ASIC CLASS ORDER (CO 07/569)
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes Class Order (CO 07/569) Revocation of Class Order (CO 05/21) under s992B(1)(c) of the Corporations Act 2001 (the Act).
Paragraph 992B(1)(c) provides that ASIC may declare that Part 7.8 of the Act applies in relation to a person or a financial product, or class of persons or financial products as if specified provisions of that Part were omitted, modified or varied as specified in the declaration.
1. Background
The Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 (SRS Act) introduced a number of amendments to the Act. These included, in relation to s990A of the Act, the repeal of that section with effect from 28 June 2007, and the substitution of a new s990A containing the words, ‘Sections 990B to 990H do not apply to a financial services licensee that is a public company’.
Before this substitution, s990A applied where, among other things, a financial services licensee was ‘a body corporate to which section 327 applie[d]’. When first inserted, this provision had the effect of ensuring that a financial services licensee who was required to appoint an auditor under Chapter 2M of the Act did not also need to comply with s990B – 990H of the Act, which relate to the appointment, removal or resignation of auditors under Part 7.8 of the Act.
However, s327 of the Act was subsequently repealed, with effect from 1 July 2004, by the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (the CLERP 9 Act). It was replaced by Subdiv A of Div 6 of Part 2M.4 of the Act, which now deals with the appointment of auditors. This meant that, from 1 July 2004, s990A referred to a section of the Act that no longer existed.
Class Order (CO 05/21) Clarification of requirement for the appointment of auditors by financial services licensees was first issued on 14 January 2005. It was made to overcome the anomaly in the operation of s990A, by ensuring that this section operated as if the reference to ‘a body corporate to which section 327 applie[d]’ were a reference to the provisions that replaced s327 of the Act.
The substitution in the wording of s990A introduced by the SRS Act has now removed any uncertainty in relation to the requirement for the appointment of auditors by financial services licensees, by removing any reference to repealed s327, and specifying that s990B – 990H do not apply to public companies.
2. Purpose of the class order
The purpose of CO 07/569 is to revoke CO 05/21.
Now that the SRS Act has removed the legislative anomaly that CO 05/21 addressed, CO 05/21 can have no further operation, and is no longer necessary.
3. Operation of the class order
CO 07/569 revokes CO 05/21.
4. Consultation
ASIC did not undertake any specific consultation with other stakeholders before CO 07/569 was made, as it is of a minor and machinery nature.
Overview
The Australian Securities and Investments Commission (ASIC) has introduced the Class Order (CO 07/569) under section 992B(1)(c) of the Corporations Act 2001 to address a legislative anomaly that arose following the repeal of section 327 of the Act. The Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 (SRS Act) had amended section 990A, leading to an overlap in the requirements for the appointment of auditors by financial services licensees. Initially, Class Order (CO 05/21) was created to ensure that financial services licensees who were required to appoint an auditor did not also need to comply with certain provisions relating to auditor appointments. However, with the SRS Act removing the legislative uncertainty, CO 05/21 is now redundant. The purpose of CO 07/569 is to revoke CO 05/21, as the legislative issue it sought to address is no longer present.
Scope and Application
The ASIC Class Order (CO 07/569) applies to financial services licensees under the Corporations Act 2001, specifically those who are public companies, by removing the necessity for them to comply with certain sections regarding the appointment, removal or resignation of auditors. The revocation of the previous Class Order (CO 05/21) clarifies that these sections, 990B to 990H, no longer apply to public companies following legislative amendments introduced by the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007. This class order operates across Australia as it is issued by the Australian Securities and Investments Commission, which has a national jurisdictional reach. There are no exclusions or exemptions mentioned in the order, but it should be noted that the order does not extend or restrict the application through subordinate instruments. The revocation of CO 05/21 is effective due to the legislative changes that have already been implemented, thereby making the previous class order redundant.
Key Provisions
The main operative sections of the ASIC Class Order (CO 07/569) involve the revocation of the previous Class Order (CO 05/21), which was issued to address an anomaly in the Corporations Act 2001 (the Act) (s1). This revocation is pursuant to section 992B(1)(c) of the Act, which allows ASIC to declare that certain specified provisions of Part 7.8 of the Act apply or do not apply to a person or a financial product, or class of persons or financial products (s1). CO 07/569 was made to revoke CO 05/21 because the legislative anomaly that CO 05/21 addressed has been removed by the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 (s2). The purpose of CO 07/569 is therefore simply to remove CO 05/21 from the legislative framework (s2).
The obligations and requirements that CO 07/569 imposes on the parties or entities it governs are essentially nil, as its purpose is to revoke an existing Class Order (s2). The previous Class Order (CO 05/21) had been in place to ensure that the requirements for the appointment of auditors by financial services licensees operated correctly, given the repeal of certain sections of the Act (s1). With the removal of this anomaly by the SRS Act, there is no longer a need for CO 05/21, and thus, CO 07/569 effectively nullifies any obligations that CO 05/21 might have imposed.
There are no specific offences, penalties, or consequences for breach under CO 07/569, as its function is to revoke an existing Class Order rather than impose new requirements (s2). The Class Order itself does not create new obligations or impose penalties; rather, it removes an existing one. Consequently, there are no maximum penalties or other civil or criminal consequences associated with CO 07/569. However, entities and individuals should remain aware of their obligations under the Corporations Act 2001 and any other relevant legislation, as non-compliance with these could result in penalties or other consequences.