EXPLANATORY STATEMENT for
ASIC Corporations (Repeal) Instrument 2016/774
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes ASIC Corporations (Repeal) Instrument 2016/774 under paragraph 601QA(1)(a) of the Corporations Act 2001 (the Act).
This legislative instrument repeals ASIC Class Order [CO 02/226] Managed investment schemes: No issue required disclosure.
Paragraph 601QA(1)(a) of the Act provides that ASIC may exempt a person, a class of persons or all persons from a provision of Chapter 5C of the Act.
Under subsection 33(3) of the Acts Interpretation Act 1901 (as in force as at 1 January 2005 and as applicable to the relevant power 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.
1. Background
ASIC has recently reviewed ASIC Class Order [CO 02/226] which provides an alternative to subsection 601ED(2) of the Act to permit certain managed investment schemes to be unregistered. ASIC has decided to cease to provide the relief in [CO 02/226] as that relief is considered to be unnecessary.
The Legislation Act 2003 (the LA) provides for the periodic expiry of legislative instruments (‘sunsetting’) to ensure that they are kept up to date and only remain in force for as long as they are needed. [CO 02/226] was scheduled to expire on 1 April 2017, under the sunsetting provisions of the LA.
ASIC’s review of the policy underlying this class order, and subsequent consultation which garnered no feedback, has provided an opportunity to deal with the class order's imminent expiry and to repeal the instrument rather than let it sunset.
2. Purpose of the instrument
The purpose of ASIC Corporations (Repeal) Instrument 2016/774 is to repeal ASIC Class Order [CO 02/226] Managed investment schemes: No issue required disclosure.
3. Operation of the instrument
ASIC Corporations (Repeal) Instrument 2016/774 repeals [CO 02/226].
4. Consultation
On 30 May 2016 ASIC released CP 259 Repealing ASIC class order on managed investment schemes: No issue required disclosure [CO 02/226] (CP 259) seeking feedback on our proposal to repeal [CO 02/226] as we consider it is no longer required and does not form a useful and necessary part of the legislative framework. The consultation period ended on 28 June 2016.
ASIC received no submissions in response to CP 259.
Following the consultation, ASIC decided to proceed to repeal [CO 02/226].
Overview
The ASIC Corporations (Repeal) Instrument 2016/774, enacted under the Corporations Act 2001, addresses the redundancy of ASIC Class Order [CO 02/226], which previously provided an alternative to the Act’s requirements for certain managed investment schemes to be unregistered. The Australian Securities and Investments Commission (ASIC), acting under its authority granted by the Corporations Act, has repealed this class order as it is deemed unnecessary. The repeal aims to streamline the legislative framework, ensuring that regulations remain relevant and effective. The Corporations Act 2001 empowers ASIC to exempt certain entities from specific provisions, and in this instance, the repeal instrument is exercised to remove a class order that is no longer serving its intended purpose. The decision to repeal was preceded by a consultation process outlined in CP 259, which concluded with no feedback and thus supported the decision to proceed with the repeal.
Scope and Application
The ASIC Corporations (Repeal) Instrument 2016/774 pertains to the repeal of ASIC Class Order [CO 02/226], which was concerned with managed investment schemes and their disclosure requirements. This instrument is applicable to managed investment schemes and the entities managing such schemes within Australia. The repeal of [CO 02/226] was prompted by a recent review conducted by ASIC, which concluded that the class order was no longer necessary. The instrument operates by revoking the class order, thereby ensuring that the legislative framework remains current and relevant. Additionally, the instrument leverages the authority granted under paragraph 601QA(1)(a) of the Corporations Act 2001, allowing ASIC to exempt certain persons or classes of persons from specific provisions of Chapter 5C of the Act. The instrument is part of a broader legislative framework that includes the Corporations Act 2001 and the Acts Interpretation Act 1901, which provides for the periodic review and updating of legislative instruments.
Key Provisions
The ASIC Corporations (Repeal) Instrument 2016/774 (the Instrument) repeals ASIC Class Order [CO 02/226] which previously allowed certain managed investment schemes to operate without registration. Section 601QA(1)(a) of the Corporations Act 2001 (the Act) allows ASIC to exempt entities from certain provisions, but the Instrument revokes this exemption by repealing [CO 02/226]. The repeal of [CO 02/226] was considered unnecessary after a review and consultation process where no feedback was received.
The primary obligation imposed by the Instrument is the requirement for all managed investment schemes to comply with registration requirements under the Act, as the exemption provided by [CO 02/226] is no longer applicable. This means that any entities that were previously exempt from registration now need to register their schemes in accordance with the Act's provisions. The Instrument's repeal of [CO 02/226] aims to ensure that all managed investment schemes adhere to the necessary regulatory standards.
There are potential civil and criminal consequences for non-compliance with the Act’s registration requirements following the repeal of [CO 02/226]. Section 1311(1) of the Act states that a corporation that fails to comply with certain provisions can be subject to a civil penalty of up to $210,000 for a corporation, or fines and imprisonment for individuals depending on the severity of the breach. Additionally, section 1317E outlines the potential criminal penalties for breaches that include fines and imprisonment terms that can vary based on the nature and extent of the breach. The precise penalties are determined by the courts, taking into account the seriousness and circumstances of each case.