Overview

The ASIC Class Order [CO 06/0226] was enacted in 2006 under the Corporations Act 2001 to address the need for a continuous framework governing the exemption of certain managed investment schemes from the requirement to separate scheme property from other assets. The Australian Securities and Investments Commission (ASIC) made this class order to amend and extend the exemptions set out in previous class orders [CO 98/51] and [CO 04/194]. The primary objective of the class order was to remove sunset clauses and specific paragraphs from the earlier class orders, ensuring that the exemptions for managed investment schemes and Managed Discretionary Account (MDA) services remained in effect without interruption. This was achieved to maintain the regulatory flexibility needed for these schemes while ensuring compliance with licensing and conduct provisions aimed at consumer protection.

Scope and Application

The ASIC Class Order [CO 06/0226] applies to responsible entities of registered managed investment schemes and operators of Managed Discretionary Account (MDA) services, extending its reach to those managing assets under these arrangements. The order operates within the framework of the Corporations Act 2001, specifically under subsections 601QA(1)(a), 741(1)(a) and 1020F(1)(a). The primary focus is to adjust the conditions under which these entities can operate without the strict requirement of segregating scheme property, as long as they adhere to licensing and conduct provisions in the Act. Geographically, the order applies across the Commonwealth of Australia, ensuring a uniform regulatory approach. The order removes specific sunset clauses and interpretation paragraphs from Class Orders [CO 98/51] and [CO 04/194], effectively extending their application indefinitely. There are no explicit exclusions mentioned, but the scope is inherently limited to those entities directly involved in managed investment schemes and MDA services. Subordinate instruments may further detail or refine the application of this class order.

Key Provisions

The ASIC Class Order [CO 06/0226] made under the Corporations Act 2001 primarily amends two existing class orders: [CO 98/51] and [CO 04/194]. Section 1 of the explanatory statement outlines that Class Order [CO 06/0226] removes the sunset clauses from these two orders, which were originally set to expire on 31 March 2006. This means that the exemptions and reliefs provided by these orders will remain in effect indefinitely unless otherwise amended. Additionally, the Class Order removes certain specific paragraphs and subparagraphs from the Interpretation sections of both orders, thereby clarifying and potentially simplifying the application of these orders. The obligations imposed by these provisions are largely aimed at ensuring that the responsible entities of registered schemes and operators of Managed Discretionary Account (MDA) services continue to operate under the specified conditions and reliefs granted by the amended class orders. For instance, the responsible entities of registered schemes must still ensure that scheme property is clearly identified and held separately from other property unless exempted by the provisions of Class Order [CO 98/51]. Similarly, MDA operators must comply with the licensing and conduct provisions in Parts 7.6 and 7.7 of the Act, along with additional conduct requirements designed to protect consumers. Any breach of the obligations and requirements set out in the Corporations Act 2001 or the amended class orders can lead to various consequences. Under the Act, breaches can result in civil or criminal penalties. Civil penalties for contraventions of the Act can include substantial fines, with the exact amount depending on the nature and severity of the breach. For example, section 1317E of the Act provides for significant monetary penalties for breaches of certain provisions, which can reach into millions of dollars for corporations. Additionally, directors and officers of companies found in breach may face personal fines and disqualification from managing corporations, as outlined in sections 206C and 206D of the Act. Criminal penalties may also apply, with individuals potentially facing imprisonment, especially in cases involving serious misconduct or repeated breaches.