ASIC Corporations (Amendment) Instrument 2016/1158

Administered by Department of the Treasury

Legislation au F2016L01945 Not in force Legislative Instrument

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EXPLANATORY STATEMENT for


ASIC Corporations (Amendment) Instrument 2016/1158

 

Prepared by the Australian Securities and Investments Commission

 

Corporations Act 2001

 

 

The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Amendment) Instrument 2016/1158 under subsections 341(1), 601QA(1), 741(1), 926A(2), 992B(1) and 1020F(1) of the Corporations Act 2001 (the Act).

 

Subsection 341(1) of the Act provides that ASIC may relieve a registered scheme or a disclosing entity from all or specified requirements of Parts 2M.2, 2M.3 and 2M.4 (other than Division 4) of the Act.

 

Paragraph 601QA(1)(a) of the Act provides that ASIC may exempt a person from all or specified provisions of Chapter 5C of the Act.

 

Paragraph 741(1)(a) of the Act provides that ASIC may exempt a person from a provision of Chapter 6D of the Act.

 

Paragraph 741(1)(b) of the Act provides that ASIC may declare that Chapter 6D of the Act applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.

 

Subsection 926A(2) of the Act provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.6 (other than Divisions 4 and 8) of the Act.

 

Paragraph 992B(1)(a) of the Act provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.8 of the Act.

 

Paragraph 1020F(1)(a) of the Act provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.9 of the Act.

 

  1. Background

 

Australian financial services (AFS) licensees providing financial services to retail clients have an obligation to have a dispute resolution system in place consisting of:

 

(a) internal dispute resolution procedures; and

(b) membership of one or more external dispute resolution schemes (sections 912A(1)(g) and 912A(2) of the Act).

 

As AFS licensees, this obligation extends to an operator of a platform, product issuers and licensed dealer groups if they provide financial services to retail clients. ASIC considers that it is appropriate that retail clients for whom financial products are held through an investor directed portfolio service (IDPS) or IDPS-like scheme (together, referred to as platforms) have the same rights of complaint as they would have had if they had acquired the financial products directly.

 

In March 2012, ASIC published a consultation paper setting out its proposals and supporting rationale for reviewing its regulatory approach to platforms: see Consultation Paper 176 Review of ASIC policy on platforms: Update to RG 148 (CP 176). A summary of key submissions made in response to CP 176 and ASIC's consideration of those responses can be found in Report 351 Response to submissions on CP 176 Review of ASIC policy on platforms: Update to RG 148. In CP 176, ASIC proposed that platform clients should have access to a product issuer’s internal and external dispute resolution system when they have concerns about investments made through platforms: see proposal F5(a) in CP 176.

 

ASIC did not proceed in 2013 with applying a restriction on acquisitions because it sought to confirm that existing ASIC-approved dispute resolution schemes would be able to address such complaints under their terms of reference. It was subsequently confirmed that this was the case. 

 

2.    Purpose of the instrument

 

Access to dispute resolution for platform clients

 

The purpose of ASIC Corporations (Amendment) Instrument 2016/1158 is to implement changes to Class Order [CO 13/763] Investor directed portfolio services ([CO 13/763]) and Class Order [CO 13/762] Investor directed portfolio services provided through a registered managed investment scheme ([CO 13/762]) to require an AFS licensee operating a platform to ensure retail clients have the same rights of complaint as they would have had if they had acquired the financial products directly.

 

Clarifying the definitions in [CO 13/763] and [CO 13/762]

 

Following consultation with several stakeholders, ASIC was made aware of a lack of clarity on whether certain types of arrangements are intended to be covered by the definition of an ‘IDPS’ in [CO 13/763].  ASIC Corporations (Amendment) Instrument 2016/1158 amends the definition of an ‘IDPS’ in [CO 13/763] to clarify the types of arrangements intended to be covered, by adding a new limb that excludes an arrangement under which material terms of any rights that may be acquired on behalf of a client are negotiated, or substantially determined.

 

Similarly, ASIC was made aware of a lack of clarity on the schemes that are technically not covered by the definition of an ‘IDPS-like scheme’ in [CO 13/762], but which otherwise satisfy the criteria in the definition.  ASIC Corporations (Amendment) Instrument 2016/1158 amends this definition of an ‘IDPS-like scheme’ in [CO 13/762] so that the definition extends to a scheme that substantially meets the requirements of (a) and (b) of the definition as well as to a scheme that has a constitution with provisions that effect these requirements.

 

3.    Operation of the instrument

 

Paragraphs 1 to 9 of Schedule 1 of ASIC Corporations (Amendment) Instrument 2016/1158 amend [CO 13/762] and paragraphs 10 to 26 of Schedule 1 amends [CO 13/763].

 

Paragraph 4(e) of Schedule 1 in ASIC Corporations (Amendment) Instrument 2016/1158 amends [CO 13/762] by replacing notional section 1013DAB(8) with notional section 1013DAB(8) to (8G) and paragraph 14 of Schedule 1 amends [CO 13/763] by replacing notional section 912AD(25) and (26) with notional section 912AD(25) to (26G).  For issues or sales after 30 December 2017—platform clients are required to have access to a product issuer’s internal and external dispute resolution system if they have concerns about investments made by retail investors through the platform (see notional sections 1013DAB(8)(b)(ii) and (8G) in [CO 13/762] and notional sections 912AD(26)(b)(ii) and (26G) in [CO 13/763]).

 

Paragraphs 4(m) and 9 of Schedule 1 in ASIC Corporations (Amendment) Instrument 2016/1158 amend [CO 13/762] by amending certain definitions in notional section 1013DAB(19) and paragraph 19 of [CO 13/762].  Paragraphs 17 and 26 of Schedule 1 in ASIC Corporations (Amendment) Instrument 2016/1158 amend [CO 13/763] by amending certain definitions in notional section 912AD(42) of the Act and paragraph 21 of [CO 13/763].  These amendments include amending the definition of 'IDPS-like scheme' in [CO 13/762] and the definition of 'IDPS' in [CO 13/763].

 

Paragraph 5 of Schedule 1 in ASIC Corporations (Amendment) Instrument 2016/1158 amends [CO 13/762] by omitting paragraph 8 (which notionally inserts section 912ADB of the Act) and paragraph 19 of Schedule 1 amends [CO 13/762] by omitting notional section 912ADA of the Act.  This amendment removes the requirement for an AFS licensee to comply with certain dispute resolution requirements on the basis that it has provided a notice to the platform operator that it will comply.

 

The remaining paragraphs in Schedule 1 in ASIC Corporations (Amendment) Instrument 2016/1158 make other minor and machinery amendments to [CO 13/762] and [CO 13/763].

 

The amendments take effect from the day after ASIC Corporations (Amendment) Instrument 2016/1158 is registered under the Legislation Act 2003, subject to transitional provisions (see notional sections 1013DAB(8)(b)(ii) and (8G) in [CO 13/762] and notional sections 912AD(26)(b)(ii) and (26G) in [CO 13/763]), for certain provisions that will apply from 1 January 2018.

 

4.    Consultation

 

ASIC consulted with stakeholders through Consultation Paper 264 Remaking ASIC class order on nominee and custody services and proposed changes to platforms policy (CP 264) which was issued for comment from 21 July 2016 until 1 September 2016.

 

CP 264 proposed amendments to ASIC's related policy for IDPS and IDPS-like schemes. Mark-up versions of the updates to [CO 13/763] and [CO 13/762] were attached to CP 264. ASIC received two submissions in response to CP 264, one of which was confidential.

 

The Office of Best Practice Regulation advised that a Regulation Impact Statement is not required.

 


 

 

 

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

ASIC Corporation (Amendment) Instrument 2016/1158

 

ASIC Corporation (Amendment) Instrument 2016/1158 is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview

 

The purpose of ASIC Corporation (Amendment) Instrument 2016/1158 is to implement changes to Class Order [CO 13/763] Investor directed portfolio services and Class Order [CO 13/762] Investor directed portfolio services provided through a registered managed investment scheme to impose requirements on an AFS licensee operating a platform to ensure retail clients have the same rights of complaint as they would have had if they had acquired the financial products directly.  ASIC Corporation (Amendment) Instrument 2016/1158 also updates the definition of 'IDPS' and 'IDPS-like scheme' and implements other minor and mechanical amendments.

 

Human rights implications

 

This legislative instrument does not engage any of the applicable rights or freedoms.

 

Conclusion

 

This legislative instrument is compatible with human rights as it does not raise any human rights issues.

 

Australian Securities and Investments Commission

 

 

Overview

The ASIC Corporations (Amendment) Instrument 2016/1158 was enacted by the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001 to address issues and gaps in the regulatory framework governing Australian financial services (AFS) licensees, specifically concerning dispute resolution systems for clients of investor directed portfolio services (IDPS) and IDPS-like schemes. The instrument aims to ensure that retail clients who invest through these platforms have the same rights of complaint as if they had invested directly, aligning their dispute resolution rights with those of direct clients. Additionally, the instrument seeks to clarify definitions within the existing class orders to better encompass the types of arrangements and schemes that fall under the regulatory scope. This amendment responds to stakeholder feedback and aims to provide more precise guidance on the application of dispute resolution obligations. ASIC's consultation with stakeholders led to the recognition of ambiguities in the definitions of 'IDPS' and 'IDPS-like scheme', prompting amendments to these definitions in the class orders. The instrument further ensures that platform clients have access to the internal and external dispute resolution systems of product issuers when they have concerns about investments made through platforms. These changes aim to enhance the clarity and effectiveness of the regulatory framework, ensuring that clients of AFS licensees operating platforms are not disadvantaged in terms of their rights to dispute resolution.

Scope and Application

The ASIC Corporations (Amendment) Instrument 2016/1158 applies to Australian financial services (AFS) licensees, including platform operators, product issuers, and licensed dealer groups, who provide financial services to retail clients. The instrument seeks to ensure that retail clients who invest through investor directed portfolio services (IDPS) or IDPS-like schemes have the same rights of complaint as they would have if they had acquired the financial products directly. The instrument amends Class Order [CO 13/763] Investor directed portfolio services and Class Order [CO 13/762] Investor directed portfolio services provided through a registered managed investment scheme to clarify the definitions of IDPS and IDPS-like scheme, and to mandate that retail clients have access to a product issuer’s internal and external dispute resolution system when they have concerns about investments made through platforms. The instrument extends to the Commonwealth of Australia and will take effect from the day after it is registered under the Legislation Act 2003, subject to certain transitional provisions. The instrument does not contain any exclusions, exemptions, or thresholds, but may be extended or restricted through subordinate instruments. The instrument is compatible with human rights as it does not engage any of the applicable rights or freedoms.

Key Provisions

The ASIC Corporations (Amendment) Instrument 2016/1158, made under the Corporations Act 2001, amends Class Order [CO 13/763] Investor directed portfolio services and Class Order [CO 13/762] Investor directed portfolio services provided through a registered managed investment scheme. The primary amendments, found in Schedule 1, require Australian Financial Services (AFS) licensees operating platforms to ensure that retail clients have access to a product issuer's internal and external dispute resolution systems if they have concerns about investments made through the platform. This requirement applies to issues or sales after 30 December 2017. Additionally, the instrument clarifies the definitions of 'IDPS' and 'IDPS-like scheme', ensuring that arrangements where material terms are negotiated or substantially determined are excluded from the definition of an IDPS. Similarly, it extends the definition of an IDPS-like scheme to include those that substantially meet the requirements of the definition or have a constitution with provisions that effect these requirements. The obligations imposed by the amended Class Orders include ensuring that retail clients have the same rights of complaint as if they had acquired the financial products directly. AFS licensees must now provide clear access to dispute resolution systems for platform clients, facilitating both internal resolution procedures and membership in external dispute resolution schemes. This change is crucial for maintaining consumer protection and ensuring that clients who invest through platforms have adequate avenues for addressing concerns and resolving disputes. In terms of enforcement and consequences, the Corporations Act 2001 provides for various penalties for non-compliance with its provisions. AFS licensees who fail to adhere to the new requirements may face enforcement actions, which could include fines, public reprimands, or even revocation of their licence. The specific penalties are determined by the nature and severity of the breach, as outlined in the relevant sections of the Corporations Act. For instance, under sections 1317E and 1317G, significant penalties can be imposed for breaches of continuous disclosure obligations, while section 12AA addresses civil penalties for breaches of the Act. These provisions underscore the importance of compliance and the potential consequences of failing to meet regulatory standards.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.