ASIC Class Order [CO 04/1063]

Overview

The Australian Securities and Investments Commission Corporations Act 2001 is a pivotal piece of legislation enacted to address the need for comprehensive regulation of financial services within Australia. This Act was established to ensure the integrity, efficiency, and transparency of the financial markets, ultimately protecting investors and consumers. It was enacted by the Australian Parliament, with a policy objective to foster a robust and reliable financial system that promotes economic growth and consumer confidence. On 27 August 2004, a legislative instrument was introduced under the authority of the Australian Securities and Investments Commission to further refine the application of the Act. Specifically, the instrument modifies the application of Part 7.8 of the Act to include financial services licensees that operate with an authorised trustee corporation and manage interests in registered schemes, such as cash common funds. This amendment aims to ensure that these entities are held to the same standards as other financial services providers, thereby enhancing regulatory oversight and safeguarding the interests of investors.

Scope and Application

The Corporations Act 2001 applies to a wide range of entities including companies, limited partnerships, trustees of registered schemes, and financial services licensees. Specifically, the legislative instrument F2007B00379 pertains to financial services licensees, modifying the application of Part 7.8 of the Act to include those with an authorised trustee corporation that relates to an interest in a registered scheme operated by that corporation, often referred to as a cash common fund. This modification extends the regulatory oversight of the Australian Securities and Investments Commission (ASIC) to cover these additional activities and entities. The geographic reach of this Act is national, as it applies throughout Australia. The Act does not specify exclusions or exemptions, but its application may be subject to certain thresholds or conditions outlined in subordinate instruments, which can further refine or clarify the scope of its provisions. This legislative instrument ensures that financial services licensees operating with authorised trustee corporations and cash common funds are subject to the same regulatory standards as other financial entities under the Corporations Act.

Key Provisions

The Australian Securities and Investments Commission (ASIC) has amended the Corporations Act 2001 under paragraph 992B(1)(c) to extend the applicability of Part 7.8 to financial services licensees that engage with an authorised trustee corporation in relation to an interest in a registered scheme, specifically a cash common fund. This legislative instrument, dated 27th August 2004, modifies the existing law by adding subparagraph (ia) to section 981B, thus broadening the scope of what constitutes financial services under the Act. This inclusion ensures that activities involving cash common funds are now subject to the same regulatory standards as other financial products. Under this amendment, financial services licensees are required to comply with the additional provisions outlined in Part 7.8 of the Act. This includes adhering to the licensing requirements, maintaining appropriate financial resources, and ensuring that they meet the ongoing obligations related to providing financial services. The licensees must also ensure that their practices and operations align with the regulatory standards set forth by ASIC, which include conducting due diligence on the authorised trustee corporation and ensuring that the cash common fund is managed in a manner that protects investors’ interests. Failure to comply with the requirements set out in the Corporations Act 2001 can result in significant legal consequences. The Act provides for both civil and criminal penalties for breaches. Civil penalties can include substantial fines, up to the maximum limit specified by the Act, and in some cases, compensation to affected parties. Criminal penalties may include imprisonment for individuals found guilty of serious or repeated breaches, reflecting the seriousness with which the Act treats non-compliance. The specific penalties depend on the nature and severity of the breach, as well as any previous history of non-compliance by the licensee.