ASIC Class Order [CO 99/1225]

Overview

ASIC Class Order [CO 99/1225], enacted in 1999, addresses the financial reporting requirements for benefit fund friendly societies by relieving companies registered under the Life Insurance Act 1995 from specific obligations under the Corporations Act 2001. This legislative instrument, made by the Australian Securities and Investments Commission (ASIC) under subsection 341(1) of the Corporations Act, aims to alleviate the burden on benefit fund friendly societies by modifying certain financial reporting obligations, provided they comply with the Prudential Rules No. 47 issued by the Australian Prudential Regulation Authority. The policy objective is to ensure that these entities can meet their regulatory requirements without undue hardship, while still providing necessary transparency and compliance with financial reporting standards. The order applies to financial years and half-years commencing on or before 31 December 2004, subject to certain conditions regarding compliance with Prudential Rules and member reporting obligations.

Scope and Application

ASIC Class Order [CO 99/1225] applies to companies that are benefit fund friendly societies registered under the Life Insurance Act 1995, providing specific relief from certain financial reporting requirements under the Corporations Act 2001 for financial years and half-years commencing on or before 31 December 2004. The Class Order, made under subsection 341(1) of the Corporations Act, exempts these entities from the obligation to present a single set of financial statements and notes covering both management and benefit funds, from the need to comply with accounting standards to the extent they conflict with the Prudential Rules No. 47 issued by the Australian Prudential Regulation Authority, and from the requirement to distribute full financial reports to members whose membership is not directly linked to a specific fund. However, the Class Order stipulates that these entities must comply with prudential requirements and provide certain information in their financial reports, including meeting member requests for full financial reports and applying specific accounting standards where concise financial reports are prepared. The scope of the Class Order is further defined by its conditions, which include detailed provisions for both full-year and half-year financial reports, ensuring alignment with prudential rules while allowing for some flexibility in reporting practices.

Key Provisions

ASIC Class Order [CO 99/1225], enacted under subsection 341(1) of the Corporations Act 2001, provides specific financial reporting reliefs for benefit fund friendly societies. These reliefs primarily apply to companies registered under the Life Insurance Act 1995 for financial years and half-years ending on or before 31 December 2004. Under this Class Order, certain financial reporting requirements of the Corporations Act are relaxed to align with the Prudential Rules No. 47 issued by the Australian Prudential Regulation Authority. Specifically, the Class Order exempts such entities from the requirement to present a single set of financial statements and notes (sections 295, 296(1), 302-305), mandates compliance with accounting standards in separate financial statements and notes (subsection 296(1), section 304), and relieves them from distributing certain financial reports to members (subsection 314(1), paragraph 316(1)(b)). However, these reliefs come with conditions, such as the need for the financial report and auditor’s report to comply with Prudential Rules No. 47 for full years and the application of AASB 1039 “Concise Financial Reports” for concise financial reports. The obligations imposed by ASIC Class Order [CO 99/1225] on benefit fund friendly societies primarily revolve around the preparation and compliance of financial reports. If a financial year is involved, the entity must ensure that its financial report and auditor’s report adhere to Prudential Rules No. 47. For concise financial reports, the entity must apply AASB 1039, modified to omit cross-references to notes in the financial report. Additionally, separate financial statements and other information for each benefit fund and the management fund must be presented. For half-year reports, while separate financial statements of benefit funds need not be prepared, certain information must still be disclosed as per Schedule 2 to PR 47. Furthermore, entities must comply with the application of AASB 1029 “Interim Financial Reports” and paragraph 43 of PR 47, modified to exclude references to the appointed actuary’s statement. Non-compliance with the requirements set out in ASIC Class Order [CO 99/1225] can result in various civil and criminal consequences under the Corporations Act 2001. For civil penalties, the Act provides for substantial fines, with the exact amount depending on the nature and severity of the breach. Criminal penalties may also apply, including imprisonment for officers and directors of the entity found to be in breach of the Act. The specific maximum penalties for these offences are not detailed within the Class Order itself but are governed by the overarching provisions of the Corporations Act, which can impose fines and imprisonment terms that vary based on the specific sections breached and the circumstances of the offence.