Corporations Amendment Regulation 2012 (No. 9)

Administered by Department of the Treasury

Legislation au F2012L02235 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

Select Legislative Instrument 2012 No. 267

 

Issued by authority of the Assistant Treasurer

Corporations Act 2001

Corporations Amendment Regulation 2012 (No. 9)

The Corporations Act 2001 (the Act) provides for the regulation of corporations, financial markets and 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, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The Corporations Amendment Regulation 2012 (No. 9) (the Regulation) makes a number of amendments to the Corporations Regulations 2001 (the Principal Regulations).  These amendments support the reforms in the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012 (the CGS Act).

The Regulation prescribes the:

•                 addition of Commonwealth Government Securities (CGS) depository interests to the definition of ‘Division 3 asset’ in subregulation 1.0.02(1) of the Principal Regulations; and

•                 website address for information on CGS depository interests.

The Australian Securities and Investments Commission and the Australian Office of Financial Management were consulted as part of the development of the Regulations.  As these amendments are purely consequential to the operation of the CGS Act, there was no public consultation in relation to the Regulation. 

Details of the Regulation are set out in Attachment A.

A statement of the Regulation’s compatibility with human rights is set out in Attachment B.

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Act does not specify any conditions that need to be satisfied before the power to make the Regulation may be exercised.

The Regulation commences on the day after registration.

ATTACHMENT A

Details of the Corporations Amendment Regulation 2012 (No. 9)

Section 1 – Name of Regulation

Section 1 provides that the name of the Regulation is the Corporations Amendment Regulation 2012 (No. 9).

Section 2 – Commencement

Section 2 provides for the Regulation to commence on the day after registration.

Section 3 – Amendment of the Corporations Regulations 2001

Section 3 provides that Schedule 1 amends the Corporations Regulations 2001 (the Principal Regulations).

Schedule 1 – Amendments

Item [1]

The Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012 (the CGS Act) facilitates trading of Commonwealth Government Securities (CGS) depository interests on financial markets accessible to retail investors.  Depository interests are beneficial interests in the underlying CGS and provide the holder with the same economic rights as if they were the legal holder of the CGS.  This means that all interest and principal payments flow through to the CGS depository interest holder.  The use of depository interests allows existing trading systems to be used and ensures that retail investors can trade CGS in a manner similar to trading shares.

Divisions 3 and 4 of Part 7.11 of the Corporations Act 2001 contain provisions clarifying how transfers of title must occur when shares and other designated securities are traded.  In order to make sure that CGS depository interests can be traded it is necessary to apply these two Divisions to CGS depository interests.  This is partially achieved in item 15, paragraph 1073A(1)(da) of the CGS Act by making appropriate amendments to the list of securities in section 1073A to include CGS depository interests.  This ensures that Division 3 of Part 7.11 of the Act applies.

Division 4 of Part 7.11 refers to the Principal Regulations to determine which financial products fall within its scope (section 1074A).  Regulation 7.11.03 in turn states that among others, ‘Division 3 securities’ fall within the scope of Division 4 of Part 7.11.  ‘Division 3 securities’ are then defined in subregulation 1.0.02(1) of the Principal Regulations as ‘Division 3 assets’ and ‘Division 3 rights’. 

The Regulation amends the definition of ‘Division 3 assets’ to include CGS depository interests and thereby ensure that CGS depository interests are covered by Division 4 of Part 7.11 of the Act.


Item [2]

The CGS Act requires a regulated person to give retail clients an information statement about CGS depository interests if they make a recommendation to the client to acquire a CGS depository interest.  This information statement must be published on the CGS depository interest information website.  Item 2 of Schedule 1 amends the Principal Regulations to prescribe the address of the CGS depository interest information website for the purposes of section 1020AH of the CGS Act.


ATTACHMENT B

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. 9)

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 Corporations Amendment Regulation 2012 (No. 9) (the Regulation) makes a number of amendments to the Corporations Regulations 2001. These amendments support the reforms in the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012.

The Regulation prescribes the:

•                 addition of Commonwealth Government Securities (CGS) depository interests to the definition of ‘Division 3 asset’ in subregulation 1.0.02(1) of the Corporations Regulations 2001; and

•                 website address for information on CGS depository interests.

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. 9), issued under the authority of the Assistant Treasurer, amends the Corporations Regulations 2001 to support the reforms introduced by the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012. This regulation was developed to address the need for clear regulatory frameworks governing the trading of Commonwealth Government Securities (CGS) depository interests, particularly for retail investors. The enacting body for these amendments is the Commonwealth Government, aiming to ensure that CGS depository interests can be traded in a manner similar to trading shares, thereby facilitating their inclusion in financial markets accessible to the public. The policy objective is to enhance the trading of CGS depository interests by aligning them with existing regulatory structures, ensuring transparency and accessibility for retail investors. The regulation specifically includes CGS depository interests within the definition of 'Division 3 asset' and mandates the provision of an information website address for CGS depository interests. These amendments are consequential to the changes made by the CGS Act, which facilitates the trading of CGS depository interests. The Australian Securities and Investments Commission and the Australian Office of Financial Management were consulted in the development of these regulations, ensuring that the amendments are well-founded and aligned with broader financial market objectives. The Regulation is compatible with human rights as it does not engage any applicable rights or freedoms.

Scope and Application

The Corporations Act 2001 is a Commonwealth statute that regulates corporations, financial markets and products and services, including in relation to licensing, conduct, financial product advice and disclosure. The Act applies to corporations, financial markets, financial products, financial services, and other entities and persons as specified in the Act or its subsidiary legislation. The Act has a national jurisdictional reach as it is a Commonwealth statute. The Corporations Amendment Regulation 2012 (No. 9) made consequential amendments to the Corporations Regulations 2001 to facilitate the trading of Commonwealth Government Securities (CGS) depository interests on financial markets accessible to retail investors. The Regulation prescribes the addition of CGS depository interests to the definition of ‘Division 3 asset’ and the website address for information on CGS depository interests. The Regulation applies to entities and persons involved in the trading of CGS depository interests. The Regulation does not specify any exclusions, exemptions, or thresholds. The Act extends its application through subordinate instruments such as regulations and guidelines.

Key Provisions

The Corporations Amendment Regulation 2012 (No. 9) introduces two key amendments to the Corporations Regulations 2001. Firstly, it adds Commonwealth Government Securities (CGS) depository interests to the definition of ‘Division 3 asset’ in subregulation 1.0.02(1) of the Principal Regulations (section 3 of Schedule 1, item [1]). This change ensures that CGS depository interests are subject to the same regulatory requirements as other securities, specifically those outlined in Divisions 3 and 4 of Part 7.11 of the Corporations Act 2001, which govern the transfer of title when shares and other designated securities are traded. By including CGS depository interests within the scope of these Divisions, the Regulation facilitates the trading of CGS depository interests in a manner similar to shares, allowing retail investors to trade these securities through existing trading systems. Secondly, the Regulation prescribes the website address for information on CGS depository interests (section 3 of Schedule 1, item [2]). This requirement is in line with section 1020AH of the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012, which mandates that regulated persons must provide retail clients with an information statement about CGS depository interests if they recommend the acquisition of such interests. The prescribed website serves as the platform for disseminating this information, ensuring that clients have access to necessary disclosures. The obligations imposed by the Regulation primarily concern regulated persons, such as financial advisors and brokers. They must now include CGS depository interests within their compliance frameworks, ensuring that all transactions involving these securities adhere to the regulatory requirements outlined in Divisions 3 and 4 of Part 7.11 of the Corporations Act 2001. Additionally, regulated persons must ensure that any recommendations to acquire CGS depository interests are accompanied by the required information statement, which must be accessible via the prescribed website. In terms of penalties and consequences for non-compliance, the Regulation itself does not specify any particular penalties. However, breaches of the underlying provisions of the Corporations Act 2001, which the Regulation supports, may result in significant civil or criminal penalties. For example, under section 1311 of the Corporations Act 2001, individuals found guilty of engaging in conduct that contravenes the Act may face penalties of up to $210,000 for individuals and $1,050,000 for bodies corporate. Furthermore, section 1317 of the Act allows for imprisonment for offences involving dishonesty or breaches of continuous disclosure obligations, with maximum penalties of up to five years for individuals and significantly higher fines for bodies corporate. The severity of these penalties underscores the importance of compliance with the Act and the Regulation’s provisions.

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Corporate Law & Governance
Instrument
Regulation
Concepts
Definitions & Interpretation
Regulatory Standards
Reporting & Disclosure Obligations

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