EXPLANATORY STATEMENT for
ASIC Corporations (Amendment) Instrument 2018/752
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Amendment) Instrument 2018/752 under subsections 765A(2) and 1020F(1) and paragraphs 601QA(1)(a), 926A(2)(a), 951B(1)(a) and 992B(1)(a) of the Corporations Act 2001 (the Act).
Paragraph 601QA(1)(a) provides that ASIC may exempt a person from a provision in Chapter 5C of the Act.
Subsection 765A(2) provides that ASIC may declare that a specified facility, interest or other thing is not a financial product for the purposes of Chapter 7 of the Act.
Paragraph 926A(2)(a) provides that ASIC may exempt a person or class of persons from all or specified provisions to which section 926A of the Act applies.
Paragraph 951B(1)(a) provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.7 of the Act.
Paragraph 992B(1)(a) provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.8 of the Act.
Subsection 1020F(1) provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.9 of the Act, exempt a financial product or a class of financial products from all or specified provisions of Part 7.9 or declare that Part 7.9 applies in relation to a person or a financial product, or a class of persons or financial products, as if specified provisions were omitted, modified or varied.
ASIC Corporations (Amendment) Instrument 2018/752 amends ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211. Under subsection 33(3) of the Acts Interpretation Act 1901 (as in force as at 1 January 2005 and 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 (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
- Background
The Act provides that a facility through which, or through the acquisition of which, a person makes payments otherwise than through the delivery of notes or coins – a non-cash payment facility – is a financial product.
These products are subject to the financial services regulatory regime, which requires persons to:
- hold an Australian financial services (AFS) licence in order to provide financial services in relation to a financial product;
- comply with the conduct obligations in Part 7.8 of the Act; and
- provide Product Disclosure Statements and confirmations of transactions to retail clients.
Shortly after commencement of the financial services regulatory regime, it became apparent that the scope of some of these rules was unintentionally broad. ASIC addressed these issues by making seven legislative instruments relating to non-cash payment products:
- Class Order [CO 02/1075] Travellers’ cheques and confirmation of transactions addressed the unnecessary application of the requirement to give a confirmation of transaction in relation to travellers’ cheques at the time of purchase or disposal of the cheque;
- Class Order [CO 03/705] Non-cash payment facilities – licensing exemption provided relief for licensees who assist clients with payments to third parties;
- Class Order [CO 05/736] Low value non-cash payment facilities contained a tailored regulatory regime for ‘low value’ products;
- Class Order [CO 05/737] Loyalty schemes declared that loyalty scheme are not financial products;
- Class Order [CO 05/738] Gift facilities exempted non-reloadable payment products marketed solely as gift facilities from the licensing, conduct and disclosure obligations in the Act;
- Class Order [CO 05/739] Road toll facilities declared that facilities solely used for paying road tolls are not financial products; and
- Class Order [CO 05/740] Prepaid mobile facilities exempted prepaid mobile phone accounts from the licensing, conduct and disclosure obligations in the Act.
The 2014 Financial System Inquiry (FSI) also considered the policy settings underpinning the regulation of non-cash payment facilities. The final report of the FSI recommended that the Government enhance graduation of retail payments regulation by clarifying thresholds for regulation by ASIC and the Australian Prudential Regulation Authority (APRA), strengthen consumer protection by mandating the ePayments Code and introduce a separate prudential regime with two tiers for purchased payment facilities.
In its response to the FSI, the Government stated that APRA, ASIC and the Reserve Bank of Australia would review the framework for payments system regulation and develop clear guidance. In 2016, as the sunset dates for the above Class Order approached, ASIC noted that this work was ongoing, and the Government, Treasury and the relevant regulators were still considering how to give effect to the FSI’s recommendation that payments regulation be made clearer and more graduated. In order to provide certainty while the final policy settings for payments regulation were being considered, ASIC remade the above Class Orders without substantive changes in ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211 for three years.
The relief in ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211 is due to cease in early 2019. Government, Treasury and the relevant regulators are continuing to consider how to give effect to the FSI recommendation. The relevant Government policy settings are unlikely to be clarified by the time ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211 ceases.
2. Purpose of the instrument
The purpose of ASIC Corporations (Amendment) Instrument 2018/752 is to preserve the effect of ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211 while policy settings for the regulation of payment products are clarified.
3. Operation of the instrument
ASIC Corporations (Amendment) Instrument 2018/752 operates to continue the effect of the relief in ASIC Corporations (Non-cash payment facilities) Instrument 2016/211 by removing the provision for a three-year cessation date in section 3.
4. Consultation
ASIC previously consulted with industry stakeholders on its proposal to remake the above Class Orders for a period of three years while the final policy settings for payments regulation were being determined and the FSI recommendation was being implemented. The four responses that ASIC received at the time broadly approved of the way in which we remade the non-cash payments relief. One response included suggested changes to the policy settings for low value payments products; we stated at the time of issuing ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211 that ASIC would consider these suggestions in the context of the implementation of the FSI recommendation.
We noted in 2016 that, once the policy uncertainty associated with payments regulation is resolved, ASIC will review ASIC Corporations (Non-cash Payment Facilities) Instrument 2016/211, and that at that subsequent time we would consult publicly on any changes that we propose to make. Accordingly, we have not further consulted with industry on our issue of ASIC Corporations (Amendment) Instrument 2018/752.