ASIC Class Order [CO 02/314]

Overview

ASIC Class Order [CO 02/314], introduced in 2002 under the Corporations Act 2001, was enacted to provide relief in relation to employee redundancy funds. This legislation was developed by the Australian Securities and Investments Commission (ASIC) to streamline the regulation of schemes that employers use to fund redundancy and other employment-related entitlements for their employees. The Class Order specifically targets schemes that are mandated by awards or agreements, aiming to alleviate the regulatory burden on employers while ensuring that these funds are managed properly and transparently. The primary objective, as stated in the Class Order, is to facilitate the operation of these schemes without imposing undue financial or administrative constraints on the participating employers.

Scope and Application

ASIC Class Order [CO 02/314], made under the Corporations Act 2001, provides relief in relation to employee redundancy funds, specifically targeting entities that operate or promote schemes where employers are required or encouraged to make contributions to fund redundancy entitlements and other employment-related benefits for their employees. This legislation applies to any person who engages in activities related to the promotion or operation of such schemes, including making offers or recommendations for the issue or acquisition of interests in these schemes. The scope of the Act extends nationally, given its foundation in federal legislation, thereby ensuring uniform application across Australia. Notably, the Act exempts certain activities from specific sections of the Corporations Act and removes the requirement for an Australian financial services licence for financial services related to these schemes. The exclusions and exemptions outlined in the schedules detail the specific circumstances and activities that are subject to relief, thereby allowing for a streamlined approach to managing employee redundancy funds within the bounds of federal regulation.

Key Provisions

ASIC Class Order [CO 02/314], enacted under the Corporations Act 2001, pertains to employee redundancy funds and provides relief in certain circumstances. Specifically, under paragraph 601QA(1)(a) of the Act, ASIC revokes Class Order [01/929], thereby eliminating certain restrictions that previously applied. Additionally, ASIC exempts individuals specified in Schedule A from particular sections of the Act, including sections 601ED, 992A, and 992AA, as well as Part 7.9, in the situations outlined in Schedule B. Furthermore, under paragraph 911A(2)(l) of the Act, ASIC exempts these individuals from the necessity of holding an Australian financial services licence when providing financial services related to specified schemes. The instrument takes effect from the commencement of Schedule 1 to the Financial Services Reform Act 2001. Schedule A identifies the individuals who operate or promote schemes of the type specified in Schedule B, which pertains to making offers for the issue of interests in, or recommendations to acquire interests in, or offers to arrange the issue of interests in schemes. These schemes involve employers making contributions where the primary objective is to fund redundancy entitlements and other employment-related entitlements for employees. Such schemes are governed by awards or agreements that require employer contributions. The exemptions and relief provided by ASIC Class Order [CO 02/314] are designed to facilitate these schemes while ensuring compliance with the broader regulatory framework. The obligations imposed by ASIC Class Order [CO 02/314] primarily concern those individuals operating or promoting the specified schemes. These individuals must adhere to the conditions and exemptions outlined in the schedules of the Class Order. They must ensure that their activities comply with the specified exemptions from certain sections of the Corporations Act 2001, including the requirement to hold an Australian financial services licence for certain financial services related to the schemes. Compliance with these obligations is essential for the continued operation of the schemes and for avoiding regulatory sanctions. For breaches of the Corporations Act 2001, including non-compliance with ASIC Class Order [CO 02/314], there can be significant civil and criminal consequences. Civil penalties for breaches of the Act can include substantial fines. For example, under section 1317E of the Act, individuals can be fined up to $210,000, and corporations can be fined up to $1,050,000. Additionally, criminal penalties may apply, particularly if the breach is found to be intentional or reckless. The severity of the penalties will depend on the nature and extent of the breach, with more severe penalties applying for repeated or egregious violations. It is imperative for those affected by the Class Order to understand and adhere to the requirements to avoid these potential consequences.