Australian Securities and Investments Commission
Corporations Law — Paragraph 601QA(1)(a) — Variation
Pursuant to paragraph 601QA(1)(a) of the Corporations Law (the Law) the Australian Securities and Investments Commission (the Commission) hereby varies ASIC Class Order 98/55 by inserting the following new paragraph 5(c) of Schedule B:
“(c) an interest arising from a Secure Look-through Enhanced Customised Transaction Master Agreement (“SELECT Master Agreement”) including the Schedule and the form of the Annexure (as those terms are defined in the SELECT Master Agreement) offered by Deutsche Bank AG ARBN 064 165 162 if Deutsche Bank AG represents to the client in writing prior to the client executing the SELECT Master Agreement and in each Confirmation (as defined in the SELECT Master Agreement) that is issued that:
(i) the terms of the SELECT Master Agreement do not materially differ from the terms of the agreement that was given to the Commission on 19 September 1997 ( the “standard form agreement”) except for:
(A) any variation that the Commission has permitted in writing; or
(B) any variation as a result of:
(I) the deletion of a provision from the agreement or the re-inclusion of a provision in the agreement, in accordance with the express terms of the agreement;
(II) the insertion of the relevant details in the Schedule and the Confirmation in the Annexure;
(III) the variation of the definition of “Authorised Investments” in the Schedule,
other than a variation that extends the categories of Authorised Investments outside the categories in the Schedule to the standard form agreement;
(ii) Deutsche Bank AG will ensure at the time of purchase of Authorised Investments that the Authorised Investments will be rated at least as Investment Grade Rated Securities as defined in the standard form agreement;
(iii) any additional terms in paragraph 8 of the Confirmation do not amend the SELECT Master Agreement so that its terms are materially different from the terms of the standard form agreement (the making of representations contemplated by this paragraph (c) do not result in the terms being materially different for this purpose); and
(iv) Deutsche Bank AG is an Australian bank,
and in relation to which the responsible entity at the time each SELECT Contract (as defined in the standard form agreement) is entered:
(v) is reasonably satisfied, based only on the creditworthiness of the issuer of the Authorised Investments purchased under a SELECT Contract and the creditworthiness of Deutsche Bank AG and any other relevant person assessed having regard to all the circumstances relevant to the assessment of creditworthiness including any relevant credit rating issued by a ratings agency, that the responsible entity or its agent will at each of the fixed times applying in relation to the SELECT Contract receive the relevant maximum amount it can be entitled to receive as the investor under the SELECT Master Agreement assuming the SELECT Contract is held to maturity; and
(vi) based on the current circumstances, believes that, if permitted by law, it is likely that it or its agent will hold the SELECT Contract investment until maturity.”
Dated this 19th day of January 1999
Signed by Brendan Bryne
as a delegate of the Australian Securities and Investments Commission.
Overview
The Australian Securities and Investments Commission (ASIC) enacted this legislative instrument in 1999 to address a gap in regulatory oversight concerning derivative transactions involving Deutsche Bank AG and its Secure Look-through Enhanced Customised Transaction Master Agreement (SELECT Master Agreement). This legislative instrument modifies the ASIC Class Order 98/55 to provide specific guidance on the terms and conditions under which Deutsche Bank AG can offer the SELECT Master Agreement to clients. The policy objective is to ensure that the terms of the SELECT Master Agreement do not materially differ from a standard form agreement previously submitted to ASIC, except for certain permitted variations. Additionally, it mandates that Deutsche Bank AG confirms the creditworthiness of the investments and the likelihood of holding the contracts until maturity.
This legislative instrument aims to maintain consistency and transparency in the terms offered by Deutsche Bank AG, thereby protecting investors and ensuring compliance with existing regulatory standards. By specifying the conditions under which the SELECT Master Agreement can be offered, ASIC seeks to mitigate potential risks associated with derivative transactions. This regulatory action is part of ASIC's broader mandate to safeguard the integrity of the financial markets and protect investors by ensuring that financial products are offered under fair and transparent terms.
Scope and Application
The Australian Securities and Investments Commission (ASIC) has the authority under paragraph 601QA(1)(a) of the Corporations Law to vary certain class orders, as demonstrated by the amendment to ASIC Class Order 98/55. This legislative instrument introduces a new paragraph 5(c) into Schedule B, which specifically addresses the Secure Look-through Enhanced Customised Transaction Master Agreement (SELECT Master Agreement) offered by Deutsche Bank AG. The variation applies to the SELECT Master Agreement, including its Schedule and Annexure, under specific conditions. For instance, Deutsche Bank AG must certify that the SELECT Master Agreement's terms do not materially differ from a standard form agreement submitted to ASIC on 19 September 1997, with certain permitted variations. Furthermore, Deutsche Bank AG must ensure that Authorised Investments are rated at least as Investment Grade Rated Securities and that any additional terms in the Confirmation do not alter the SELECT Master Agreement's terms materially. The responsible entity of Deutsche Bank AG must also be reasonably satisfied that it will receive the maximum amount entitled under the agreement if the investment is held to maturity. This variation extends to any subordinate instruments that may further define or restrict the application of this class order.
Key Provisions
The Australian Securities and Investments Commission (ASIC) has introduced variations to ASIC Class Order 98/55 through legislative instrument F2006B01312. Specifically, paragraph 5(c) of Schedule B is amended to include new provisions concerning the Secure Look-through Enhanced Customised Transaction Master Agreement (SELECT Master Agreement) offered by Deutsche Bank AG. This paragraph requires Deutsche Bank AG to make certain representations to clients before they execute the SELECT Master Agreement or any subsequent Confirmations. The representations must confirm that the terms of the SELECT Master Agreement do not materially differ from a standard form agreement provided to ASIC on 19 September 1997, except for specific permitted variations (section 601QA(1)(a)). Deutsche Bank AG must also ensure that any Authorised Investments are rated at least as Investment Grade Rated Securities as defined in the standard form agreement. Furthermore, any additional terms in the Confirmation must not alter the SELECT Master Agreement to the extent that its terms are materially different from the standard form agreement.
The obligations imposed by these provisions are significant for Deutsche Bank AG. The bank must make specific written representations to clients before they enter into the SELECT Master Agreement or any Confirmations. These representations include confirming the terms of the SELECT Master Agreement, ensuring Authorised Investments meet certain credit ratings, and ensuring any additional terms in the Confirmation do not materially alter the SELECT Master Agreement. Moreover, Deutsche Bank AG must be reasonably satisfied, based on creditworthiness assessments, that it or its agent will receive the maximum entitled amount if the SELECT Contract is held to maturity. The bank must also believe, based on current circumstances, that it or its agent is likely to hold the investment until maturity if permitted by law.
Failure to comply with these obligations can result in legal consequences. While the legislation does not explicitly state specific offences or penalties, breaches of such representations and obligations can lead to regulatory action by ASIC. This may include enforcement actions, fines, or other penalties as deemed appropriate by ASIC. The exact penalties would depend on the nature and severity of the breach, as well as any additional relevant laws and regulations that may apply.