ASIC Class Order [CO 06/68]

Administered by Department of the Treasury

Legislation au F2006L00473 Not in force Legislative Instrument

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ASIC CLASS ORDER [06/0068]

 

EXPLANATORY STATEMENT

 

Prepared by the Australian Securities and Investments Commission

 

Corporations Act 2001

 

Paragraph 992B(1)(a) – Exemption

 

Paragraph 992B(1)(a) of the Corporations Act 2001 (the Act) provides that the Australian Securities and Investments Commission (ASIC) may exempt a person or class of persons from all or specified provisions of Part 7.8 of the Act. 

 

1.  Background

 

A financial services licensee is required under Division 6 of Part 7.8 of the Act to prepare and lodge audited financial statements and keep financial records in relation to its financial services business. These financial record keeping and financial reporting obligations apply equally to licensees which are incorporated in Australia and those which are incorporated or formed in a foreign jurisdiction (“foreign licensees”).

 

The principal purpose of requiring these financial statements to be lodged with ASIC is to enable ASIC to conduct surveillance activities on licensees to ascertain whether they are complying with the financial requirements imposed as conditions of their financial services licence.

 

ASIC’s licensing powers do not enable it to grant a financial services licence to an Australian branch of a foreign company because that branch is not a separate legal entity. Where a foreign company establishes a branch in Australia for the purposes of carrying on a financial services business in Australia, and ASIC is minded to grant a financial services licence to enable it carry on these activities, ASIC must grant the licence to the foreign company, being the legal entity incorporated or formed in the foreign jurisdiction. Accordingly, the financial record keeping and financial reporting obligations imposed by Division 6 of Part 7.8 will apply to the foreign company and not just to the branch operations in Australia.      

 

The costs of requiring foreign licensees to comply with the financial record keeping and financial reporting requirements of Division 6 of Part 7.8 is considered to be disproportionately burdensome having regard to the following factors: 
 

  • the size and scope of the Australian financial services business of the foreign licensee is often relatively small in comparison to the size and scope of the foreign licensee’s global financial services business; and
     
  • the financial information is already available to ASIC because of the requirement in subsection 601CK(1) to lodge financial statements in accordance with the foreign company’s home jurisdiction and, if applicable (eg for foreign general insurers and foreign life insurers), the financial returns required to be lodged with the Australian Prudential and Regulation Authority (APRA).   

     

ASIC has previously granted financial record keeping and financial reporting relief to foreign authorised deposit-taking institutions (“foreign ADIs”) under Class Order
[CO 03/823].  

 

2.  Purpose of the class order

 

The purpose of Class Order [CO 06/0068] is to exempt foreign licensees (except foreign ADIs) from those financial record keeping and financial reporting obligations of Division 6 of Part 7.8 which are considered to be disproportionately burdensome. The class order is intended to remove unnecessary regulatory duplication.         

 

3.  The class order

 

Class Order [CO 06/0068] relieves foreign licensees (except foreign ADIs) from the requirement under Division 6 of Part 7.8 to prepare and lodge audited financial statements and keep certain financial records in relation to its financial services business. The relief is available to all foreign licensees (except foreign ADIs), irrespective of whether the foreign licensee is regulated by APRA.   

 

A foreign licensee seeking to rely on the relief  must lodge with ASIC at least once a year a copy of its profit and loss statement, balance sheet and cash flow statement, as required to be prepared by the laws of the foreign licensee’s home jurisdiction. Where the foreign licensee is registered as a foreign company under Division 2 of Part 5B.2, and is therefore subject to the financial reporting obligation under subsection 601CK(1), compliance with that subsection will also result in the foreign licensee satisfying these conditions of the class order.

 

The foreign licensee must also ensure that the financial statements are audited in accordance with the requirements of the entity’s home jurisdiction and must lodge a copy of a document setting out the auditor’s views about those financial statements.   

 

The class order does not grant relief from the following requirements: 
 

  • keep financial records that correctly record and explain the transactions and financial position of the financial services business carried on by the licensee (paragraph 988A(1)(a));
     
  • maintain the financial records in writing in the English language or in a manner that enables them to be readily converted into writing in the English language (section 988C);
     
  • on direction by ASIC, cause any financial records kept outside of Australia to be produced at a designated place in Australia (paragraph 988D(b));
     
  • keep particular categories of financial records (section 988E);
     
  • entries in the records taken to be made by, or with the authority of, the licensee (section 988G).
     

These abovementioned provisions relating to financial record keeping from which the class order does not grant relief, are not considered to impose a disproportionate burden  on a foreign licensee.

 

The class order does not apply to foreign ADIs because these entities are granted relief under existing Class Order [CO 03/823]. ASIC chose not to disturb the existing relief given to foreign ADIs.      

  

4. Consultation

 

The issue addressed by this class order was raised by, and discussed with, a number of individual foreign licensees and an industry association representing the interests of the general insurance industry. ASIC also consulted an industry association representing the interests of foreign banks.   

 

The Office of Regulation Review confirmed that a Regulation Impact Statement was not mandatory. 

Overview

The Corporations Act 2001 was enacted to provide a comprehensive regulatory framework for corporations, including financial services licensees, operating in Australia. One of the key provisions of the Act, Paragraph 992B(1)(a), empowers the Australian Securities and Investments Commission (ASIC) to exempt individuals or classes of individuals from certain regulatory requirements. This mechanism was introduced to address the need for regulatory flexibility, particularly in cases where compliance might impose an undue burden. The ASIC Class Order [CO 06/0068], enacted under this authority, aims to relieve foreign financial services licensees, excluding foreign authorised deposit-taking institutions (ADIs), from specific financial record keeping and reporting obligations deemed disproportionately burdensome. The objective of this class order is to eliminate unnecessary regulatory duplication while ensuring that essential record keeping requirements remain in place. ASIC achieved this by exempting foreign licensees from the obligation to prepare and lodge audited financial statements and maintain certain financial records, provided they comply with other specified conditions. The class order was developed through consultation with affected foreign licensees and industry associations, and while it does not require a Regulation Impact Statement, it was subject to internal review processes to ensure its alignment with the overarching objectives of the Corporations Act.

Scope and Application

The ASIC Class Order [CO 06/0068] applies to foreign licensees operating in Australia, excluding foreign authorised deposit-taking institutions (ADIs), who are otherwise subject to the financial record keeping and reporting obligations under Part 7.8 of the Corporations Act 2001. This class order aims to relieve these entities from certain financial reporting burdens considered disproportionately burdensome due to the global nature of their operations and the availability of financial information to ASIC through other channels. The scope of the relief is national, applying across all states and territories of Australia. However, it excludes compliance with specific financial record-keeping requirements that are not deemed burdensome, such as maintaining financial records in writing in English and ensuring records are readily accessible. Additionally, foreign ADIs are excluded from this relief as they are already covered under a different class order. The class order does not extend to subordinate instruments but serves as a directive under the powers granted to ASIC by the Corporations Act.

Key Provisions

The ASIC Class Order [CO 06/0068] primarily exempts foreign licensees from specific financial record keeping and reporting obligations under Division 6 of Part 7.8 of the Corporations Act 2001, except for authorised deposit-taking institutions (ADIs). This exemption (paragraph 992B(1)(a)) is intended to alleviate what is considered a disproportionate burden on foreign licensees, particularly in terms of financial record keeping and the preparation and lodging of audited financial statements with ASIC. However, it's important to note that this relief does not extend to all financial record keeping requirements. For instance, foreign licensees must still keep financial records that correctly record and explain their financial services business transactions and positions (section 988A(1)(a)) and maintain these records in English or in a form that can be readily converted into English (section 988C). Furthermore, they must comply with the requirements to have their financial statements audited in accordance with the laws of their home jurisdiction and lodge a copy of the auditor's report (section 988E). The obligations imposed by the Class Order on foreign licensees include the annual lodging of specific financial statements, such as the profit and loss statement, balance sheet, and cash flow statement, as required by their home jurisdiction's laws. These statements must also be audited by a qualified auditor in the foreign licensee's home jurisdiction. The foreign licensee must ensure that the financial statements and the auditor's report are lodged with ASIC. This requirement is intended to provide ASIC with a level of visibility into the financial operations of foreign licensees while avoiding the duplication of financial reporting efforts. Failure to comply with the obligations set out in the Class Order could result in enforcement actions by ASIC. Although the Class Order itself does not explicitly state the penalties for non-compliance, breaches of the Corporations Act 2001 can result in significant civil and criminal penalties. For instance, individuals found guilty of contravening the Act could face fines of up to $222,000 for each offence under section 13001 for corporations and $22,200 for individuals, depending on the nature and seriousness of the offence. In more severe cases, directors could also face disqualification from managing corporations under section 206C. Additionally, ASIC can seek injunctions, penalties, and other remedies under sections 1317E and 1317G to enforce compliance with the Act's requirements.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.