ASIC Class Order [CO 98/1807]

Overview

The Australian Securities and Investments Commission Corporations Law Paragraph 601QA(1)(b) Declaration, enacted in 1998, serves to exempt certain undertakings from the stringent regulatory requirements imposed on registered managed investment schemes under the Corporations Law. This legislative instrument was introduced to address the need for a more streamlined regulatory approach for specific types of investment arrangements, particularly those where all interests are issued by excluded issues, none are held by a responsible entity of a registered scheme, and all holders have consented to the exemption in writing. The enactment is a product of the Australian Securities and Investments Commission, acting as delegate, with a clear policy objective to provide regulatory relief to certain investment structures without compromising investor protection or market integrity. This exemption allows for a more efficient management of investments that do not necessitate the comprehensive oversight required for registered schemes.

Scope and Application

The legislative instrument F2007B01001, issued under the authority of the Australian Securities and Investments Commission (ASIC), delineates the application of specific provisions of the Corporations Law to particular undertakings. The instrument applies to management companies, trustees or representatives of prescribed interests, and holders of these interests within a defined class of undertakings as outlined in the Schedule. To be eligible for the exclusion declared by this instrument, all holders of prescribed interests must have been issued their interests through an excluded issue, none of the prescribed interests can be held by a responsible entity of a registered scheme or its agent as scheme property, nor by a trustee or representative acting under an approved deed. Additionally, all holders of prescribed interests must agree in writing that the undertaking should not be required to register as a managed investment scheme or continue to be subject to the Corporations Law as it stood before the enactment of Chapter 5C. The management company must also file a notice confirming that these conditions have been met. This exclusion operates within the jurisdictional reach of the Commonwealth of Australia, applying specifically to those undertakings meeting the criteria set out in the Schedule, thereby exempting them from certain regulatory requirements under the Corporations Law.

Key Provisions

The Australian Securities and Investments Commission (ASIC) has declared that certain provisions of the Corporations Law (the Law) apply to the management company and holders of prescribed interests in specific undertakings, as outlined in the Schedule, with a significant exception. Pursuant to paragraph 601QA(1)(b) of the Law, these provisions apply as if Division 11 (second appearing) of Part 11.2 of the Law were omitted (601QA(1)(b)). This declaration essentially tailors the regulatory oversight for these particular undertakings, excluding them from certain obligations that would otherwise apply under the Law. The Schedule outlines the criteria for an undertaking to be subject to this declaration. Firstly, all holders of prescribed interests must have received their interests through an excluded issue (Schedule (a)). Secondly, none of the prescribed interests can be held by a responsible entity of a registered scheme or its agent as scheme property, or by a trustee or representative acting under an approved deed (Schedule (b)). Thirdly, all holders of prescribed interests must have agreed in writing that the undertaking should not be required to register as a registered managed investment scheme or continue to be subject to the Law as in force before the commencement of Chapter 5C (Schedule (c)). Lastly, the management company must have lodged a notice confirming that each of these conditions is met (Schedule (d)). Entities governed by this legislation face specific obligations and requirements. The management company must ensure that all prescribed interests meet the conditions set out in the Schedule and must lodge the necessary notice with ASIC. Holders of prescribed interests must provide written agreement to the terms of the declaration. Furthermore, these undertakings are exempt from certain regulatory requirements that would otherwise apply under Division 11 of Part 11.2 of the Law, allowing them to operate under a lighter regulatory framework provided that all conditions are satisfied. Failure to comply with the conditions outlined in the Schedule or the requirements of the declaration can lead to serious consequences. Breaches of the Corporations Law can result in both civil and criminal penalties. Civil penalties can include fines, while criminal penalties can include imprisonment, reflecting the seriousness with which non-compliance is treated. The exact penalties depend on the nature and severity of the breach, but they can be substantial, highlighting the importance of adhering to the conditions set out in the legislation.