EXPLANATORY STATEMENT for
ASIC Corporations (Amendment) Instrument 2016/1246
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Amendment) Instrument 2016/1246 (the Amending Instrument) under section 926A(2)(a) of the Corporations Act 2001 (Corporations Act). Paragraph 926A(2)(a) provides that ASIC may exempt a person, or class of persons, from all or specified provisions in Part 7.6 of that Act (except Divisions 4 and 8).
Under subsection 33(3) of the Acts Interpretations Act 1901 (as applicable to the relevant powers because of section 5C of the Act), where an Act confers a power to make, grant or issue any instrument, the power shall be construed as including a power exercisable in the like manner and subject to the like conditions to repeal, rescind, revoke, amend or vary any such instrument.
1. Background
On 14 December 2016 ASIC made ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 (the Principal Instrument) and ASIC Credit (Concept Validation Licensing Exemption) Instrument 2016/1176, which allow eligible businesses to test certain products and services for 12 months without needing to obtain an AFS licence or credit licence, respectively.
The Principal Instrument allows provides that a person does not need to hold an AFS licence to:
a. provide financial product advice in relation to an eligible product;
b. deal in an eligible product (other than by way of issuing or varying the eligible product).
Eligible product is defined in the Principal Instrument as:
- non-cash payment facilities issued by an ADI (within the meaning of the Banking Act 1959);
- home contents insurance product or personal and domestic property insurance products (with the meaning of the Corporations Regulations 2001) where the sum insured under those products does not exceed $50,000;
- managed investment products in relation to a simple managed investment scheme (with the meaning of the Corporations Regulations 2001); and
- quoted securities.
The value of the eligible products (other than the insurance products listed above) must be below $10,000: see subsection 6(3) of the Principal Instrument.
When making the Principal Instrument, ASIC intended to include debentures, stocks or bonds issued or proposed to be issued by the Government of the Commonwealth. However, this did not occur.
2. Purpose of the instrument
ASIC has made the Amending Instrument to amend the Principal Instrument to include debentures, stocks or bonds issued or proposed to be issued by the Government of the Commonwealth within the meaning of ‘eligible product’ in that instrument.
The effect of this change is that new businesses may test certain financial services relating to Government-issues debentures, stocks or bonds without a financial services licence for 12 months.
3. Operation of the instrument
Section 4 of, and Schedule 1 to, the Amending Instrument provides that the definition of eligible product in the Principal Instrument is amended to include debentures, stocks or bonds issued or proposed to be issued by the Government of the Commonwealth.
4. Consultation
ASIC did not undertake a formal consultation process on the Amending Instrument on the basis that it makes a minor amendment to reflect the intended effect of the Principal Instrument.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
ASIC Corporations (Amendment) Instrument 2016/1246
ASIC Corporations (Amendment) Instrument 2016/1246 (Amending Instrument) 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 the Amending Instrument is to make a minor amendment to the ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 (the Principal Instrument).
The Principal Instrument allows eligible persons to test certain products and services for 12 months without needing to obtain an AFS licence. The intention of the Principal instrument is to promote innovation in financial services by facilitating unlicensed testing of certain types of services while maintaining many of the normal protections that apply to consumers.
The Amending Instrument includes debentures, stocks or bonds issued or proposed to be issued by the Government of the Commonwealth as a class of product in relation to which specified services can be tested under the Principal Instrument.
Human rights implications
The Amending Instrument does not engage any of the applicable rights or freedoms.
Conclusion
The Amending 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 2016/1246 was enacted to amend the ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175, which allows eligible businesses to test certain financial products and services for 12 months without requiring an Australian Financial Services (AFS) licence. The Australian Securities and Investments Commission (ASIC) introduced this amendment to include debentures, stocks, or bonds issued or proposed to be issued by the Government of the Commonwealth within the definition of "eligible product" in the Principal Instrument. The purpose of this change is to enable new businesses to test financial services related to government-issued debentures, stocks, or bonds without needing a financial services licence for a period of 12 months. This amendment aims to foster innovation in financial services by facilitating the unlicensed testing of specific products, while still upholding the consumer protections that are generally applicable. ASIC did not undertake formal consultation on this amendment due to its minor nature and the intention to reflect the original purpose of the Principal Instrument.
Scope and Application
The ASIC Corporations (Amendment) Instrument 2016/1246, made under section 926A(2)(a) of the Corporations Act 2001, pertains to the exemption of certain persons from specified provisions in Part 7.6 of the Act, excluding Divisions 4 and 8. This amendment specifically targets the ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175, allowing eligible businesses to trial particular financial products and services for a period of 12 months without requiring an Australian Financial Services (AFS) licence. The Act applies to businesses that intend to provide financial product advice or deal in specific products like non-cash payment facilities, certain insurance products, managed investment products, quoted securities, and now also includes debentures, stocks or bonds issued by the Government of the Commonwealth. This amendment broadens the scope of the exemption to include these government-issued financial instruments, thereby promoting innovation in the financial services sector while ensuring consumer protections remain largely intact. The geographic reach of this legislation is national, impacting entities across Australia. The exemption does not extend to transactions exceeding specified monetary thresholds and excludes certain types of financial products and services, as defined in the Corporations Regulations 2001. Any further extensions or restrictions are to be determined through subordinate instruments, as permitted under the Acts Interpretation Act 1901.
Key Provisions
The main operative sections of the ASIC Corporations (Amendment) Instrument 2016/1246 (Amending Instrument) pertain to the inclusion of debentures, stocks or bonds issued or proposed to be issued by the Government of the Commonwealth within the definition of 'eligible product' as stipulated in the ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 (Principal Instrument). Section 4 of the Amending Instrument, along with Schedule 1, modifies the definition of 'eligible product' in the Principal Instrument. This amendment allows new businesses to test certain financial services relating to government-issued debentures, stocks or bonds without needing a financial services licence for a period of 12 months, thereby broadening the scope of products that can be tested under the Principal Instrument (section 4, Schedule 1).
The obligations and requirements imposed by the Amending Instrument on the parties it governs are primarily to ensure compliance with the amended definition of 'eligible product'. Eligible businesses must now also consider the inclusion of government-issued debentures, stocks or bonds when testing financial services, ensuring that these products are within the allowable parameters outlined in the Principal Instrument. This includes adhering to the value thresholds specified in the Principal Instrument, such as the $10,000 limit for products other than insurance, and the $50,000 limit for home contents and personal and domestic property insurance products. These obligations are designed to maintain consumer protections while encouraging innovation in financial services.
Any breach of the provisions set out in the Amending Instrument may result in civil or criminal consequences, depending on the nature and severity of the violation. The Corporations Act 2001 outlines various offences that can attract penalties. For example, misleading or deceptive conduct can result in fines up to $1.65 million for a corporation and imprisonment for individuals. Additionally, failure to comply with the licensing requirements can lead to fines of up to $26,000 per day for a corporation and $5,000 per day for an individual, as well as potential criminal charges. The maximum penalties underscore the importance of adhering to the legislative requirements to avoid severe legal repercussions.