ASIC CLASS ORDER 07/0642

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

The Australian Securities and Investments Commission (ASIC) makes Class Order [CO 07/0642] Variation to Class Order [CO 02/315] Time-sharing schemes – use of loose-leaf price list under paragraph 601QA(1)(b) of the Corporations Act 2001 (the Act).  Paragraph 601QA(1)(b) of the Act provides that ASIC may declare that Chapter 5C of the Act applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

1. Background

Paragraph 601GA(1)(a) of the Act requires that the constitution of a registered managed investment scheme makes adequate provision for the consideration that is to be paid to acquire an interest in the scheme.

[CO 02/315]:

(a) modifies paragraph 601GA(1)(a) of the Act to allow promoters and operators of registered time-sharing schemes to specify the acquisition price of time-sharing interests in a prospectus, separate loose-leaf price list or product disclosure statement instead of requiring that the acquisition price be specified in the constitution of the registered time-sharing; and

(b) exempts promoters and operators of registered time-sharing schemes from the requirements in sections 710 and 711 of the Act to specify the acquisition price of time-sharing interests in a prospectus.

ASIC granted relief from paragraph 601GA(1)(a) of the Act and sections 710 and 711 of the Act in [CO 02/315] because the acquisition price of a time-sharing interest is often negotiable and variable.  Allowing promoters and operators of registered time-sharing schemes to use a loose-leaf price list to specify the acquisition price facilitates prices being quickly and easily updated.

ASIC has imposed conditions on the relief in [CO 02/315] that are designed to:

(a) protect consumers from the effects of pressure selling tactics; and

(b) assist consumers make an information decision about the costs associated with the purchase of time-sharing interests.

2. The purpose of the class order

[CO 07/0642] effects amendments to [CO 02/315] which are intended to remove the requirement that operators of registered time-sharing schemes give a cooling-off period of 14 calendar days and replace it with a requirement that gives them a choice of giving a cooling-off period of not less than 7 calendar days if they are members of the Australian Timeshare and Holiday Ownership Council and ASIC has not notified them in writing that they cannot continue to give a cooling-off period of 7 calendar days or giving a cooling-off period of not less than 14 calendar days if they are not members of the Australian Timeshare and Holiday Ownership Council. 

The change has been made in light of the existence of a Code of Practice bindingmembers of Australian Timeshare and Holiday Ownership Council. That Code of Practice specifically deals with marketing and selling related issues. We considered that compliance with this Code of Practice could reduce the risk of pressure selling such that a lesser cooling-off period is warranted. We will continue to monitor complaints of pressure selling in the time-sharing industry to ensure the proposed relief remains warranted.

3. Consultation

ASIC has received and considered written submissions from various parties, including the Australian Timeshare and Holiday Ownership Council and operators of time-sharing schemes, in relation to whether it should give time-sharing operators and promoters a choice of giving a cooling-off period of not less than 7 calendar days if they are members of the Australian Timeshare and Holiday Ownership Council or giving a cooling-off period of not less than 14 calendar days if they are not members of the Australian Timeshare and Holiday Ownership Council.  These submissions were taken into account in the development of [CO 07/0642].