Australian Securities and Investments Commission
Corporations Act 2001 — Paragraphs 911A(2)(l) and 992B(1)(a) — Exemption
1. Under paragraph 992B(1)(a) of the Corporations Act 2001 (the Act), the Australian Securities and Investments Commission (ASIC) exempts each foreign ADI which holds an Australian financial services licence from:
(a) the following provisions of the Act:
(i) section 988B;
(ii) paragraph 988D(a);
(iii) section 988E; and
(iv) section 989C; and
(b) regulation 7.8.12 of the Corporations Regulations 2001.
2. Under paragraph 992B(1)(a) of the Act, ASIC exempts each foreign ADI which holds an Australian financial services licence from section 989B of the Act on the following conditions and for so long as those conditions are met:
(a) the foreign ADI must lodge with ASIC, at least once in every calendar year and at intervals of not more than 15 months:
(i) a copy of its balance-sheet made up to the end of its last financial year; and
(ii) a copy of its cash flow statement for its last financial year; and
(iii) a copy of its profit and loss statement for its last financial year;
in such form and containing such particulars and including copies of such documents as the foreign ADI is required to prepare by the law for the time being applicable to that foreign ADI in its place of origin; and
(b) together with copies of the documents in paragraph (a), the foreign ADI must lodge a statement in writing verifying that the copies are true copies of the documents so required; and
(c) the foreign ADI must ensure that the documents referred to in subparagraphs (a)(i) to (a)(iii) are audited in accordance with the requirements for the time being applicable to that foreign ADI in its place of origin; and must lodge a copy of a document setting out the views of that auditor about those documents.
Note: Where the foreign ADI is subject to subsection 601CK(1) of the Act, compliance with that subsection will also result in the conditions set out in subparagraphs 2(a) and 2(b) being satisfied.
3. Under paragraph 911A(2)(l) of the Act, ASIC exempts each foreign ADI from the requirement to hold an Australian financial services licence for the provision of a financial service where all of the following apply:
(a) the service consists only of either or both of the following:
(i) dealing in derivatives;
(ii) dealing in foreign exchange contracts; and
(b) the service does not involve the making of a market for derivatives or foreign exchange contracts; and
(c) the dealing is entered into for the purpose of managing a financial risk that arises in the ordinary course of the foreign ADI’s banking business; and
(d) the dealing is entered into on the foreign ADI’s own behalf; and
(e) the counterparty for the dealing is a wholesale client; and
(f) the foreign ADI does not hold an Australian financial services licence covering the provision of the service.
Commencement
4. This instrument takes effect on gazettal.
Interpretation
5. In this instrument:
foreign ADI has the meaning given by section 5 of the Banking Act 1959;
foreign exchange contract has the meaning given by section 761A of the Act; and
wholesale client has the meaning given by section 761G of the Act.
Dated this 26th day of September 2003
Signed by Stephen Yen, PSM
as a delegate of the Australian Securities and Investments Commission
Overview
The Australian Securities and Investments Commission Corporations Act 2001 — Paragraphs 911A(2)(l) and 992B(1)(a) — Exemption legislative instrument, enacted in 2003, was designed to address specific regulatory gaps for foreign Authorised Deposit-taking Institutions (ADIs) operating in Australia. This instrument, issued under the authority of the Australian Securities and Investments Commission (ASIC), provides targeted exemptions for foreign ADIs that hold an Australian financial services licence, aiming to streamline regulatory compliance while ensuring financial stability. The policy objective is to facilitate the operations of foreign ADIs in the Australian market by reducing unnecessary regulatory burdens, provided that they meet specified financial reporting and auditing requirements.
Scope and Application
The Corporations Act 2001, as amended by this legislative instrument, provides specific exemptions to foreign Authorised Deposit-taking Institutions (ADI) that hold an Australian financial services licence, thereby tailoring regulatory requirements to accommodate their unique operational context while maintaining a level of oversight. These exemptions apply to foreign ADIs under certain conditions, primarily focusing on the submission of financial statements and the holding of a financial services licence for specific financial services. For instance, foreign ADIs are exempt from lodging detailed financial statements with ASIC unless they are subject to certain conditions such as submitting audited financial documents annually. Additionally, these institutions are exempted from holding an Australian financial services licence if their dealings are strictly limited to specific financial services like derivatives and foreign exchange contracts, provided these services are for managing financial risks within their banking business, are conducted on their own behalf, and involve wholesale clients exclusively. This legislative instrument applies to foreign ADIs as defined under the Banking Act 1959 and extends across jurisdictions within Australia, ensuring a consistent regulatory approach while offering flexibility to foreign entities operating within the Australian financial market. The exemptions provided are contingent on the foreign ADIs meeting specified conditions, ensuring that regulatory oversight is neither overly burdensome nor insufficient.
Key Provisions
The Australian Securities and Investments Commission Corporations Act 2001, under paragraphs 911A(2)(l) and 992B(1)(a), provides exemptions for foreign authorised deposit-taking institutions (ADIs) holding an Australian financial services licence. Under paragraph 992B(1)(a), these foreign ADIs are exempted from specific sections of the Act, such as sections 988B, 988D(a), 988E, and 989C, as well as regulation 7.8.12 of the Corporations Regulations 2001. However, they must comply with certain conditions to maintain these exemptions. The Act mandates that these foreign ADIs lodge detailed financial documents with ASIC annually. Specifically, they must provide copies of their balance sheet, cash flow statement, and profit and loss statement for the last financial year, all prepared in accordance with the laws of their country of origin. Additionally, they must include a written statement verifying the accuracy of these documents and a copy of the auditor's report concerning these documents.
Furthermore, these foreign ADIs are required to ensure that their financial documents are audited according to the applicable standards in their home country. The exemptions also include a condition that if the foreign ADI is subject to subsection 601CK(1) of the Act, compliance with that subsection will satisfy the conditions outlined in subparagraphs 2(a) and 2(b). Another significant exemption pertains to paragraph 911A(2)(l) of the Act, which exempts foreign ADIs from the need to hold an Australian financial services licence for specific financial services. This exemption applies when the services involve dealing in derivatives or foreign exchange contracts but only if the dealings are for managing financial risks arising from the ADI's banking business, are conducted on their own behalf, involve wholesale clients, and the ADI does not already hold a relevant Australian financial services licence.
The obligations under this legislation are stringent but necessary to ensure compliance with Australian financial regulations while providing flexibility to foreign ADIs operating within the Australian market. Non-compliance with these conditions can result in civil or criminal penalties, depending on the severity and intent behind the breach. While the specific penalties are not detailed in the legislative instrument, breaches of the Corporations Act generally can lead to substantial fines and, in some cases, imprisonment for individuals involved in the breach. The exact penalties would be determined by the courts based on the nature and impact of the non-compliance.