Overview

The ASIC Market Integrity Rules (ASX Market) Amendment 2011 (No. 1) was introduced to address concerns raised by the Senate Standing Committee on Regulations and Ordinances regarding the ASIC Market Integrity Rules (ASX Market) 2010. Specifically, the amendment seeks to mitigate the potential negative impact on individuals who have been charged with an offence but not convicted, thereby addressing the potential detriment that could arise from such a charge being considered in the assessment of their good fame and character and high business integrity. The rules were enacted under subsection 798G(1) of the Corporations Act 2001 by the Australian Securities and Investments Commission (ASIC) to provide a legislative instrument dealing with the activities or conduct of persons in relation to financial products traded on licensed markets. The policy objective of this legislative instrument is to ensure that individuals involved in the business of the Market Participant are of good fame and character and high business integrity, while also taking into consideration the detrimental impact that could arise from being charged with an offence without a conviction. No consultation was conducted by ASIC prior to the enactment of the amendment, however, a period of public consultation was undertaken before the original rules were made. The amendment effectively deletes the words “charged with or” from subparagraph (2)(b)(i) of rule 2.1.4 of the Rules, thereby excluding charges from the criteria used to assess an individual's good fame and character and high business integrity. This amendment was made to align the rules with the principles of personal rights and parliamentary propriety as examined by the Senate Standing Committee on Regulations and Ordinances.

Scope and Application

The ASIC Market Integrity Rules (ASX Market) Amendment 2011 (No. 1) applies to the activities and conduct of licensed markets, the activities and conduct of persons in relation to these markets, and the activities and conduct of persons in relation to financial products traded on these markets. This legislative instrument specifically targets Market Participants, their employees, and directors or Controllers of corporate Market Participants under the Corporations Act 2001. The amendment operates within the jurisdiction of the Commonwealth of Australia and is designed to ensure that individuals involved in the financial markets maintain high standards of good fame, character, and business integrity. The legislative instrument amends the existing Rules to refine the criteria for determining good fame and character, specifically addressing concerns raised about the potential negative impact of being charged with an offence without a conviction. Notably, the amendment removes the consideration of charges without convictions when assessing an individual's suitability for involvement in market activities. There are no stated exclusions or thresholds within this specific legislative instrument, but it is part of a broader set of rules that may contain such provisions. The application and enforcement of these rules may be further defined through subordinate instruments issued by ASIC.

Key Provisions

The ASIC Market Integrity Rules (ASX Market) Amendment 2011 (No. 1) modifies rule 2.1.4 of the ASIC Market Integrity Rules (ASX Market) 2010. Specifically, it changes the definition of what constitutes a lack of good fame and character and high business integrity for individuals involved in the business of a Market Participant. The amendment addresses concerns raised by the Senate Standing Committee on Regulations and Ordinances regarding the potential impact of being charged with an offence, without a conviction, on a person's suitability to be involved in market activities. Under the amendment, subrule 2.1.4(2) is altered to exclude the phrase "charged with or," meaning that only convictions, and not mere charges, will now disqualify a person from being deemed of good fame and character and high business integrity. The Act imposes obligations on Market Participants to ensure that all employees and other individuals involved in their business, as well as directors or controllers of a body corporate, meet the criteria for good fame and character and high business integrity. Market Participants must conduct thorough checks and assessments to verify that these individuals have not been convicted of any offence, as this is now the sole criterion under the amended rule. Additionally, Market Participants must maintain records of these assessments and ensure ongoing compliance with the rule, especially in the event of changes in personnel or management. There are no specific offences or penalties outlined in the Amendment itself. However, failure to comply with the integrity requirements could potentially result in regulatory action under the Corporations Act 2001. Market Participants who do not ensure that their employees or associated individuals meet the good fame and character and high business integrity criteria could be subject to enforcement actions by ASIC, including fines, public reprimands, or other regulatory sanctions. The exact penalties would depend on the nature and severity of the non-compliance, as well as any resultant harm to the market or investors.