ASIC CLASS ORDER [CO 05/ 770 ]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Chapters 2L, 5C, 6, 6D and Parts 7.6, 7.8 and 7.9 – Variation
The Australian Securities and Investments Commission (ASIC) makes class order [CO 05/770] under subsections 283GA(1), 601QA(1), 655A(1), 741(1), 951B(1), 992B(1) and 1020F(1) and paragraph 911A(2)(l) of the Corporations Act 2001 (the Act).
Subsection 283GA(1) provides that ASIC may exempt a person from a provision in Chapter 2L of the Act.
Subsection 601QA(1) provides that ASIC may exempt a person from a provision in Chapter 5C of the Act.
Subsection 655A(1) provides that ASIC may exempt a person from a provision in Chapter 6 of the Act.
Subsection 741(1) provides that ASIC may exempt a person from a provision in Chapter 6D of the Act.
Paragraph 911A(2)(l) provides that ASIC may exempt a person from the requirement to hold an Australian financial services licence.
Subsection 951B(1) provides that ASIC may exempt a person from a provision in Part 7.7 of the Act.
Subsection 992B(1) provides that ASIC may exempt a person from a provision in Part 7.8 of the Act.
Subsection 1020F(1) provides that ASIC may exempt a person from a provision in Part 7.9 of the Act.
1. Background
ASIC has previously made a number of Class Orders concerning the issue and sale of, and publishing of notices in relation to, foreign securities. These include the following ASIC class orders:
[CO 00/180] Foreign securities: publishing of reports and notices
- [CO 00/181] Foreign securities: publishing of reports and notices
- [CO 00/183] Foreign rights issue
- [CO 00/185] Foreign securities
- [CO 00/214] Foreign securities: listed foreign companies making 20 or fewer offers in Australia in 12 months
- [CO 03/184] Employee Share Schemes
These class orders provide relief from various provisions of Chapter 6D of the Act (dealing with fundraising) for certain activities in relation to securities which are quoted on an 'approved foreign market'.
ASIC's policy on approving foreign markets for the purposes of the fundraising provisions of the Act is outlined in ASIC Policy Statement 72 Foreign securities prospectus relief.
The concept of financial products being listed on an approved foreign market has also been used as a basis for ASIC to provide relief in areas other than fundraising. ASIC has granted limited relief from the takeovers provisions in the Act in regard to securities listed on an approved foreign market. This is contained in Class Order [00/2238] Relief from the minimum bid price principle – s621(3). ASIC has also provided limited relief from formal requirements regarding the provision of personal financial product advice for some financial products listed on an approved foreign market. This is contained in Class Order [CO 04/10] Statement of Advice relief for certain products able to be traded on an approved foreign market. In addition, Class Order [03/184] Employee Share Schemes also provides incidental relief from the debenture, managed investment scheme, licensing and financial product advice provisions in the Act for products listed on an approved foreign market.
At the request of the JSE Securities Exchange South Africa (JSE), ASIC has decided to expand its current list of approved foreign markets to include JSE. This is because ASIC is satisfied that JSE meets the criteria for approval set out in our existing policy.
2. The Class Order
ASIC Class Order [CO 05/770] varies each of the existing ASIC Class Orders mentioned above so as to include JSE as an approved foreign market. It also makes technical amendments to a number of the class orders. These amendments include updating the references to other approved foreign markets to reflect name changes and removing some foreign markets that have ceased to exist.
3. Consultation
ASIC did not undertake any consultation with external stakeholders before these instruments were made. Consultation was not undertaken because the instrument is considered minor or machinery in nature.
Overview
The Australian Securities and Investments Commission (ASIC) enacted Class Order [CO 05/770] under the Corporations Act 2001 to address the need for expanding the list of approved foreign markets, thereby providing relief from certain provisions of the Act for securities listed on these markets. This order was introduced to offer relief from various provisions, including those related to fundraising, takeovers, and financial product advice, for securities traded on approved foreign markets. ASIC, acting under the authority of the Act, made this class order without external consultation as it was deemed minor and technical in nature. The policy objective behind this legislation is to facilitate the regulation of financial products listed on approved foreign markets, ensuring that they meet certain criteria and standards while providing necessary relief to entities involved in such activities.
Scope and Application
The ASIC Class Order [CO 05/770] applies to persons and entities engaged in the issue and sale of foreign securities, specifically those listed on an approved foreign market, and seeks to provide relief from certain provisions of the Corporations Act 2001. This includes exemptions from provisions related to fundraising, takeovers, and financial product advice for securities listed on an approved foreign market. The order applies across Australia, under the authority of the Commonwealth, and extends to updating and including the Johannesburg Securities Exchange (JSE) as an approved foreign market, thereby subjecting securities traded there to the same relief as those listed on other approved markets. There are no explicit exclusions or exemptions stated in the class order itself, although its scope is inherently limited to activities that fall within the relief provided for in the referenced provisions of the Corporations Act. The application and interpretation of the class order may be further refined through subordinate instruments or policy statements issued by ASIC.
Key Provisions
The ASIC Class Order [CO 05/770] primarily involves the variation of existing class orders (sections 1, 2) to incorporate the Johannesburg Stock Exchange (JSE) as an approved foreign market. This means that certain securities listed on the JSE will be subject to different regulatory requirements under the Corporations Act 2001 compared to those listed on other markets. The order also includes technical amendments to update references and remove defunct foreign markets. The key provisions of the order pertain to relief from various regulatory requirements for securities listed on approved foreign markets, particularly those related to fundraising, takeovers, and financial product advice. This includes relief from the minimum bid price principle (section 283GA(1)), exemption from the requirement to hold an Australian financial services licence (paragraph 911A(2)(l)), and exemption from provisions in Chapters 6D, 5C, and 6 of the Act (subsections 655A(1), 601QA(1), and 741(1)).
The obligations imposed by this class order on the parties it governs primarily revolve around compliance with the modified requirements for securities listed on the JSE. Companies issuing securities on the JSE must adhere to the varied regulatory provisions, which may include reduced disclosure obligations or exemptions from certain licensing requirements. Financial advisors providing advice on financial products listed on the JSE must also comply with the modified requirements regarding the provision of personal financial product advice. Furthermore, the order necessitates that these entities ensure they are aware of the criteria for approval of foreign markets as set out in ASIC's existing policy and comply with any associated conditions.
In terms of penalties and consequences for breach, the Corporations Act 2001 provides for various civil and criminal penalties. For instance, contravening the fundraising provisions in Chapter 6D may result in civil penalties including fines up to $500,000 for individuals and $2.5 million for corporations, as well as potential criminal penalties such as imprisonment for up to five years (section 728A). Similarly, failure to comply with the licensing requirements under Chapter 5C may lead to civil penalties of up to $200,000 for individuals and $1 million for corporations, and potential criminal penalties including fines and imprisonment (section 911A). The specific penalties for breaching the varied provisions in this class order would depend on the nature and severity of the breach, but they align with the general penalties outlined in the Act.