ASIC CLASS ORDER [CO 09/728]
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 09/728] under ss601QA and 911A(2)(l) of the Corporations Act 2001 (the Act).
Section 601QA(1)(a) provides that ASIC may exempt a class of persons from the provisions of Ch 5C of the Act.
Section 911A(2)(l) provides that ASIC may exempt a class of persons from the requirement to hold an Australian Financial Services licence (AFS licence) under Pt 7.6 of the Act.
1. Background
ASIC Class Order [CO 08/1] gives conditional relief from the AFS licensing regime and Ch 5C of the Act for some group purchasing bodies (GPBs) who arrange or hold risk management products (insurance) for the benefit of third parties. GPBs include sporting and other not-for-profit organisations which arrange insurance for third parties (e.g. players or volunteers).
ASIC Class Order [CO 08/1] provides conditional relief only to a limited class of GPBs who organise insurance on a non-commercial basis. The transitional period for compliance with [CO 08/1] was scheduled to end on 30 September 2009. Industry have asked ASIC to clarify [CO 08/1] and its policy for relief as explained in RG 195 Group purchasing bodies for insurance and other risk management products (RG 195).
2. Purpose of the class order
ASIC Class Order [CO 09/728] extends the transitional period for compliance with [CO 08/1] by four months to enable ASIC to make any necessary amendments to [CO 08/1] and RG 195 to clarify how the eligibility tests in the relief operate.
3. Operation of the class order
Paragraph 4 amends [CO 08/1] by substituting ‘31 January 2010’ in place of ‘30 September 2009’ in subparagraph 10(f). This means that from 1 February 2010 GPBs relying on relief under [CO 08/1] will need to report any breaches of the conditions of [CO 08/1] to ASIC under subparagraph 10(f).
5. Consultation
In preparing [CO 09/728] ASIC has taken account of concerns articulated by the National Insurance Brokers Association of Australia (NIBA). ASIC did not undertake further consultation as [CO 09/728] is of a minor and machinery nature.
Overview
The Australian Securities and Investments Commission (ASIC) issued the ASIC Class Order [CO 09/728] under sections 601QA and 911A(2)(l) of the Corporations Act 2001. This class order extends the transitional period for compliance with ASIC Class Order [CO 08/1], which provides conditional relief from the Australian Financial Services (AFS) licensing regime and Chapter 5C of the Corporations Act for certain group purchasing bodies (GPBs) that arrange or hold risk management products, such as insurance, for the benefit of third parties. The purpose of the class order is to allow ASIC additional time to amend and clarify the conditions of relief provided under [CO 08/1] and the related guidance in Regulatory Guide 195. The class order extends the transitional period by four months, providing relief until 31 January 2010. ASIC prepared the class order with consideration of feedback from the National Insurance Brokers Association of Australia, though no further consultation was undertaken as the changes were of a minor and administrative nature.
Scope and Application
The ASIC Class Order [CO 09/728] applies to group purchasing bodies (GPBs) that are not-for-profit organisations arranging or holding insurance for third parties, such as players or volunteers. The Act grants conditional relief from the Australian Financial Services licensing regime and certain provisions of the Corporations Act 2001 to these GPBs provided they operate on a non-commercial basis. This relief extends the transitional period for compliance with a previous class order, [CO 08/1], allowing affected GPBs additional time until 31 January 2010 to comply with the stipulated conditions. The geographic reach of this legislation is national, as it pertains to the overarching framework set by the Commonwealth through the Corporations Act 2001. No specific exclusions or thresholds are mentioned in the explanatory statement, but the relief is contingent upon the GPBs meeting the non-commercial criteria as outlined in the relief policy. The application of the Act can be further refined or extended through subordinate instruments, as permitted under sections 601QA and 911A(2)(l) of the Corporations Act 2001.
Key Provisions
The main operative sections of ASIC Class Order [CO 09/728], as referenced in the explanatory statement, focus on extending the transitional period for compliance with a previous class order, [CO 08/1]. This extension is primarily found in paragraph 4, which amends the original compliance deadline from 30 September 2009 to 31 January 2010, as stated in subparagraph 10(f) of [CO 08/1]. This change allows certain group purchasing bodies (GPBs) that arrange insurance for third parties, such as not-for-profit organisations, additional time to comply with the conditions set out in [CO 08/1]. This relief is contingent on the GPBs organising insurance on a non-commercial basis.
ASIC Class Order [CO 09/728] imposes several obligations and requirements on the GPBs that are subject to its provisions. Firstly, these GPBs must ensure they adhere to the conditions specified in [CO 08/1], which include reporting any breaches of these conditions to ASIC. This requirement is now applicable from 1 February 2010, as per the amendment made by [CO 09/728]. Additionally, GPBs must be vigilant in their operations to ensure they remain within the bounds of the non-commercial insurance arrangement criteria to continue qualifying for the relief provided by [CO 08/1].
Under the Corporations Act 2001, breaches of the provisions outlined in ASIC Class Orders can lead to both civil and criminal consequences. While the explanatory statement does not detail specific penalties for non-compliance with [CO 09/728], general penalties for breaches of the Act can include substantial fines and, in severe cases, imprisonment. The penalties are designed to enforce compliance and protect the interests of third parties involved in the insurance arrangements. For instance, penalties for breaches of the AFS licensing requirements can be severe, including fines up to $1.3 million for corporations and $260,000 for individuals, as well as potential imprisonment terms.
It is crucial for GPBs to be aware that the extension provided by [CO 09/728] is temporary and does not eliminate the need to ultimately comply with the conditions set forth in [CO 08/1]. The extension is solely to allow ASIC the necessary time to make any required amendments and provide clarity to the industry. Failure to comply with the conditions of [CO 08/1] after the extended period could result in the loss of the relief, potentially necessitating the acquisition of an AFS licence or adherence to the full requirements of Chapter 5C of the Corporations Act 2001.