ASIC CLASS ORDER [05/739]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Subsection 765A(2) – Declaration
Section 765A(2) of the Corporations Act 2001 (the Act) provides that the Australian Securities and Investments Commission (ASIC) may declare that a specified facility, interest or other thing is not a financial product for the purposes of Chapter 7 of the Act.
1. Background
Section 763D of the Act provides that a person makes non-cash payments if they make payments, or cause payments to be made, otherwise than through the physical delivery of Australian or foreign currency in the form of notes and/or coins. The facility through which, or through the acquisition of which, a person makes such payments is a financial product: s763A(1)(c).
This means that if a person carries on a financial services business involving dealing in, or providing financial product advice on, a non-cash payment (NCP) facility in Australia, the person must hold an Australian financial services licence unless an exemption applies. Parts 7.7, 7.8 and 7.9 of the Act impose conduct and disclosure obligations on persons who provide financial product advice on or deal in a financial product. The Act also prohibits the hawking of financial products to retail clients.
ASIC issued its Policy proposal paper Non-cash payment facilities (Non-cash payment facilities PPP) in December 2004. The Non-cash payment facilities PPP set out how ASIC proposed to regulate non-cash payment facilities and sought feedback from interested parties. (The Non-cash payment facilities PPP may be accessed at http://www.asic.gov.au.)
The Australian Government released its proposals paper Refinements to Financial Services Regulation on 2 May 2005. The proposals paper noted there is ‘[u]ncertainty as to whether loyalty schemes, retailer gift vouchers and certain low-value non-cash payment facilities are intended to be regulated under the financial services regime’. (This paper may be accessed at http://www.treasury.gov.au.) In response, ASIC announced it would issue guidance and/or relief to deal with the unintended application of the non-cash payment facility definition to certain kinds of facilities as part of its project on the regulation of non-cash payment facilities (see Information Release [IR 05-22] ASIC provides details on financial services refinement projects (12 May 2005), which can be accessed at http://www.asic.gov.au).
A facility that may be used solely for making non-cash payments of road tolls is a specific type of NCP facility.
2. Purpose of the class order
The purpose of Class Order [CO 05/739] is to declare that a facility for making road toll payments is not a financial product for the purposes of Chapter 7 of the Act. These facilities are simple, easy-to-use and well understood by retail consumers. Their provision does not generally constitute a significant part of the business of the provider. Accordingly, regulation of such facilities under the financial services regulatory regime is unnecessary and inappropriate.
3. The class order
Under [CO 05/739], a facility for making non-cash payments of road tolls is not a financial product for the purposes of Chapter 7 of the Act where the facility is used solely for such payments. This means the financial services licensing, conduct and disclosure requirements (including the anti-hawking provision) and Part 7.10 of the Act will not apply to such a facility.
4. Consultation
In response to the Non-cash payment facilities PPP, we received 27 submissions, three of which directly addressed issues confronting road toll facility issuers. These submissions were taken into account in the development of [CO 05/739].
ASIC has also taken into account the Australian Government’s proposals paper Refinements to Financial Services Regulation (2 May 2005).
In addition, a Regulation Impact Statement (RIS) was prepared for ASIC’s proposed Policy Statement 185 Non-cash payment facilities [PS 185] before [CO 05/739] was made. The RIS is attached to this statement.