Overview

The ASIC Class Order [CO 05/986], enacted in 2005, was introduced to provide ongoing relief for operators and promoters of participating property syndicates, a type of managed investment scheme, from specific requirements under the Corporations Act 2001. The Australian Securities and Investments Commission (ASIC) made this Class Order under the authority granted by paragraphs 601QA(1)(a) and 911A(2)(l) of the Corporations Act, which allow ASIC to exempt certain persons from compliance with certain provisions of the Act and from the requirement to hold an Australian financial services licence. The primary aim of the Class Order was to address the ongoing suitability of the temporary relief that had been in place since 1998, which was initially set to expire on 30 September 2005. Given the lack of significant industry or regulatory developments suggesting a need to cease this relief, ASIC determined that permanent relief was appropriate. The Class Order reflects a policy decision to maintain the status quo in the regulatory environment for participating property syndicates, ensuring that investors retain the ability to exercise control over their investments without the burden of immediate compliance with the relevant legislative requirements.

Scope and Application

ASIC Class Order [CO 05/986] applies to the operators and promoters of participating property syndicates, which are a type of managed investment scheme, as defined under the Corporations Act 2001. This Class Order, made under the authority granted by paragraphs 601QA(1)(a) and 911A(2)(l) of the Act, grants exemptions from specific regulatory requirements applicable to these schemes. Specifically, it exempts such operators and promoters from the need to register under Chapter 5C of the Act and from holding an Australian financial services licence, provided that investors retain a significant level of control over the management of their investments. The scope of this relief extends across the Commonwealth of Australia and applies to any entity or individual operating or promoting participating property syndicates within its jurisdiction. This Class Order is a continuation of the temporary relief previously provided by ASIC Class Order [CO 02/239], which has now been made permanent. The decision to extend the relief was made following limited consultation, as the changes were considered to be of a minor or procedural nature.

Key Provisions

The ASIC Class Order [05/986] primarily amends the previously established relief for participating property syndicates under the Corporations Act 2001. Specifically, section 601QA(1)(a) allows ASIC to exempt certain individuals or entities from the provisions of Chapter 5C of the Act, which mandates the registration of managed investment schemes. Section 911A(2)(l) provides ASIC with the authority to exempt certain persons from the requirement to hold an Australian financial services licence. This Class Order removes the previously set expiration date of 30 September 2005 for the relief provided to operators and promoters of participating property syndicates, making the exemption permanent. The obligations imposed by the Class Order [05/986] are relatively straightforward. Operators and promoters of participating property syndicates, where investors have significant control over the management of their investments, are now permanently exempt from complying with the requirements of Chapter 5C and from holding an Australian financial services licence. This means they are not required to register their schemes with ASIC or obtain the necessary financial services licence under these specific conditions. However, it is important to note that this exemption applies only to syndicates where investors can exercise significant control over the management of their investments. The Class Order [05/986] does not explicitly outline specific offences, penalties, or consequences for breaches. However, any breach of the Corporations Act 2001 or its associated regulations could result in civil or criminal penalties. Under the Act, individuals or entities found to be in breach of its provisions may face significant fines, and in severe cases, imprisonment. For example, breaches related to financial services licensing could incur penalties up to a maximum of $210,000 for individuals and $1,050,000 for bodies corporate, as stipulated in other sections of the Act. It is essential for operators and promoters to adhere to the conditions of this exemption to avoid any potential legal repercussions.