ASIC Class Order [CO 02/0246]

Overview

The ASIC Class Order [CO 02/246] was enacted under the Corporations Act 2001 to address the specific issue of securities offers made over the internet, which could potentially draw Australian investors without the necessary regulatory oversight. This legislation aims to protect Australian investors by regulating the way in which securities offers are made online, ensuring that such offers are not inadvertently targeted at Australian residents. The Australian Securities and Investments Commission, as the relevant body responsible for enforcing the Corporations Act 2001, introduced this class order to maintain the integrity of the financial markets by preventing unauthorised offers of securities to Australian residents through internet channels. The policy objective is to ensure that any internet-based securities offers are incidental to offers made in other jurisdictions and do not specifically target Australian investors.

Scope and Application

The ASIC Class Order [CO 02/246] under the Corporations Act 2001 exempts certain persons from specific sections of the Act when issuing notices offering financial products or inviting offers for such products on the internet. This exemption applies to individuals or entities involved in the issuance of notices that are intended to be made available to persons within Australia or its external territories, including notices that refer to or enable access to offer notices. The exemption is contingent on several conditions being met, including measures to ensure that the notices are not directed at Australian residents, the notices do not contain information specific to Australian residents such as tax details or currency references, and a prominent disclaimer must be included stating that the offer is not available to persons within Australia. This exemption applies to all jurisdictions within Australia and its external territories, and it is designed to prevent the unintended targeting of Australian residents by foreign issuers of financial products. The exemption can be modified or revoked if the conditions are not adhered to. This class order came into effect on 2 September 2015 following amendments and is subject to modifications via subordinate instruments as per the table of amendments and instruments.

Key Provisions

The ASIC Class Order [CO 02/246] provides an exemption from certain sections of the Corporations Act 2001 for entities issuing or facilitating the issuance of certain financial product notices over the internet (sections 1020F(1)(a) and 992B(1)(a)). This exemption applies specifically to notices offering or inviting applications for financial products, as well as notices that enable access to such offers. This includes notices distributed via email, electronic mail services, and websites accessible within Australia. The exemption is subject to several stringent conditions designed to ensure that the notices are not intended for Australian audiences. For instance, the notices must not be targeted at Australian addresses or made available through Australian-based newsgroups or websites. Furthermore, the content of the notices must not include Australian-specific information, such as tax details or pricing in Australian dollars. Additionally, there must be a clear statement in the notice indicating that the offer is not available to Australian residents, and the offer must not be made in Australia through any other means unless specific conditions are met under the ASIC Corporations (Foreign Securities—Incidental Advertising) Instrument 2015/360. The obligations imposed by this Class Order on entities taking advantage of the exemption are comprehensive. They must implement and regularly monitor measures to prevent Australian residents from accessing the notices. This includes refraining from sending notices to Australian addresses or accepting applications from individuals whose details suggest they are located in Australia. The notices must also avoid any content that would be relevant to Australian residents, and they must prominently display a statement clarifying that the offer is not available within Australia. Non-compliance with these conditions can result in the exemption being modified or withdrawn. Entities must continuously ensure that the notices are not intended for Australian audiences and that they adhere strictly to the specified conditions. Failure to comply with the conditions set out in the ASIC Class Order [CO 02/246] can lead to significant legal consequences. The Act does not specify particular offences or penalties for breaching the conditions of the exemption. However, general provisions of the Corporations Act 2001 may apply, which can include civil penalties for misleading or deceptive conduct, administrative penalties, and potential criminal charges in cases of serious misconduct. The maximum penalties for such offences can be substantial, often reaching into the millions of dollars for corporate entities, alongside potential imprisonment terms for individual officers found guilty of breaches. The precise penalties would depend on the specific nature and severity of the breach, but the potential consequences underscore the importance of strict compliance with the Class Order’s conditions.