ASIC Class Order [CO 02/284]

Overview

The ASIC Class Order [CO 02/284] was enacted in 2002 under the Corporations Act 2001 to address the need for a streamlined process for the trading and settlement of foreign securities through the Clearing House Electronic Subregister System (CHESS) in Australia. This legislation was developed by the Australian Securities and Investments Commission (ASIC) to ensure that financial products, specifically equitable interests in foreign securities, could be traded with the same regulatory oversight as domestic securities. The policy objective was to provide a clear legal framework for the operation of foreign securities within Australia, ensuring that these securities are subject to the same rules and protections as Australian securities, thereby maintaining market integrity and investor confidence. This class order specifically applies to equitable interests in common shares of James Hardie Industries N.V., allowing for these interests to be traded and settled through CHESS, which is managed by the Australian Stock Exchange (ASX).

Scope and Application

ASIC Class Order [CO 02/284], made under the Corporations Act 2001, applies specifically to the equitable interests, referred to as “units”, in common (or ordinary) shares of James Hardie Industries N.V. (JHI NV), a company incorporated in The Netherlands. These units, defined as CUFS (CHESS Uncertificated Financial Securities) according to the operating rules of the ASX-approved depository (ASTC), are issued by or on behalf of CHESS Depositary Nominees Pty Limited for shares quoted on the financial market operated by Australian Stock Exchange Limited (ASX). The primary purpose of this Class Order is to enable the transfer and settlement of these securities through ASX’s Clearing House Electronic Subregister System (CHESS). This legislation extends the application of Division 4 of Part 7.11 of the Corporations Act to these CUFS, treating them as if they were Division 4 financial products, subject to specified modifications and additional definitions as outlined in the Class Order. The Class Order ensures that the holders of these CUFS are bound by the issuer's constitution, and similarly, the issuer is bound by its constitution in relation to these securities, thereby facilitating transparent and regulated transactions in these foreign securities within the Australian market.

Key Provisions

The ASIC Class Order [CO 02/284], made under subsection 1075A(1) of the Corporations Act 2001, declares that Division 4 of Part 7.11 of the Act, and any regulations made for that Division, apply to a specific class of financial products. This includes financial products such as equitable interests, referred to as “units”, in common shares of James Hardie Industries N.V. (JHI NV), which are issued or made available in respect of securities quoted on the Australian Stock Exchange (ASX). These financial products are referred to as CUFS as defined by the Australian Securities and Exchange Commission (ASIC) operating rules. The Class Order modifies the application of these Division 4 financial products by inserting additional definitions and a new regulation. The new regulation, 7.11.27A, specifies that when CUFS are issued in relation to a financial product quoted on a financial market, they are held subject to certain terms and conditions, and both the issuer and the holder of the CUFS are bound by specific aspects of the issuer’s constitution. The ASIC Class Order [CO 02/284] imposes obligations on both issuers and holders of CUFS. Issuers must ensure that the CUFS are held in accordance with the terms and conditions set by the depository nominee appointed by the issuer. Additionally, issuers must enforce certain aspects of their constitution against holders of CUFS, and holders must be bound by those aspects. Conversely, holders of CUFS are also required to be bound by certain provisions of the issuer's constitution, allowing the issuer to enforce those provisions against the holder. Importantly, this regulation does not limit the enforcement of the terms and conditions of the securities or the constitution of the issuer. The ASIC Class Order [CO 02/284] does not explicitly detail specific offences, penalties, or civil/criminal consequences for breaches of its provisions. However, as it is made under the Corporations Act 2001, any breaches of the Act, including those indirectly related to the Class Order, may result in civil or criminal penalties. Under the Corporations Act, penalties for breaches can include fines for both individuals and corporations, disqualification from managing corporations, and imprisonment in severe cases. The exact penalties would depend on the specific breach and the discretion of the court or ASIC in enforcement actions.