EXPLANATORY STATEMENT
Issued by authority of the Minister for Housing and Assistant Treasurer
Australian Securities and Investments Commission Act 2001
Australian Securities and Investments Commission Amendment (First Home Loan Deposit Scheme Guarantees) Regulations 2019
The Australian Securities and Investments Commission Act 2001 (the Act) complements the Corporations Act 2001 and provides for the Australian Securities and Investments Commission and certain other bodies. The Act outlines additional obligations and regulations applicable to business entities in Australia.
Section 251 of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The purpose of the Australian Securities and Investments Commission Amendment (First Home Loan Deposit Scheme Guarantees) Regulations 2019 (the Amending Regulations) is to make amendments to the Australian Securities and Investments Commission Regulations 2001 (the Principal Regulations) in respect of definitions for financial products. The amendments exclude guarantees issued under the First Home Loan Deposit Scheme by the National Housing and Finance Investment Corporation as financial products.
The Commonwealth has enacted the National Housing Finance and Investment Corporation Amendment Act 2019 which amended the National Housing Finance and Investment Corporation Act 2018. The Amending Act established the First Home Loan Deposit Scheme, which will provide a guarantee to allow eligible borrowers to purchase a modest home with a deposit of as little as 5 per cent, without incurring the additional cost of lender’s mortgage insurance. The First Home Loan Deposit Scheme will be implemented by the National Housing Finance and Investment Corporation, a corporate Commonwealth entity. The First Home Loan Deposit Scheme will provide up to 10,000 guarantees for eligible first home buyers each year. Eligibility criteria will incorporate income and regional dwelling price limits.
Paragraph 12BAA(8)(p) of the Act provides that a facility, interest or other thing may be declared by the regulations not to be a financial product.
Item 1 of Schedule 1 to the Amending Regulations inserts section 2BD into the Principal Regulations to exclude guarantees issued under the First Home Loan Deposit Scheme by the National Housing and Finance Investment Corporation as financial products.
Public consultation on an exposure draft of the Amending Regulations and the accompanying exposure draft explanatory statement occurred from 27 October 2019 to 4 November 2019. No submissions were received and as a result no substantive changes were made in response to public consultation. Consultation was also undertaken with the Australian Securities and Investments Commission. Minor editorial changes were made to the exposure draft explanatory statement following the end of the consultation period.
Under the Corporations Agreement 2002, the State and Territory Governments referred their constitutional powers with respect to corporate regulation to the Commonwealth. The Legislative and Governance Forum for Corporations has been notified about the Amending Regulations as required by the Corporations Agreement 2002. Paragraph 507(1)(f) and subclause 511(2) of the Corporations Agreement 2002 provide that approval of the Legislative and Governance Forum for Corporations and the usual public exposure period are not required for amendments to regulations relating to financial products and services.
The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.
The Regulations commenced on the day after it was registered.
The Regulations have a negligible compliance cost impact.
A statement of Compatibility with Human Rights is at Attachment A.
ATTACHMENT A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Australian Securities and Investments Commission Amendment (First Home Loan Deposit Scheme Guarantees) Regulations 2019
This Legislative 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.
Overview of the Legislative Instrument
The purpose of the Australian Securities and Investments Commission Amendment (First Home Loan Deposit Scheme Guarantees) Regulations 2019 is to make amendments to the Australian Securities and Investments Commission Regulations 2001 in respect of definitions for financial products. The amendments exclude guarantees issued under the First Home Loan Deposit Scheme by the National Housing and Finance Investment Corporation as financial products.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
Overview
The Australian Securities and Investments Commission Amendment (First Home Loan Deposit Scheme Guarantees) Regulations 2019 were enacted to address a gap in the regulatory framework concerning financial products, specifically in relation to guarantees issued under the First Home Loan Deposit Scheme. These regulations amend the Australian Securities and Investments Commission Regulations 2001 by excluding such guarantees from being classified as financial products. Enacted by the Australian Government, the policy objective of these amendments is to facilitate easier access to home ownership for eligible first home buyers by providing a guarantee that allows them to purchase a modest home with a deposit of as little as 5% without incurring the additional cost of lender’s mortgage insurance. The scheme is implemented by the National Housing Finance and Investment Corporation, a corporate Commonwealth entity, and will provide up to 10,000 guarantees annually to eligible first home buyers, subject to income and regional dwelling price limits.
Scope and Application
The Australian Securities and Investments Commission Act 2001 applies to business entities within Australia, establishing additional obligations and regulations that these entities must comply with. This Act, which complements the Corporations Act 2001, serves to regulate and oversee financial markets, investment products, and related activities across Australia. The Act allows the Governor-General to make regulations necessary for the implementation and enforcement of its provisions, as outlined in Section 251. The Australian Securities and Investments Commission Amendment (First Home Loan Deposit Scheme Guarantees) Regulations 2019 further refine the application of the Act by amending the Australian Securities and Investments Commission Regulations 2001, specifically excluding guarantees issued under the First Home Loan Deposit Scheme by the National Housing and Finance Investment Corporation from being classified as financial products. The geographic reach of these regulations is national, aligning with the overarching aim of the Commonwealth to facilitate home ownership through the provision of financial assistance and regulation. The Regulations do not require approval from the Legislative and Governance Forum for Corporations or an extended public exposure period, as stipulated by the Corporations Agreement 2002, due to their specific focus on financial products and services.
Key Provisions
The Australian Securities and Investments Commission Amendment (First Home Loan Deposit Scheme Guarantees) Regulations 2019 (Amending Regulations) make specific amendments to the Australian Securities and Investments Commission Regulations 2001 (Principal Regulations). Section 251 of the Australian Securities and Investments Commission Act 2001 (the Act) allows the Governor-General to make regulations necessary for the implementation of the Act, and the Amending Regulations exercise this power to modify the definition of financial products. Specifically, Item 1 of Schedule 1 to the Amending Regulations inserts section 2BD into the Principal Regulations, thereby excluding guarantees issued under the First Home Loan Deposit Scheme by the National Housing and Finance Investment Corporation as financial products (section 2BD). This amendment is intended to facilitate the new scheme designed to assist first home buyers by guaranteeing their loans, thus enabling them to make a home purchase with a lower deposit.
The Amending Regulations impose certain obligations on financial entities and regulators. These entities must ensure compliance with the revised definitions of financial products as set forth in the Principal Regulations. By excluding guarantees under the First Home Loan Deposit Scheme from the definition of financial products, the Regulations aim to streamline the process for eligible borrowers who wish to take advantage of the new scheme. This legislative change is meant to reduce the compliance burden on financial institutions and simplify the regulatory landscape for first home buyers. Additionally, the Australian Securities and Investments Commission (ASIC) must oversee the implementation of these amendments to ensure that financial entities adhere to the updated definitions and regulatory requirements.
Breaches of the provisions set out in the Amending Regulations can result in various consequences. While the Amending Regulations themselves do not explicitly detail specific offences or penalties, entities that fail to comply with the Act or the Principal Regulations may face enforcement actions under the broader framework of the Australian Securities and Investments Commission Act 2001. These actions could include civil penalties, enforcement orders, and other administrative measures. The Act provides for significant penalties, including fines of up to $2.1 million for corporations and up to $420,000 for individuals, depending on the nature and severity of the breach. Additionally, persistent non-compliance or serious misconduct could lead to criminal charges, resulting in imprisonment for individuals. The precise penalties and enforcement actions would be determined in accordance with the overarching legal framework and specific circumstances of the breach.