2001, the Corporations Act 2001, and other related financial services and investment Acts, with a focus on aligning these Acts with the new financial services regime established by the Financial Services Reform Act 2001.
• The Act imposes several obligations and requirements on the entities it governs. For instance, it mandates that a person must not engage in unconscionable conduct in trade or commerce in connection with the supply or acquisition of financial services, unless the services are provided or acquired for prices exceeding $3,000,000 or a higher prescribed amount. It also prohibits false or misleading representations about financial products that include interests in land, offering gifts or prizes with the intent not to provide them, and using physical force or undue harassment or coercion in connection with financial services transactions. Furthermore, the Act imposes specific conditions for sending unsolicited credit or debit cards and mandates that these cards should not be used interchangeably without proper authorisation. The Act further stipulates that certain licensing and transitional provisions apply to markets, clearing and settlement facilities, and individuals carrying out financial services activities.
• Under the Act, several offences carry penalties. For example, failure to comply with the requirements under sections 19, 21(3), 30, 31, 32A, 33, 34, 37(9), 38, 39, and other sections is an offence that attracts a penalty of up to 100 penalty units or imprisonment for 2 years, or both. Additionally, offences of strict liability apply to various subsections, including those related to making false or misleading representations, offering gifts or prizes with the intent not to provide them, and accepting payment without intending to supply as ordered. These strict liability offences require no proof of intent or knowledge, meaning that the mere act of the offence itself is sufficient for conviction. In certain cases, such as failing to provide required information or services as promised, the Act stipulates that a defendant bears a legal burden to prove an exception. Other sections impose penalties of up to 2,000 or 10,000 penalty units, depending on the severity of the offence. Notably, if a person lacks sufficient financial resources to pay both a fine and compensation for loss or damage caused by a contravention, the court must give preference to ordering compensation.
• The Act also introduces civil and criminal consequences for breaches. Civil consequences include the imposition of fines and the ability for the Australian Securities and Investments Commission (ASIC) to apply for non-punitive and punitive orders. Non-punitive orders can include community service orders, probation orders, and orders for disclosure or publication of information. Punitive orders may require adverse publicity, including the disclosure of information and the publication of advertisements at the offender's expense. Criminal consequences include imprisonment terms and penalties specified in the Criminal Code, with some offences carrying maximum penalties of up to 10,000 penalty units. The Act provides for the continued application of certain old legislation provisions during transitional periods, ensuring that individuals and entities have adequate time to comply with the new regulatory framework. Failure to comply with certain requirements, such as lodging notices with ASIC, also constitutes an offence under the Act, with specified penalties.

Legal classification tags

Area of Law

Corporate Law & Governance

Financial Services Regulation

Instrument

Act

Concepts

Commencement Provisions

Offence Provisions

Regulatory Standards

Transitional Provisions