ASIC CLASS ORDER [CO 12/418]
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 12/418] under paragraph 951B(1)(c) of the Corporations Act 2001 (the Act).
Paragraph 951B(1)(c) provides that ASIC may declare that Part 7.7 of the Act applies in relation to a person or class of persons as if specified provisions were omitted, modified or varied as specified in the declaration.
1. Background
A Financial Services Guide (FSG) is a key disclosure document under the Act that sets out the terms and basis under which a financial services licensee or an authorised representative of a such a licensee, will provide a financial service. The FSG is provided to retail clients to assist them to make an informed decision on whether to acquire a financial service from the licensee or authorised representative.
In a time critical situation, such as during the provision of a financial service over the telephone, it may not be reasonably practicable to provide an FSG before the financial service is provided. Instead, section 941D of the Act permits a statement of certain key information to be given at the time, with the FSG given to the retail client within five days, or sooner if practicable, after the financial service is provided.
ASIC Class Order [CO 04/1055] (the original class order), which took effect on 30 August 2004, provided relief that had the effect that information in an FSG given in a time critical situation need only be up to date as at the time the earlier statement of key information was given to a retail client.
The original class order was inadvertently not registered on the Federal Register of Legislative Instruments (FRLI) within the meaning of section 4 of the Legislative Instruments Act 2003 (the LI Act) by the last day for lodging the instrument as originally made for registration under Division 3 of Part 4 of the LI Act. As a consequence, the original class order ceased to be enforceable by or against the Commonwealth, or by or against any other person or body, from 1 October 2006.
To overcome this problem, ASIC has made two class orders:
- ASIC Class Order [CO 12/417] (the prospective class order); and
- ASIC Class Order [CO 12/418] (the retrospective class order).
2. Purpose of the class order
The purpose of this class order is to retrospectively reinstate the effect of the original class order from the date it became unenforceable (1 October 2006) until the commencement of the prospective class order. The purpose of the original class order and the prospective class order are more fully set out in the Explanatory Statement for the prospective class order.
3. Operation of the class order
This class order retrospectively reinstates the effect of the original class order from the date it became unenforceable (1 October 2006) until the commencement of the prospective class order.
The operation of the original class order and the prospective class order are more fully set out in the Explanatory Statement for the prospective class order.
The retrospective operation of this class order from 1 October 2006 does not disadvantageously affect the rights of any person or impose liabilities on a person in respect of anything done or omitted to be done before the date this class order is registered on the FRLI: subsection 12(2) of the LI Act.
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 legislative instrument 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
As this class order retrospectively reinstates the effect of the original class order on which the financial services industry had been relying, ASIC considers the making of this class order to be of a minor and technical nature which does not require consultation.
Overview
The Australian Securities and Investments Commission (ASIC) enacted ASIC Class Order [CO 12/418] under the Corporations Act 2001 to address a gap created by the inadvertent failure to register ASIC Class Order [CO 04/1055] on the Federal Register of Legislative Instruments. This oversight caused the original class order to become unenforceable from 1 October 2006, which in turn affected the ability of financial services licensees and their representatives to provide key information to retail clients in time-critical situations as permitted under section 941D of the Act. The primary objective of this class order is to retrospectively reinstate the effect of the original class order, ensuring continuity and legal certainty in the operation of financial services without imposing liabilities on individuals for actions taken prior to the registration of this class order. ASIC considers this class order to be minor and technical, thus not requiring further consultation.
Scope and Application
ASIC Class Order [CO 12/418] applies to financial services licensees and authorised representatives who provide financial services to retail clients, specifically in time-critical situations where a Financial Services Guide (FSG) cannot be provided before the service is rendered. This class order is made under the Corporations Act 2001, aiming to reinstate the relief provided by the original ASIC Class Order [CO 04/1055], which inadvertently ceased to be enforceable from 1 October 2006 due to registration issues. The retrospective nature of this class order ensures it applies from the date it became unenforceable until the prospective class order takes effect. It does not impose any new liabilities or disadvantageously affect the rights of any person for actions taken before its registration on the Federal Register of Legislative Instruments. The class order does not engage any of the human rights and freedoms recognised in the international instruments listed in the Human Rights (Parliamentary Scrutiny) Act 2011, hence a Statement of Compatibility with Human Rights is not required.
Key Provisions
ASIC Class Order [CO 12/418] applies under section 951B(1)(c) of the Corporations Act 2001 (the Act), which allows ASIC to declare that Part 7.7 of the Act applies to a person or class of persons as if specified provisions were omitted, modified, or varied. This class order serves to reinstate the effect of a previous class order, ASIC Class Order [CO 04/1055], which had inadvertently ceased to be enforceable due to not being registered on the Federal Register of Legislative Instruments (FRLI) by the required deadline. The primary purpose of this class order is to retrospectively reinstate the original class order's effect from the date it became unenforceable (1 October 2006) until the prospective class order [CO 12/417] commences. It ensures that financial services licensees and their authorised representatives are not disadvantaged and continue to operate under the same conditions as before the original class order ceased to be enforceable.
The obligations imposed by this class order are primarily on financial services licensees and their authorised representatives. These entities must ensure that any Financial Services Guide (FSG) provided to retail clients in a time-critical situation contains information that is up to date as at the time a statement of certain key information was given to the client. The FSG must be provided within five days after the financial service is provided, or sooner if practicable. This requirement ensures that clients receive the necessary information to make informed decisions about the financial services they acquire. The class order aims to maintain the integrity and transparency of financial services provision.
Failure to comply with the provisions of this class order may result in civil or criminal consequences. The penalties for breaching the Act can include substantial fines and, in severe cases, imprisonment. The exact penalties depend on the nature and severity of the breach. For corporations, fines can be significant, often reaching up to millions of dollars, while individuals involved in the breach may face fines and imprisonment. The severity of the penalties underscores the importance of adhering to the requirements set out in the class order and the Act to avoid legal repercussions.