EXPLANATORY STATEMENT
Select Legislative Instrument 2012 No. 46
Corporations Act 2001
Corporations Amendment Regulation 2012 (No. 3)
Section 1364(1) of the Corporations Act 2001 (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.
Section 911A (2)(k) of the Act enables regulations to prescribe services that are exempt from the requirement to hold an Australian financial services (AFS) licence.
The Regulation makes a minor amendment to the Corporations Regulations 2001 (the Principal Regulations) to exempt a registered auditor that provides a cover pool monitor service from the requirement to hold an AFS licence.
The Banking Amendment (Covered Bonds) Act 2011 (the 2011 Act) established a framework for the issuance of covered bonds by Authorised Deposit-Taking Institutions (ADIs) in Australia. Section 30 of the 2011 Act requires a cover pool monitor to assess an ADI’s compliance with its obligations and provide an opinion with respect to this compliance.
The intention of the 2011 Act was that auditors that provide a cover pool monitor service would not be required to hold an AFS licence if they were registered under Part 9.2 of the Act. This intention is consistent with regulation 7.1.29(3)(a) of the Principal Regulations, which exempts persons engaged in the preparation or auditing of financial reports or audit reports from the requirement to hold an AFS licence.
Following the passage of the 2011 Act, it has been suggested that registered auditors may still be required to hold an AFS licence to provide a cover pool monitor service. As such, the Regulation clarifies that an auditor who is recognised under Part 9.2 of the Act that provides a cover pool monitor service is exempt from the obligation to hold an AFS licence.
The Regulation was made after public consultation on the drafting of the 2011 Act in March 2011, as well as targeted industry consultation with cover pool monitors in January 2012.
Under the Corporations Agreement 2002 (the Agreement), the State and Territory Governments referred their constitutional powers with respect to corporations regulation to the Commonwealth. The Agreement requires the Commonwealth to consult with the Ministerial Council for Corporations before making amendments to certain provisions of the Principal Regulations. The Ministerial Council for Corporations was consulted about these amendments, and notified of the Minister’s decision to dispense with the period of public exposure on the basis that the amendments were minor in nature and merely sought to restore the intended operational effect of the 2011 Act.
The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.
The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on the day after they are registered.
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. 3)
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 exempt a registered auditor that provides a cover pool monitor service from the requirement to hold an Australian financial services (AFS) licence.
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 Corporations Amendment Regulation 2012 (No. 3) was enacted to address a gap in the application of the Corporations Act 2001, particularly concerning the provision of cover pool monitor services by registered auditors. The Act was introduced by the Parliament of Australia to amend the Corporations Regulations 2001, ensuring that registered auditors who perform cover pool monitor services are exempt from the requirement to hold an Australian financial services (AFS) licence. This amendment aligns with the intention of the Banking Amendment (Covered Bonds) Act 2011, which aimed to facilitate the issuance of covered bonds by Authorised Deposit-Taking Institutions (ADIs) while ensuring compliance assessments by cover pool monitors. The policy objective of the Regulation is to clarify and restore the intended operational effect of the 2011 Act, ensuring that registered auditors providing cover pool monitor services are exempt from AFS licensing requirements, thereby facilitating the smooth functioning of the covered bonds framework.
Scope and Application
The Corporations Amendment Regulation 2012 (No. 3) amends the Corporations Regulations 2001 to exempt a registered auditor providing a cover pool monitor service from the requirement to hold an Australian financial services (AFS) licence. This amendment applies to registered auditors who are recognised under Part 9.2 of the Corporations Act 2001 and are engaged to provide cover pool monitor services for Authorised Deposit-Taking Institutions (ADIs) issuing covered bonds, as per the Banking Amendment (Covered Bonds) Act 2011. The exemption is intended to align with the original intention of the 2011 Act, which was to ensure that auditors engaged in this specific service would not need an AFS licence. The Regulation was made following consultations with the Ministerial Council for Corporations and the public, and it comes into effect on the day after registration. There are no exclusions or thresholds specified in the Regulation, which applies nationally as per the Corporations Agreement 2002, under which the State and Territory Governments referred their powers regarding corporations regulation to the Commonwealth. The Regulation does not engage any applicable rights or freedoms, and is compatible with human rights as it does not raise any human rights issues.
Key Provisions
The Corporations Amendment Regulation 2012 (No. 3) amends the Corporations Regulations 2001 to make a specific change regarding the services provided by registered auditors. Under section 911A(2)(k) of the Corporations Act 2001, regulations can specify services that are exempt from the requirement to hold an Australian financial services (AFS) licence. This regulation implements such an exemption for registered auditors who provide a cover pool monitor service, ensuring they are not required to hold an AFS licence for this specific role. This amendment aligns with the intent of the Banking Amendment (Covered Bonds) Act 2011, which established a framework for the issuance of covered bonds by Authorised Deposit-Taking Institutions (ADIs) in Australia. The 2011 Act intended that auditors providing cover pool monitoring services would not need an AFS licence if they were registered under Part 9.2 of the Act.
The obligations imposed by this Regulation on registered auditors who provide cover pool monitor services are primarily to ensure they understand and comply with the specific exemption from holding an AFS licence. Auditors must be registered under Part 9.2 of the Corporations Act 2001 to benefit from this exemption. They must also continue to comply with any other regulatory requirements pertinent to their role as cover pool monitors, including the need to provide accurate assessments and opinions on ADIs' compliance with their obligations, as mandated by section 30 of the Banking Amendment (Covered Bonds) Act 2011. Failure to meet these obligations could result in non-compliance with the broader regulatory framework governing financial services and auditing in Australia.
Breaching the provisions of the Corporations Act 2001 or the Corporations Regulations 2001 can lead to various consequences, including both civil and criminal penalties. For instance, knowingly providing misleading or deceptive information in the context of financial services could result in significant fines and even imprisonment. Although the specific Regulation does not introduce new penalties, any failure by a registered auditor to adhere to the intended operational effect of the 2011 Act could still lead to enforcement actions under the broader regulatory framework. The penalties for such breaches can be severe, with fines and imprisonment being potential outcomes, reflecting the importance of compliance with financial regulations in Australia.