Australian Securities and Investments Commission
Corporations Act 2001 — Paragraphs 601QA(1)(a) and 601QA(1)(b) — Exemption and Declaration
1. Under paragraph 601QA(1)(a) of the Corporations Act 2001 (the “Act”) the Australian Securities and Investments Commission (“ASIC”) exempts each responsible entity of a registered scheme (the “responsible entity”) from subparagraph 601FC(1)(i)(ii) of the Act in the case referred to in the Schedule.
2. Under paragraph 601QA(1)(b) of the Act ASIC declares that Chapter 5C of the Act applies to the responsible entity in the case referred to in the Schedule as if section 601FC of the Act were modified or varied as follows:
(a) in subsection (2), omit “The” and substitute “Subject to subsection (2A), the”; and
(b) after subsection (2), insert the following:
“(2A) Subsection (2) does not prevent the responsible entity appointing an Australian ADI (the ADI) as agent to hold scheme property on its behalf where:
(a) the scheme property is money; and
(b) the ADI deposits the money into an account with itself; and
(c) the ADI uses money so deposited in the ordinary course of its banking business.”.
Schedule
Where:
(a) the scheme property consists of money; and
(b) the scheme property is held by a person (the “prime broker”) who is an Australian ADI under the terms of a prime brokerage agreement between the prime broker and the responsible entity; and
(c) the responsible entity takes reasonable steps to ensure the prime broker has in place adequate arrangements for the management of conflicts of interest that may arise wholly, or partially, in connection with its holding the scheme property on behalf of the responsible entity.
Interpretation
In this instrument:
“prime brokerage agreement” means a written agreement under which the prime broker makes all of the following services available to the responsible entity:
(a) taking money on deposit and making advances of money in the ordinary course of its banking business as an Australian ADI; and
(b) disposing of securities to the responsible entity subject to an arrangement to reacquire the same or similar securities from the responsible entity at a later time; and
(c) holding scheme property on behalf of the responsible entity; and
“securities” has the meaning given by subsection 92(1) of the Act.
Dated this 16th day of December 2003
Signed by Brendan Byrne
as a delegate of the Australian Securities and Investments Commission
Overview
The Australian Securities and Investments Commission Corporations Act 2001, enacted by the Commonwealth Parliament, is a comprehensive statute designed to regulate and oversee financial markets, corporate activities, and investment services within Australia. This legislation aims to ensure transparency, fairness, and efficiency in the financial sector, protecting investors and maintaining public confidence in financial institutions. The Act was introduced to address various issues such as corporate governance, financial reporting, and consumer protection within the corporate environment. The legislative instrument, F2007B00628, amends certain sections of the Act to provide specific exemptions and declarations for responsible entities of registered schemes, particularly in relation to the holding of scheme property by authorised deposit-taking institutions (ADIs). This amendment allows responsible entities to appoint Australian ADIs as agents to hold scheme property under specified conditions, thereby facilitating more flexible and efficient management of investment schemes while ensuring appropriate safeguards are in place.
Scope and Application
The legislative instrument F2007B00628 pertains to specific provisions of the Corporations Act 2001, focusing on exemptions and declarations related to responsible entities of registered schemes. This instrument primarily applies to responsible entities of registered schemes that hold scheme property, which consists of money, through a prime broker who is an Australian Authorised Deposit-taking Institution (ADI) under a prime brokerage agreement. The instrument exempts these responsible entities from certain requirements of the Act, specifically concerning the holding of scheme property, provided that the responsible entity takes reasonable steps to ensure the prime broker has adequate conflict-of-interest management arrangements in place. Furthermore, it declares that Chapter 5C of the Act applies to these responsible entities with modifications that allow them to appoint an Australian ADI as an agent to hold scheme property, provided the money is deposited into an account with the ADI and used in the ordinary course of its banking business. This legislative instrument operates within the Commonwealth jurisdiction and extends its application through subordinate instruments as necessary, while excluding entities not meeting the specified conditions outlined in the instrument.
Key Provisions
The legislative instrument modifies the Corporations Act 2001 by exempting responsible entities of registered schemes from certain requirements under section 601FC, while also applying specific provisions of Chapter 5C to these entities under section 601QA. Specifically, paragraph 601QA(1)(a) exempts responsible entities from subparagraph 601FC(1)(i)(ii) when the conditions outlined in the Schedule are met. Paragraph 601QA(1)(b) modifies the application of section 601FC to responsible entities, allowing them to appoint an Australian Authorised Deposit-taking Institution (ADI) as an agent to hold scheme property, provided the property is money, the ADI deposits the money into an account with itself, and the ADI uses the money in the ordinary course of its banking business. The instrument also clarifies that this exemption applies when the scheme property is held by a prime broker, who must be an Australian ADI under a prime brokerage agreement, and when the responsible entity ensures the prime broker has adequate conflict of interest management arrangements in place.
The obligations imposed on the responsible entities under this legislative instrument include ensuring that the prime broker has in place adequate arrangements to manage any conflicts of interest that may arise from holding the scheme property. This involves a due diligence process where the responsible entity must verify that the prime broker, who must be an Australian ADI, has appropriate conflict management policies. Additionally, the responsible entity must ensure compliance with the terms of the prime brokerage agreement, which specifies the services the ADI must provide, such as taking money on deposit, making advances, disposing of securities, and holding scheme property.
Failure to comply with the provisions of this legislative instrument may result in legal consequences. While the specific penalties are not detailed in the text, breaches of the Corporations Act 2001 generally carry significant penalties, including fines and imprisonment for individuals, and fines for corporations. The maximum penalties for breaches of the Act can vary widely depending on the nature and severity of the offence, but they can include substantial fines for both individuals and companies, reflecting the importance of compliance with financial regulations in Australia.