Overview

The Australian Securities and Investments Commission Corporations Law Modification Instrument 2007 (F2007B00074) was enacted in 2007 to address a specific gap in the regulatory framework governing investment schemes and their operations, particularly in relation to their deregistration and status as an Investment Deposit Protection Scheme (IDPS). This legislative instrument amends the Corporations Law by modifying section 601PA to ensure that certain schemes meet the criteria for being recognised as IDPSs under the ASIC Class Order [00/1], thereby making the operators of these schemes eligible for exemption from Chapter 5C of the Class Order. The enactment of this legislative instrument was authorised by the Australian Securities and Investments Commission and aims to enhance the protection of investors' funds by ensuring that investment schemes are appropriately classified and regulated upon deregistration. The modification to the Corporations Law introduced by this legislative instrument targets schemes where members have the ability to direct investments into specified securities and where distributions are tied to the performance of those securities. By adjusting the criteria in section 601PA, the instrument ensures that such schemes are recognised as IDPSs, thereby providing a layer of protection for investor deposits in the event of the scheme's deregistration. This legislative action was taken by the Australian Securities and Investments Commission under the authority granted by the Australian Government, aiming to maintain investor confidence and safeguard investments within the financial sector.

Scope and Application

Under paragraph 601QA(1)(b) of the Corporations Law, the Australian Securities and Investments Commission (ASIC) has modified the application of section 601PA to specific entities. The amendment applies to any person who serves as the responsible entity of a registered scheme that allows members to direct the investment of their contributions in specified securities and where the distributions to members are determined based on the returns from these specified securities. This modification clarifies the conditions under which the scheme will be recognised as an Industry-wide Disclosure and Product Standard (IDPS) under ASIC Class Order [00/1], thereby making the scheme's operator eligible for exemption from certain regulatory requirements under Chapter 5C of that Class Order. This legislative instrument has a national reach, applying across Australia as it concerns the administration of the Corporations Law, which is a Commonwealth statute. The specific modifications do not introduce any exclusions, but they do refine the criteria for the application of the existing regulatory framework, ensuring that the amended provisions apply to the defined circumstances outlined in the Schedule.

Key Provisions

The legislative instrument F2007B00074 modifies section 601PA of the Corporations Law, as stated in paragraph 601QA(1)(b). This modification applies specifically to the persons described in the attached Schedule. Under section 601PA(2)(c) of the Law, the phrase “scheme” is omitted and replaced with “scheme; or,” and a new subparagraph (d) is added. This subparagraph specifies that, upon deregistration, the scheme will function as an Investment Deposit Protection Scheme (IDPS) under ASIC Class Order [00/1], thereby making the operator eligible for an exemption from Chapter 5C of the same Class Order. The Act imposes certain obligations on the parties involved, particularly those who are responsible entities of registered schemes. As per the Schedule, these entities must ensure that members can direct investments into specified securities corresponding to their investment in the scheme. Additionally, the distribution of capital and income to members must be determined based on the amounts received by the custodian in relation to the specified securities acquired following the member's direction. Failure to comply with the provisions outlined in this legislative instrument can lead to various legal consequences. Although specific penalties are not detailed within the text of this instrument, breaches of the Corporations Law generally attract significant penalties. These may include substantial fines for corporations and, in severe cases, imprisonment for individuals. The exact penalties depend on the nature and severity of the breach, as well as any relevant provisions within the broader Corporations Law framework.