ASIC Class Order [CO 03/606]

Overview

The Corporations Act 2001, enacted by the Commonwealth Parliament, provides the legal framework for the regulation of financial services and markets in Australia. One of the significant gaps it aimed to address was the need to streamline and regulate the provision of financial product advice, ensuring consumer protection while facilitating efficient financial markets. The Class Order [CO 03/606], issued under section 911A(2)(l) of the Act, was introduced by the Australian Securities and Investments Commission (ASIC) to exempt certain individuals from the requirement to hold an Australian financial services licence when providing general advice through specific documents. This legislative instrument aims to reduce unnecessary regulatory burdens while maintaining adequate oversight and protection for consumers. The policy objective is to balance the need for efficient financial advice with the imperative to protect investors and maintain market integrity.

Scope and Application

The Class Order [CO 03/606] under the Corporations Act 2001 provides an exemption from the requirement to hold an Australian financial services licence for the provision of general advice contained in certain specified documents. This exemption applies to a person who prepares such documents as a result of a requirement of the Act or the Superannuation Industry (Supervision) Act 1993, or when preparing statements about compromises or arrangements regulated by specific foreign jurisdictions. The documents covered include financial reports, bidder’s statements, continuous disclosure notices, and other documents mandated by Australian or foreign laws. The exemption under this Class Order is limited to general advice and excludes more specific financial product advice, which would generally require a licence. The Class Order has been amended over time to refine the types of documents and circumstances covered, with the most recent amendment coming into effect on 23 June 2009. The Australian Securities and Investments Commission (ASIC) has the authority to revoke or modify this exemption through subordinate instruments, ensuring that the regulation remains effective and relevant.

Key Provisions

Under the Corporations Act 2001 (the “Act”), the Australian Securities and Investments Commission (ASIC) exempts a person from the requirement to hold an Australian financial services licence for the provision or giving of financial product advice under certain conditions. According to the Act, a person is exempt from needing a licence if the advice they provide is both general advice and is contained in a specific type of document that is required by and prepared as a result of a requirement under the Act or the Superannuation Industry (Supervision) Act 1993. The types of documents that qualify for this exemption include statements about reductions in share capital, share buy-backs, financial assistance, financial reports, compromise or arrangement statements, bidder’s statements, documents about proposed acquisitions, continuous disclosure notices, disclosure documents, supplementary or replacement documents, information given to members of superannuation funds, documents about investment strategies, and offer documents or responses related to acquisitions. The Act imposes certain obligations on individuals and entities who wish to avail themselves of this exemption. The advice must be general advice, and the document containing this advice must be of a type specified in the Act or the Superannuation Industry (Supervision) Act 1993. Additionally, the document must be prepared as a result of a requirement under one of these Acts. For instance, if a company is required to prepare a financial report under the Corporations Act, any general advice contained within this report would be exempt from requiring a financial services licence. Failure to comply with the requirements of this exemption may result in various consequences, including the imposition of fines and, in severe cases, criminal penalties. However, the specific penalties for breaches are not detailed within the Class Order itself, but rather would be governed by the general provisions of the Corporations Act. For example, individuals or entities that provide financial product advice without the required licence could face substantial fines and potential imprisonment, depending on the severity and intent behind the breach. This Class Order, [CO 03/606], was first introduced on 17 July 2003 and has since been amended several times. The most recent amendment, [CO 09/69], came into effect on 23 June 2009, and includes changes that affect the interpretation of the Class Order and the types of documents that qualify for the exemption. The purpose of these amendments is to ensure that the Class Order remains relevant and effective in light of changes in the regulatory environment and financial markets.