ASIC CLASS ORDER [CO 05/0903]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Subsections 601QA(1)(a), 741(1)(a), 951B(1)(a), 1020F(1)(a) and 1020F(1)(c)— Variations
The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 05/0903] under paragraphs 601QA(1)(a), 741(1)(a), 951B(1)(a), 1020F(1)(a) and 1020F(1)(c) of the Corporations Act 2001 (the Act).
1. Background
Section 601FC(1)(i) of the Corporations Act 2001 (the Act) provides that in exercising its powers and carrying out its duties, the responsible entity of a registered scheme must ensure that scheme property is:
(i) clearly identified as scheme property; and
(ii) held separately from property of the responsible entity and property of any other scheme.
Class Order [CO 98/51] exempts responsible entities of registered managed investment schemes from subsection 601FC(1)(i) of the Act in a number of specified circumstances.
Class Order [04/194] exempts operators of MDA services (MDA operators) from the managed investments provisions in Ch 5C of the Corporations Act 2001 (Act) and the product disclosure provisions in Pt 7.9 of the Act. Managed Discretionary Account services are arrangements that involve a person (the MDA operator) managing a portfolio of assets for a retail client on an individual basis. To have the benefit of this relief, MDA operators must comply with the licensing and conduct provisions in Pts 7.6 and 7.7 of the Act and some additional conduct requirements designed to promote consumer protection.
2. Class Order [CO 05/0903] Relief from duty to separate assets of a managed investment scheme and Managed discretionary accounts — amendments
Class Order [CO 05/0903] effects only one amendment to [CO 98/51], which is to extend the relief set out in paragraph (e) of the Schedule, which was previously due to expire on 30 September 2005, and will now expire on 31 March 2006.
Class Order [CO 05/0903] effects two amendment to [CO 04/194], which are to extend the relief set out in subparagraphs 1.23(b)(v) and 2.10(e), which were previously due to expire on 30 September 2005, and will now expire on 31 March 2006.
3. Consultation
Consultation was not required as the class order is minor or machinery in nature. ASIC did not conduct consultation in respect of this class order.
Overview
The ASIC Class Order [CO 05/0903] was enacted in 2005 under the Corporations Act 2001 by the Australian Securities and Investments Commission (ASIC), the regulatory body responsible for enforcing Australia's corporate, securities, financial services and consumer credit laws. The class order was introduced to address the need for relief concerning the separation of assets for certain types of investment schemes and services. Specifically, it aimed to provide a temporary exemption from the duty to clearly identify and separate scheme property for responsible entities of registered managed investment schemes and operators of Managed Discretionary Account (MDA) services. This relief was intended to assist these entities in managing their operations without the stringent requirement of asset separation, provided they adhered to other licensing and conduct provisions designed to protect consumers. The order extended the expiry date of certain exemptions previously set to expire on 30 September 2005 to 31 March 2006, without requiring consultation as it was deemed minor or of a machinery nature.
Scope and Application
ASIC Class Order [CO 05/0903] applies to responsible entities of registered managed investment schemes and operators of Managed Discretionary Account (MDA) services, ensuring they meet specific regulatory requirements under the Corporations Act 2001. The Act mandates that scheme property must be clearly identified and held separately from the property of responsible entities and any other schemes. However, Class Order [CO 05/0903] provides relief to these entities under certain circumstances, extending the previous exemptions outlined in Class Orders [CO 98/51] and [CO 04/194]. These reliefs, which were set to expire on 30 September 2005, are now extended until 31 March 2006. The class order operates on a national level within Australia, covering both state and territory jurisdictions. Notably, this class order does not require consultation as it is considered minor or of a machinery nature.
Key Provisions
ASIC Class Order [CO 05/0903], made under the Corporations Act 2001, primarily extends the relief period for certain exemptions related to the separation of assets for managed investment schemes and Managed Discretionary Account (MDA) services. Specifically, section 1(2) of the Class Order extends the relief period from 30 September 2005 to 31 March 2006. This means that certain responsible entities and MDA operators will have more time to comply with the asset separation requirements before the exemptions lapse.
The Class Order imposes specific obligations on the parties it governs. Under section 1(1), responsible entities of registered schemes and MDA operators must ensure that scheme property is clearly identified as such and held separately from other property unless they are granted an exemption under the Class Order. This requirement is crucial to maintaining the integrity of the financial system and protecting investors by ensuring that assets are managed and held appropriately.
There are no explicit offences, penalties, or civil/criminal consequences outlined in the Explanatory Statement for breaching the provisions of ASIC Class Order [CO 05/0903]. However, it is important to note that any failure to comply with the Corporations Act 2001 or any related class orders can lead to enforcement actions by ASIC. These actions may include fines, legal proceedings, or other regulatory sanctions, depending on the nature and severity of the breach. The maximum penalties for breaches of the Corporations Act can vary widely, but they can include substantial fines for both individuals and corporations, as well as potential disqualification from managing corporations or participating in financial services.