ASIC CLASS ORDER 07/88
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001- Paragraphs 601QA(1)(b) and 741(1)(a) – variation
Paragraph 601QA(1)(b) of the Corporations Act 2001 (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.
Paragraph 741(1)(a) of the Act provides that ASIC may exempt a person from a provision of Chapter 6D of the Act.
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.
Section 710 of the Act requires that a prospectus must contain all of the information that consumers would reasonably require to make an informed assessment about whether to acquire the product.
Section 711 of the Act requires that the prospectus must set out certain specified information.
ASIC Class Order 02/315 Time-sharing schemes – use of loose-leaf price list (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 Class Order
ASIC Class Order 07/88 (CO 07/88) effects amendments to [CO 02/315] which are intended to:
(a) replace references to the disclosure regime in Chapter 6D of the Act and the transitional disclosure regime in Part 10.2 of the Act, which no longer apply to time-sharing interests, and replace them with references to the disclosure regime in Part 7.9 of the Act, which now applies to time-sharing interests; and
(b) remove the requirement that operators of registered time-sharing schemes give a cooling-off period of not less than 10 business days, or if the operator is a member of the Australian Timeshare & Holiday Ownership Council Limited (ATHOC), not less than 5 business days and replace it with a requirement that operators of a scheme give a cooling-off period of not less than 14 calendar days. The changes have been made in light of ongoing concerns regarding cooling-off periods for time-sharing schemes and to harmonise the cooling-off period for these time-sharing schemes with the cooling-off period that applies to other products regulated under the Act.
3. Consultation
ASIC has received and considered written submissions from various parties, including ATHOC, operators of time-sharing schemes and consumer groups, in relation to whether it should require that all operators of time-sharing schemes give purchasers of time-sharing interests 14 calendar days to exercise their cooling-off rights. These submissions were taken into account in the development of [CO 07/88].
ASIC did not consult on the other amendments to [CO 02/315] in [CO 07/88], as they are only minor or machinery in nature.
Overview
The ASIC Class Order 07/88 was enacted in 2007 as an amendment to Class Order 02/315, which initially provided relief to promoters and operators of registered time-sharing schemes by allowing them to specify the acquisition price of time-sharing interests in a prospectus, separate loose-leaf price list or product disclosure statement, rather than in the constitution of the registered time-sharing. This amendment was introduced to address the issue of negotiable and variable acquisition prices for time-sharing interests, facilitating easier and quicker updates. The policy objective of these orders is to protect consumers from pressure selling tactics and to assist them in making an informed decision about the costs associated with purchasing time-sharing interests. The changes in CO 07/88 aim to replace outdated references to disclosure regimes and harmonise the cooling-off period for time-sharing schemes with other products regulated under the Corporations Act 2001. ASIC considered written submissions from various parties, including the Australian Timeshare & Holiday Ownership Council Limited, operators of time-sharing schemes, and consumer groups, in determining the appropriate length of the cooling-off period.
Scope and Application
ASIC Class Order 07/88 applies to persons and entities involved in the operation of registered time-sharing schemes in Australia, specifically modifying and updating the regulatory framework that governs these entities. The order pertains to the acquisition price disclosure and cooling-off period requirements for such schemes. Geographically, the Act applies nationwide under the Commonwealth jurisdiction, ensuring uniform regulation across all states and territories. The order includes modifications to earlier provisions in ASIC Class Order 02/315, addressing the evolving regulatory environment by updating references to the disclosure regime and altering the cooling-off period for purchasers. It excludes certain transitional disclosure regimes that no longer apply to time-sharing interests. The application of the Act can be further extended or restricted through subordinate instruments, allowing ASIC to adapt to changing market conditions and practices.
Key Provisions
The ASIC Class Order 07/88 primarily amends the earlier Class Order 02/315 concerning time-sharing schemes. Section 601QA(1)(b) of the Corporations Act 2001 allows the Australian Securities and Investments Commission (ASIC) to declare that certain provisions of Chapter 5C of the Act apply to a person as if specified provisions were omitted, modified or varied as specified in the declaration. Similarly, section 741(1)(a) of the Act allows ASIC to exempt a person from a provision of Chapter 6D of the Act. These provisions provide ASIC with the flexibility to tailor regulatory approaches to specific circumstances while maintaining the overarching objectives of the Act. Class Order 07/88 amends the relief provided by Class Order 02/315, updating references to reflect the current legislative framework and addressing consumer protection concerns.
The obligations imposed by the Class Order on parties governed by it include ensuring that the acquisition price of time-sharing interests is specified in a prospectus, separate loose-leaf price list, or product disclosure statement rather than in the constitution of the registered time-sharing scheme. This amendment facilitates the updating of prices and provides consumers with clear information. Additionally, operators of registered time-sharing schemes are required to provide a cooling-off period of at least 14 calendar days, harmonising the cooling-off period for these schemes with other products regulated under the Corporations Act. This requirement aims to protect consumers by allowing them sufficient time to consider their purchase decision.
Breaches of the provisions outlined in the Class Order can lead to significant consequences. While the explanatory statement does not detail specific offences or penalties, the underlying legislation, the Corporations Act, provides for various civil and criminal penalties for non-compliance. For example, misleading or deceptive conduct can result in substantial fines, both for the individual and the corporation involved. Additionally, directors and officers of companies found in breach of the Act may face disqualification from managing corporations, further underscoring the importance of adherence to the regulatory requirements. The Act also provides for both civil penalties and criminal sanctions, with maximum penalties varying depending on the nature and severity of the breach.