Securities Industry Act 1970 (NSW)

SECURITIES INDUSTRY ACT.

iSetu ^outf) Males;

ANNO UNDEVICESIMO

ELIZABETHS II BEGINS

* * * * * * * * ! | ! * ^ ! * ! | e s | ! * ! ( :

Act No. 35, 1970.

An Act to make provisions with respect to stock exchanges and stockbrokers and other persons dealing in securities; to create certain offences related to trading in securities; to constitute a Corporate Affairs Commission; and for purposes connected therewith. [Assented to, 8th April,

1970.]

Securities Industry.

No. 35,1970 73E it enacted by the Queen’s Most Excellent Majesty, by

and with the advice and consent of the Legislative Council and Legislative Assembly of New South Wales in Parhament assembled, and by the authority of the same, as follows:—

PART I.

Preliminary.

Short title.

This Act may be cited as the “Securities Industry Act,

1970”.

Commence

(1) This Part of this Act shall commence on the day (2) Subject to subsection one of this section, this Act shall commence in accordance with subsection three of this section.

ment.	on which this Act receives the Royal assent.
(3) The Governor may appoint, and notify by proclamation published in the Gazette, the day upon which a Part or provision of this Act shall commence and may, at different times, appoint different days for different Parts or provisions, and the Part or provision to which such a proclamation relates shall commence as specified therein.

Division

This Act is divided into Parts, as follows ;—

into Parts.

PART I.— Preliminary—

1-4.

PART II.— Corporate A ffairs Commission— s. 5.

PART III.— Stock Exchanges— ss. 6-8.

PART IV.— Licences—

9-20.

PART V.—A ccounts and A udit— ss. 21-38.

PART VI.— Investment of Stockbrokers’ Trust

Funds—ss. 39-45.

PART VII.—Fidelity Funds— ss. 46-69.

PART VIII.— Trading in Securities— ss. 70-75.

PART IX.— General— ss. 76-78.

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4. or subject-matter otherwise indicates or requires—

(1) In this Act, except to the extent that the context No. 35, 1970

. .

“agent” in relation to a dealer includes a person who is or at any time has been a banker of the dealer;

“auditor” means a registered company auditor within the meaning of the Companies Act, 1961;

“business” in relation to a dealer means business of dealing in securities;

“Commission” means the corporation constituted by section five of this A ct;

“Commissioner” means the Commissioner for Corporate Affairs appointed under section five of this Act;

“committee” in relation to a stock exchange means the persons for the time being in whom the management of the stock exchange is vested;

“corresponding law” means Act or enactment of any other State or a Territory of the Commonwealth which the Governor declares by order published in the Gazette to be a corresponding law for the purposes of this A ct;

“dealer” means person who carries on a business of dealing in securities whether or not he carries on any other business, but does not include an exempt dealer;

“dealer’s representative” means person in the direct employment of or acting for or by arrangement with a dealer, not being an exempt dealer, who performs for that dealer any of the functions of a dealer (other than work ordinarily performed by accountants, clerks or cashiers) whether his remuneration is by way of salary, wages, eommis- sion or otherwise and, where the dealer is a corporation, includes any director, member or officer of the corporation who is not the holder of a dealer’s licence and who performs for the corporation any of those functions (whether or not his remuneration is as aforesaid);

“dealing

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No. 35, 1970

“dealing in securities” means (whether as principal or agent) making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into—

(a)	any agreement for or with a view to acquiring, disposing of, subscribing for, or underwriting securities; or
(b)	any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of securities or by reference to fluctuations in the value of securities;

‘exempt dealer” means—

(a)	person who carries on a business of dealing in securities only through the holder of a dealer’s licence;
(b)	corporation that is declared by the Gover nor, pursuant to paragraph (b) of sub section seven of section thirty-eight of the Companies Act, 1961, to be an authorised dealer in the short term money market;
(c)	public statutory corporation constituted under a law of the Commonwealth or of a State;

(d) the State Superannuation Board; (e) the Transport Retirement Board;

“investment adviser” means person who carries on a business of advising others concerning securities or who as part of a regular business issues or promulgates analyses or reports concerning securities; but does not include—

(a)	bank as defined in section five of the Banking Act 1959 of the Commonwc^th as amended from time to time;

(b)

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(b)

corporation authorised by the law of any No. 35, 1970 wealth to take in its own name a grant of probate or of letters of administration of the estate of a deceased person;

(c)	corporation registered under the law of the Commonwealth relating to life insurance;
(d)	solicitor or registered public accountant in public practice as such whose carrying on of that business is solely incidental to the practice of his profession;
(e)	dealer or exempt dealer whose carrying on of that business is solely incidental to the conduct of his business of dealing in securities; or
(f)	person who is the publisher of a newspaper registered under the law of the Common wealth for transmission by post as a newspaper, where—

(i) in so far as the newspaper is distributed generally to the public, it is so distributed only to subscri bers therefor, and purchasers thereof, for value;

(ii) the advice is given, or the analyses or reports issued or promulgated, only through that newspaper;

(iii) that person has no interest directly or indirectly in any security to which the advice, analysis or report relates;

(iv) that person receives no commission or other consideration for giving the advice, or issuing or

promulgating

the

analyses

reports; and

(V)

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No. 35, 1970

(v) the advice is given, and the analyses and reports are issued or promul gated, solely as incidental to the conduct of that person’s business as such a publisher.

“investment representative” means person in the direct employment of or acting for or by arrangement with an investment adviser, who performs for that investment adviser any of the functions of an investment adviser (other than work ordinarily performed by accountants, clerks or cashiers) whether his remuneration is by way of salary, wages, commission or otherwise and, where the investment adviser is a corporation, includes any director, member or officer of the corporation who is not the holder of an investment adviser’s licence and who performs for such corporation any of those functions (whether or not his remuneration is as aforesaid);

“licence” means—

(a) a dealer’s licence;

(b) an investment adviser’s licence; or

under Part IV of this Act;

“member firm” means firm which carries on a business of dealing in securities and is recognised as a member firm by a stock exchange;

“relevant authority” means—

(a)	in relation to a sole trader, the stock exchange of which the sole trader is a member;
(b)	in relation to a member firm, the stock exchange by which the firm is recognised; and

(c)

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(c)	in relation to any other person the Com- No. 35, 1970 mission;

“representative” means dealer’s representative or an investment representative;

“rules” in relation to a stock exchange means rules governing the conduct of the stock exchange or the members thereof by whatever name called and wherever contained and includes rules contained in the memorandum of association and the articles of association of the stock exchange;

“securities” means debentures, funds, stocks, shares or bonds of any government or of any local govern ment authority or of any body corporate or unin corporate and includes any right or option in respect thereof and any interest as defined in section seventy-six of the Companies Act, 1961;

“sole trader” means stockbroker who carries on a busi ness of dealing in securities on his own account and not in partnership;

“stockbroker” means—

(a) member of a stock exchange; or

(b) partner in a member firm;

“stock exchange” means—

(a) The Sydney Stock Exchange Limited; and

(b)	any other body corporate which has been approved by the Minister under section seven of this Act;

“stock market” means market, exchange or other place at which securities are regularly offered for sale, purchase or exchange;

‘the

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No, 35, 1970

"the State” means the State of New South Wales;

“trust account” means a trust account established under

section twenty-three of this Act;

(2) The regulations may provide that, subject to any terms and conditions prescribed, all the provisions, or any of the provisions, of this Act—

(a)	shall not have effect in relation to any prescribed dealer who does not, or to any prescribed class of dealers who do not, deal in securities for or on behalf of any other person; or
(b)	shall have effect in relation to any such dealer or class of dealers to such extent as is prescribed; or
(c)	shall not have effect in relation to any prescribed investment adviser, or class of investment advisers, who have no interest, either directly or indirectly in any securities upon which he or they give advice and receive no commission or other consideration for giving that advice,

and this Act shall have effect accordingly.

(3) The regulations may provide that paragraph (d), (e) or (f) of the definition of “investment adviser” in subsec tion one of this section shall not apply, or shall cease to apply, or shall apply subject to specified terms and condi tions, on and after a specified day (being a day that is not less than twenty-one days after the regulation takes effect) to or in respect of a specified person or a specified class of persons and that definition shall, in relation to that person or class of persons, be deemed, after that day, to have been modified to the extent of the operation of the regulations as from time to time in force.

PART

Securities Industry.

PART II.

No. 35, 1970

C o r po r a t e

A f f a ir s

C o m m is s io n .

a Commissioner for Corporate Affairs who is hereby consti- “

tuted a corporation sole under the corporate name of “Cor-Affairs

porate Affairs Commission”, with perpetual succession and Commission,

an official seal.

(1) The Governor may, subject to this Act, appoint Constitution

(2) The Commission is hereby charged with the administration of this Act and shall have, and may exercise, such powers, authorities, duties and functions as are conferred or imposed upon it by or under this or any other Act.

(3) The Commission may acquire, hold and dispose of real and personal property and shall be capable of suing and being sued in its corporate name.

(4) All courts, judges and persons acting judicially

shall take judicial notice of the seal of the Commission affixed

to any document and shall presume that it was duly affixed.

(5) The Commissioner shall be appointed for a term, not exceeding seven years specified in the instrument of his appointment and shall, if otherwise qualified, be eligible for re-appointment from time to time for a term, not exceeding seven years, specified in the instrument of his re-appointment.

(6) A person who is of or above the age of sixty-five years shall not be appointed as Commissioner or continue in that office.

(7) The Commissioner shall devote the whole of his time to the duties of his office and shall receive such salary and allowances as the Governor may from time to time determine.

(8) The provisions of the Public Service Act, 1902, shall not apply to or in respect of the appointment by the Governor of the Commissioner and he shall not, in his capacity as Commissioner, be subject to the provisions of that Act during his term of office.

(9 )

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No. 35, 1970

( 9) The Commissioner shall be deemed to have

vacated his office—

(a) if he dies;

(b)	if he engages during his term of office in any paid employment outside the duties of his office;
(c)	if he becomes bankrupt, compounds with his credi tors or makes any assignment of his salary, allowances or estate for their benefit;
(d)	if he absents himself from duty for a period exceed ing fourteen consecutive days except—

(i) on leave granted by the Minister;

(ii) through illness or other unavoidable cause; or

(iii) pursuant to a right preserved by subsection twelve of this section;

(e)	if he becomes a mentally ill person, a protected person or an incapable person within the meaning of the Mental Health Act, 1958;
(f)	if he is convicted in the State of a felony or of a misdemeanour that is punishable by imprisonment for twelve months or upwards or if he is convicted elsewhere than in the State of an offence that, if committed in the State, would be a felony or a misdemeanour so punishable;
(g)	if he resigns his office by writing under his hand addressed to the Governor;
(h)	if he is removed from office by the Governor for misbehaviour or incompetence;

(i) on the day on which he attains the age of sixty-five years.

(10)

Securities Industry.

(10) A person who, immediately before h is appoint-No. 35, 1970

ment as Commissioner is an officer of the Public Service and who ceases to be Commissioner from any cause whatever (otherwise than in pursuance of subsection nine (paragraph (g) excepted) or of this section) shall if he has not attained the age of sixty years be appointed to some office in the Public Service not lower in classification and salary than that which he held immediately before his appointment as Commissioner.

(11) Nothing in this section shall affect rights accrued or accruing under the Public Service Act, 1902, or the Superannuation Act, 1916, to a person appointed as Commis sioner who was at any time before his appointment an officer of the Public Service or an employee within the meaning of the Superannuation Act, 1916.

(12) An officer of the Public Service or a person who is an employee within the meaning of the Superannuation Act, 1916, who is appointed as Commissioner shall continue to contribute to any fund or account and shall be entitled to receive any deferred or extended leave and any payment, pen sion or gratuity as if he were an officer within the meaning of the Public Service Act, 1902, or an employee within the meaning of the Superannuation Act, 1916, and for that pur pose his service as Commissioner shall be deemed to be service for the purpose of those Acts.

(13) Where a Commissioner referred to in subsection twelve of this section contributes to a fund or account so referred to, the employer by whom he was employed imme- •diately before his appointment as Commissioner shall pay to the State Superannuation Board such amounts as would have been payable if the Commissioner had remained an employee within the meaning of the Superannuation Act, 1916, and had continued to be employed by that employer at the same salary as that he receives as Commissioner.

(14) A Commissioner shall not be entitled, in respect of the same period of service, to a benefit under this Act and another Act.

(15)

Securities Industry.

No. 35, 1970

(15)

The Governor may, under and in accordance

with the Public Service Act, 1902, appoint and employ such, officers and employees as may be necessary for the exercise, and discharge by the Commission of its powers, authorities, duties and functions.

(16)	Until the first appointment is made pursuant to

subsection one of this section, the person for the time being holding or acting in the office of Registrar of Companies under the Companies Act, 1961, shall be deemed to be the Com missioner for Corporate Affairs but the provisions of subsections five, seven, eight and ten of this section shall not apply to or in respect of the Commissioner holding office pursuant to this subsection.

PART III.

St o c k

E x c h a n g e s .

Establish	6 .	A person shall not establish or maintain or assist in
ment, &c.,

of stock

establishing or maintaining, or hold himself out as providing

markets.

or maintaining, a stock market that is not the stock market

of a stock exchange.

Penalty : First offence—one thousand dollars,

Second or

subsequent offence—five thousand dollars.

Power for	7.	Where application for approval of a body corporate
Minister

to approve	as a stock exchange is made to the Minister in the prescribed
as stock	form and manner, the Minister may in writing approve the
exchange.	body corporate as a stock exchange if he is satisfied—

(a)	that at least twenty members of the body will carry on business dealing in securities independently of and in competition with each other;
(b)	that the rules of the body make satisfactory provision—

(i) for the exclusion from membership of per sons who are not of good character and high business integrity;

(ii)

Securities Industry.

(ii)

for the expulsion, suspension or disciplining no. 35,1970 just and equitable principles in the transac tion of business or for a contravention of or failure to comply with the rules of the stock exchange or the provisions of this A ct;

(iii) with respect to the conditions under which securities may be listed for trading in the market proposed to be conducted by the body;

(iv) with respect to the conditions governing dealings in securities by members;

(v) with respect to the class or classes of securi ties that may be dealt in by members; and

(vi) generally for the carrying on of the business of the stock exchange with due regard to the interests of the public; and

(c)	that the interests of the public will be served by the granting of his approval.

8. (1) Where an amendment is made, whether by way Minister to

of rescission, alteration or addition, to the rules of a stock

exchange the committee of the stock exchange shall forward ments to

written notice thereof to the Minister.

(2) If notice in accordance with the provisions of subsection one of this section is not given within twenty-one ■days after an amendment is made to the rules of a stock exchange, the amendment shall cease to have force and effect.

(3) The Minister may, within twenty-one days after receipt of notice under subsection one of this section give notice to the stock exchange concerned that he disallows the whole or any specified part of the amendment to which the notice relates and thereupon the amendment shall, to the extent of the disallowance, cease to have force and effect.

(4) A notice under this section may be served

personally or by post.

PART

Securities Industry.

No. 35, 1970	PART IV.
L ic e n c e s .

Application

(1) The provisions of this Part do not apply to or in (2) Where a person would, but for this subsection, be liable to a penalty for not being the holder of a particular type of licence, he shall not be so liable—

of Part.

respect of an exempt dealer.

(a)	until the expiration of the period of three months, next succeeding the commencement of this P art; or
(b)	where, before the expiration of that period, he- applies for that type of licence, until—

(i) he is issued with such a licence; or

(ii) his application is refused.

Dealer’s

10.

A person shall not carry on a business of dealing in

licence.

securities or hold himself out as carrying on such a business

unless he is the holder of a dealer’s licence under this Part.

Invest	11. A person shall not act as an investment adviser or
ment

adviser’s	hold himself out to be an investment adviser unless he is
licence.	the holder of an investment adviser’s licence under this Part.

Represent

12.

A person shall not—

holder of a dealer’s representative’s lieence under

this Part; or

ative’s

licence.	(a)
(b)

holder of an investment representative’s licence

under this Part.

Securities Industry.

13.

licence shall be made to the Commission in the prescribed

form and manner and shall be accompanied by the prescribed for licence

fee and, in the case of an application for renewal of a licence, renewal,

shall be made not later than one month before the day on

which the licence, if not renewed, would expire.

(1) An application for a licence or for renewal of a No. 35, 1970

(2) The Commission may require an applicant to supply it with any further information it considers necessary in relation to the application.

(3) The Commission shall not refuse to grant or renew a licence without first giving the applicant for the licence or renewal an opportunity of being heard.

14. The Commission shall grant or renew a dealer’s Commission

licence or an investment adviser’s licence if-—

U T I d l w i V

* j

dc&lcr s

(a) after consideration—

licence or

.	investment

(i) where the applicant is an individual—of adviser’s the character and financial position of the certain*”

applicant; or

circum stances.

(ii) where the applicant is a corporation—of the character of the directors and secretary of the corporation and of the corporation’s financial position; and

(b) after cons’.aeration of the interests of the public,

it is of opinion that the applicant is a fit and proper person

to hold the licence applied for.

15. The Commission shall grant or renew a representa- commission

five’s licence if after consideration of the application it is of

* A

Qj» rgncw

opinion that the applicant is a fit and proper person to hold representa-

the licence applied for.

tive’s licence

in certain

circum

stances.

16. subject to any conditions or restrictions it thinks fit.

(1) The Commission may grant or renew a licence Power to

toknpose°”

conditions

( 2 )

restrictions.

Securities Industry.

No. 35,1 970

( 2) A person who contravenes or fails to comply with any condition of or restriction applicable to his licence: shall be guilty of an offence.

Security to

17.

(1) Except in the case of a dealer who is a stock (2) A security required by this section shall be by cash deposit or by such other method as the Commission m any particular case allows.

be lodged

in respect	broker, the Commission shall not grant or renew a dealer’s
of dealer’s
licence.	licence unless there is lodged with it a security in the sum of ten thousand dollars in respect of the licence.
(3) A security lodged under this section shall be applied by the Commission subject to and in accordance with, the regulations.
(4) The regulations may provide that, subject to any terms and conditions prescribed, this section shall not apply to a person who is a stockbroker or dealer within the meaning of any corresponding law.

Period of

18.

(1) Subject to subsection two of this section a licence

licence.

shall expire one year after the date thereof.

(2)	A licence that has been renewed in accordance

with the provisions of this Part shall continue in force for a period of twelve months next succeeding the date upon which but for its renewal it would have expired.

Power to

court to

19. (1) The holder of a licence may be summoned

cancel

before a court of petty sessions consisting of a stipendiary

licence,

magistrate sitting alone to show cause why his licence should

&c.

not be cancelled and why he should not be disqualified either

permanently or temporarily from holding such a licence—

(a)	in the case of an individual, on the ground that he is not a fit and proper person to hold the licence; or

(b>

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(b)

in the case of a corporation, on the ground that the No. 35, 1970 the licence or that any director or secretary of the corporation is not a fit and proper person to be a director or secretary (as the case may be) of a corporation holding such a licence.

(2) On being satisfied that a ground for cancellation ■of a licence has been established the court may order that the licence be cancelled and that the holder of the licence be disqualified either permanently or for such period as the court specifies from holding another such licence.

(3) The Commission shall, before giving effect to an

order made under subsection two of this section—

(a) await the expiration of the time for appeal; or

(b)	where an appeal is lodged, await the decision of the court on the appeal,

and, in the case referred to in paragraph (b) of this sub section, shall give effect to the decision of the court on the appeal.

20. (1) A person who is aggrieved by a decision of the Appeal.

Commission under this Part or by a decision of a court under section nineteen of this Act may within thirty days after that decision appeal to the District Court in accordance with rules of court.

(2)	Any appeal under this section shall be by way of

Te-hearing and the decision of the court shall be final and shall be given effect to by the Commission.

PART

Securities Industry.

No. 35, 1970	PART V.
Application

of Part.

A c c o u n t s

a n d

A u d it .

21. ( l ) T h is P a r t—

(a) applies to and in relation to—

(i) the business of a dealer who is a stock broker within the meaning of this Act whether that business is carried on in the State or elsewhere; and

(ii) the business of a dealer who is not a stock broker within the meaning of this Act or of any corresponding law in so far as that business is carried on in the State; and

(b)	does not apply to or in relation to the business of a dealer who is a stockbroker within the meaning of any corresponding law.

(2)	In this Fart, except to the extent that the context

or subject-matter otherwise indicates or requires any reference to books, accounts, records, securities, trust accounts or busi ness of or in relation to a dealer who carries on business in partnership shall be read and construed as a reference to books, accounts, records, securities, trust accounts or business, (as the case requires) of or in relation to the partnership.

Accounts to

22.

(1) A dealer shall keep or cause to be kept in written or printed form in the English language such accounting and other records as will sufficiently explain the transactions and financial position of his business and enable true and fair profit and loss accounts and balance-sheets to be prepared from time to time and shall cause those records to be kept in such a manner as to enable them to be conveniently and properly audited.

be kept by

dealers.

(2) If accounting and other records arc kept by a

dealer at a place outside the State the dealer shall cause to be

sent to and kept at a place in the State such statements and

returns

Securities Industry.

returns with respect to the business dealt with in those records No. 35, 1970

as will enable to be prepared true and fair profit and loss

accounts and balance-sheet:.

(3) Without affecting the generality of subsection

one of this section, a dealer shall keep or cause to be kept—

(a)	a Bought and Sold Book recording the name of the buyer and seller respectively of every security bought or sold by the dealer in the course of his business;
(b)	a Scrip Receipt Book containing copies of acknowledgments of receipt of securities received by the dealer from clients for sale or safe custody and clearly showing the name or names in which the particular securities are registered;
(c)	a Cash Book containing entries of all amounts paid or received by the dealer in the course of his business;

(d) a Journal;

(e) a Ledger or Ledgers showing all transactions—

(i) with clients of the dealer;

(ii) with other dealers; and

(iii) in respect of nominal or private accounts;

(f)	a General Scrip Register recording the receipt and disposal by the dealer of all securities other than those dealt with in the Safe Custody Scrip Register;
(g)	a Safe Custody Scrip Register recording all securities held by the dealer for safe custody; and
(h)	an Underwriting Register recording all under writing and sub-underwriting transactions entered into by the dealer.

(4) Every entry in a Safe Custody Scrip Register and in an Underwriting Register kept by a dealer shall be dated and initialled by the person making the entry.

(5 )

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No. 35,1970

( 5) For the purposes of this section any account or record required to be kept by a dealer may be kept either by making entries in a bound book or by recording the matters in question in any other manner.

----

(6) Where any account or record required by this section to be kept by a dealer is not kept by making entries in a bound book, the dealer shall take reasonable precautions for guarding against falsification and for facilitating discovery of any falsification.

Certain	23.	(1) A dealer shall establish and keep in a bank or
moneys

received by	banks in the State one or more trust accounts designated or
dealers to
be paid into	evidenced as such into which he shall pay—
a trust

account.

(a) all amounts (less any brokerage and other proper charges) which are received from or on account of any person (other than a stockbroker) for the pur chase of securities and are not attributable to securities delivered to the dealer before or within three bank trading days after receipt of such amounts; and

(b)	all amounts (less any brokerage and other proper charges) which are received for or on account of any person (other than a stockbroker) from the sale of securities and are not paid to such person or as such person directs within three bank trading days after receipt of such amounts.

(2) Moneys required by this section to be paid into a trust account shall be so paid within three bank trading days after they are received by the dealer.

(3) A person who—

(a)	contravenes or fails to comply with any provision of this section shall be guilty of an offence and liable to a penalty not exceeding five hundred dollars; or

(b)

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(b) with intent to defraud contravenes or fails to No. 35,1970 comply with any provision of this section shall be

----

guilty of an offence and liable on conviction on indictment to a penalty not exceeding one thousand dollars or to imprisonment for not more than two years or to both such penalty and imprisonment.

(4)	Notwithstanding anything in this section where

any moneys required by this section to be paid into a trust account are received by a dealer in another State or in a Territory of the Commonwealth those moneys may be paid into a trust account established and kept by the dealer in a bank in that State or Territory.

24. account except for the purpose of making a payment-

A dealer shall not withdraw any moneys from a trust Purposes for

money may

be with

(a) to the person entitled thereto;

drawn from

(b) to a stock exchange in accordance with

the pro account.

visions of section forty of this A ct; or

25. Save as otherwise provided in this Part, moneys held Moneys in

in a trust account shall not be available for payment of the founts not debts of a dealer or be liable to be paid or taken in execution available for under the order or process of any court. debtsf&L*̂ *

26. or affecting any lawful claim or hen which any person has

Nothing in this Part shall be construed as taking away claims and

against or upon any moneys held in a trust account or against	'
or upon any moneys received for the purchase of securities or from the sale of securities before such moneys are paid into a trust account.

27. and where for any reason the auditor ceases to hold that office

A dealer shall appoint an auditor to audit his accounts Dealer to

the dealer shall within fourteen days appoint another auditor.

’

Securities Industry.

No. 35, 1970

28.

(1) A dealer shall on or before the thirty-first day

Dealer to	of August in each year or before such later day as is specified
lodge	under subsection two of this section lodge with the relevant
auditor’s
report.	authority an auditor’s report, containing information on such matters as are prescribed, for the year ending on the preceding thirtieth day of June.
(2) The relevant authority may for special and exceptional reasons grant an extension of time not exceeding four weeks for the lodging of a report under this section.
(3) If a dealer fails to comply with the provisions of subsection one of this section the relevant authority shall forthwith report the matter to the Minister.

Auditor to	29.	Where in the performance of his duties as auditor for
send report

to relevant	a dealer an auditor becomes aware of any matter which in his
authority in	opinion may adversely affect the financial position of the
certain
cases.	dealer to a material extent or constitutes a breach of section twenty-two, twenty-three or twenty-four of this Act he shall within seven days send a report in writing on such matter to the relevant authority and a copy thereof to the dealer.

Report of 30. (1) If, after consideration of an auditor’s report auditor to be furnished under section twenty-nine of this Act, a relevant

forwarded to

. . .

■

^ j

Minister in

authority IS not satisfied—

certain

cases.	(a)	that the financial position of the dealer in respect of whom the report is made is such as to enable him to meet all his commitments as a dealer; and
(b)	that the dealer has complied with the requirements of this Act,

the relevant authority shall, and for any other reason which the authority thinks proper may, forward the report to the Minister with any further report thereon which it thinks proper to make.

(2) It shall be a defence to any proceedings in

defamation in respect of any statement made in a report by

an auditor under subsection one of this section or in any

further

Securities Industry.

further report made under that subsection by a relevant No. 35,1970

authority if the defendant satisfies the court that the statement

was made without malice.

31.

(1) Where the Minister has received—

Power to Minister

(a)	a report under subsection three of section twenty- to appoint eight of this Act from a relevant authority; or
(b)	an auditor’s report forwarded to him pursuant to section thirty of this Act by a relevant authority,

he may, if he is satisfied that it is in the interests of the dealer concerned, the dealer’s clients or the public generally to do so, appoint in writing an independent auditor to examine, audit and report either generally or in relation to any particular matter upon the books, accounts and records of and securities held by the dealer.

(2) Where the Minister is of opinion that the whole or any part of the costs and expenses of an auditor appointed by him under this section should be borne by the dealer or relevant authority concerned, he may, by order in writing, direct the dealer or relevant authority to pay a specified amount, being the whole or part of those costs and expenses, within the time and in the manner specified.

(3) Where a dealer or relevant authority has failed to comply with an order of the Minister under subsection two of this section, the amount specified in the order may be recovered in a court of competent jurisdiction as a debt due to the Crown.

32.

person who alleges that a dealer has failed to account to him

in respect of any moneys or securities held or received by that independent

dealer for or on his behalf the Minister may appoint in writ

ing an independent auditor to examine, audit and report either application

generally or in relation to any particular matter upon the

books, accounts and records of and securities held by that

dealer.

(1) Upon receipt of an application in writing from a power to

(2 )

P 19089—26

Securities Industry.

No. 35,1970

( 2) Every application under subsection one of this

section shall state—

(a)	particulars of the circumstances under which the dealer received the moneys or securities in respect of which he is alleged to have failed to account;
(b)	particulars of those moneys or securities and of the transactions of the applicant and the dealer relating thereto; and

(3) Every statement in any such application shall be verified by a statutory declaration made by the applicant and shall, if made bona fide and without malice, be privileged.

(4) The Minister shall not appoint an independent auditor under subsection one of this section unless he is satisfied—

(a)	that the applicant has good reason for making the application; and
(b)	that it is expedient in the interests of the dealer or the applicant or the public generally that the books, accounts and records of and securities held by the dealer should be examined, audited and reported upon.

Auditor to

33.

An auditor appointed by the Minister under section

of the examination and audit in respect of which he was

appointed, make a report thereon to the Minister.

MiSster

thirty-one or thirty-two of this Act shall, upon the conclusion

■

Powers of

34.

An auditor appointed by the Minister to examine and audit the books, accounts and records of and securities held by a dealer may for the purpose of carrying out the examina tion and audit—

auditors.

(a)	examine on oath the dealer concerned and, where the dealer carries on business in partnership, any of the members of the partnership and any of the dealer’s servants and agents and any other auditor appointed under this Act in relation to those books, accounts, records and securities;

(b)

Securities Industry.

(b) employ such persons as he considers necessary; and No. 35, 1970

(c)	by instrument in writing under his hand authorise any person employed by him to do, in relation to the examination and audit, any act or thing that he could himself do in his capacity as auditor, except to examine any person on oath or to exercise the powers conferred by this paragraph.

35.

provisions of this Act or so far as may be required for the

purpose of any proceedings, civil or criminal, an auditor ployees to

appointed by the Minister under section thirty-one or thirty- cate?ertain

two of this Act and an employee of any such auditor shall matters,

not communicate any matter which may come to his know

ledge in the performance of his duties as such an auditor or

employee to any person other than the Minister, the relevant

authority in relation to the dealer concerned, any other person

specified by the Minister or that relevant authority and, in

the case of an employee, the auditor by whom he is

employed.

Except for the purpose of carrying into effect the As to right

3 6 . ( 1 ) Upon request by an auditor appointed by the Books,

Minister under section thirty-one or thirty-two of this Act and°records

or by a person who produces a written authority in that behalf to be

given under paragraph (c) of section thirty-four of this Act— Spon̂ '̂ '̂*

demand.

(a)	a dealer and, where the dealer carries on business in partnership, the other members of the partner ship and the dealer’s servants and agents shall produce any books, accounts and records of and securities held by the dealer relating to his business; and
(b)	an auditor appointed by a dealer shall produce any books, accounts and records held by him

’	relating to the business of the dealer.

(2 )

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No. 35, 1970

(2)

A dealer and, where the dealer carries on busi

ness in partnership, the other members of the partnership and the dealer’s servants and agents and any auditor appointed by the dealer shall answer all questions relevant to an examina tion and audit which are put to him by an auditor appointed by the Minister under section thirty-one or thirty-two of this Act or by a person who produces a written authority in that behalf given under paragraph (c) of section thirty-four of this Act.

Penalty: On conviction on indictment, two thousand dollars or imprisonment for two years, or both.

Penalty for	37. (1) A person who, with intent to defeat the
destroying

concealing	purposes of this Part or with intent to prevent, delay or
or altering	obstruct the carrying out of any examination and audit under
records or
sending	this Part—
records or
other

property out

(a) destroys, conceals or alters any book, account,

of the State.

record or document relating to the business of a

dealer; or

(b)	sends or attempts to send or conspires with any other person to send out of the State any such book, account, record or document or any property of any description belonging to or in the disposition of or under the control of a dealer,

shall be guilty of an offence.

Penalty: On conviction on indictment, two thousand dollars or imprisonment for two years, or both.

(2)	If in a prosecution for an offence under subsec

tion one of this section it is proved that the person charged—

(a)	destroyed, concealed or altered any book, account, record or document aforesaid; or

Securities Industry.

(b)

sent or attempted to send or conspired to send out No. 35,1970 document or any property aforesaid,

the onus of proving that in so doing he did not act with intent to defeat the purposes of this Part or with intent to prevent, delay or obstruct the carrying out of an examination and audit under this Part shall lie on him.

38.

committee of a stock exchange imposing on the members of

that stock exchange any further obligations or requirements obligations,

Nothing contained in this Part shall prevent the Right of

which the committee thinks fit with respect to—

members

(a) the audit of accounts;

byftlfpart

(b)	the information to be furnished in reports from auditors; or

PART VI.

I n v e s t m e n t

o f

St o c k b r o k e r s ’

T r u s t

F u n d s .

39. In this Part—

Inter

pretation.

“prescribed day” means—

(a)	in relation to a stockbroker who was carry ing on business as a stockbroker at the com mencement of section twenty-three of this Act and is so carrying on business on the first day of July next succeeding that com mencement—that first day of July; and
(b)	in relation to a stockbroker who commences to carry on business as a stockbroker after the commencement of section twenty-three of this Act and is so carrying on business on the first day of July next succeeding the day on which he commences so to carry on business—that first day of July;

“relevant

Securities Industry.

No. 35,1970

“relevant period” means—

(a)	in relation to a stockbroker referred to in paragraph (a) of the definition of “pre scribed day” in this section—the period of twelve months ending on the thirtieth day of June next succeeding the commencement of section twenty-three of this Act; and
(b)	in relation to a stockbroker referred to in paragraph (b) of that definition—the period of twelve months ending on the thirtieth day of June next succeeding the day on which he commences to carry on business as a stockbroker.

Certain	40.	(1) A stockbroker shall, out of the moneys that are
moneys to

be deposited	received by him or by any firm of which he is a member and
exchange,
with stock	are required to be dealt with in accordance with section
cf. Act No.	twenty-three of this Act—
22, 1898,

s. 42a.

(a) cause to be deposited with the stock exchange of which he is a member, or by which his firm is recog nised, on or before the prescribed day for the stock broker, an amount that is not less than the pre scribed part of the lowest balance in his or the firm’s trust account during the relevant period for the stockbroker; and

(b)	thereafter, during each period of twelve months ending on the thirtieth day of June, cause to be kept deposited with that stock exchange an amount that is not at any time less than the prescribed part of the aggregate of—

(i) the amount that was the lowest balance in

his, or the firm’s, trust account on any day during that period or the period of twelve months ending on the immediately

!	preceding thirtieth day of June; and

fii)

Securities Industry.

(ii)

an amount that, on the day on which the No. 35, 1970 for the purposes of subparagraph (i) of this paragraph, was standing upon deposit by the stockbroker or firm with that stock exchange in accordance with this section.

(2) Where two or more trust accounts are kept under section twenty-three of this Act on any day by a stock broker or member firm, the aggregate of the balances of those trust accounts on that day shall, for the purposes of subsection one of this section, be deemed to be the balance in the trust account of that stockbroker or that member firm on that day.

(3) The prescribed part of the amount, or aggre gate of the amounts, referred to in subsection one of this section shall be one-third of that amount or aggregate, or such lesser fraction as may be prescribed.

(4) Nothing in this section requires a stockbroker—

(a)	to comply with paragraph (a) of subsection one of this section if the lowest balance referred to therein is less than three thousand dollars; or
(b)	to comply with paragraph (b) of that subsection if the aggregate amount referred to therein is less than three thousand dollars.

(5) Subject to subsection four of this section, where a stockbroker fails to comply with subsection one of this section he and, if he is a partner in a member firm, each of the partners in the firm, is guilty of an offence against this Act and liable to a penalty not exceeding five hundred dollars and a further penalty not exceeding one hundred dollars for every day during which the offence continues.

41. suant to this Part shall be held by the stock exchange upon ^°heWby

(1) All money deposited with a stock exchange pur- Certain

trust for the stockbroker or member firm on whose behalf it stock

was deposited and shall be repaid to the stockbroker or mem

ber firm on demand.	cf. Act No.
22, 1898,

(2)

s. 42b.

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No. 35, 1970

(2)

The fact that money referred to in subsection one

of this section is repayable on demand does not affect the

obligation of a stockbroker under section forty of this Act.

Investment

of certain

42. (1) Until repayment thereof is demanded, money

moneys by	deposited with a stock exchange under section forty of this
stock
exchange,	Act shall be invested by the stock exchange either on deposit
cf. Act No.	with a bank in New South Wales bearing interest or upon loan
22,1898,	to the Treasurer at a rate of interest not less than the maxi
ss. 42b, 44a.	mum rate for the time being payable by a bank in New South Wales on a fixed deposit.

(2)	The interest earned from investments made by a

stock exchange under subsection one of this section shall be paid to the fidelity fund of the stock exchange established under Part VII of this Act.

As to	43.	A deposit repaid pursuant to section forty-one of this
deposits

repaid.

Act shall be forthwith paid by the depositor into his trust account and if the deposit is not so paid the depositor, or where the depositor is a member firm each of the partners in the firm, shall be guilty of an offence.

Accounts of

44.

(1) A stock exchange shall establish and keep proper accounts of all deposits and shall, as soon as practicable after each quarter day, cause a balance-sheet to be made out as at that quarter day.

deposits.

(2) The committee of a stock exchange shall appoint an auditor to audit the accounts of the stock exchange relating to deposits.

(3) The auditor appointed by the committee of a stock exchange shall regularly and fully audit the accounts of the stock exchange relating to deposits and shall audit each balance-sheet and cause it to be laid before the committee not later than one month after the balance-sheet is made out.

(4)

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( 4 )

In this section “quarter day” means the last day No. 35,1970

of March, June, September and December.

45.

Nothing done under this Part shall affect—

Clmms, &c., affected by

(a)	any claim or lien which a depositor has upon or in this Part, relation to any deposit; or
(b)	the rights or remedies of any person other than a depositor.

PART VII.

F id e l it y

F u n d s .

46. subject-matter otherwise indicates or requires—

In this Part, except to the extent that the context or interpreta-

“Court” means the Supreme Court of New South Wales; “stock exchange” in relation to a fidelity fund means the

stock exchange which established the fund.

47. (1) A stock exchange shall establish and keep a Establish-

fidelity fund which shall be administered by the committee

on behalf of the stock exchange.

funds.

(2)	The assets of a fidelity fund shall be the property

of the stock exchange but shall be kept separate from all other property of the stock exchange for the purposes set out in this Part.

Securities Industry.

No. 35, 1970

48.

The fidelity fund of a stock exchange shall consist

. .	of—
Moneys
constitut

ing fidelity

(a) all moneys paid to the stock exchange by stock

fund.

brokers in accordance with the provisions of this

Part;

(b)	the interest on moneys invested by the stock exchange under section forty-two of this A ct;
(c)	the interest and profits from time to time accruing from the investment of the fund;

(d) all moneys paid to the fund by the stock exchange;

(e)	all moneys recovered by or on behalf of the stock exchange in the exercise of any right of action conferred by this Part;
(f)	all moneys paid by an insurer pursuant to a con tract of insurance or indemnity entered into by the stock exchange under section sixty-eight of this Act; and

(g) all other moneys lawfully paid into the fund.

Fund to be	49. All moneys forming part of a fidelity fund shall,
kept in

separate	pending the investment or application thereof in accordance
bank	with this Part, be paid or transferred into a bank in the State
account.	to the credit of a separate account.

Payments

50.

Subject to this Part, there shall from time to time be fidelity fund of a stock exchange as required and in such order as the committee of the stock exchange deems proper—

out of fund,

(a)	the amount of all claims, including costs, allowed by the committee or established against the stock exchange under this P art;
(b)	all legal and other expenses incurred in investigat ing or defending claims made under this Part or incurred in relation to the fund or in the exercise by the committee of the rights, powers and authori ties vested in it by this Part in relation to the fund;

(c)

Securities Industry.

(c)

all premiums payable in respect of contracts of No. 35, 1970 tee under section sixty-eight of this Act;

(d)	the expenses incurred or involved in the adminis tration of the fund including the salaries and wages of persons employed by the committee in relation thereto; and
(e)	all other moneys payable out of the fund in accord ance with the provisions of this Act.

51. (1) A stock exchange shall establish and keep proper Accounts

accounts of its fidelity fund and shall before the thirty-first day of August in each year cause a balance-sheet in respect of those accounts to be made out as at the preceding thirtieth day of June.

(2) The committee of a stock exchange shall appoint an auditor to audit the accounts of the fidelity fund of the stock exchange.

(3) The auditor appointed by the committee of a stock exchange shall regularly and fully audit the accounts of the fidelity fund and shall audit each balance-sheet and cause it to be laid before the committee not later than one month after the balance-sheet was made out.

52. (1) The committee of a stock exchange may appoint Management

a management sub-committee of not less than three and not more than five persons being members of the stock exchange, one at least being also a member of the committee of the stock exchange.

(2) The committee of a stock exchange may by resolution delegate to a sub-committee appointed by it under this section all or any of its powers, authorities, duties and functions under this Part (other than under this section, section fifty-five, subsections three, four and five of section fifty-eight and section sixty).

( 3 )

Securities Industry.

No. 35, 1970

( 3)

Any power, authority, duty or function delegated

under this section may be exercised by members forming a majority of the sub-committee as if by this Part that power, authority, duty or function had been conferred on a majority of the members of the sub-committee.

(4) Any delegation under this section may at any time be rescinded or varied.

(5) The committee of a stock exchange may at any time remove any member of a sub-committee appointed by it under this section and may fill any vacancy in the sub committee howsoever arising.

Contribu

53.

(1) A person shall not be admitted to membership of a stock exchange or to partnership in a member firm until he has paid to the stock exchange or, in the case of a member firm, the stock exchange by which the firm is recognised, as a contribution to its fidelity fund such amount being not less than one hundred dollars as is determined by the stock exchange.

tions to

fund.

(2) A stockbroker shall on or before the thirty- first day of March in each year pay to the stock exchange of which he is a member or, if he is a partner in a member firm, the stock exchange by which the firm is recognised as a contribution to its fidelity fund such amount, being not less than one hundred dollars as is determined by the stock exchange.

Provisions

54,

( 1 ) In the event of the fidelity fund of a stock

exceeds

exchange amounting to a sum exceeding two million

$2,000,000. dollars—-

(a)

every stockbroker who has made twenty annual contributions to the fund, and in respect of whom no payment from the fund has been made or (if any such payment has been made) the fund has been fully reimbursed, shall subject to subsection two of this section be freed and discharged from further annual contributions to the fund;

(b )

Securities Industry.

(b)

on the retirement from business of a stockbroker No. 35, 1970 committee of the stock exchange of which he was a member or, where he was a partner in a member firm, the stock exchange by which the firm was recognised may, in its discretion, cause to be paid to him the total amount of annual contributions made by him to the fund or such proportion thereof as is for the time being determined by the committee either generally or in relation to the particular stock broker, either with or without simple interest thereon at a rate not exceeding three per centum per annum; and

(c)	on the death of a stockbroker so referred to without any payment having been made to him under para graph (b) of this subsection the committee may in its discretion make such a payment either to his legal representative or to his widow or any dependant or dependants.

(2) Any determination of a committee under para graph (b) of subsection one of this section shall be in writing and may be in respect of all or any class of stockbrokers or any particular stockbroker.

(3) The committee of a stock exchange may by notice in writing published in the Gazette—

(a)	suspend the operation of paragraph (b) or (c) of subsection one of this section; or

(b) revoke any such suspension,

but where the operation of one of those paragraphs is for the time being suspended the committee shall not suspend the operation of the other.

(4)	If the amount of the fidelity fund of a stock

exchange that exceeded two million dollars is reduced below the sum of one million dollars, the committee may determine that a stockbroker who has been freed and discharged from

payment

Securities Industry.

No, 35,1970 payment under subsection one of this section shall again be

----	required, to such extent as it thinks fit, to pay annual contribu tions under section fifty-three of this Act and the stockbroker shall thereupon be liable to make contributions in accordance with that determination.

Levy in	55. (1) If at any time the fidelity fund of a stock ascertained of the stock exchange in relation thereto, the com mittee may impose on every stockbroker liable to contribute to that fund a levy of such amount as it thinks fit, not exceeding five hundred dollars, for payment into the fund.
addition to
annual con	exchange is not sufficient to satisfy the liabilities that are then
tributions.
(2) The amount of a levy under this section shall be paid within the time and in the manner specified by the committee either generally or in relation to any particular case.
(3) No stockbroker shall be required to pay by way of levy under this section more than five thousand dollars in the aggregate, or more than one thousand dollars in any period of twelve months.

Power to	56.	(1) A Stock exchange may from time to time from
stock

exchange	its general funds give or advance on such terms as the com
to make	mittee thinks fit any sums of money to its fidelity fund.
advances
to fund.	(2) Any moneys advanced under subsection one of this section may from time to time be repaid from the fidelity fund to the general funds of the stock exchange.

Investment

57.

Any moneys in a fidelity fund of a stock exchange

of fund.

that are not immediately required for its purposes may be invested by the committee of the stock exchange in any manner in which trustees are for the time being authorised by law to invest trust funds or upon deposit with any corpora tion that is declared by the Governor, pursuant to paragraph (b) of subsection seven of section thirty-eight of the Com panies Act, 1961, to be an authorised dealer in the short term money market.

Securities Industry.

58. (1) Subject to this Part a fidelity fund shall be held No. 3 5 ,1970

and applied for the purpose of compensating persons who Application

suffer pecuniary loss—

of fund.

(a)

from any defalcation committed by a sole trader who is liable to contribute to that fund, whether or not he has been freed and discharged from payment under section fifty-four of this Act, or by any of his clerks or servants in relation to any money or other property which, whether before or after the commencement of this Act, in the course of or in connection with the sole trader’s business—

(i) was entrusted to or received by the sole trader or any of his clerks or servants for or on behalf of any other person; or

(ii) (the sole trader being in respect of the money or other property either the sole trus tee or a trustee with another person) was entrusted to or received by the sole trader or any of his clerks or servants as trustee or for or on behalf of the trustees of the said money or property; or

(b)

from any defalcation committed by the partners or by any of the partners in a member firm who are liable to contribute to that fund, whether or not they have been freed and discharged from payment under section fifty-four of this Act, or by any of the clerks or servants of such a member firm in relation to any money or other property which, whether before or after the commencement of this Act, in the course of or in connection with the business of that firm—

(i) was entrusted to or received by the partners or any of the partners or any of the firm’s clerks or servants for or on behalf of any other person; or

( i i )

Securities Industry.

No. 35, 1970

(ii)

(the partners or any of the partners being in respect of the money or other property either the sole trustee or trustees or trustee or trustees with any other person or per sons) was entrusted to or received by the partners or any of the partners or any of the firm’s clerks or servants as trustee or trustees or for or on behalf of the trustees of the money or property.

(2) Where no right to compensation arises under paragraph (a) or (b) of subsection one of this section, a fidelity fund may, subject to this Part, be applied for the pur pose of paying to the Official Receiver in Bankruptcy an amount not greater than the amount that he certifies is required to make up or reduce the total deficiency arising by reason of the available assets of a bankrupt sole trader or partner in a member firm being insufficient to satisfy the admitted claims, arising out of transactions in securities, of creditors of the sole trader or partner.

(3)	Save as otherwise provided in this section the

total amount that may be paid under this Part—

(a)	to all persons who suffer loss through defalcations by any sole trader and through defalcations by any of his clerks or servants;
(b)	to all persons who suffer loss through defalcations by the partners or any of the partners in a member firm and through defalcations by any of the firm’s clerks or servants; or

shall not in any event exceed in respect of that sole trader or that member firm the sum of two hundred and fifty thousand dollars but for the purposes of this subsection any amount paid from a fidelity fund shall to the extent to which the fund is subsequently reimbursed therefor be disregarded.

Securities Industry.

(4) If after taking into account all ascertained or No. 35,1970

contingent liabilities of the fidelity fund of a stock exchange the committee of the stock exchange considers that the assets of the fund so permit the committee may from time to time by notice that it causes to be published in the Gazette increase the total amount which may be applied from that fund pur suant to the provisions of subsection three of this section and from the date of that publication until the notice is revoked or varied the amount specified in the notice shall be the maxi mum total amount which may be applied as aforesaid.

(5) A notice under subsection four of this section may be revoked or varied by the committee by notice pub lished in the Gazette and a notice which is so varied shall have effect accordingly.

(6) If in any particular case after taking into account all ascertained or contingent liabilities of the fidelity fund of a stock exchange the committee of the stock exchange considers that the assets of the fund so permit the committee may apply out of the fund such sum in excess of the total amount limited by or under this section as the committee in its absolute discretion thinks fit in or towards the compensation of persons who have suffered pecuniary loss as provided in subsection one of this section or in making a payment under subsection two of this section.

(7) For the purposes of this section “sole trader” or “partner in a member firm” includes a person who has been, but at the time of any defalcation or bankruptcy in question has ceased to be, a sole trader or a partner in a member firm if, at the time of the defalcation or bankruptcy the person claiming compensation or, as the case may be, the creditor had reasonable grounds for believing that person to be a sole trader or a partner in a member firm.

59.

eight of this Act shall be entitled to claim compensation from

the appropriate fidelity fund and to take proceedings in the

(1) Subject to this Part every person who suffers As to claims

pecuniary loss as provided in subsection one of section fifty- f establish the claim.

( 2 )

Securities Industry.

No. 35,1970

( 2) Subject to subsection three of this section, a person shall in no case have any claim against a fidelity fund in respect of—

(a)	a defalcation committed before the commencement of this Act; or
(b)	a defalcation in respect of money or other property which prior to the commission of the defalcation had in the due course of the administration of a trust ceased to be under the sole control of the sole trader concerned or in the case of a member firm of the partner or partners concerned.

(3) Upon the amalgamation of The Sydney Stock Exchange Members’ Fidelity Guarantee Fund, maintained pursuant to the articles of association of The Sydney Stock Exchange Limited, with the fidelity fund of The Sydney Stock Exchange Limited established under this Act, the fidelity fund so established shall be liable, in the manner and to the extent provided by those articles of association before any amend ment thereof required to enable the amalgamation to be effected, for claims against The Sydney Stock Exchange Members’ Fidelity Guarantee Fund arising before that amalgamation.

(4) Subject to this Part the amount which any claimant shall be entitled to claim as compensation from a fidelity fund shall be the amount of the actual pecuniary loss suffered by him (including the reasonable costs of and dis bursements incidental to the making and proof of his claim) less the amount or value of all moneys or other benefits received or receivable by him from any source other than the fidelity fund in reduction of the loss.

(5) In addition to any compensation payable under this Part, interest shall be payable out of a fidelity fund con cerned on the amount of the compensation, less any amount attributable to costs and disbursements, at the rate of five per centum per annum calculated from the day upon which the defalcation was committed and continuing until the day upon which the claim is satisfied.

Securities Industry.

60.

section fifty-nine of this Act have been fully compensated in

accordance with the provisions of this Part for the loss suffered innocent

by them as a result of a defalcation committed by a partner

in a member firm any other partner in that firm who has fund,

made payment to any person in compensation for loss suffered

by him from the defalcation shall be subrogated to the extent

of that payment to all the rights and remedies of that person

against the fidelity fund concerned if the committee of the

stock exchange is of opinion having regard to all the circum

stances that he was in no way a party to the defalcation and

that he acted honestly and reasonably in the matter.

(1) Where all persons submitting claims pursuant to No. 3 5 ,1970

(2) If any partner in a member firm feels aggrieved by the opinion of a committee under subsection one of this section he may within twenty-eight days after receipt of notice thereof appeal to the Court in accordance with rules of court.

(3) An appellant shall, on the same day as he lodges notice of appeal with the Court, lodge a copy thereof with the secretary of the committee against whose opinion he is appealing.

(4) The Court shall inquire into and decide upon the appeal which shall be in the nature of a re-hearing and, if the Court is of opinion having regard to all the circumstances that the appellant was in no way a party to the defalcation and that he acted honestly and reasonably in the matter, it may direct that the appellant shall to the extent of any payment made by him be subrogated to all the rights and remedies in relation to the fidelity fund concerned of the person to whom he has made payment in compensation as aforesaid.

61. (1) The committee of a stock exchange may cause Notice

to be published in a daily newspaper published and circulat

ing generally in the State a notice, in or to the effect of the against

form prescribed, specifying a date, not being earlier than

three months after publication of the notice, on or before

which claims for compensation from the fidelity fund, of the

stock exchange, in relation to the person specified in the

notice, may be made.

(2)

Securities Industry.

No. 35,1970

( 2) A claim against a fidelity fund in respect of a

----	defalcation or bankruptcy shall be made in writing to the committee—

(a)	where a notice under subsection one of this section has been published, on or before the date specified in the notice; or
(b)	where no such notice has been published—within six months after the claimant became aware of the defalcation or, as the case may be, within six months after the bankruptcy,

and any claim which is not so made shall be barred unless the

committee otherwise determines.

(3) No action for damages shall lie against a stock exchange or against any member or employee of a stock exchange or of a committee or management sub-committee by reason of any notice published in good faith and without malice for the purposes of this section.

Power to	62. (1) The committee of a stock exchange may, the fidelity fund of the stock exchange at any time after the commission of the defalcation, or after the bankruptcy, in respect of which the claim arose.
committee
to settle	subject to this Part, allow and settle any proper claim against
claims.
(2) Subject to subsection three of this section, a person shall not commence proceedings under this Part against a stock exchange without leave of the committee of the stock exchange or of the Court unless—

(a) the committee has disallowed his claim; and

(b)

the claimant has exhausted all relevant rights of action and other legal remedies for recovery of the money or other property in respect of which the defalcation was committed available against the sole trader or the partners in the member firm in relation to whom or to which the claim arose and all other persons liable in respect of the loss suffered by the claimant.

(3 )

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(3) A person who has been refused leave by a com- No. 35, 1970

mittee to commence proceedings against a stock exchange under this Part may, in accordance with rules of court, apply to the Court for that leave, and the Court may make such order in the matter as it thinks fit.

(4) A committee after disallowing (whether wholly or partly) any claim against a fidelity fund shall serve notice of the disallowance in the prescribed form on the claimant or his solicitor.

(5) No proceedings against a stock exchange in Tespect of a claim which has been disallowed by the committee of the stock exchange shall be commenced after the expiration of three months after service of notice of disallowance under subsection four of this section.

(6) In any proceedings brought to establish a claim against the fidelity fund of a stock exchange evidence of any admission or confession by or other evidence which would be admissible against the stockbroker or other person by whom it is alleged a defalcation was committed shall be admissible to prove the commission of the defalcation notwithstanding that the stockbroker or other person is not the defendant in or a party to those proceedings, and all defences which would have been available to that stockbroker or person shall be available to the stock exchange.

(7)	The committee of a stock exchange or, where

proceedings are brought to establish a claim against the fidelity fund of the stock exchange, the Court, if satisfied that the defalcation on which the claim is founded was actually committed, may allow the claim and act accordingly, notwith standing that the person who committed the defalcation has not been convicted or prosecuted therefor or that the evidence on which the committee or Court (as the case may be) acts would not be sufficient to establish the guilt of that person upon a trial in respect of the defalcation.

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No. 35, 1970

63.

(1) Where in any proceedings brought to establish a

Form of	claim against the fidelity fund of a stock exchange the Court
order of	is satisfied that the defalcation on which the claim is founded

^ t“hr h-

actually committed and that otherwise the claimant has

ciafm.'*

a valid claim the Court shall by order—

(a)	declare the fact and the date of the defalcation and the amount of the claim; and
(b)	direct that the committee concerned allow the claim as so declared and deal with it in accordance with the provisions of this Part.

(2) Any proceedings brought to establish a claim against the fidelity fund of a stock exchange shall be by action at law against the stock exchange as for a debt due by the stock exchange and, in any such action, all defences that would have been available to the stockbroker in relation to whom the claim arose shall be available to the stock exchange, and all questions of costs shall be in the discretion of the Court.

Power to 64. The committee of a stock exchange may at any time

to re™uire ̂ and from time to time require any person to produce and production deliver any securities, documents or statements of evidence

of secunties, necessary to support any claim made against the fidelity fund

of the stock exchange or necessary for the purpose either of exercising its rights against a sole trader or the partners in a member firm or any other person concerned or of enabling criminal proceedings to be taken against any person in respect of a defalcation and, in default of delivery of any such securi ties, documents or statements of evidence, the committee may disallow any claim under this Part made by the person required to produce and deliver them.

Subrogation	65.	On payment out of its fidelity fund of any moneys in
of stock

exchange to	respect of any claim under this Part a stock exchange shall be
rights, &c.,	subrogated to the extent of that payment to all the rights and
of claimant
upon	remedies of the claimant in relation to the loss suffered by
payment	him from the defalcation on which the claim was based.
from fund.

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6 6 . No moneys or other property belonging to a stock No. 35, 1970

■exchange other than the fidelity fund shall be available for the p

payment of any claim under this Part whether the claim is claims only

allowed by the committee or is made the subject of an order

•of the Court.

67.

of a stock exchange is insufficient to pay the whole amount of ^su^cienf

all claims against it which have been allowed or in respect of to meet

which orders of the Court have been made, then the amount ĥeTe

at credit in the fund shall, subject to subsection two of this claims

(1) Where the amount at credit in the fidelity fund Provision

section, be apportioned between the claimants in

such t S m o u n t

manner as the committee thinks equitable, and any such claim payable,

so far as it then remains unpaid shall be charged against

future receipts of the fund and paid out of the fund when

moneys are available therein.

(2) Where the aggregate of all claims against the fidelity fund of a stock exchange which have been allowed or in respect of which orders of the Court have been made in relation to defalcations by or in connection with a sole trader or member firm exceeds the total amount which may pursuant to subsection two of section fifty-eight of this Act be paid under this Part in respect of that sole trader or member firm, that total amount shall be apportioned between the claimants in such manner as the committee of the stock exchange thinks equitable and, upon payment out of the fund of the said total amount in accordance with that apportionment all such claims and any orders relating thereto and all other claims which may thereafter arise or be made in respect of defalcations by or in connection with that sole trader or member firm shall be absolutely discharged.

68. (1) A stock exchange may in its discretion enter into Power to

any contract with any person or body of persons corporate or enter"intô

unincorporate carrying on fidelity insurance business in the contracts of

State whereby the stock exchange will be insured or indemni- insurance,

fied to the extent and in the manner provided by such

contract against liability in respect of claims under this Part.

(2 )

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No. 35,1970

( 2) A contract referred to in subsection one of this section may be entered into in relation to stockbrokers, generally, or in relation to any particular stockbroker or stockbrokers named therein, or in relation to stockbrokers generally with the exclusion of any particular stockbroker or stockbrokers named therein.

(3) No action shall lie against a stock exchange or against any member or servant of a stock exchange or com mittee of a stock exchange or against any member of a man agement sub-committee of a stock exchange for injury alleged to have been suffered by any stockbroker by reason of the publication in good faith of a statement that any contract entered into under this section does or does not apply with respect to him.

Application 69. No claimant against the fidelity fund of a stock

moneyr"'^ ̂ exchange shall have any right of action against any person or

'	body of persons with whom a contract of insurance or indemnity is made under this Part in respect of that contract, or have any right or claim with respect to any moneys paid by the insurer in accordance with any such contract.

PART VIII.

T ra d in g

Se c u r it ie s .

False trading 70. A person shall not create or cause to be created or

and markets, do anything which is calculated to create, a false or

misleading appearance of active trading in any securities on any stock market in the State, or a false or misleading appearance with respect to the market for, or the price of., any securities.

Market

71.

(1) A person shall not effect, take part in, be con-

rigging _ cerned in or carry out, either directly or indirectly, any trans

transactions. g(,j-jons in any class of securities which have the effect of

raising or lowering the price of securities of that class for the purpose of inducing the purchase or sale of securities of that class by others.

(2)

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(2)	It shall be a defence to a prosecution under sub- No, 3 5 ,1970

section one of this section if the defendant proves that he acted without malice and solely to further or protect his own lawful interests.

(3) A person shall not, in consideration or anticipa tion of a reward or benefit, circulate or disseminate, or authorise or be concerned in the circulation or dissemination of, any statement or information to the effect that the price of any securities will or is likely to rise or fall because of any act that to his knowledge is or would be a contravention of subsection one of this section.

72. (1) A person shall not by means of purchases or Affecting

sales of any securities involving no change in the beneficial

ownership of those securities, or by any fictitious transactions fictions,

or devices inflate, depress or cause fluctuations in, the market

price of any securities.

(2) A purchase or sale of securities involves no •change in beneficial ownership within the meaning of sub section one of this section if a person who held an interest in the securities before the purchase or sale or a person asso ciated with the first-mentioned person in relation to those securities holds an interest in the securities after the purchase or sale.

(3) In determining whether a person held or holds an interest within the meaning of subsection two of this sec tion the provisions of section 6a of the Companies Act, 1961, shall be applied and in applying those provisions any reference to shares shall be read as a reference to securities.

(4)	For the purposes of subsection two of this sec

tion a person is associated with another person in relation

to securities if the first-mentioned person is—

(a)	a corporation that by virtue of subsection five of section six of the Companies Act, 1961, is deemed to be related to that other person;

(b)

Securities Industry.

No. 35, 1970	(b)	a person in accordance with whose directions, instructions or wishes that other person is accus tomed or likely to act in relation to the securities;
(c)	a person who is accustomed or likely to act in accordance with the directions, instructions or wishes of that other person in relation to the securities;
(d)	a body corporate that is, or the directors of which are, accustomed or likely to act in accordance with the directions, instructions or wishes of that other person in relation to the securities; or
(e)	a body corporate in accordance with the directions, instructions or wishes of which or of the directors of which that other person is accustomed or likely to act in relation to the securities.

7 3 . A person shall not with respect to any securities, make

False or

misleading

statements	any statement or disseminate any information which at the
about	time it is made or disseminated, he knows or has reasonable
marketable
securities.	grounds for knowing is false or misleading in a material particular.

Offences 7 4 . A person who contravenes any o f the provisions of and penalty, jhig Paj-t shall be guilty of an offence against this Act and

liable, on conviction on indictment, to a penalty not exceeding ten thousand dollars or to imprisonment for not more than five years or to both such penalty and imprisonment.

Convicted

7 5 .

A person who is convicted of an offence under this

H abietopay liable to pay compensation to any person who compensa-^ has purchased or sold any securities at a price affected by tion. thg act or transaction the subject of the offence for the damage

suffered by him as a result of that purchase or sale.

PART

Securities Industry.

No. 35, 1970

PART K .

G e n e r a l .

76. respect to—

(1) The Governor may make regulations for or with Regulations,

(a) regulating advertisements relating to securities;

(b) prescribing forms for the purposes of this Act;

(c)	prescribing fees to be paid in respect of any matter or thing required for the purposes of this Act;

<d) all matters or things which by this Act are required or permitted to be prescribed or which are necessary or expedient to be prescribed to give effect to this Act.

(2) Save as otherwise expressly provided in this

Act the regulations—

(a)	may be of general or specifically limited application; and
(b)	may impose a penalty of not more than two hun dred dollars for any contravention thereof.

7 7 . A person who is not a stockbroker within the meaning Restrictions

of this Act shall not take or use or by inference adopt the

name or title of stockbroker or take or use or have attached broker”,

to or exhibited at any place any name, title or description

implying or tending to give rise to the belief that he is a

stockbroker.

7 8 . (1) A person who contravenes or fails to comply offences

with any provision of this Act shall be guilty of an offence

penalty,

and, where no penalty is expressly provided, shall be liable to

a penalty not exceeding five hundred dollars.

(2)

Securities Industry.

No. 35,1970	(2) Where a person, being a corporation, is guilty of an offence against this Act any director, manager, secretary or other officer of the corporation who was knowingly a party to the offence shall also be guilty of that offence.
(3) Except where this Act otherwise provides, offences against this Act shall be punishable oa summary conviction.

GOVERNOR’S