ASIC Class Order [CO 03/826]

Overview

The Australian Securities and Investments Commission Corporations Act 2001, enacted by the Parliament of Australia, is a comprehensive piece of legislation that aims to provide a regulatory framework for financial services and products within Australia. One of the key issues the Act was designed to address is ensuring that the financial services market operates in a fair, efficient, and transparent manner, protecting both consumers and investors. A specific legislative instrument, F2007B00422, issued in 2003, provides an exemption under paragraph 992B(1)(a) of the Act for holders of an Australian financial services licence. This exemption relieves such holders from Regulation 7.8.19 of the Corporations Regulations 2001 when dealing with instructions from wholesale clients outside Australia in financial markets not operated within Australia. The policy objective behind this exemption is to streamline regulatory requirements for certain high-value transactions while maintaining the overarching goal of protecting market integrity and investor interests.

Scope and Application

The legislative instrument, F2007B00422, pertains to a specific exemption under the Corporations Act 2001 as delegated by the Australian Securities and Investments Commission. This exemption applies to holders of an Australian financial services licence who receive instructions to deal in financial products from or on behalf of wholesale clients not located within the jurisdiction of Australia. The exemption specifically targets instances where the instructions pertain to transactions conducted through financial markets outside Australia. This exclusion from Regulation 7.8.19 of the Corporations Regulations 2001 is intended to alleviate certain regulatory burdens on financial service providers when they engage in cross-border financial activities with non-resident wholesale clients. The term "wholesale client" is defined under section 761G of the Act, ensuring clarity on who qualifies for this exemption. This instrument effectively narrows the application of the regulation to maintain a balance between regulatory oversight and facilitating international financial transactions.

Key Provisions

Paragraph 992B(1)(a) of the Corporations Act 2001, as referenced in the legislative instrument F2007B00422, provides an exemption from Regulation 7.8.19 of the Corporations Regulations 2001 for holders of an Australian financial services licence. Specifically, this exemption applies to each instruction to deal in financial products received by the holder, provided that both the instruction is from or on behalf of a wholesale client who is not in Australia, and the instruction pertains to a dealing through a financial market that is not operated within Australia. The term "wholesale client" is defined by section 761G of the Corporations Act 2001, which typically refers to entities that meet certain criteria related to their financial size, sophistication, and the nature of their dealings with financial services providers. The obligations imposed by this exemption are relatively straightforward. A holder of an Australian financial services licence must ensure that the exemption criteria are met for each relevant instruction. This involves verifying that the instruction comes from a wholesale client outside of Australia and that the dealing is through a financial market not based in Australia. The licensee must maintain records and documentation to demonstrate compliance with these conditions, as required under the Corporations Act 2001 and the Corporations Regulations 2001. Additionally, the licensee must ensure that all dealings comply with other applicable laws and regulations that govern financial services in Australia. Breaching the conditions of this exemption can have significant consequences. While the legislative instrument does not specify particular offences or penalties for non-compliance with this exemption, general provisions of the Corporations Act 2001 may apply. Non-compliance with the Act can result in civil or criminal penalties. For instance, if a licensee fails to comply with the Act's provisions, they could be subject to fines, legal action, or other enforcement measures by the Australian Securities and Investments Commission (ASIC). The maximum penalties for breaches can vary widely depending on the nature and severity of the breach but can include substantial fines and, in severe cases, imprisonment for individuals who are found to be responsible for the breach.