ASIC Class Order [CO 02/0150]

Overview

The Australian Securities and Investments Commission Corporations Act 2001 — Paragraph 1020F(1)(a) — Exemption was enacted in 2002 as a legislative instrument to address a specific gap in the regulation of financial product advertisements. This exemption, issued by a delegate of the Australian Securities and Investments Commission (ASIC), aims to facilitate the publication of advertisements for financial products of foreign corporations in certain circumstances, while ensuring compliance with Australian regulatory standards. The exemption applies to authors who publish advertisements in foreign newspapers or periodicals that circulate predominantly outside Australia, provided these advertisements comply with local legislative requirements. The underlying policy objective is to allow foreign financial product advertisements to reach Australian audiences under controlled conditions, ensuring that consumers are adequately informed before any financial products are procured. This exemption is part of a broader regulatory framework designed to balance the need for international market access with the protection of Australian consumers.

Scope and Application

The Australian Securities and Investments Commission Corporations Act 2001, under paragraph 1020F(1)(a), provides an exemption for certain individuals, referred to as authors, from the prohibitions contained in section 1018A of the Act. This exemption applies to authors who cause or authorise the publication of advertisements or statements regarding financial products of foreign corporations or proposed foreign corporations. Specifically, the exemption applies if the advertisement or statement is published in a newspaper or periodical produced outside of Australia or if the circulation is substantially outside Australia, and the publication is not distributed in Australia by or on behalf of the author or at their instigation. This exemption is contingent upon the condition that if a person whose address is known to be in Australia responds to the advertisement or statement by applying for the financial product, the author must provide a Product Disclosure Statement that complies with the Act's requirements before supplying the financial product. The exemption applies to Australia and includes the external territories regarding superannuation and RSA products and related financial services, as defined in sections 5 and 9 of the Act and regulation 1.0.22 of the Corporations Regulations 2001. This legislative instrument came into effect on the commencement of Schedule 1 to the Financial Services Reform Act 2001.

Key Provisions

Under paragraph 1020F(1)(a) of the Corporations Act 2001, the Australian Securities and Investments Commission (ASIC) has granted an exemption for certain authors from the prohibitions outlined in section 1018A of the Act. Specifically, this exemption applies to those who publish advertisements or statements regarding financial products offered by foreign corporations or proposed foreign corporations. These advertisements or statements must be published in newspapers or periodicals produced outside Australia, with the majority of their circulation occurring outside Australia, and not distributed in Australia by or on behalf of the author, unless done so indirectly at the instigation or by arrangement with the author. Additionally, the advertisements must comply with any relevant legislative requirements or codes of conduct in the place of production. The obligations imposed by this exemption are primarily on the authors of such advertisements or statements. If a person whose address is known to be within Australia responds to the advertisement or statement by applying for the financial product, the author is required to ensure that the person is provided with a Product Disclosure Statement (PDS) that complies with the Act's requirements before supplying the financial product. This PDS must be given to the person before any provision of the financial product takes place. Failure to comply with this requirement could potentially render the exemption invalid, exposing the author to the prohibitions of section 1018A of the Act. In terms of consequences, breaching the conditions of this exemption can lead to significant penalties. The Act does not specify exact penalties within the exemption itself, but violations of section 1018A generally attract substantial penalties. For corporations, the maximum penalty can include fines of up to $1.65 million or three times the benefit obtained from the breach, whichever is greater. For individuals, the penalties can include fines of up to $330,000 or imprisonment for up to five years, or both. Additionally, civil consequences may include compensation for any losses incurred due to non-compliance. It is important to note that the severity of the penalties can vary based on the specifics of the breach and the discretion of the court or ASIC.