ASIC Class Order [CO 09/1063]

Overview

The Australian Securities and Investments Commission (ASIC) issued ASIC Class Order [CO 09/1063] under the Corporations Act 2001 to address specific issues related to the reporting of short sales, particularly covered short sales and naked exchange-traded option (ETO) short sales. The Class Order was enacted to streamline and update the reporting requirements as a permanent regime for reporting covered short sales was set to commence with the Corporations Amendment (Short Selling) Act 2008. The purpose of this Class Order was to revoke the interim reporting measures established by ASIC Class Order [CO 08/751] and to omit the conditions in [CO 08/764] that required certain steps to facilitate the reporting of naked ETO short sales, as these were rendered redundant by the new regime. This instrument, which is of a minor and machinery nature, did not require consultation with external parties and took effect from the commencement of Schedule 3 to the Short Selling Act on 11 December 2009.

Scope and Application

ASIC Class Order [CO 09/1063] applies to financial products, specifically targeting covered short sales and naked exchange-traded option (ETO) short sales within the financial markets. It primarily affects market participants and entities involved in trading and reporting of securities and managed investments, ensuring compliance with the new short selling regime introduced under the Corporations Amendment (Short Selling) Act 2008. The jurisdictional reach of this class order is national, as it is issued under the Corporations Act 2001, which operates across Australia. The order revokes the earlier Class Order [CO 08/751] and omits specific conditions in Class Order [CO 08/764], reflecting the legislative changes aimed at streamlining and enhancing transparency in short selling practices. The order took effect on the commencement of Schedule 3 to the Short Selling Act, which was 11 December 2009. ASIC did not consult with external parties due to the minor and machinery nature of the changes introduced by this order.

Key Provisions

The ASIC Class Order [CO 09/1063] under the Corporations Act 2001 (section 1020F(1)(a) and (c)) serves to modify the regulatory framework governing short selling in Australia. Specifically, it revokes the earlier Class Order [CO 08/751] that had imposed interim reporting requirements for covered short sales (section 1020B products) and omits certain conditions in Class Order [CO 08/764] related to naked ETO short sales. The new regime will align with the permanent legislative changes set out in Division 5B of Part 7.9 of the Act and Division 15 of the Corporations Regulations 2001, which are scheduled to commence on 11 December 2009. Entities and individuals subject to the Corporations Act 2001 must comply with the new requirements set forth in the Class Order [CO 09/1063]. This includes understanding and adhering to the definitions and distinctions between covered short sales and naked ETO short sales. The order requires market participants to ensure that any transactions they are involved in are appropriately reported in line with the statutory obligations. Notably, the new regime will no longer necessitate the reporting of naked ETO short sales, a requirement previously stipulated in [CO 08/764]. Failure to comply with the provisions of the ASIC Class Order [CO 09/1063] may result in regulatory action. While the explanatory statement does not explicitly detail specific offences, penalties, or civil/criminal consequences, breaches of the Corporations Act 2001 can lead to significant penalties. For instance, under section 1317E, a person who contravenes certain civil penalty provisions can be subject to a pecuniary penalty of up to $210,000 for a corporation and $42,000 for an individual, as well as potential criminal penalties, including fines and imprisonment. The exact consequences will depend on the nature and severity of the breach. Overall, the ASIC Class Order [CO 09/1063] aims to streamline and update the regulatory framework for short selling in Australia, ensuring that it aligns with the permanent legislative changes introduced by the Short Selling Act. By revoking outdated provisions and omitting redundant conditions, the order seeks to reduce regulatory burden while maintaining effective oversight and reporting mechanisms within the financial markets.