ASIC CLASS ORDER 07/90
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001- Paragraphs 601QA(1)(a), 911A(2)(l) and 1020F(1)(a) - variation
Paragraph 601QA(1)(a) of the Corporations Act 2001 (the Act) provides that the Australian Securities and Investments Commission (ASIC) may exempt a person from a provision of Chapter 5C of the Act.
Paragraph 911A(2)(l) of the Act provides that a person is exempt from the requirement to hold an Australian financial services licence for a financial service if the provision of the service is covered by an exemption covered by an exemption specified by ASIC in writing and published in the Gazette.
Paragraph 1020F(1)(a) of the Act provides that ASIC may exempt a person or class of persons from all or specified provisions in Part 7.9 of the Act.
1. Background
A rental pool involves the pooling of members unused time-sharing entitlements for the purpose of renting those entitlements to other persons. The proceeds of the rental pool (after related expenses are deducted) are then distributed among members of the rental pool. A rental pool allows members to receive income if they do not choose to use their allocated time during any particular year.
Section 601ED of the Act provides that a managed investment scheme must be registered under section 601EB if:
(a) it has more than 20 members;
(b) it was promoted by a person, or an associate of a person who was, when the scheme was promoted, in the business of promoting managed investment schemes; or
(c) ASIC determines that a number of managed investment schemes are closely related and that each of them has to be registered at any time when the total number of members of all of the schemes exceeds 20.
Division 3 of Part 7.9 imposes various disclosure obligations on the issuer of a financial product, including to provide ongoing disclosure.
ASIC Class Order 02/237 Time-sharing schemes – operation of rental pool (CO 02/237) grants conditional relief from the requirements to:
(a) register the rental pool as a managed investment scheme under section 601ED of the Act;
(b) obtain an Australian financial services licence for persons (other than the operator of the rental pool) that provide financial services for the interests in the rental pool; and
(c) comply with the additional disclosure requirements in Division 3 of Part 7.9 of the Act (except section 1017D of the Act).
[CO 02/237] also revokes earlier relief granted by ASIC for the operation of rental pools in ASIC Class Order 01/179 Time-sharing schemes – operation of rental pool.
ASIC has granted relief in [CO 02/237] for:
(a) a rental pool that forms part of a new time-sharing scheme; and
(b) a rental pool formed after interests in a time-sharing scheme have been issued.
ASIC has granted this relief because the rental pool is generally an incidental part of the business associated with the time-sharing scheme.
ASIC has imposed conditions on the relief that will:
(a) help consumers make an informed decision about the costs associated with the rental pool;
(b) help members understand their investment in the rental pool; and
(c) protect members from loss or misappropriation of the proceeds of the rental pool.
2. The Class Order
ASIC Class Order 07/90 (CO 07/90) effects amendments to [CO 02/237] that are intended to replace outdated 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 following recent legislative changes.
3. Consultation
ASIC did not consult on the amendments to [CO 02/237] in [CO 07/90], as they are only minor or machinery in nature.
Overview
The ASIC Class Order 07/90, introduced in 2007, serves to amend the regulatory relief previously provided by the Australian Securities and Investments Commission (ASIC) under Class Order 02/237 concerning the operation of rental pools in time-sharing schemes. This order was enacted to address the need for updating the regulatory framework to reflect recent legislative changes and to ensure that the relief provided remains relevant and effective. The objective of this Class Order is to align the regulatory relief with the current disclosure regime under Part 7.9 of the Corporations Act 2001, replacing outdated references to other parts of the Act that no longer apply to time-sharing interests. ASIC has determined that these amendments are of a minor or machinery nature, and thus consultation was not required prior to the issuance of this Class Order.
Scope and Application
The ASIC Class Order 07/90 amends the ASIC Class Order 02/237 concerning the operation of rental pools for time-sharing schemes, thereby applying to rental pools that are part of new time-sharing schemes and those formed after interests in a time-sharing scheme have been issued. This Class Order affects those managing these rental pools, as well as any financial services providers involved in the scheme, by altering the regulatory landscape in which they operate. Geographically, the application of this Class Order is national, aligning with the jurisdictional reach of the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001. The amendments are designed to update the legal framework to reflect recent legislative changes that now subject time-sharing interests to the disclosure regime in Part 7.9 of the Act, rather than the superseded regimes in Chapter 6D and Part 10.2. ASIC has not required consultation for these amendments, deeming them minor or procedural in nature, ensuring continued regulatory efficiency without undue administrative burden.
Key Provisions
The ASIC Class Order 07/90 (CO 07/90) amends the earlier ASIC Class Order 02/237 (CO 02/237), which provides relief from certain regulatory requirements for the operation of rental pools in time-sharing schemes. Specifically, under section 601QA(1)(a) of the Corporations Act 2001, CO 02/237 exempts certain time-sharing rental pools from being classified as a managed investment scheme and thus from the need to register under section 601ED of the Act if certain criteria are met. Under section 911A(2)(l), CO 02/237 also exempts individuals and entities providing financial services for the interests in the rental pool from the need to hold an Australian financial services licence if specified by ASIC in writing and published in the Gazette. Additionally, under section 1020F(1)(a), CO 02/237 exempts these entities from some of the disclosure requirements under Division 3 of Part 7.9 of the Act. CO 07/90 updates these references to align with the current legislative framework.
The obligations imposed by CO 07/90 on entities and individuals benefiting from the relief include ensuring that members of the rental pool are provided with adequate information to make informed decisions. This includes information about the costs associated with the rental pool and members' understanding of their investment. Additionally, entities must ensure that the proceeds of the rental pool are protected from loss or misappropriation. The conditions under CO 07/90 aim to protect consumers and members by ensuring transparency and accountability in the operation of rental pools.
Breach of the conditions set out in CO 07/90 could lead to various consequences. While the explanatory statement does not specify maximum penalties, breaches of the Corporations Act 2001 can result in substantial fines and, in some cases, imprisonment. For example, under section 1304 of the Act, individuals found guilty of contravening certain provisions can be subject to fines of up to $210,000 and imprisonment for up to five years. Entities, rather than individuals, may face even higher fines, up to $10.5 million. Additionally, civil penalties can be imposed for breaches of disclosure obligations, and ASIC can seek court orders for redress or compensation for affected parties. It is essential for entities to comply with the conditions to avoid these severe repercussions.