ASIC Corporations (Regulatory Capital Securities) Instrument 2026/88

Explanatory Statement

ASIC Corporations (Regulatory Capital Securities) Instrument 2026/88

This is the Explanatory Statement for ASIC Corporations (Regulatory Capital Securities) Instrument 2026/88 (Instrument).

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

Summary

1.              Chapter 6D of the Act sets out the legislative framework for the offer of securities for issue or sale under a disclosure document. Within that framework, an offer of securities will require disclosure unless a specific exemption applies, and an offer for sale will only require disclosure in specific circumstances.
2.              Prudentially regulated bodies issue regulatory capital securities to meet their regulatory capital requirements under the relevant prudential standards. In certain circumstances, regulatory capital securities may be converted into, or exchanged for, ordinary shares.
3.              This instrument modifies Chapter 6D of the Act to:
   1.           enable the use of a transaction specific prospectus under section 713 of the Act for certain offers of regulatory capital securities for issue; and
   2.           provide relief from the on-sale disclosure requirement in section 707 of the Act for certain subsequent sale offers of underlying securities issued on the conversion or exchange of regulatory capital securities.
4.              ASIC considers such relief is appropriate because, broadly speaking:

(a) given the features and risks of regulatory capital securities, and the way in which these determine the expected return to investors, prospectus disclosure needs to be focused to a great degree on the terms of the regulatory capital securities; and

(b) issuers of regulatory capital securities (or their listed parent company) are subject to the continuous disclosure regime. Accordingly, investors in regulatory capital securities can access sufficient information to make an informed investment decision in relation to ordinary shares in the issuer (or its listed parent company where current or proposed holding structures are involved).

1.              The Instrument provides relief, on largely the same terms as ASIC Corporations (Regulatory Capital Securities) Instrument 2016/71 which was scheduled to expire under the Legislation Act 2003 on 1 April 2026 (Sunsetting Instrument).

Purpose of the instrument

1.              Prudentially regulated bodies are regular issuers of regulatory capital securities, also known as hybrid securities or bank hybrids, which are used to meet the issuer’s regulatory capital requirements under the relevant prudential standards.
2.              Those prudential standards prescribe that, to qualify as regulatory capital, regulatory capital securities must include a number of features; for example, the standards require that on the occurrence of certain trigger events, the regulatory capital securities must be written-off or converted into ordinary shares.

Transaction-specific disclosure and on-sale relief for retail offers of bank hybrids

1.              Where regulatory capital securities are convertible into continuously quoted securities of the issuer, they could be offered to retail investors using a transaction-specific prospectus (in reliance on a broad reading of ASIC Corporations (Offers of Convertibles) Instrument 2026/97), and the securities issued on conversion then be freely on-sold without further disclosure (in reliance on Category 2 of ASIC Corporations (Sale Offers That Do Not Need Disclosure) Instrument 2026/94).
2.              In practice, however, this relief has not been available to prudentially regulated bodies because:
   1.           in many cases, the potential interposition of a non-operating holding company (which would become the listed parent company of the issuer) means the securities to be issued on conversion may be those of a non-operating holding company, rather than the issuer; and
   2.           in other cases, typically where such a holding company has already been established, it may be optimal from a capital management perspective for particular operating companies to issue regulatory capital securities directly, where those instruments are required to convert into securities in the listed parent company.
3.          The Instrument provides disclosure relief for retail offers of regulatory capital securities in such cases by permitting the use of a transaction-specific prospectus, and gives on-sale relief for the underlying securities issued on conversion.

On-sale relief for offers of regulatory capital securities made without prospectus disclosure

1.          For offers of regulatory capital securities made without prospectus disclosure, similar structural issues prevent reliance on ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) Instrument 2026/96. While offers of regulatory capital securities to wholesale investors (or foreign retail investors) do not require prospectus disclosure, in the absence of an exception or relief, the on-sale of securities issued on conversion of those regulatory capital securities will require disclosure.
2.          The Instrument provides relief comparable to ASIC Corporations (Sale Offers: Securities Issued on Conversion of Convertible Notes) 2026/96 to facilitate the use of an ‘enhanced cleansing notice’ to permit the subsequent on-sale of the underlying securities issued on conversion.

Third-party acquisition scenarios

1.          Broadly speaking, ASIC considers providing disclosure and on-sale relief for retail offers of regulatory capital securities— in circumstances where the issuer of the ordinary shares on conversion may ultimately be a non-operating holding company of the issuer, interposed after the regulatory capital securities are issued—to be appropriate on the basis that any non-operating holding company so interposed would ‘be’ the issuer in a substantive sense.
2.          Where the terms of regulatory capital securities permit the issuer of underlying securities on conversion to be substituted not only with a potential non-operating holding company, but also with a third-party acquirer following a change of control transaction, the policy basis for providing disclosure relief and related on-sale relief is no longer satisfied.
3.          Therefore, the disclosure and on-sale relief for retail offers of regulatory capital securities in the Instrument is not available where the terms of the regulatory capital securities contemplate such a third-party acquisition scenario.'

Consultation

1.          ASIC determined that the relief in the Sunsetting Instrument was operating effectively and efficiently and continues to form a necessary and useful part of the legislative framework.
2.          On 24 November 2025, ASIC published CS 36 Proposed remake of relief for fundraising and mergers and acquisitions (CS 36).
3.          On 24 November 2025, ASIC also published an accompanying news item (ASIC proposes to remake relief for fundraising and mergers and acquisitions). 
4.          ASIC brought CS 36 to the attention of its external stakeholders through the Corporate Finance Update published November 2025.
5.          ASIC received confidential submissions in relation to the Instrument which ASIC will consider (and may consult upon) later in the year.  

Operation of the instrument

1.          The Instrument commences on the later of:
   1.           the day after it is registered on the Federal Register of Legislation; and
   2.           1 April 2026.

Definition of regulatory capital security

1.          The Instrument inserts a definition of ‘regulatory capital security’ into s9, to mean a security that satisfies all of the following:

(a) the security is issued by any of the following entities:

(i) an authorised deposit-taking institution, a subsidiary of an authorised deposit-taking institution or an authorised NOHC for the purposes of the Banking Act 1959;

(ii) a general insurer, a subsidiary of a general insurer or an authorised NOHC for the purposes of the Insurance Act 1973; or

(iii) a life company, a subsidiary of a life company or a registered NOHC for the purposes of the Life Insurance Act 1995; Note              NOHC means non-operating holding company.

(b) either:

(i) under the terms of the security, it must or may be converted into, or exchanged for, ordinary shares in:

1.         the issuer of the security; or

(B) an entity that is both:

(I) an authorised deposit-taking institution, a general insurer, a life company, an authorised NOHC or a registered NOHC for the purposes of any of those Acts; and

(II) the ultimate holding company of the issuer; or

(C) an entity (including an entity that, at the time the security is issued, does not exist) that, as a result of a restructure (however described) will be, at the time of conversion or exchange, both:

(I) an authorised NOHC or a registered NOHC for the purposes of any of those Acts; and

(II) the ultimate holding company of the issuer;

in the circumstances permitted or required by prudential standards made for the purposes of any of those Acts; or

(ii) under the terms of the security, it must or may be converted into, or exchanged for, ordinary shares in any of the entities referred to in subparagraph (i), where the proceeds from the issue of the security is to be used to acquire a regulatory capital security of a subsidiary of the issuer the terms of which satisfy subparagraph (i);

(c) if, at the time the security is issued, the conversion or exchange occurred, the ordinary shares to be issued on conversion or exchange would be in a class of continuously quoted securities.

1.          In addition to meeting the definition of ‘regulatory capital security’, the offer of regulatory capital securities must also meet certain other conditions for the disclosure and on-sale relief provided by the Instrument to be available.
2.          The Instrument modifies two further definitions in s9:

(a) the definition of ‘underlying securities’ is amended to mean, in relation to regulatory capital securities, the securities that are issued on conversion or exchange of the regulatory capital securities; and

(b) a new definition of ‘notional underlying securities’ is inserted, to mean the securities that would be issued on conversion or exchange of a regulatory capital security if that conversion or exchange occurred at the time the regulatory capital security is issued.

Relief to permit transaction-specific disclosure

1.          The Instrument modifies s713 by inserting new paragraphs s713(1)(ab) and 713(2)(cb), to permit the use of a transaction-specific prospectus for offers of regulatory capital securities where that prospectus:

(a) meets the requirements in s713 for the underlying securities that will be issued on conversion or exchange; and

(b) discloses the information required by s713(2) for the regulatory capital securities.

1.          The instrument further modifies s713 by inserting new subsection s713(2A), to clarify that:

(a) if the issuer of the underlying securities is not the same as the issuer of the regulatory capital securities (for example, where the regulatory capital securities are being issued by an operating subsidiary of a listed non-operating holding company), the issuer of the underlying securities must consent to all statements in the prospectus about that body and the underlying securities; and

(b) if the terms of the regulatory capital securities contemplate the potential interposition of a non-operating holding company as the issuer of underlying securities on conversion or exchange, but at the time the regulatory capital securities are issued, no such holding company has been established, the issuer of the notional underlying securities is the body that must consent to all statements in the prospectus about that body and the notional underlying securities.

Relief to permit on-sale of underlying securities

1.          The Instrument modifies s708A by inserting new subsection s708A(12G), which provides on-sale relief for the underlying securities issued on conversion or exchange of regulatory capital securities, where the regulatory capital securities were issued under a prospectus, and the conversion or exchange did not involve any further offer.
2.          This on-sale relief is available where the regulatory capital securities were issued under either a s713 prospectus (relying on the disclosure relief provided by the Instrument), or a s710 prospectus (without relying on the disclosure relief provided by the Instrument).

Third-party acquisition scenarios

1.          The Instrument further modifies s713 and 708A, by inserting new subsections s713(8) and 708A(12GA), to limit the disclosure and on-sale relief provided so that it is not available where certain third-party acquisition scenarios are contemplated.
2.          The transaction-specific disclosure and on-sale relief for offers of regulatory capital securities under a prospectus does not apply where the terms of the regulatory capital securities permit, following a change of control involving a third-party acquirer, that third-party acquirer being substituted as the issuer of underlying securities on conversion or exchange of the regulatory capital securities: s713(8) and 708A(12GA).
3.          More specifically, while a ‘third-party acquisition scenario’ is not specifically defined in the instrument, s713(8) and 708A(12GA) disapply the relief in s713 and 708A(12G) where the terms of the regulatory capital securities permit the issuer of the underlying securities to be substituted for another entity, where that substitution is the result of a restructure (however described) initiated by persons other than the directors of the issuer of the regulatory capital securities or the ultimate holding company of the issuer.
4.          Subsections 713(8) and 708A(12GA) are intended to accommodate, to the extent possible, the terms of many regulatory capital securities which typically:

(a) define a broad ‘change of control event’ (which will trigger a conversion or exchange of the regulatory capital securities, so that holders may participate in any control transaction as holders of the underlying securities); and

(b) carve-out from this definition—by reference to whether or not the change of control event was initiated by the directors— a ‘NOHC event’ which relates to the potential interposition of a non-operating holding company (but which does not result in the transfer of control to a third party).

On-sale relief for offers of regulatory capital securities made without prospectus disclosure

1.          The Instrument further modifies s708A by inserting s708A(12H) and (12I), to provide relief to facilitate the use of an enhanced cleansing notice for offers of regulatory capital securities made without prospectus disclosure (for example, where offers are made only to wholesale investors), to permit the subsequent on-sale of the underlying securities issued on conversion or exchange.
2.          Under new s708A(12I)(a) and (b), the notice must:

(a) contain the information required by s713(2)–(5) for the underlying securities that will be issued on conversion or exchange;

(b) contain the information required by s713(2) for the regulatory capital securities; and

(c) be worded and presented in a clear, concise and effective manner.

1.          Under new s708A(12H)(e), where the issuer of the underlying securities is:

(a) the same as the issuer of the underlying securities, the notice must be given to the relevant market operator for the issuer of the regulatory capital securities; and

(b) not the same as the issuer of the regulatory capital securities (for example, where the regulatory capital securities are being issued by an operating subsidiary of a listed non-operating holding company), the notice must be given jointly by the issuer of the notional underlying securities and the issuer of the regulatory capital securities to the relevant market operator for the issuer of the notional underlying securities.

1.          Under new s708A(12I)(c), where the notice includes a statement by a person (or a statement said to be based on a statement by a person):
   1.    the person must consent to the statement in the form and context in which it is included;
   2.    the notice must state that the person has given this consent and
   3.    the consent of that person must not be withdrawn before the notice is given to the relevant market operator.
2.          Unlike the disclosure and on-sale relief provided for offers of regulatory capital securities made under a prospectus, the on-sale relief provided by this instrument in new s708A(12H) and (12I) also applies where the terms of the regulatory capital securities contemplate a third-party acquisition scenario.

Repeal of Sunsetting Instrument

1.          The Instrument repeals the Sunsetting Instrument (rather than leave it to expire/sunset) to avoid any doubt that it no longer continues in force.

Legislative instrument and primary legislation 

1.          The subject matter and policy implemented by this instrument is more appropriate for a legislative instrument rather than primary legislation because

(a) the matters contained in the instrument are a specific amendment designed to ensure the application of primary legislation keeps pace with market developments not contemplated at the time the law was originally made and applies in a way consistent with the intended policy and the enabling provisions in the primary legislation; and

(b) the matters contained in the instrument only affect a relatively small subset of issuers. If the matters in the instrument were to be inserted into the primary legislation, they would insert, into an already complex statutory framework, a set of specific provisions that would apply only to a relatively small group of entities. This would result in additional cost and unnecessary complexity for other users of the primary legislation.

1.          It will be a matter for the Government and for Parliament as to whether the Act or Regulations may be amended in future to include the relief in the Instrument.

Duration of the instrument

1.          The Instrument will expire after 5 years.
2.          This allows sufficient time for the Government and for Parliament to determine whether to amend the Act or Regulations to include the relief.

Legislative authority

1.          ASIC makes this Instrument under subsections 741(1) and 1020F(1) of the Act.
2.          Subsection 741(1) provides that ASIC may:
   1.           exempt a person from a provision of Chapter 6D; or
   2.           declare that Chapter 6D applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration.
3.          Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power is to 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.
4.          This Instrument is disallowable under section 42 of the Legislation Act 2003.

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 (Regulatory Capital Securities) Instrument 2026/88

Overview

1. Prudentially regulated bodies issue regulatory capital securities to meet their regulatory capital requirements under the relevant prudential standards. In certain circumstances, regulatory capital securities may be converted into, or exchanged for, ordinary shares.  This instrument modifies Chapter 6D of the Corporations Act 2001 (Act) to:

(a) enable the use of a transaction specific prospectus under section 713 of the Act section 713 for certain offers of regulatory capital securities for issue; and

(b) provide relief from the on-sale disclosure requirement in section 707 of the Act for certain subsequent sale offers of underlying securities issued on the conversion or exchange of regulatory capital securities.

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.