ASIC CLASS ORDER [CO 07/572]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes Class Order [CO 07/572] Variation of Class Orders [CO 01/1455] and [CO 04/672] under subsections 741(1) and 1020F(1) of the Corporations Act 2001 (the Act).
Subsection 741(1) provides that ASIC may declare that Chapter 6D applies to a person as if specified provisions (including definitions as they apply to references in that Chapter) were omitted, modified or varied as specified in the declaration.
Subsection 1020F(1) provides that ASIC may declare that Part 7.9 applies in relation to a person as if specified provisions (including definitions as they apply to references in that Part) were omitted, modified or varied as specified in the declaration.
1. Background
Class Order [CO 01/1455]
Sections 713 and 1013FA of the Act permit a disclosing entity to prepare a prospectus or Product Disclosure Statement (PDS) with a specified limited content (“transaction-specific disclosure”) for continuously quoted securities. Transaction-specific disclosure is predicated on the fact that such entities are subject to the continuous disclosure requirements of the Act and that the market generally should have all information necessary to reach an informed view about those securities.
Section 9 of the Act defines “continuously quoted securities”. Securities of an entity will only satisfy the definition of “continuously quoted securities” where, among other things, no order under s340 or 341 covered the entity, its directors or auditor, during the shorter of the period during which the class of securities were quoted and the period of 12 months before the date of the prospectus or Product Disclosure StatementPDS.
Class Order [CO 01/1455] allows an entity to use transaction-specific disclosures even where the entity, its directors or auditor are covered by certain ASIC orders made under section 341 which give technical accounting and financial reporting relief and do not detract from the level of information available to the market.
Class Order [CO 04/672]
The Act requires a person to prepare a prospectus or PDS for an offer to sell securities or financial products where:
(a) the offer is made within 12 months of issue;
(b) there was no disclosure at the time of issue; and
(c) certain other criteria set out in subsections 707 and 1012C are satisfied.
A prospectus or PDS is not required for securities or financial products that are quoted and for which a “cleansing notice” under section 708A and s1012DA has been lodged with the relevant operator of the financial market. This “cleansing notice” exemption is only available where, among other thing, no order under section 341 covered entity, its directors and or auditor, at any time during the shorter of the period during which the class of securities or financial products were quoted and the period of 12 months before the day on which the relevant securities or products were issued.
Class Order [CO 04/672] allows an entity to rely on the “cleansing notice” exemption even where the entity, its directors or auditor are covered by certain ASIC orders made under section 341 which give technical accounting and financial reporting relief and do not detract from the level of information available to the market.
2. Purpose of the class order
The purpose of Class Order [CO 07/572] the class order is to remove references in
CO CO 01/1455] and [CO CO 04/672] to certain orders made under section 341 which:
(a) have been superseded because they have expired or been revoked; and
(b) could not have covered an entity, its directors or auditor so as to disqualify a person from relying on section 708A, 713, 1012DA or 1013FA.
3. Operation of the class order
Class Order [CO 07/572] amends [CO 01/1455] and [CO 04/672] by removing references in those class orders to the following superseded orders:
-
- Class Order [CO 98/105] Authorised trustee corporations – trust liabilities; -
- Class Order [CO 98/107] NSW workers compensation statutory funds; -
- Class Order [CO 98/110] ADIs – related party balances and transactions; -
- Class Order [CO 98/1416] Comparative information in financial reports; -
- Class Order [CO 05/640] ADIs – related party transactions and balances; -
- Class Order [CO 05/643] Combining registered scheme financial reports; - Class Order [CO 06/50] Transfer of remuneration information into directors' report; and - Class Order [CO 06/105] Calculation of director and executive remuneration.
4. Consultation
Class Order [CO 07/572] is of a minor or machinery nature and does not substantially alter existing arrangements. Consequently, ASIC did not undertake any consultation with stakeholders before making the class order.
Overview
The Australian Securities and Investments Commission (ASIC) issued the Class Order [CO 07/572] under the Corporations Act 2001 to refine the application of certain existing class orders. Specifically, Class Order [CO 07/572] modifies Class Orders [CO 01/1455] and [CO 04/672] to remove references to superseded orders made under section 341 of the Act. These superseded orders, such as Class Orders [CO 98/105], [CO 98/107], [CO 98/110], [CO 98/1416], [CO 05/640], [CO 05/643], [CO 06/50], and [CO 06/105], have either expired, been revoked, or could not have applied to entities, their directors, or auditors in a way that would disqualify them from relying on specific disclosure provisions. The objective of this class order is to streamline the regulatory framework by removing outdated references, thereby ensuring that the provisions remain relevant and effectively address current market conditions. This amendment is considered minor and does not necessitate stakeholder consultation, as it does not substantially alter existing arrangements.
Scope and Application
The ASIC Class Order [CO 07/572] applies to entities preparing prospectuses or Product Disclosure Statements (PDS) for securities and financial products, specifically those subject to the continuous disclosure requirements of the Corporations Act 2001. This includes entities whose securities are continuously quoted and those that need to prepare a prospectus or PDS for offers made within 12 months of issue where no disclosure was provided at the time of the initial issue. The Class Order varies the previous Class Orders [CO 01/1455] and [CO 04/672] by removing references to certain superseded orders under section 341 that have expired or been revoked. These superseded orders included those related to authorised trustee corporations, NSW workers compensation statutory funds, authorised deposit-taking institutions (ADIs), and various reporting requirements such as combining financial reports and the calculation of director and executive remuneration. The Class Order does not substantially alter existing arrangements and therefore did not require consultation with stakeholders. The Class Order operates to streamline the regulatory framework by removing outdated references, ensuring that the requirements for preparing prospectuses or PDS remain relevant and efficient.
Key Provisions
The ASIC Class Order [CO 07/572] is a variation of Class Orders [CO 01/1455] and [CO 04/672] under the Corporations Act 2001 (the Act). Specifically, it amends these class orders by removing references to certain superseded orders made under section 341 of the Act (subsections 741(1) and 1020F(1)). The purpose of this variation is to ensure that the class orders remain relevant and do not refer to orders that have been expired or revoked, and could not have covered an entity, its directors, or auditor, thus disqualifying them from relying on certain sections of the Act (sections 708A, 713, 1012DA, or 1013FA).
The obligations and requirements imposed by the Act under these class orders primarily concern the preparation of prospectuses or Product Disclosure Statements (PDS) for entities offering securities. Section 713 of the Act allows for transaction-specific disclosure for continuously quoted securities, while section 9 defines "continuously quoted securities." These securities are subject to continuous disclosure requirements, ensuring that the market has all necessary information to make informed decisions. Class Order [CO 01/1455] allows entities to use transaction-specific disclosures even if they are covered by certain ASIC orders under section 341, which provide technical accounting and financial reporting relief without compromising the market's access to information. Similarly, Class Order [CO 04/672] permits reliance on a "cleansing notice" exemption for offers made within 12 months of issue, provided no order under section 341 covered the entity, its directors, or auditor, during the relevant period.
The Class Order [CO 07/572] removes references to several superseded orders, including Class Order [CO 98/105], [CO 98/107], [CO 98/110], [CO 98/1416], [CO 05/640], [CO 05/643], [CO 06/50], and [CO 06/105], to ensure the class orders remain current and applicable. These superseded orders related to various topics, such as trust liabilities, workers compensation statutory funds, related party balances and transactions, comparative information in financial reports, and the calculation of director and executive remuneration. The removal of these references is intended to streamline and clarify the existing class orders.
The Act does not specify any particular offences, penalties, or civil/criminal consequences for breaches of the class orders themselves. However, the underlying provisions of the Act, such as sections 708A, 713, 1012DA, and 1013FA, may carry penalties for non-compliance. For instance, misleading or deceptive conduct under section 1041H of the Act can result in civil penalties of up to $1.7 million for a corporation and $340,000 for individuals, as well as criminal penalties. Additionally, breaches of continuous disclosure obligations under section 674 can result in civil penalties of up to $1.7 million for a corporation and $340,000 for individuals. The exact penalties depend on the nature and severity of the breach.