ASIC CLASS ORDER [CO 10/116]
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 10/116] 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 can 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] limits the relief provided to circumstances where the group purchasing body is most likely to be acting in the interests of the persons to be covered by the risk insurance product, rather than in its own interests or in the interests of anyone else. Given that the role played by certain group purchasing bodies is in many ways more like the buyer of risk management products rather than a seller, ASIC considers that there may be less need for strict compliance with the requirements of Chapters 7 and 5C. ASIC Class Order [CO 08/1] came into effect on 30 September 2008. In 2009, some participants in the insurance industry and some group purchasing bodies 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) to remove uncertainty about the conduct of group purchasing bodies that might bring them within the scope of the relief, to give more particular guidance about the practical operation of the eligibility tests for the relief, and to introduce greater flexibility into the notification requirements in the conditions of relief.
2. Purpose of the class order
ASIC Class Order [CO 10/116] clarifies the relief available for eligible group purchasing bodies that are arranging and holding risk management products or operating a risk management scheme. It also extends the transitional period for compliance with the breach reporting condition in [CO 08/1] to permit stakeholders time to understand the clarifications made to [CO 08/1] and RG 195.
3. Operation of the class order
Paragraph 4 amends [CO 08/1] by:
(a) extending relief to group purchasing bodies that are Australian financial services licensees and the authorised representatives of Australian financial services licensees where the interests in the risk management scheme are issued to officers or employees of the body or their relative, by inserting subparagraph 4(c), amending subparagraph 5(a), inserting subparagraph 5(aa) and amending paragraph 6;
(b) clarifying the eligibility test for not-for-profit group purchasing bodies by amending subparagraph 5(b)(i)(B);
(c) clarifying the eligibility test for independent group purchasing bodies by extending the persons from whom the body may receive payments in relation to the risk management product by amending subparagraph 6(a)(i) and inserting subparagraph 6(a)(ia);
(d) specifying the types of payments that a group purchasing body may receive by inserting subparagraph 6(a)(ia);
(e) varying the requirement to give notification if the risk management product is not or is no longer available by amending subparagraph 10(b) to introduce a “reasonable steps” qualification;
(f) varying the requirement to give specified information about the risk management product by amending subparagraph 10(e) to introduce a “reasonable steps” qualification;
(g) extending the cessation of the transitional period for compliance with the breach reporting requirement from 28 February 2010 until the first time that the group purchasing body acquires, renews, or renegotiates the terms of, the risk management product on or after 30 June 2010 but, in any event, no later than 30 June 2011; and
(h) making several related minor technical amendments to [CO 08/1].
4. Consultation
In preparing [CO 10/116] ASIC has taken account of concerns raised by the National Insurance Brokers Association of Australia, the Western Australian Hockey Association and the Australian Sports Commission. ASIC did not undertake further consultation with respect to [CO 10/116] as it is of a minor and machinery nature.