ASIC Corporations (Division 3 Securities and Division 4 Financial Products) Instrument 2026/32

Explanatory Statement

ASIC Corporations (Division 3 Securities and Division 4 Financial Products) Instrument 2026/32

This is the Explanatory Statement for ASIC Corporations (Division 3 Securities and Division 4 Financial Products) Instrument 2026/32 (the Instrument).

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

Summary

1.       ASIC Corporations (Division 3 Securities and Division 4 Financial Products) Instrument 2015/1030 (Sunsetting Instrument) is an instrument that, among other things, regulates and facilitates the transfer through ASX Settlement Pty Ltd (ASX Settlement) of certain classes of financial products. The Sunsetting Instrument is due to sunset on 1 April 2026. ASIC has reviewed its policy underlying the Sunsetting Instrument. In light of this review and following a targeted consultation, ASIC considers that this Sunsetting Instrument is necessary, fit-for-purpose and relevant. As such, ASIC has decided to reissue the relief underlying the Sunsetting Instrument into a new legislative instrument, being the Instrument.

Purpose of the instrument

1.       The purpose of the Instrument is to:

1.           declare certain classes of financial products for the purposes of regulations that regulate and facilitate transfers of financial products through ASX Settlement; and
2.           disapply the application to certain warrants of certain subregulations that deal with circumstances under which such warrants would be taken to have ceased quotation on a financial market; and
3.           clarify the operation of the regulations which deal with the effect on a transferee of a transfer through ASX Settlement of financial products that are rights; and
4.           expand the operation of the transfer provisions in Division 3 and 4 of Part 7.11 of the Act to cover interests in registered schemes that are quoted on the financial market operated by Cboe Australia Pty Ltd (Cboe); and
5.           discontinue the Sunsetting Instrument, which will be superseded by the Instrument.

Consultation

1.       ASIC conducted a targeted consultation when considering whether to remake the Sunsetting Instrument and received submissions from ASX Limited (ASX), Cboe, National Stock Exchange of Australia (NSX) and Securities Exchange Guarantee Corporations. All the submissions received were in favour of extending the relief or had no concerns with ASIC remaking the Sunsetting Instrument.
2.       Some submissions indicated that the Instrument should be amended and drafted in a manner that is market neutral in the interests of reducing barriers to competition for these products and services.
3.       After considering the submissions received, ASIC has determined that the Instrument cannot be amended in a way that would make it market neutral. This position reflects that, at present, only ASX and Cboe require the relief provided by the instrument. However, if any other declared financial market wishes to rely on this relief in the future, it may submit an individual application to ASIC for consideration.

Operation of the Instrument

1.       Division 4 of Part 7.11 of the Act, and regulations under the Corporations Regulations 2001 (the Regulations) made for the purposes of that Division, regulate and facilitate the transfer of certain classes of financial products – “Division 4 financial products” – effected through a prescribed clearing and settlement facility.
2.       As at the commencement date of the instrument, ASX Settlement was the only clearing and settlement facility that had been prescribed by the Regulations. ASX Settlement was previously known as ASX Settlement and Transfer Corporation Pty Limited (ASTC). As at the commencement date of the Instrument, the Regulations continue to refer to ASTC.
3.       ASIC considers that subsection 1075A(2) is satisfied in relation to the declaration that certain classes of financial products are Division 4 financial products because of the advantages of effecting a transfer of financial products in accordance with Division 4 of Part 7.11 of the Act through ASX Settlement. The main advantages are as follows:

1.           legal certainty in relation to the effectiveness of the transfer, for example:

1.             a transfer effected through ASX Settlement in accordance with its operating rules is valid and effective for the purposes of any law or instrument governing or relating to the way in which the financial product may be transferred (see section 1074D of the Act);
2.             a transfer effected through ASX Settlement in accordance with its operating rules may be effected to a trustee or legal representative (executor or administrator) despite any law or anything in the relevant instrument appointing the trustee or legal representative (see subsection 1074G(7) of the Act);
3.             the authority of a participant to effect a disposal of a financial product is continued notwithstanding that the client has died (see regulations 7.11.25 and 7.11.26 of the Regulations);

1.           legal certainty in relation to the determination of the holder of Division 4 financial products for the purposes of meetings, and of the conferral of benefits, such as dividends or distributions, on holders of such products (see regulation 7.11.37 – 7.11.39 of the Regulations);
2.           various warranties and obligations apply in relation to the transfer, for example:

1.             a participant effecting a transfer warrants to have the authority and be legally entitled to transfer the financial products (see regulation 7.11.29 of the Regulations);
2.             an indemnity to various persons, including the transferor and the transferee, if the warranty made under regulation 7.11.29 is not true (see regulation 7.11.32 of the Regulations).

1.       The kinds of financial products that are Division 4 financial products include:

1.           shares in a company;
2.           debentures of a company;
3.           interests in a registered scheme;
4.           rights to acquire any of the above by way of issue;
5.           Commonwealth Government Security (CGS) depository interests; and
6.            simple corporate bonds depository interests.

1.   A class of financial products declared by ASIC under section 1075A of the Act to be financial products the transfer of which will be effected through ASX Settlement are also Division 4 financial products. This instrument, which is a declaration under section 1075A of the Act, has the effect that the following financial products are also Division 4 financial products:

1.           warrants traded on a declared financial market;
2.           warrants admitted to the AQUA Quote Display Board;
3.           interests in unregistered managed investment schemes traded on a declared financial market or admitted to the AQUA Quote Display Board;
4.           certain shares and debentures quoted on a declared financial market issued by entities that are not companies under the Act, and by foreign companies; and
5.           depository interests in relation to securities issued by a foreign company or foreign scheme products.

1.   The Instrument also disapplies the operation of subregulations 7.11.03(4) and (5) in relation to warrants that are able to be traded on a declared financial market, and warrants that are admitted to the AQUA Quote Display Board. Those kinds of financial products are Division 4 financial products as a result of the declaration made by the Instrument.
2.   These subregulations provide that if a Division 4 financial product is suspended from quotation (which does not, of itself, mean that the financial product has stopped being quoted – see regulation 7.11.03(3)) and, during the suspension, the issuer in relation to the product ceases to be included in the official list of the market on which the product is traded, then the product is taken to stop being quoted when the issuer ceases to be included in the official list. The application of these subregulations to warrants is inappropriate because the issuer of the warrants will not be the issuer of the underlying financial product to which the warrant relates. ASIC considers that subsection 1075A(2) is satisfied in relation to this part of the declaration because it removes uncertainty in the operation of the law.
3.   The Instrument also modifies the operation of regulation 7.11.28, which deals with the effect on a transferee of a transfer through ASX Settlement of a Division 4 financial product that is a “right”. A “right” is generally defined to mean a right of a person to have a share, debenture or interest in a registered scheme issued to the person, whether or not on payment of any money or for any other consideration.
4.   Subregulations 7.11.28(1), (2) and (3) contain certain deeming provisions in relation to transfers through ASX Settlement of Division 4 financial products that are rights. The deeming provisions relate to when the transferee of the rights is taken:

1.           to have applied for the issue of, and agreed to accept, the Division 4 financial products to which the rights relate; and
2.           to have agreed to become a member of the company or scheme (as applicable);
3.           to be bound by the company’s or scheme’s constitution (as applicable).

1.   The deeming provisions take effect at the time the transfer of the rights take effect, irrespective of whether and when the transferee makes payment of the application money to the issuer in relation to the rights.
2.   Under the modified operation of the subregulation 7.11.28(1), (2) and (3) these deeming provisions only apply where a transfer of rights through ASX Settlement has taken effect and, at that time or a later time (each the relevant payment time), the transferee makes a payment of application money (or, in the case of rights that are assignable options to acquire, by way of issue, shares in a company on payment of an exercise price) to the issuer of the right. The Instrument also provides further clarification in relation to the effect of a transfer through ASX Settlement of a Division 4 financial product that is a right on the transferee. Where a transfer of a right takes effect at a particular time, the transferee is taken to have agreed at that time to accept the rights themselves subject to the terms and conditions on which the transferor held the right immediately before that time. ASIC considers that subsection 1075A(2) is satisfied in relation to the part of the declaration that modifies the operation of regulation 7.11.28 because it provides clarification and removes uncertainty in the operation of the law regarding transfers of rights through ASX Settlement.

Duration of the Instrument

1.   The Instrument will cease to apply on 1 April 2031.

Schedule to the Instrument

1.   Schedule 1 of the Instrument repeals the Sunsetting Instrument.  

Statement of Compatibility with Human Rights 

1.   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 (Division 3 Securities and Division 4 Financial Products) Instrument 2026/32 

Overview

1.       ASIC Corporations (Division 3 Securities and Division 4 Financial Products) Instrument 2026/32 (the Instrument) is an instrument that, among other things, regulates and facilitates the transfer through ASX Settlement Pty Ltd (ASX Settlement) of certain classes of financial products.

1.       The purpose of the Instrument is to:

1.           declare certain classes of financial products for the purposes of regulations that regulate and facilitate transfers of financial products through ASX Settlement; and
2.           disapply the application to certain warrants of certain subregulations that deal with circumstances under which such warrants would be taken to have ceased quotation on a financial market; and
3.           clarify the operation of the regulations which deal with the effect on a transferee of a transfer through ASX Settlement of financial products that are rights; and
4.           expand the operation of the transfer provisions in Division 3 and 4 of Part 7.11 of the Act to cover interests in registered schemes that are quoted on the financial market operated by Cboe Australia Pty Ltd (Cboe); and
5.           discontinue the Sunsetting Instrument, which will be superseded by the Instrument.

1.       The Instrument repeals ASIC Corporations (Division 3 Securities and Division 4 Financial Products) Instrument 2015/1030 as it is superseded by the Instrument upon commencement.

Assessment of human rights implications

1.       This Instrument does not engage any of the applicable rights or freedoms.

Conclusion

1.       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.