ASIC Class Order [CO 09/27]

Administered by Department of the Treasury

Legislation au F2009L00869 Not in force Legislative Instrument

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ASIC CLASS ORDER [CO 09/27]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 09/27] under subsections 601QA(1) and 1075A(1) of the Corporations Act 2001 (the Act).

Paragraph 601QA(1)(b) of the Act provides that ASIC may declare that specified provisions of Chapter 5C of the Act apply to a person or class of persons as if they were omitted, modified or varied as specified in the declaration.

Subsection 1075A(1) provides that ASIC may declare that Part 7.11 of the Act applies to a specified class of financial products as if specified provisions were modified as specified in the declaration.

1. Background

The ASX Quoted Assets (AQUA) rules is a framework set up by ASX Limited (ASX) for the quotation of particular managed funds and structured products on the market. These products are known as “AQUA Products”.

A financial product may be admitted as an AQUA Product in certain circumstances if the product gives investors exposure to any underlying asset or set of assets such that the value of the AQUA Product is linked to the performance of the underlying asset(s) rather than the financial performance of the issuer.

The AQUA framework consists of the AQUA trading market and the AQUA Quote Display Board and is implemented through the recently introduced new Sections 10A and 10B of the ASX Market Rules.

Class Order [09/27] varies ASIC Class Orders [CO 02/312] and [CO 05/26].

ASIC Class Order [02/312]

Under [CO 02/312] Part 7.11, Division 4 financial products for ASTC, certain products are specified to be Division 4 financial products in relation to the clearing and settlement facility operated by ASX Settlement & Transfer Corporation Pty Ltd (ASTC). This enables those products to be transferred through ASTC under the regulations made for the purposes of Div 4 of Part 7.11 of the Act and with the benefit of the statutory warranties and indemnities contained in those regulations.

Class Order [02/312] also has the effect that the National Guarantee Fund provisions, contained in Division 4 of Part 7.5 of the Act and the related regulations, apply to transfers of those financial products that are effected electronically by an ASX participant in ASTC's Clearing House Electronic Subregister System (CHESS).

Class Order [02/312] also modifies the operation of regulation 7.11.28 of the Corporations Regulations 2001 in respect of Division 4 financial products.

ASIC Class Order [05/26]

Paragraph 601GA(1)(a) of the Act requires the constitution of a registered managed investment scheme to make adequate provision for the consideration at which interests in the scheme are acquired. In 2005, ASIC executed Class Order [CO 05/26] Constitutional provisions about the consideration to acquire interests. The class order operates so that if the scheme's constitution contains provisions to the effect of the terms of the class order, the responsible entity of the scheme may set the issue price of interests in certain prescribed circumstances.

Subsection 601GAB of the Act (as notionally inserted by [CO 05/26]) provides for two alternative approaches to setting the issue price, depending on whether or not the interests in the scheme are quoted on a financial market. If an interest is quoted, the formula or method must be based on the market price of the interests on the market.

2. Purpose of the class order

Most AQUA Products fall under Part 7.11 of the Act, either by virtue of being a Division 4 financial product under the Act or under [CO 02/312]. However, it appears that not all AQUA Products will be covered. The purpose of [CO 09/27] is to amend [CO 02/312] so that Division 4 of Part 7.11 of the Act applies to AQUA Products.

The other purpose of [CO 09/27] is to amend [CO 05/26] so that where an interest in a registered scheme is able to be traded on the AQUA market, the interest may be issued at a price that is set by using a formula or method that is based on the value of the scheme property of the scheme less any liabilities that under the constitution may be met from that property divided by the number of interests on issue.

3. Operation of the class order

Paragraph 4(a)(i) of [CO 09/27] amends [CO 02/312] so that Division 4 of Part 7.11 of the Act also applies to warrants and certain managed investment scheme interests which are admitted to the AQUA Quote Display Board.

Paragraph 4(a)(ii) of [CO 09/27] amends [CO 02/312] by substituting the description of CHESS Depositary Interests with a new description to avoid doubt that Division 4 of Part 7.11 of the Act applies to CHESS Depositary Interests.

Paragraph 5 of [CO 09/27] amends [CO 05/26] by amending subsection 601GAB(2) & inserting a new subsection 601GAB(13A) so that the constitution of a scheme may provide for the determination of the issue price of interests in the scheme by using a formula or method that is based on the value of scheme property of the scheme less any liabilities that under the constitution may be met from that property divided by the number of interests on issue, if the interests are AQUA Products and are able to be traded on a financial market operated by ASX.

4. Documents incorporated by reference

A copy of the ASX Market Rules and the ASTC Settlement Rules can be obtained from the ASX's website at http://www.asx.com.au.

5. Consultation

As this class order is minor and machinery in nature, no consultation took place in deciding to provide this relief other than with ASX who requested the relief.

Overview

The Australian Securities and Investments Commission (ASIC) introduced ASIC Class Order [CO 09/27] in 2009 under the Corporations Act 2001, aiming to address the gaps in the regulatory framework concerning the quotation of certain managed funds and structured products, referred to as "AQUA Products," on the Australian Securities Exchange (ASX) market. This order was enacted by ASIC to enhance the existing regulatory provisions, particularly by aligning them with the ASX Quoted Assets (AQUA) rules. The primary objective is to ensure that Division 4 of Part 7.11 of the Act applies to AQUA Products, thereby extending the scope of the regulatory framework to cover these products comprehensively. Additionally, the order seeks to allow for the issuance of interests in registered schemes based on a formula or method that reflects the value of the scheme's property, provided these interests can be traded on the AQUA market. This adjustment aims to provide a more flexible and appropriate pricing mechanism for AQUA Products, ensuring they are subject to the necessary regulatory oversight.

Scope and Application

ASIC Class Order [CO 09/27] applies to entities and products within the Australian financial market, particularly those admitted to the Australian Securities Exchange (ASX) Quoted Assets (AQUA) framework. This class order is made under the Corporations Act 2001, which has a national jurisdictional reach across Australia. It targets AQUA Products, which include managed funds and structured products quoted on the ASX, by modifying how these products are regulated under Part 7.11 of the Act. The class order specifically adjusts provisions from earlier ASIC class orders [CO 02/312] and [CO 05/26] to ensure that Division 4 of Part 7.11 of the Act applies to AQUA Products. This includes modifying how the issue price of interests in managed investment schemes can be set when these interests are traded on the AQUA market. The class order also extends its application through the use of subordinate instruments, ensuring that the regulations remain comprehensive and effective within the evolving financial market landscape.

Key Provisions

ASIC Class Order [CO 09/27] under the Corporations Act 2001 introduces specific provisions that apply to ASX Quoted Assets (AQUA) products, a category of managed funds and structured products listed on the Australian Securities Exchange (ASX). Section 4(a)(i) of the class order amends the previous ASIC Class Order [CO 02/312], extending Division 4 of Part 7.11 of the Act to include warrants and certain managed investment scheme interests that are admitted to the AQUA Quote Display Board. Section 4(a)(ii) further clarifies that Division 4 of Part 7.11 of the Act applies to CHESS Depositary Interests, ensuring there is no doubt regarding this application. Additionally, section 5 of the class order modifies ASIC Class Order [CO 05/26] by amending subsection 601GAB(2) and inserting a new subsection 601GAB(13A), which allows the constitution of a scheme to provide for the determination of the issue price of interests in the scheme based on the value of the scheme property less any liabilities that can be met from that property, divided by the number of interests on issue. This is applicable if the interests are AQUA Products and can be traded on a financial market operated by ASX. The obligations imposed by the ASIC Class Order [CO 09/27] require that AQUA Products comply with Division 4 of Part 7.11 of the Act, ensuring they meet the statutory warranties and indemnities required for transfers through ASTC. Additionally, the responsible entities of registered managed investment schemes must ensure that their constitutions allow for the setting of issue prices based on the prescribed formula if the interests in the scheme can be traded on the AQUA market. This involves calculating the issue price using the value of the scheme property less any liabilities, divided by the number of interests on issue. These obligations ensure that AQUA Products are listed and traded in a manner that complies with regulatory standards and provides transparency to investors. The class order does not explicitly outline specific offences, penalties, or civil/criminal consequences for breaches. However, any failure to comply with the requirements of Division 4 of Part 7.11 of the Act, including the statutory warranties and indemnities for transfers, or the prescribed method for setting issue prices, could potentially result in actions under the broader provisions of the Corporations Act 2001. Such actions could include civil penalties, fines, and other enforcement actions by ASIC. The penalties for breaches of the Corporations Act can vary widely depending on the nature and severity of the breach, but they can include substantial fines for both individuals and corporations, and in severe cases, imprisonment.

Area of Law: Corporate Law & Governance
Instrument: Regulation
Concepts: Definitions & Interpretation; Regulatory Standards; Licensing & Registration

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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