EXPLANATORY STATEMENT
Select Legislative Instrument 2012 No. 43
Issued by the Minister for Financial Services and Superannuation
Subject - Corporations Act 2001
Corporations Amendment Regulation 2012 (No. 2)
Corporations Amendment Regulations 2010 (No. 3) Amendment Regulation 2012 (No. 1)
The Corporations Act 2001 (the Act) provides for the regulation of corporations, financial markets, products and services, including in relation to licensing, conduct, financial product advice and disclosure.
Subsection 1364(1) of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations, or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act.
The Corporations Amendment Regulation 2012 (No. 2) and Corporations Amendment Regulations 2010 (No. 3) Amendment Regulation 2012 (No. 1) would make a number of amendments to the Corporations Regulations 2001 (the Principal Regulations). The changes reflect discussions with the trustee company industry and the States and Territories regarding the operation of Chapter 5D of the Act, as amended by the Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Act 2011.
These Regulations amend the Principal Regulations to include:
• a definition of “publish”, in relation to ASIC providing notice of the issue of a certificate for the transfer of estate assets and liabilities from a transferring company to a receiving company, and a trustee company providing notice of a licence cancellation or of a voluntary transfer of estate assets and liabilities;
• changes to the trustee company common fund rules to better reflect industry practice;
• listing of entities (other than trustee companies or Public Trustees) authorised to carry out transfers of Division 3 securities under Part 7.11 of the Act;
• the deletion of a so-called “arm’s length” rule (this has been moved to section 601SCD of the Act);
• name changes of licensed trustee companies (in Schedule 8AA); and
• additional State and Territory legislation which are not excluded by the Commonwealth trustee company provisions (in Schedule 8AD).
These Regulations also amend the Corporations Amendment Regulations 2010 (No. 3) to extend the current deemed licensing regime (for trustee companies seeking to be consolidated) until 31 December 2012.
The Commonwealth consulted publicly on a draft of the regulations in January 2012 and also consulted with industry peak bodies (the Trustee Corporations Association of Australia and the Australian Custodial Services Association) and individual trustee, custodial and nominee companies. The purpose of the consultation was to ensure that the changes were technically correct and created no unintended or undesirable consequences for the industry or consumers.
Under the Corporations Agreement 2002 (the Corporations Agreement), the State and Territory Governments referred their constitutional powers with respect to corporate regulation to the Commonwealth. The Legislative and Governance Forum for Corporations (meeting as the Ministerial Council for Corporations) has been consulted about the Regulations as required by the Corporations Agreement. However, paragraph 507(1)(f) and subclause 511(2) of the Corporations Agreement provide that approval of the Council and the usual public exposure period are not required for amendments to regulations relating to financial products and services. Traditional trustee company services are “financial services” under the Corporations Act.
Sections 1 to 3 and Schedule 1 of the Corporations Amendment Regulation 2012 (No. 2) would operate retrospectively to the extent that they deem entities listed in Schedule 9 of the Regulations to have been authorised to effect transfers of Division 3, Part 7.11 securities from 13 April 2011 onwards. The retrospective change is necessary to ensure that no person is disadvantaged as a result of transfers being invalidated or possible offences having arisen. Section 2 of the Corporations Amendment Regulations 2010 (No. 3) Amendment Regulation 2012 would also operate retrospectively to ensure the extension to the current deemed licensing regime (for trustee companies seeking to be consolidated) until 31 December 2012 operates from the commencement of the Corporations Amendment Regulations 2010 (No. 3). In accordance with subsection 12(2) of the Legislative Instruments Act 2003 no person is disadvantaged or rendered liable for anything by this retrospective operation.
Details of the Regulations are set out in Attachment A and Attachment B.
The Act specifies no other conditions that need to be satisfied before the power to make the Regulations may be exercised.
These Regulations would be legislative instruments for the purposes of the Legislative Instruments Act 2003.
Sections 1 to 3 and Schedule 1 of the Corporations Amendment Regulation 2012 (No. 2) would be taken to have commenced on 13 April 2011 and Schedule 2 would commence the day after registration. The Corporations Amendment Regulations 2010 (No. 3) Amendment Regulation 2012 (No. 1) would be taken to have commenced on 6 May 2010.
ATTACHMENT A
Details of the Corporations Amendment Regulation 2012 (No. 2)
Section 1 – Name of Regulation
This section specifies the name of the Regulation as the Corporations Amendment Regulation 2012 (No. 2).
Section 2 – Commencement
This section provides for:
• sections 1 to 3 and Schedule 1 commence (retrospectively) on 13 April 2011; and
• the remainder of the regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.
Section 3 – Amendment of Corporations Regulations 2001
This section provides that the Corporations Regulations 2001 (the Principal Regulations) are amended as set out in Schedules 1 and 2.
Schedule 1 – Amendments taken to have commenced on 13 April 2011
Items [1], [2], [3], [4], and [5]
These items amend or omit regulations 7.11.01, 7.11.02, 7.11.12, 7.11.13, paragraph 7.11.21(3)(a); and subregulation 7.11.40(5); to replace the now repealed term “authorised trustee corporation” with a new term encompassing:
• a licensed trustee company within the meaning of Chapter 5D of the Principal Act,
• a Public Trustee of a State or Territory, or
• a company listed in (amended) Schedule 9 of the Principal Regulations.
These entities will be empowered to perform functions under Division 3 of Part 7.11 of the Act and Principal Regulations (Division 3). Division 3 deals with the transfer of securities other than through a prescribed clearing and settlement (CS) facility (for example, off-market paper-based transfers).
Item [6]
This item replaces the existing Schedule 9 of the Principal Regulations with a new Schedule 9 listing certain entities which are authorised to effect transfers under Division 3, Part 7.11. It is no longer necessary to list licensed trustee companies and Public Trustees as they are already authorised to carry out such transfers. The item will apply from 13 April 2011.
Schedule 2 – Amendments commencing on day after registration
Item [1]
This item replaces existing regulation 5D.1.01 with two new regulations:
Regulation 5D.1.01 provides a definition of publish for the purposes of section 601RAA paragraph 601WBH(b), paragraph 601WDA(1)(b) and subsection 601WDA(3) of the Principal Act. Paragraph 601WBH(b) governs the requirement of ASIC to publish notice of the issue of a certificate for the transfer of estate assets and liabilities from a transferring company to a receiving company. Paragraph 601WDA(1)(b) and subsection 601WDA(3) govern the requirement to publish notice of the cancellation of a trustee company licence.
Regulation 5D.1.01A restates former regulation 5D.1.01. It provides that:
• to qualify as a “trustee company”, a company must be listed in Schedule 8AA of the Principal Regulations; and
• a company that performs the function of a State or Territory Public Trustee may only be listed as a trustee company if the responsible State or Territory Minister formally requests such a listing.
Item [2]
Regulation 5D.2.06 governs the operation of common funds by trustee companies. Paragraph 5D.2.06(5)(b) provides that a trustee company commits an offence if it applies income from investment of a common fund other than for allocation to the accounts from which the fund is derived.
Subregulation 5D.2.06(6) deletes the current paragraph 5D.2.06(6)(b). The effect of this deletion would be that an allocation authorised by paragraph 5D.2.06(5)(b) is subject to only one condition, that it must be made at intervals not exceeding 6 months.
Item [3]
Current subregulations 5D.2.06(10) and (11) permit a licensed trustee company to realise investments in a common fund subject to strict conditions.
This item amends subregulation 5D.2.06(11) so that it reflects current industry practice. It would make it an offence for a licensed trustee company that has realised such an investment to not credit or debit any profit or loss to the unit holders:
• proportionately to the amount invested in the fund by the unit holders at the time of the realisation; and
• within 14 days of the realisation.
The item retains the current level of penalty for breaches of subregulation 5D.2.06(11) (50 penalty units).
Item [4]
This item omits regulation 5D.2.09, which deals with related party transactions by licensed trustee companies where the common fund is not a registered managed investment scheme. This item is no longer required, as a similar provision has now been inserted into the Principal Act (section 601SCD).
Item [5]
Item 5 inserts a new Part 5D.4 into Chapter 5D of the Principal Regulations including new regulation 5D.4.01.
Regulation 5D.4.01
This regulation confirms that, where there has been a transfer of estate assets and liabilities from a transferring trustee company to a receiving trustee company, the obligations of the receiving company include providing retail clients with access to the receiving company’s compensation arrangements and dispute resolution system, in relation to any complaint arising from the provision of traditional trustee company services by the transferring company.
Items [6], [7] and [8]
These items update the names of licensed trustee companies (and deemed licensees) in Schedule 8AA where those names have been changed.
Items [9], [10], [11], [12], [13], [14] and [15]
These items update the list of State and Territory legislation in Schedule 8AD of the Principal Regulations. Schedule 8AD is a list of State and Territory legislation which is not excluded by the Commonwealth trustee company provisions.
ATTACHMENT B
Details of the Corporations Amendment Regulations 2010 (No.3 ) Amendment Regulation 2012 (No. 1)
Section 1 – Name of Regulation
This section specifies that the name of the Regulation is the Corporations Amendment Regulations 2010 (No. 3) Amendment Regulation 2012 (No. 1).
Section 2 - Commencement
This section provides that the Regulation commences (retrospectively) on 6 May 2010.
Section 3 – Amendment of Corporations Amendment Regulations 2010 (No. 3)
This section provides that the Corporations Amendment Regulations 2010 (No. 3) are amended as set out in Schedule 1.
Item [1]
This item provides that the current transitional arrangements for unlicensed trustee companies that are listed in Schedule 8AA to the Principal Regulation are extended until 31 December 2012.
This extension allows the States and Territories to pass complementary legislation, of the kind envisaged in paragraph 601WBA(2)(b)(iv) and section 601WBC of the Act, to facilitate transfers of estate assets and liabilities from a transferring trustee company to a receiving trustee company.
Item [2]
This item provides that the period during which a deemed trustee company licensee is exempt from the dispute resolution and compensation requirements of an Australian financial services licensee is extended to 31 December 2012.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Corporations Amendment Regulation 2012 (No. 2)
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 Legislative Instrument is to maintain the effectiveness of the national regulation of trustee companies.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.