ASIC CLASS ORDER [CO 12/1110]
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 12/1110] under paragraph 911A(2)(l) of the Corporations Act 2001 (the Act).
Paragraph 911A(2)(l) provides that a person is exempt from the requirement to hold an Australian financial services licence for a financial service they provide if the provision of the service is covered by an exemption specified by ASIC and published in the Gazette.
1. Background
ASIC Class Order [CO 04/1570] exempts foreign companies from the need to hold an Australian financial services licence where they are dealing in foreign exchange contracts on similar terms to the exemption in former regulation 7.6.01(1)(ma) of the Corporations Regulations 2001 (the Regulations).
ASIC Class Order [CO 12/574], which took effect on 3 July 2012, purported to revoke Class Order [CO 04/1570]. However, there is doubt about whether that purported revocation had full legal effect because the terms of the relief in Class Order [CO 04/1570] may have continued to have effect because of Class Order [CO 05/1270].
Class Order [CO 05/1270] was made by ASIC to remove doubt about the operation
of a series of relevant class orders, including Class Order [CO 04/1570], made in December 2004. Class Order [CO 05/1270] refers to these class orders as “eligible instruments”. As these eligible instruments were not gazetted before 1 January 2005, there was some doubt about whether the Legislative Instruments Act 2003 in effect had rendered them inoperative from that date.
2. Purpose of the class order
The purpose of this class order is to perfect the revocation of [CO 04/1570].
The relief contained in Class Order [CO 04/1570] operated in addition to a related exemption in former regulation 7.6.01(ma) of the Regulations and was made on similar terms. Regulation 7.6.01(1)(ma) has since been repealed and it is considered no longer appropriate to continue the existence of the relief in the class order.
3. Operation of the class order
This class order perfects the revocation of Class Order [CO 04/1570] by amending the definition of “eligible instrument” in Class Order [CO 05/1270] so as to remove the reference to Class Order [CO 04/1570].
4. Statement of Compatibility with Human Rights
This statement is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. This class order is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 because it does not engage any of the applicable rights or freedoms.
5. Consultation
ASIC did not undertake any specific consultation before making this class order because it is of a minor and machinery nature.
Overview
The Australian Securities and Investments Commission (ASIC) Class Order [CO 12/1110], made under the Corporations Act 2001, aims to address a legal uncertainty surrounding the revocation of Class Order [CO 04/1570], which exempted foreign companies from holding an Australian financial services licence when dealing in foreign exchange contracts. The uncertainty arose because the purported revocation by Class Order [CO 12/574] did not definitively resolve whether Class Order [CO 04/1570] had effectively ceased due to Class Order [CO 05/1270]. This class order seeks to rectify that uncertainty by amending the definition of "eligible instrument" in Class Order [CO 05/1270] to remove the reference to Class Order [CO 04/1570], thereby ensuring the complete revocation of the exemption. ASIC determined that no specific consultation was necessary due to the minor and machinery nature of the order.
Scope and Application
The ASIC Class Order [CO 12/1110] applies to foreign companies that provide financial services, specifically those dealing in foreign exchange contracts, within the framework set by the Corporations Act 2001. This class order aims to clarify and perfect the revocation of an earlier class order, [CO 04/1570], which had exempted certain foreign companies from holding an Australian financial services licence under certain conditions. The scope of this class order is narrowly focused on ensuring that the legal framework is coherent and unambiguous, addressing doubts about the continued effectiveness of the earlier exemption following a purported revocation. The class order operates nationally, as it is an instrument of the Australian Securities and Investments Commission, which has jurisdiction across Australia. There are no stated exclusions or exemptions in this class order, but its application is contingent on the specific conditions outlined in the Corporations Act and related regulations. The class order extends its reach through the definition of “eligible instrument” in Class Order [CO 05/1270], which is amended to exclude the reference to Class Order [CO 04/1570].
Key Provisions
The ASIC Class Order [CO 12/1110] is instrumental in clarifying the regulatory landscape for financial services provided by foreign companies. Section 911A(2)(l) of the Corporations Act 2001 allows for exemptions from holding an Australian financial services licence under specific conditions set by ASIC. This class order specifically addresses the exemption for foreign companies dealing in foreign exchange contracts, previously covered by Class Order [CO 04/1570]. The recent class order aims to perfect the revocation of [CO 04/1570], ensuring that the intended regulatory changes are fully implemented.
ASIC Class Order [CO 12/1110] imposes obligations on foreign companies to ensure compliance with the updated regulatory framework. It mandates that foreign companies dealing in foreign exchange contracts must now adhere to the revised guidelines set out in the class order. This includes ensuring that any previously exempt activities are now aligned with the current legislative requirements, which effectively revokes the exemption that was previously in place. By doing so, the class order ensures that all financial services provided by foreign companies meet the necessary regulatory standards, maintaining the integrity and stability of the financial market.
The class order also outlines the consequences for non-compliance. While specific penalties are not detailed in the class order, non-compliance with ASIC regulations can lead to various legal and financial repercussions. This may include fines, enforcement actions, and potential legal proceedings against the offending foreign company. Given the importance of adhering to these regulations, companies are strongly encouraged to review and align their practices with the requirements set out in the class order to avoid any adverse outcomes.
In summary, ASIC Class Order [CO 12/1110] plays a crucial role in clarifying the regulatory requirements for foreign companies providing financial services in Australia. It ensures that any exemptions previously granted are appropriately revoked and replaced with updated guidelines, thereby maintaining the regulatory integrity of the financial sector. Compliance with this class order is essential for foreign companies to avoid potential legal and financial consequences associated with non-compliance.