Overview

The ASIC Class Order [CO 08/781] was enacted in 2008 under the Corporations Act 2001, aiming to address a specific problem in the regulation of financial products, particularly warrants, within Product Disclosure Statements (PDS) and supplementary PDS. The Corporations Act mandates that these documents must be lodged with the Australian Securities and Investments Commission (ASIC) to ensure the availability of necessary information for regulatory oversight and consumer protection. However, the existing provisions caused an unintended and disproportionately burdensome regulatory requirement for issuers of warrants, who had to frequently lodge out-of-use notices when warrants ceased to be available. This class order was introduced by ASIC to alleviate this burden, aligning with the policy objectives of the Act by maintaining regulatory oversight while minimising unnecessary administrative costs. The class order provides an exemption from the requirement to lodge out-of-use notices until all warrants in a PDS or supplementary PDS cease to be available for recommendation or offer to new clients, provided the PDS or supplementary PDS includes two or more warrants and the same responsible person manages all the warrants. This targeted relief aims to streamline compliance for warrant issuers without compromising the Act's objectives of ensuring ASIC’s awareness of financial product information, minimising business costs, and enhancing consumer protection.

Scope and Application

ASIC Class Order [CO 08/781] applies to responsible persons for Product Disclosure Statements (PDS) and supplementary PDS that include warrants as financial products. The class order exempts these responsible persons from the requirement to lodge out-of-use notices with the Australian Securities and Investments Commission (ASIC) under paragraph 1015D(2)(c) of the Corporations Act 2001 until all the warrants to which the PDS or supplementary PDS relates cease to be available to be recommended or offered to new clients in a recommendation, issue or sale situation. This exemption applies only if the PDS or supplementary PDS contains two or more separate product disclosure statements or supplementary product disclosure statements for warrants, and the responsible person for each of these documents is the same. The exemption aims to alleviate the disproportionate burden on warrant issuers that results from frequent lodging of out-of-use notices while maintaining ASIC's regulatory oversight of financial products available to investors. The class order operates across Australia as it is a Commonwealth regulation.

Key Provisions

The ASIC Class Order [CO 08/781] under the Corporations Act 2001, primarily modifies the requirements for lodging out-of-use notices concerning warrants in a Product Disclosure Statement (PDS) or supplementary PDS. Specifically, Section 5 of [CO 08/781] provides that a responsible person does not need to lodge an out-of-use notice with ASIC until all the warrants to which the PDS or supplementary PDS relates cease to be available for recommendation or offer to new clients (Section 5). This exemption applies where a document includes two or more product disclosure statements or supplementary product disclosure statements for warrants, and the responsible person for each of these statements is the same (Section 4(a) and (b)). The Class Order imposes certain obligations on the parties it governs. Primarily, it requires that a responsible person for warrants in a PDS or supplementary PDS must ensure that the document includes two or more warrants, and that the responsible person is the same for all included warrants (Section 4). This requirement ensures that the relief provided by [CO 08/781] is not abused and is applied correctly. Additionally, it necessitates that the responsible person must monitor the availability of the warrants and lodge an out-of-use notice with ASIC when all warrants cease to be available (Section 5). In terms of consequences for non-compliance, while the Explanatory Statement does not explicitly state any penalties or consequences, breaches of the Corporations Act 2001 can lead to significant civil or criminal penalties. These can include fines and imprisonment, depending on the nature and severity of the breach. The exact penalties would depend on the specific breach and the discretion of the court, but they can be substantial under Australian law. It is also worth noting that failure to comply with ASIC’s requirements can lead to other regulatory consequences, such as public censure or further regulatory action against the responsible person or the issuer of the warrants.