ASIC Class Order [CO 14/648]

Overview

The Australian Securities and Investments Commission (ASIC) has issued ASIC Class Order [CO 14/648] under the Corporations Act 2001 to address a transitional issue related to the reporting of breaches by group purchasing bodies (GPBs). The principal class order, ASIC Class Order [CO 08/1], provided conditional relief from the Australian financial services licensing regime and Chapter 5C of the Act for certain GPBs that organise insurance on a non-commercial basis. This relief included a condition requiring GPBs to report breaches of the relief to ASIC. However, the transitional period for compliance with this breach reporting condition was set to expire on 30 June 2014. To allow more time for the Government and ASIC to consider how to address the issues raised by GPBs, ASIC Class Order [CO 14/648] extends the transitional period for compliance with the breach reporting conditions by another 12 months, meaning GPBs will not need to report breaches until after the earlier of the first time they acquire, renew, or renegotiate the terms of a risk management product on or after 30 June 2015, or 30 June 2016. This extension aims to provide a period for the Government and ASIC to consult with stakeholders and consider amendments to the Corporations Regulations 2001.

Scope and Application

ASIC Class Order [CO 14/648], made under the Corporations Act 2001, extends the transitional period for compliance with breach reporting conditions in ASIC Class Order [CO 08/1], which provides conditional relief from the Australian Financial Services (AFS) licensing regime and Chapter 5C of the Act for certain group purchasing bodies (GPBs) that arrange insurance on a non-commercial basis. This class order applies to the same class of GPBs that benefit from the principal class order, namely sporting and other not-for-profit organisations that arrange insurance for third parties such as players or volunteers. The transitional period extension delays the requirement for these GPBs to report breaches of the relief conditions in [CO 08/1] to ASIC until after the earlier of the first time they acquire, renew or renegotiate the terms of the risk management product on or after 30 June 2015, or 30 June 2016. This extension allows the Government and ASIC to consider how to address issues raised by GPBs, including through amendments to the Corporations Regulations 2001, and to consult with stakeholders during this process. The class order is applicable nationally within the Commonwealth of Australia, and no consultation was undertaken as it is a transitional measure of a minor and machinery nature required as a matter of urgency.

Key Provisions

The ASIC Class Order [CO 14/648] is an amending class order under the Corporations Act 2001, which extends the transitional period for compliance with the breach reporting conditions for group purchasing bodies (GPBs) that arrange insurance on a non-commercial basis. The original class order, ASIC Class Order [CO 08/1], provided conditional relief from the Australian Financial Services (AFS) licensing regime and Chapter 5C of the Act for certain GPBs. However, this relief came with conditions, one of which required GPBs to report to the Australian Securities and Investments Commission (ASIC) any breaches of the conditions of the relief. The transitional period for compliance with this breach reporting condition in [CO 08/1] was initially scheduled to end on 30 June 2014. ASIC Class Order [CO 14/648] amends this by extending the transitional period by another 12 months, meaning that GPBs will not need to report breaches of [CO 08/1] to ASIC until after the earlier of the first time that the GPB acquires, renews or renegotiates the terms of the risk management product on or after 30 June 2015, or 30 June 2016. GPBs that rely on the relief provided by [CO 08/1] must comply with all the conditions of the class order, including the requirement to report breaches to ASIC. This obligation ensures that ASIC is kept informed of any issues that may affect the continued appropriateness of the relief provided by [CO 08/1]. Failure to comply with the reporting condition, or any other condition of the class order, may result in ASIC taking action against the GPB, potentially including the revocation of the relief provided by the class order. The exact consequences of non-compliance will depend on the nature and severity of the breach, but could include fines, legal action, or other regulatory measures. The ASIC Class Order [CO 14/648] does not impose any new criminal or civil penalties for breaches of the class order. Instead, any penalties for breaches of the conditions of [CO 08/1], including the reporting condition, would be determined by ASIC in accordance with the existing provisions of the Corporations Act 2001 and any applicable regulations. The maximum penalties for breaches of the Act or regulations will depend on the specific offence and the circumstances of the case, but can include substantial fines and/or imprisonment. In addition to any criminal or civil penalties, GPBs that breach the conditions of [CO 08/1] may also face reputational damage, loss of trust from stakeholders, and other negative consequences that could impact their ability to operate effectively. In summary, ASIC Class Order [CO 14/648] extends the transitional period for compliance with the breach reporting conditions in ASIC Class Order [CO 08/1] by another 12 months. GPBs that rely on the relief provided by [CO 08/1] must comply with all the conditions of the class order, including the requirement to report breaches to ASIC. Failure to comply with the reporting condition, or any other condition of the class order, may result in ASIC taking action against the GPB, potentially including the revocation of the relief provided by the class order. Any criminal or civil penalties for breaches of the class order would be determined by ASIC in accordance with the existing provisions of the Corporations Act 2001 and any applicable regulations.