ASIC Class Order [CO 03/1048]

Overview

The Corporations Act 2001 was enacted to provide a comprehensive regulatory framework for corporations and financial services in Australia. Among its many provisions, it established the Australian Securities and Investments Commission (ASIC) to oversee and regulate the financial services sector. In 2003, ASIC introduced a legislative instrument to address the need for efficient and accessible dispute resolution mechanisms for consumers dealing with mortgage offset accounts. This instrument, F2007B00647, exempts members of approved external dispute resolution schemes from holding an Australian financial services licence when providing specific services related to mortgage offset accounts, thus facilitating quicker resolution of disputes and ensuring that consumers have access to effective remedies. The policy objective is to enhance consumer protection by providing an efficient and affordable dispute resolution process.

Scope and Application

The Corporations Act 2001 provides a framework for financial services regulation in Australia, and under paragraph 911A(2)(l), the Australian Securities and Investments Commission (ASIC) has the authority to exempt certain individuals from the requirement to hold an Australian financial services licence. Specifically, this exemption applies to individuals who are members of an eligible external dispute resolution scheme, allowing them to provide financial product advice relating to mortgage offset accounts and to arrange for another person to apply for, acquire, vary or dispose of such accounts without needing a licence. This exemption is conditional upon the external dispute resolution scheme being approved by ASIC and capable of handling disputes concerning mortgage offset accounts. The exemption applies nationally across Australia as a legislative instrument and is subject to the definitions provided within the Act itself, including the interpretation of terms such as "financial product advice" and "mortgage offset account". This legislative instrument commenced on gazettal and is signed by Brendan Byrne, as a delegate of ASIC.

Key Provisions

The legislative instrument in question pertains to an exemption under the Corporations Act 2001, specifically paragraph 911A(2)(l). This exemption allows individuals who are members of an eligible external dispute resolution scheme to provide certain financial services without holding an Australian financial services licence. The financial services covered under this exemption include financial product advice relating to a mortgage offset account and arranging for another person to apply for, acquire, vary or dispose of a mortgage offset account. This means that members of these approved schemes can offer advice and facilitate transactions related to mortgage offset accounts, without needing to obtain a licence typically required for such activities. An eligible external dispute resolution scheme, as defined in the instrument, is one that has been approved by the Australian Securities and Investments Commission (ASIC) for specific purposes under the Act, and it must have rules that allow it to handle disputes concerning mortgage offset accounts. A mortgage offset account is described as a deposit product where the credit balance is notionally offset against the balance of a loan, or where interest on a loan is periodically reduced by an amount that would otherwise accrue on the deposit. This exemption only applies to those who are members of such approved schemes. Parties or entities governed by this Act must ensure that they are members of an eligible external dispute resolution scheme as defined, and they must adhere to the rules of that scheme when providing the specified financial services. It is crucial that the scheme is approved by ASIC and is capable of dealing with disputes related to mortgage offset accounts. Failure to comply with these requirements could mean that the individual is not protected by the exemption and may need to hold an Australian financial services licence to legally provide the specified services. Breach of the conditions set out in this legislative instrument could have consequences, though specific offences, penalties, or consequences are not detailed in the instrument itself. Generally, failure to comply with the Corporations Act 2001 can lead to civil or criminal penalties, including fines and imprisonment, depending on the nature and severity of the breach. The exact penalties would be determined in accordance with the broader provisions of the Act and any relevant case law.