ASIC Class Order [CO 02/0186]

Overview

ASIC Class Order [CO 02/186] was enacted in 2002 under the Corporations Act 2001 to address gaps in regulatory oversight concerning the operation of Managed Discretionary Accounts by participants of the Sydney Futures Exchange Limited (SFE). The Australian Securities and Investments Commission (ASIC) was given authority to issue this class order, with the primary policy objective being to ensure that the operation of Managed Discretionary Accounts by SFE participants is conducted in a manner compliant with the By-Laws and guidelines of SFE, while also ensuring that relevant disclosure documents are lodged with ASIC. This regulatory framework aims to protect investors by ensuring transparency and compliance in the operations of Managed Discretionary Accounts, thereby maintaining the integrity of the financial markets.

Scope and Application

ASIC Class Order [CO 02/186] provides exemptions under the Corporations Act 2001 for certain participants in relation to managed discretionary accounts operated by the Sydney Futures Exchange Limited (SFE). This legislation applies to individuals or entities who were participants within the meaning of SFE's By-Laws as of 10 March 2004 and who operated a managed discretionary account on that date. The exemptions cover the operation of these accounts and the offers for issue or sale of interests in such accounts, provided these activities comply with the SFE's By-Laws and guidelines, as modified by the Class Order, and are lodged with ASIC before being provided to clients. The exemptions are applicable until the earlier of 11 December 2004 or when the participant lodges a notice with ASIC for the purposes of subparagraph 1.6(c) of Class Order [CO 04/194]. This Class Order is part of a broader legislative framework that includes other subordinate instruments, which can further extend or restrict its application.

Key Provisions

The ASIC Class Order [CO 02/186] provides an exemption from certain sections of the Corporations Act 2001 for participants who operated a Managed Discretionary Account on 10 March 2004. This exemption is granted under paragraphs 601QA(1)(a), 992B(1)(a) and 1020F(1)(a) of the Act. The participants must comply with specific conditions to maintain this exemption. Firstly, they must ensure that any advertisements or publications related to their Managed Discretionary Accounts comply with the Sydney Futures Exchange's (SFE) By-Laws and guidelines concerning advertising (section (a)). Secondly, they must lodge the Product Disclosure Statement with ASIC before providing it to the relevant client (section (b)). The obligations imposed by the Class Order include adherence to the SFE's By-Laws and guidelines, which are applied as if certain references were altered. For instance, a "Registered Representative" is defined as someone who was a "Registered Representative" on 10 March 2004, and lodging documents with SFE is considered as lodging those documents with ASIC. Participants are also required to offer Managed Discretionary Accounts and interests in these accounts in accordance with the SFE's By-Laws and guidelines, as modified or varied by Schedule C of the Order. Furthermore, any actions taken under these By-Laws or guidelines by SFE or its organs, which would have applied on 10 March 2004, must be followed. There are no explicit offences, penalties, or consequences mentioned in the Class Order for breaching its conditions. However, failing to comply with the requirements may result in the loss of the exemption, potentially subjecting the participant to the full force of the Corporations Act 2001 provisions from which they were exempted. This could entail facing legal actions, financial penalties, or other regulatory consequences as prescribed under the Act.