ASIC Class Order [CO 04/239]

Overview

The Australian Securities and Investments Commission Corporations Act 2001 — Paragraphs 911A(2)(l), 992B(1)(a) and 1020F(1)(a) — Exemption legislative instrument, enacted in 2004, was introduced to address specific gaps in the financial services regulatory framework concerning factoring arrangements. This instrument, authorised by the Australian Securities and Investments Commission, exempts certain parties involved in these arrangements from the need to hold an Australian financial services licence and from certain disclosure and offer requirements under the Act. The policy objective is to streamline the regulatory process for factoring arrangements while ensuring that retail clients are adequately informed and protected. To qualify for these exemptions, the parties must ensure that the terms and conditions of the factoring arrangement are provided in writing to each retail client and establish an internal dispute resolution system that adheres to the Australian Standard on Complaints Handling AS4269-1995. This legislative instrument took effect upon gazettal.

Scope and Application

The Australian Securities and Investments Commission (ASIC) has issued an exemption under specific provisions of the Corporations Act 2001, applying to particular individuals and entities involved in factoring arrangements. This exemption pertains to those who are or propose to be purchasers of debt obligations under a factoring arrangement and those providing financial services in connection with such arrangements, excluding those already mentioned. The exemption relieves these entities from the requirement to hold an Australian financial services licence for dealing in and providing financial product advice concerning the factoring arrangement, as well as from certain prohibitions and disclosure requirements stipulated in the Act. This legislative instrument applies across the Commonwealth of Australia, impacting any factoring arrangements occurring within the nation’s jurisdiction. The exemption is contingent on the conditions outlined in the Schedule, which include the provision of written terms and conditions to retail clients and the establishment of an internal dispute resolution system compliant with the Australian Standard on Complaints Handling AS4269-1995. This instrument, which takes effect upon gazette, allows ASIC to extend or modify the exemption through subordinate instruments as necessary.

Key Provisions

Under the Corporations Act 2001, certain exemptions are provided to specific parties involved in factoring arrangements. Specifically, paragraph 911A(2)(l) exempts a person who is or proposes to be the purchaser of debt obligations under a factoring arrangement, while paragraph 992C(1)(a) exempts a person providing a financial service related to a factoring arrangement, provided they are not the purchaser. Additionally, paragraph 1020F(1)(a) exempts these parties from certain licensing requirements and restrictions on issuing factoring arrangements. These exemptions are granted on the conditions outlined in the Schedule and are contingent upon meeting these conditions. The conditions imposed on these exempted parties are primarily administrative in nature. Firstly, they must ensure that the terms and conditions of the factoring arrangement are communicated in writing to each retail client before the arrangement is issued, as per the requirements of the Schedule. This ensures transparency and clarity in the dealings between the parties involved. Secondly, they must establish and maintain an internal dispute resolution system that complies with the Australian Standard on Complaints Handling AS4269-1995. This system must be capable of handling complaints made by retail clients regarding the factoring arrangement, ensuring that any issues are addressed in a fair and efficient manner. Failure to comply with the conditions outlined in the Schedule can lead to significant consequences. While specific offences are not detailed in the Act, breaches of the conditions could potentially result in civil or criminal penalties. The maximum penalties for breaches of the Corporations Act 2001 can include substantial fines and, in some cases, imprisonment. These penalties underscore the importance of adhering to the conditions set out in the Schedule to avoid legal repercussions. In summary, the legislation provides exemptions from certain licensing and disclosure requirements for parties involved in factoring arrangements, provided they meet specific conditions. These conditions primarily focus on ensuring written communication of terms and conditions to retail clients and the establishment of an internal dispute resolution system. Non-compliance with these conditions could result in civil or criminal penalties, highlighting the importance of adherence to the requirements set out in the Schedule.