ASIC Corporations (Amendment) Instrument 2019/698

Administered by Department of the Treasury

Legislation au F2019L00928 Not in force Legislative Instrument

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Explanatory Statement

 

ASIC Corporations (Amendment) Instrument 2019/698

This is the Explanatory Statement for ASIC Corporations (Amendment) Instrument 2019/698.

The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).

Summary

 

1. ASIC Class Order [CO 14/1262] (principal class order) provides interim conditional relief to enable 31-day notice term deposits of up to five years to be treated as basic deposit products under the Corporations Act 2001 (the Act). The principal class order commenced on 22 December 2014, and provides relief for:

  • 31-day notice term deposits entered into on or before until 30 June 2019; and
  • 31-day notice term deposits that are entered into as a result of rolling over a term deposit that has the benefit of the relief.

 

The relief does not apply other term deposits entered into after 30 June 2019.

 

The principal class order was intended to give Government the opportunity to consider legislative reform regarding the meaning of basic deposit product under the Act, as it applies to 31-day notice term deposits.

 

The Government has indicated that there will not be an opportunity for any legislative changes to be made before the expiry of the principal class order.

Purpose of the instrument

 

2.  In order to preserve the current treatment of 31-day notice term deposits as an interim measure, the ASIC Corporations (Amendment) Instrument 2019/698 extends the relief given by the principal class order to:

  • 31-day notice term deposits entered into on or before 30 June 2021; and
  • 31-day notice term deposits that are entered into as a result of rolling over such term deposits.

The substituted notional definition of basic banking product made by paragraph 4A has been updated to reflect the amendment to the definition of basic banking product in section 961F of the Act that was made by Corporations Amendment (Financial Advice Measures) Act 2016, No. 22, 2016.

To ensure any products prescribed by the regulations made under paragraph 961F(e) of the Act are incorporated into the notional definition of basic banking product made by paragraph 4A, subparagraph 4A(e) is amended to refer to paragraph 961F(e).

The reference to paragraph (da) of the definition of basic deposit product in section 761 has been removed as this paragraph has been repealed.

Consultation

 

3. ASIC did not undertake a formal consultation process on extending the operation of the principal class order as the extension is a transitional measure of a minor and machinery nature.  ASIC has consulted with the Treasury on the matter.

Operation of the instrument

 

4. The legislative instrument amends sub-subparagraph (c)(i) of the definition of affected term deposit in paragraph 6 of the principal class order. The effect of this is to extend the operation of the relief given by the principal class order so that it applies to:

  • 31-day notice term deposits entered into on or before until 30 June 2021; and
  • 31-day notice term deposits that are entered into as a result of rolling over such term deposits.

Legislative authority

 

5. Paragraph 926A(2)(c) of the Act provides that ASIC may declare that Part 7.6 (other than Divisions 4 and 8) applies in relation to a person or financial product, or a class of persons or financial products, as if specified provisions were omitted, modified or varied as specified in the declaration.

 

Paragraph 951B(1)(c) of the Act provides that ASIC may declare that Part 7.7 of the Act 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 as specified in the declaration.

 

Paragraph 1020F(1)(c) of the Act provides that ASIC may declare that Part 7.9 of the Act 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 as specified in the declaration.

Under subsection 33(3) of the Acts Interpretation Act 1901, 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 (if any) to repeal, rescind, revoke, amend, or vary any such instrument.

Statement of Compatibility with Human Rights 

6.  The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.


Attachment

Statement of Compatibility with Human Rights

 

This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.  

 

ASIC Corporations (Amendment) Instrument 2019/698

Overview

 

1. The purpose of the legislative instrument is to amend ASIC Class Order [CO 14/1262] (the principal class order). The principal class order provides conditional relief to enable 31-day notice term deposits of up to five years to be treated as basic deposit products under the Corporations Act 2001 (Act), until 30 June 2019 (i.e. the relief will apply to 31-day notice term deposits entered into on or before 30 June 2019 and to rollovers of such term deposits). This was intended to give Government the opportunity to consider legislative reform regarding the meaning of basic deposit product under the Act, as it applies to 31-day notice term deposits.

 

The Government has indicated that there will not be an opportunity for any legislative changes to be made before the expiry of the principal class order.

 

In order to preserve the current treatment of 31-day notice term deposits as an interim measure, the legislative instrument extends the relief given by the principal class order so that it applies to such term deposits entered into on or before 30 June 2021 (and to rollovers of such term deposits).

Assessment of human rights implications

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

Conclusion

3. This 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 ASIC Corporations (Amendment) Instrument 2019/698, enacted by the Australian Securities and Investments Commission (ASIC), aims to extend the relief provided by ASIC Class Order [CO 14/1262], which treats 31-day notice term deposits of up to five years as basic deposit products under the Corporations Act 2001. The original class order, which commenced on 22 December 2014, was set to expire on 30 June 2019, providing a temporary measure to allow the government to consider legislative reforms concerning the definition of basic deposit products. Given the government's indication that no legislative changes would be made before the expiration of the original order, this amendment extends the relief period to 30 June 2021, ensuring that the current treatment of 31-day notice term deposits remains unchanged. The instrument also updates the notional definition of basic banking products to reflect changes made by the Corporations Amendment (Financial Advice Measures) Act 2016.

Scope and Application

ASIC Corporations (Amendment) Instrument 2019/698 serves to extend the relief provisions outlined in ASIC Class Order [CO 14/1262], which initially provided conditional relief to treat 31-day notice term deposits of up to five years as basic deposit products under the Corporations Act 2001 until 30 June 2019. This relief was intended to give the Government the opportunity to consider legislative reform regarding the meaning of basic deposit products under the Act, particularly as it applies to 31-day notice term deposits. Given the Government's indication that no legislative changes will occur before the expiry of the principal class order, the legislative instrument extends this relief to cover 31-day notice term deposits entered into on or before 30 June 2021, and those resulting from rollovers of such term deposits. The instrument is a transitional measure to preserve the current treatment of these term deposits as an interim measure. The instrument operates by amending sub-subparagraph (c)(i) of the definition of affected term deposit in paragraph 6 of the principal class order, ensuring the relief applies to the specified term deposits and rollovers. The amendment is made under the authority provided by the Corporations Act 2001, allowing ASIC to declare modifications to specified provisions concerning financial products.

Key Provisions

The ASIC Corporations (Amendment) Instrument 2019/698 amends the ASIC Class Order [CO 14/1262] to extend the relief provided for 31-day notice term deposits under the Corporations Act 2001 (the Act). Specifically, the principal class order, which began on 22 December 2014, initially applied to 31-day notice term deposits entered into on or before 30 June 2019 (section 1). This relief was intended to give the government time to consider legislative reform concerning the definition of a basic deposit product as it applies to these term deposits. However, as legislative changes are not expected before the principal class order expires, the amendment instrument extends this relief to include 31-day notice term deposits entered into on or before 30 June 2021, and rollovers of such term deposits (section 2). The instrument imposes obligations on financial institutions and customers involved in 31-day notice term deposits. Financial institutions must continue to treat these deposits as basic deposit products under the Act, which includes complying with the provisions concerning disclosure and the rights of customers (section 1). Customers, on the other hand, must be aware that these term deposits will be treated as basic deposit products, entitling them to certain protections and rights outlined in the Act (section 1). The instrument also updates the notional definition of a basic banking product to reflect amendments made by the Corporations Amendment (Financial Advice Measures) Act 2016, ensuring consistency and accuracy in the application of these definitions (section 2). Failure to comply with the requirements set forth in this instrument could result in legal consequences. Although the Explanatory Statement does not specify particular offences, breaches of the Corporations Act 2001 provisions, which this instrument is designed to support, can lead to civil or criminal penalties. For instance, corporations can face fines up to $1.65 million, while individuals may face fines up to $330,000 and imprisonment for up to five years, depending on the nature and severity of the breach (section 6). The instrument itself does not specify penalties but extends the relief period to avoid disrupting the market until legislative changes can be considered.

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Area of Law
Corporate Law & Governance
Instrument
Legislative Instrument
Concepts
Delegated & Subordinate Legislation
Transitional Provisions
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