EXPLANATORY STATEMENT
Issued by the authority of the Parliamentary Secretary to the Treasurer
Subject – Corporations Amendment (No.1) Act 2010
Proclamation
Subsection 2(1) of the Corporations Amendment (No.1) Act 2010 (the Act) provides that Schedule 1 commences on a day to be fixed by Proclamation. However, if Schedule 1 does not commence within six months of the date the Act receives the Royal Assent, then the Schedule commences on the first day after the end of that six-month period. The Act received Royal Assent on 24 November 2010.
The purpose of the Proclamation is to fix 13 December 2010 as the day on which Schedule 1 commences. Schedule 1 contains the operative provisions of the Act.
The Act amends the Corporations Act 2001 to require a person seeking a copy of the register of a company or registered scheme to make an application stating the purpose for which they are seeking the copy of the register. The Act also removes outdated references to technology in the provisions that require a company to provide a copy of a member register and provide for registers to be inspected on a computer if they are maintained electronically.
The Act also increases the maximum criminal penalties for market offences to 4,500 penalty units or three times the benefit attributable from the breach and/or imprisonment for 10 years for an individual and 45,000 penalty units, three times the benefit attributable to the breach or 10 per cent of the corporation’s annual turnover during the relevant period, for a body corporate.
The Act also amends the Telecommunications (Interception and Access) Act 1979 to include market misconduct offences, including insider trading in the definition of serious offence for which telecommunications interception warrants can be obtained.
The Act also amends the Australian Securities and Investments Commission Act 2001 search warrant power to provide that a warrant may be sought and executed without the Australian Securities and Investments Commission first issuing a notice to produce the material sought.
The Proclamation would be a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Overview
The Corporations Amendment (No. 1) Act 2010, enacted by the Parliament of Australia, was introduced to address issues in corporate governance and market integrity. This Act was designed to enhance transparency and accountability in the corporate sector by amending the Corporations Act 2001. Specifically, it addresses the problem of providing clear and updated requirements for access to company registers and updating outdated references to technology in corporate record-keeping practices. The policy objective of the Act includes strengthening the enforcement of market integrity by increasing the penalties for market offences and enhancing the powers of regulatory bodies such as the Australian Securities and Investments Commission. The Act also aims to ensure that serious offences, including market misconduct, can be effectively investigated by updating the definitions and processes under the Telecommunications (Interception and Access) Act 1979 and the Australian Securities and Investments Commission Act 2001.
Scope and Application
The Corporations Amendment (No.1) Act 2010 applies to corporations and registered schemes, as well as any person seeking access to the register of such entities, throughout Australia as a Commonwealth Act. The Act amends the Corporations Act 2001 by requiring individuals seeking a copy of a company or registered scheme register to specify the purpose of their request. Additionally, it modernises the law by removing outdated references to technology in the context of member registers and inspections, while also increasing the maximum criminal penalties for market offences significantly. The amendments also extend the definition of serious offences under the Telecommunications (Interception and Access) Act 1979 to include market misconduct, and revise the Australian Securities and Investments Commission Act 2001 to allow the pursuit and execution of a warrant without prior notice. The Act's commencement is subject to a Proclamation, which sets the effective date of its provisions, ensuring a clear and timely application of the new legislative changes.
Key Provisions
The main operative sections of the Corporations Amendment (No.1) Act 2010 (the Act) are contained in Schedule 1, which commences on 13 December 2010 as fixed by Proclamation (subs.(2)(1)). These provisions amend the Corporations Act 2001 to introduce new requirements for accessing company registers. Specifically, section 1 of Schedule 1 requires a person seeking a copy of the register of a company or registered scheme to make an application stating the purpose for which they are seeking the copy of the register (s.1227D(1)). Additionally, sections 1 and 2 remove outdated references to technology in the provisions that require a company to provide a copy of a member register and allow for registers to be inspected on a computer if they are maintained electronically (ss.1227D(2)-(3), 1227E(2)-(3)). These amendments aim to modernise the register access provisions and ensure they are consistent with current technological practices.
The Act imposes several obligations on parties and entities it governs. Firstly, any person seeking a copy of a company or registered scheme's register must now make an application stating the purpose of their request (s.1227D(1)). This requirement aims to ensure transparency and accountability in the use of company information. Secondly, companies must provide copies of their member registers and allow for electronic inspection if the registers are maintained electronically (ss.1227D(2)-(3), 1227E(2)-(3)). These obligations are designed to facilitate access to company information while ensuring it is done in a manner consistent with current technological standards.
The Act also introduces significant penalties for breaches of market offences. Section 12JA of the Act increases the maximum criminal penalties for market offences, with the penalty for an individual being 4,500 penalty units or three times the benefit attributable from the breach, and/or imprisonment for 10 years (s.12JA(2)). For a body corporate, the maximum penalty is 45,000 penalty units, three times the benefit attributable to the breach, or 10 per cent of the corporation's annual turnover during the relevant period (s.12JA(3)). These enhanced penalties reflect the seriousness of market offences and aim to deter potential offenders. Additionally, the Act amends the Telecommunications (Interception and Access) Act 1979 to include market misconduct offences, such as insider trading, in the definition of a serious offence for which telecommunications interception warrants can be obtained (s.123C). This amendment broadens the scope of activities that can be subject to interception warrants, facilitating more effective enforcement of market misconduct laws.
Furthermore, the Act amends the Australian Securities and Investments Commission Act 2001 to allow the Australian Securities and Investments Commission (ASIC) to seek and execute a search warrant without first issuing a notice to produce the material sought (s.211A). This change streamlines the process for obtaining search warrants, enabling more efficient investigations into potential market misconduct. The maximum penalties for breaching these provisions are severe, reflecting the importance of maintaining the integrity of financial markets and protecting investors. These amendments collectively strengthen the legal framework for enforcing compliance with market regulations and ensuring accountability for market misconduct.