EXPLANATORY STATEMENT for
ASIC Corporations (Repeal) Instrument 2017/796
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
The Australian Securities and Investments Commission (ASIC) makes the ASIC Corporations (Repeal) Instrument 2017/796 (the Instrument) under paragraphs 911A(2)(l), 992B(1)(a) and 1020F(1)(a) and of the Corporations Act 2001 (the Act).
The Instrument repeals ASIC Class Orders [CO 03/1048] and [CO 04/239].
Paragraph 911A(2)(l) of the Act provides that ASIC may exempt a person from the requirement to hold an Australian financial services licence for a financial service they provide. This is done by granting an exemption in writing and publishing it in the Gazette.
Paragraph 992B(1)(a) of the Act provides that ASIC may exempt a person or a financial product or class of persons or financial products from all or specified provisions of Part 7.8 of the Act.
Subsection 1020F(1)(a) of the Act provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.9 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 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 bylaws), 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
[CO 03/1048] was issued to permit the provision of financial product advice on a mortgage offset account and for arranging for another person to apply for, acquire, vary or dispose of a mortgage offset account without an AFS licence so long as the person is a member of an ASIC-approved external dispute resolution (EDR) scheme. As a result, persons who advise or deal in relation to mortgage offset accounts do not need to obtain an AFS licence solely for these purposes.
[CO 04/239] was issued to exempt persons providing, or advising on, debt factoring arrangements that are derivatives from the requirement to hold an AFS licence, and from the product disclosure and hawking provisions of Chapter 7 of the Corporations Act. ASIC considered that these requirements were not intended to apply to factoring arrangements.
Under the Legislation Act 2003 (Legislation Act), legislative instruments cease automatically, or ‘sunset’, after 10 years, unless action is taken to exempt or preserve them. To preserve its effect, a legislative instrument must be remade before its sunset date.
[CO 03/1048] and [CO 04/239] are both scheduled to sunset on 1 October 2017. ASIC has decided to preserve the effect of [CO 03/1048] and [CO 04/239] through following instruments:
(a) ASIC Corporations (Factoring Arrangements) Instrument 2017/794; and
(b) ASIC Corporations (Mortgage Offset Accounts) Instrument 2017/795.
2. Purpose of the instrument
The purpose of the ASIC Corporations (Repeal) Instrument 2017/796 is to repeal [CO 03/1048] and [CO 04/239] now that new legislative instruments preserving their effect have been made.
3. Operation of the instrument
Clause 4 provides that each of the instruments set out in Schedule 1 are amended or repealed as set out in that Schedule. Schedule 1 provides that [CO 03/1048] and [CO 04/239] are repealed in full.
4. Consultation
ASIC released a public consultation paper on its proposal to remake [CO 03/1048] and [CO 04/239] on 7 June 2017 (Consultation Paper 286 Remaking ASIC class orders on mortgage offset accounts and factoring arrangements). The consultation period closed on 6 July 2017. No submissions were received.
Overview
The ASIC Corporations (Repeal) Instrument 2017/796 was enacted to address the sunsetting of two specific ASIC Class Orders that had provided certain exemptions under the Corporations Act 2001. These Class Orders, [CO 03/1048] and [CO 04/239], were issued to exempt certain financial services related to mortgage offset accounts and debt factoring arrangements from the requirement to hold an Australian Financial Services (AFS) licence, as well as from specific regulatory provisions. The Instrument was introduced by the Australian Securities and Investments Commission (ASIC) under the authority granted by the Corporations Act 2001, aiming to streamline and modernise the regulatory framework. The policy objective was to ensure that the exemptions continued to apply without interruption, facilitating the financial services industry's operations while maintaining appropriate regulatory oversight.
Scope and Application
The ASIC Corporations (Repeal) Instrument 2017/796 applies to the Corporations Act 2001, specifically targeting ASIC Class Orders [CO 03/1048] and [CO 04/239] which are being repealed. These orders, concerning the provision of financial advice on mortgage offset accounts and debt factoring arrangements respectively, are being repealed in light of new instruments that preserve their intended effects. The repeal is executed under specific powers granted by the Corporations Act, allowing ASIC to exempt certain financial services and products from licensing requirements and regulatory provisions. The geographic reach of this Act is national, as it applies to entities and individuals providing financial services across Australia, subject to the regulatory oversight of ASIC. The repeal itself does not introduce new exclusions, exemptions, or thresholds but rather consolidates existing regulatory frameworks into new legislative instruments designed to maintain the same operational standards.
Key Provisions
The ASIC Corporations (Repeal) Instrument 2017/796 primarily serves to repeal ASIC Class Orders [CO 03/1048] and [CO 04/239] under the Corporations Act 2001 (the Act). These class orders were previously issued to provide specific exemptions regarding the provision of financial services without an Australian financial services licence (AFS licence). Class Order [CO 03/1048] permitted the provision of advice on mortgage offset accounts and the arrangement of applications for these accounts without needing an AFS licence, provided the person was a member of an ASIC-approved external dispute resolution (EDR) scheme. Class Order [CO 04/239] exempted individuals and entities from needing an AFS licence and from certain disclosure requirements for debt factoring arrangements that were derivatives.
The obligations imposed by the Act on the parties or entities governed by these repealed class orders are now governed by new instruments that have been introduced to preserve their effects. Specifically, ASIC Corporations (Factoring Arrangements) Instrument 2017/794 and ASIC Corporations (Mortgage Offset Accounts) Instrument 2017/795 replace the repealed class orders. These new instruments ensure that the exemptions and conditions previously outlined in [CO 03/1048] and [CO 04/239] continue to apply. Consequently, professionals providing advice or arranging mortgage offset accounts or debt factoring arrangements must now comply with the requirements set out in the new instruments.
The repealed class orders themselves did not impose specific penalties for non-compliance, as they primarily functioned as exemptions from certain licensing and disclosure requirements. However, any breaches of the new instruments that replace them could result in civil or criminal penalties, depending on the nature and severity of the breach. Under the Corporations Act 2001, penalties for breaches can include fines, imprisonment, or both, depending on the specific provisions that are contravened. The maximum penalties can vary widely, but they can include substantial fines for corporations and significant penalties for individuals involved in serious breaches.
In summary, the ASIC Corporations (Repeal) Instrument 2017/796 effectively repeals the outdated Class Orders [CO 03/1048] and [CO 04/239] and replaces them with new instruments that maintain the intended exemptions. Parties subject to these provisions must now comply with the new regulatory framework, and non-compliance with the new instruments could lead to civil or criminal penalties as prescribed by the Corporations Act 2001.