ASIC Class Order [CO 11/407]

Overview

ASIC Class Order [CO 11/407], enacted under the Corporations Act 2001, addresses the transitional arrangements for trustee companies that do not hold an Australian financial services licence. This class order, prepared by the Australian Securities and Investments Commission (ASIC), came into effect on 1 May 2011 and was scheduled to cease on 30 April 2012. The primary objective of this class order is to provide a temporary licence to trustee companies that do not already possess one, thereby allowing them to continue providing traditional trustee company services until they can obtain a formal licence. The class order ensures that these companies are not subjected to certain regulatory provisions during the transitional period, while also mandating that they maintain adequate net tangible assets as a condition for the temporary licence.

Scope and Application

The ASIC Class Order [CO 11/407] applies to trustee companies listed in Schedule 8AA to the Corporations Regulations 2001, which do not hold an Australian financial services licence. This class order is designed to provide transitional arrangements for these companies, allowing them to operate under specific conditions until a certain date. Specifically, from 1 May 2011 until 29 April 2012, these unlicensed trustee companies are deemed to hold a licence for providing traditional trustee company services. During this period, the provisions of Division 2 of Part 10.12 of the Corporations Act 2001 do not apply to these companies, and they are exempt from certain regulatory requirements such as holding adequate resources. However, the Australian Securities and Investments Commission (ASIC) retains the power to vary, cancel, or suspend the deemed licence under the relevant sections of the Act. The class order was registered under the Legislative Instruments Act 2003 and commenced on the later of 1 May 2011 or the date of its registration, ceasing to have effect on 30 April 2012.

Key Provisions

The ASIC Class Order [CO 11/407], which operates under subsection 601YAA(1) of the Corporations Act 2001, primarily deals with the regulatory framework for trustee companies in Australia. It provides a transitional arrangement for trustee companies that do not hold an Australian Financial Services (AFS) licence, allowing them to continue providing traditional trustee services during a specified period. Section 1495A of the Act is modified to deem such companies as holding a licence for traditional trustee services from 1 May 2011 until 29 April 2012 (subsection 2). During this period, the company is exempt from certain licensing requirements and obligations under the Act, such as section 601TAB and Part 7.7 (subsection 2(b) and (c)). This temporary measure allows trustee companies to maintain their operations without immediately obtaining an AFS licence. The obligations imposed on trustee companies under this Class Order are primarily to ensure they continue to meet certain financial and operational standards. For instance, to qualify for the deemed licence, a trustee company must maintain its net tangible assets at the level held on 6 May 2010 (subsection 4). This is defined as the total assets minus total liabilities, excluding certain assets and liabilities such as receivables from related parties and intangible assets (subsection 5). The company must also ensure it remains solvent and has adequate resources to continue providing its services. These requirements ensure that while the company is under a deemed licence, it still operates within sound financial and operational parameters. Failure to comply with the provisions of this Class Order may result in regulatory action by the Australian Securities and Investments Commission (ASIC). While the Class Order itself does not explicitly state penalties, the overarching Corporations Act 2001 provides for various civil and criminal penalties for non-compliance. For example, breaches of the Act can lead to fines for companies (up to $1.65 million) and individuals (up to $330,000), as well as potential imprisonment for serious offences. Additionally, ASIC has the power to vary, cancel, or suspend the deemed licence under the Act if a trustee company fails to meet the stipulated requirements. Such actions can significantly impact the company's ability to continue operating in the financial services sector.