ASIC Class Order [CO 10/789]

Overview

The ASIC Class Order [CO 10/789], enacted in 2010, is a variation of Class Order [CO 09/425] under the Corporations Act 2001, made by the Australian Securities and Investments Commission (ASIC). It was introduced to address a gap in the definition of "custodian" within the context of share and interest purchase plans, specifically to include entities that provide custodial or depositary services under certain exemptions, relieving them from the requirement to hold an Australian financial services (AFS) licence. The policy objective of this class order is to provide conditional relief from the disclosure requirements in Chapter 6D and Part 7.9 of the Corporations Act, thereby extending the relief to investors who hold their securities through a custodian not holding an AFS licence due to reliance on specific exemptions. This change was made following consultations with industry stakeholders who pointed out that entities benefiting from certain AFS licensing exemptions were not included in the previous definition of "custodian" in [CO 09/425].

Scope and Application

ASIC Class Order [CO 10/789] applies to entities providing custodial or depositary services that are exempt from holding an Australian Financial Services (AFS) licence under specific provisions of the Corporations Regulations 2001 and certain ASIC Class Orders, particularly those related to foreign financial service providers (FFSP). This class order extends to ASX-listed companies and managed investment schemes offering share or interest purchase plans to existing members, including those holding securities through custodians who do not hold an AFS licence due to specific exemptions. The geographic reach of this legislation is national, as it pertains to entities operating within Australia and providing services under the mentioned exemptions. The class order excludes entities that do not fall under the specified exemptions and does not alter the requirements for those custodians who already hold an AFS licence. The application of this class order may be further extended or refined through subordinate instruments, which would provide additional detail or clarification on its operation and scope.

Key Provisions

The ASIC Class Order [CO 10/789], which amends Class Order [CO 09/425], primarily adjusts the definition of "custodian" to broaden the scope of entities eligible for relief from certain disclosure requirements under the Corporations Act 2001. This change is encapsulated in section 1020F(1)(a) of the Act, enabling ASIC to exempt certain classes of persons from specific provisions. Specifically, the order expands the definition of "custodian" to include entities exempt from holding an Australian Financial Services (AFS) licence under specified conditions, thus facilitating broader participation in share and interest purchase plans by existing members of ASX-listed companies and managed investment schemes. The amended Class Order [CO 10/789] imposes obligations on entities that now qualify as "custodians" under the expanded definition. These entities must comply with the conditions set forth in the Corporations Regulations 2001 and the FFSP class orders to ensure they meet the regulatory standards necessary for providing custodial or depositary services. This includes ensuring that any related foreign entities are appropriately regulated and that the services provided adhere to the stipulated guidelines, particularly in relation to the types of clients (retail or wholesale) they can serve. Breaches of the provisions outlined in the ASIC Class Order [CO 10/789] could result in both civil and criminal penalties. For instance, non-compliance with the conditions of the FFSP class orders or failure to adhere to the custodial service requirements can lead to enforcement actions by ASIC. Civil penalties could include fines, and in severe cases, criminal penalties may apply, depending on the nature and extent of the breach. The exact penalties are not specified in the Class Order but would be determined in accordance with the relevant provisions of the Corporations Act and other applicable laws. The Class Order [CO 10/789] was implemented in response to stakeholder feedback indicating that certain entities eligible for AFS licensing exemptions were not included in the original definition of "custodian" in Class Order [CO 09/425]. This variation aims to address this oversight and ensure that all eligible entities can participate in share and interest purchase plans without unnecessary regulatory barriers. Given the nature of the changes, which are considered minor and primarily technical, ASIC did not undertake a general public consultation before issuing the order.