ASIC CLASS ORDER [CO 07/150]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

The Australian Securities and Investments Commission (ASIC) makes Class Order [CO 07/150] Revocation of Class Orders [02/149], [CO 04/10], [CO 04/1571] and [CO 05/27] under s951B(1)(a) and 1020F(1)(a) of the Corporations Act 2001 (the Act). 

Section 951B(1)(a) provides that ASIC may exempt a person or class of persons from all or specified provisions of Pt 7.7 of the Act.

Section 1020F(1)(a) provides that ASIC may exempt a person or class of persons from all or specified provisions of Pt 7.9 of the Act

1. Background

The Corporations Amendment Regulations 2005 (No. 5) (Refinements Regulations), made on 15 December 2005, introduced a number of changes to the regulation of financial products and financial services under Ch 7 of the Act and the Corporations Regulations 2001 (the Corporations Regulations). 

Some of the changes made by the Refinements Regulations include:

(a)  clarifying the circumstances in which a person does not have to provide a Product Disclosure Statement (PDS) to a person located outside of this jurisdiction (reg 7.9.07FB);

(b) replacing the “further market-related advice” (FMRA) exemption from the requirement to give a Statement of Advice (SoA) in s946B of the Act with a broader “further advice” exemption (reg 7.7.10AE);

(c) clarifying the circumstances in which a secondary service provider does not have to provide a Financial Services Guide (FSG) (reg 7.7.02(7)); and

(d) allowing a financial services provider to “tailor” the information in its FSG to information about those services that will be or are likely to be provided by them ( reg 7.7.10AA and 7.7.10AB).

These changes affect the operation of the following Class Orders:

(a) Class Order [CO 02/149] Relief to facilitate issue of interests in relevant schemes to New Zealand investors;

(b) Class Order [CO 04/10] Statement of Advice relief for certain products able to be traded on an approved foreign market;

(c) Class Order [CO 04/1571] Secondary services: General financial services guide relief; and

(d) Class Order [CO 05/27] Financial services guides – Tailoring relief.

2. Purpose of the class order

[CO 07/150] is intended to facilitate regulatory clarity by eliminating overlaps and inconsistencies between Ch 7 of the Act and the Corporations Regulations, and ASIC class orders.

[CO 02/149]

Section 1012D of the Act outlines the situations in which a PDS does not have to be given to a person.  The Refinements Regulations modified s1012D by inserting a new s1012D(8A) (reg 7.9.07FB).  New s1012D(8A) provides that a PDS does not have to be given to a client in a recommendation situation, an issue situation, or a sale situation, if the client is not in this jurisdiction. 

[CO 02/149] grants conditional relief to Australian issuers of interests in managed investment schemes to New Zealand investors from the requirements to give a PDS in s1012B and 1012C and the application form requirements in s1016A.     

ASIC considers that the relief in [CO 02/149] is no longer necessary in light of the changes made to s1012D by reg 7.9.07FB.  Class Order [CO 07/150] revokes [CO 02/149] to eliminate the overlap between the class order and reg 7.9.07FB.

[CO 04/10]

Section 946B of the Act outlines situations in which a SOA is not required.  Prior to the introduction of the Refinements Regulations, s946B(1) provided that a financial services provider who is a participant in a licensed market was not required to provide a SOA to a retail client when giving FMRA.  Section 946B(1)(c) limited the application of this exemption to advice about certain financial products that were able to be traded on a financial market. 

[CO 04/10] extended the exemption in s946B to providers of certain products able to be traded on approved foreign markets.

The Refinements Regulation modified the operation of s946B (reg 7.7.10AE).  The “further advice” exemption is no longer limited to financial products able to be traded on a financial product. 

ASIC considers that the relief in [CO 04/10] is no longer necessary in light of the changes made to s946B by reg 7.7.10AE.  Therefore, [CO 07/150] revokes [CO 04/10].

[CO 04/1571]

[CO 04/1571] grants relief to secondary service providers from the consequences of failing to provide an FSG to a retail client to whom the secondary service provider provides (via an intermediary) a financial service. The relief applies where the secondary service provider enters into an arrangement with the intermediary for the intermediary to give the secondary service provider's FSG to the client and where certain other conditions are. 

The Refinements Regulations (reg 7.7.02(7)) modified the Act so that a secondary services provider does not have to give an FSG if an intermediary provides its financial services to clients provided certain conditions are met.

ASIC considers that the relief in [CO 04/1571] is no longer necessary in light of the changes made by reg 7.7.02(7).  Therefore, [CO 07/150] revokes [CO 04/1571] to eliminate the overlap of class order and reg 7.9.07FB.

[CO 05/27]

[CO 05/27] exempts a providing entity from the requirement to include information in its FSG about remuneration it receives for financial services the providing entity is unlikely to provide to the retail client (i.e. it allows an FSG to be tailored to the services that will be or is likely to be provided to the client).

The Refinements Regulations modified the information required to be in an FSG.  Under reg 7.7.10AB, an FSG must include either information about the authorised services that the providing entity will be or is likely to be providing to the client or information about the kinds of financial services that the providing entity is authorised to provide.  This means that an FSG does not have to include information about all the financial services a providing entity is authorised to provide.  In effect, reg 7.7.10AB allows an FSG to be tailored to the services that will be or is likely to be provided to the client.

ASIC considers that the relief in [CO 05/27] is no longer necessary in light of the changes made by reg 7.7.10AB.  Therefore, [CO 07/150] revokes [CO 05/27] to eliminate the overlap of the class order and reg 7.9.07FB.

3. Operation of the class order

Paragraph 4 of [CO 07/150] revokes [CO 02/149], [CO 04/10], [CO 04/1571] and [CO 05/27].

4 Consultation

ASIC did not undertake any specific consultation with other stakeholders before [CO 07/150] was made because it is of a minor and machinery nature.