Overview

The ASIC Class Order [CO 14/1270], made under the Corporations Act 2001, was enacted in 2015 to address ambiguities in the definitions of "securities" within certain existing class orders. This clarification was necessary to ensure that the obligations placed on operators of managed discretionary accounts, investor-directed portfolio services, and custodians are clearly understood and applied. The Australian Securities and Investments Commission (ASIC) issued this class order to streamline the regulatory framework by explicitly aligning the term "securities" with its definition as per subsection 92(1) of the Act, thereby reducing potential discrepancies and enhancing regulatory compliance. The objective of this class order is to provide additional certainty and flexibility to the entities subject to the relevant obligations, ensuring that the regulatory requirements are uniformly interpreted and applied across the financial services sector.

Scope and Application

The ASIC Class Order [CO 14/1270] applies to operators of managed discretionary accounts, operators of investor directed portfolio services, and custodians, as specified in ASIC Class Orders [CO 04/194], [CO 13/763], and [CO 13/1410] respectively. This class order amends those principal class orders to clarify the meaning of the term "securities" when used in the context of the obligations imposed on these operators and custodians. By explicitly defining "securities" as per subsection 92(1) of the Corporations Act 2001, the class order ensures that the obligations and reliefs provided under the principal class orders are uniformly applied and understood. The amendment is intended to provide additional certainty and flexibility to the entities subject to these obligations. The geographic reach of this class order is national, as it applies across Australia and is administered by the Australian Securities and Investments Commission (ASIC), which has jurisdiction under the Corporations Act 2001. There are no exclusions or exemptions specified in this class order, but its application may be subject to the conditions outlined in the respective principal class orders. The class order does not create new obligations but rather refines the interpretation of existing terms, thus maintaining the integrity and purpose of the original legislative intent.

Key Provisions

ASIC Class Order [CO 14/1270] primarily serves to amend three existing class orders, namely [CO 04/194], [CO 13/763], and [CO 13/1410], by clarifying the term "securities" within these orders. This clarification is achieved by specifying that "securities" should be understood as defined in subsection 92(1) of the Corporations Act 2001. This amendment is intended to provide additional certainty and flexibility to the entities governed by these class orders. The main operative sections involved in these amendments are sections 601QA(1)(a), 741(1)(a), 926A(2)(c), 951B(1)(a), and 1020F(1)(a) of the Corporations Act, which grant ASIC the authority to make such class orders. The obligations and requirements imposed by this class order focus on ensuring that the term "securities" is uniformly interpreted across the three amended class orders, thereby preventing any ambiguity that might arise from differing interpretations of the term in different contexts. The obligations imposed by Class Order [CO 14/1270] are essentially to adhere to the clarified definition of "securities" as per subsection 92(1) of the Corporations Act 2001. This means that any references to "securities" in [CO 04/194], [CO 13/763], and [CO 13/1410] must now be understood in the context of the definition provided in the Act. This ensures consistency and clarity in the application of these class orders, particularly regarding the holding of assets on behalf of clients without separating them from assets held for other clients. The class order requires operators of managed discretionary accounts, investor-directed portfolio services, and custodians to interpret "securities" in a manner consistent with the statutory definition. In terms of potential consequences for breach, it is important to note that Class Order [CO 14/1270] itself does not introduce new penalties or offences. However, the underlying class orders ([CO 04/194], [CO 13/763], and [CO 13/1410]) may contain provisions for non-compliance that could result in civil or criminal penalties. For instance, breaches of the Corporations Act 2001 provisions related to financial services can lead to substantial fines, imprisonment, or both, depending on the severity and intent of the breach. The specific penalties would depend on the nature and extent of the non-compliance with the requirements set out in the amended class orders. The clarification provided by [CO 14/1270] aims to reduce the likelihood of misinterpretation, which could otherwise lead to unintended breaches and subsequent penalties.