Corporations Amendment Regulation 2013 (No. 2)

Administered by Department of the Treasury

Legislation au F2013L00780 Regulations Not in force Legislative Instrument

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EXPLANATORY STATEMENT

 

Select Legislative Instrument 2013 No. 83

Issued by authority of the Minister for Financial Services and Superannuation

Corporations Act 2001

Corporations Regulations 2001

Corporations Amendment Regulation 2013 (No. 2)

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. 

Section 1368 provides that regulations may specify exemptions from Chapters 6D or 7 of the Act. 

The Corporations Amendment Regulation 2013 (No. 2) (the Regulation) amends the Corporations Regulations 2001.  The Regulation provides that Part 7.7A of the Act does not have effect in relation to an Australian Financial Services Licensee or representative in respect of retail clients not in this jurisdiction. 

In addition, consistent with existing Australian Securities and Investments Commission (ASIC) Class Order relief, the Regulation provides an exemption from the obligations in Division 2 of Part 7.7A of the Act (the best interests obligations) for financial advice providers in situations where the conditions in the following ASIC Class Orders are satisfied:

•                 ASIC Class Order 05/736 Low value non cash payment facilities;

•                 ASIC Class Order 05/1122 Relief for providers of generic calculators;

•                 ASIC Class Order 08/01 Group purchasing bodies; and

•                 ASIC Class Order 11/1227 Relief for providers of retirement estimates.

Details of the Regulation are set out in Attachment A.  

A draft of the Regulation was published on the Future of Financial Advice website on 24 April 2013 for a one-and-a-half-week public consultation period.  A total of two formal submissions were received from stakeholders, including from the Australian Bankers’ Association and the Financial Services Council of Australia. The submissions were supportive of the Regulation.

In addition to formal public consultation, targeted consultation was also undertaken with a number of key stakeholders.  Stakeholders were generally supportive of the Regulation. 

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 1 July 2013.

 

ATTACHMENT A

Details of the Corporations Amendment Regulation 2013 (No. 2)

Section 1 – Name of Regulation

This section specifies the name of the Regulation as the Corporations Amendment Regulation 2013 (No. 2).

Section 2 – Commencement

This section specifies that the Regulation commences on 1 July 2013.

Section 3 – Authority

This section provides that the authority for making the Regulation is the Corporations Act 2001 (the Act).

Section 4 – Schedule(s)

This section provides that Schedule 1 amends the Corporations Regulations 2001.

Schedule 1 – Amendments

Item 1 inserts new regulation 7.7A.40 to provide an exemption from Part 7.7A of the Act in respect of the provision of financial services to offshore retail clients.

The purpose of the regulation is to provide that Australian licensees or authorised representatives are not subject to the requirements introduced under the Future of Financial Advice reforms, where financial services are provided to retail clients who are not located in Australia.  The exemption is intended to apply in circumstances where the requirements introduced under the Future of Financial Advice reforms relate to interactions between the providers of financial services and retail clients.  

The regulation serves to clarify the jurisdictional reach of financial services regulation to ensure licensees and authorised representatives are not subject to the requirements of multiple jurisdictions, consistent with the exemptions provided under the Corporations Amendment Regulations 2005 (No. 5). 

Item 2 inserts new regulation 9.12.04 to provide that Division 2 of Part 7.7A of the Act does not have effect in relation to a person to whom one of the following Australian Securities and Investments Commission (ASIC) Class Orders is stated to apply:

•                 ASIC Class Order 05/736 Low value non cash payment facilities;

•                 ASIC Class Order 05/1122 Relief for providers of generic calculators;

•                 ASIC Class Order 08/01 Group purchasing bodies; and

•                 ASIC Class Order 11/1227 Relief for providers of retirement estimates.

These ASIC Class Orders provide relief for Australian financial services licensees and authorised representatives from certain obligations under Chapter 7 of the Act if the conditions are satisfied. 

The purpose of this regulation is to extend the relief provided in these Class Orders to the best interest duty obligations introduced as part of the Future of Financial Advice reforms to financial advice providers in situations where the conditions for relief in the existing Class Orders are satisfied.  This is consistent with the policy intention underpinning the existing Class Order relief; however, ASIC does not have the power to provide Class Order relief from obligations contained in Part 7.7A of the 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 2013 (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 Corporations Amendment Regulation 2013 (No. 2) (the Regulation) amends the Corporations Regulations 2001. 

The Regulation provides that Part 7.7A of the Corporations Act 2001 does not have effect in relation to an Australian Financial Services Licensee or representative in respect of retail clients not in this jurisdiction. 

In addition, consistent with existing Australian Securities and Investments Commission (ASIC) Class Order relief, the Regulation provide an exemption from the obligations in Division 2 of Part 7.7A of the Corporations Act 2001 (the best interests obligations) for financial advice providers in situations where the conditions in the following ASIC Class Orders are satisfied:

•                 ASIC Class Order 05/736 Low value non cash payment facilities;

•                 ASIC Class Order 05/1122 Relief for providers of generic calculators;

•                 ASIC Class Order 08/01 Group purchasing bodies; and

•                 ASIC Class Order 11/1227 Relief for providers of retirement estimates.

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 2013 (No. 2) was enacted to amend the Corporations Regulations 2001 under the authority of the Corporations Act 2001. This regulation addresses the gap in the jurisdictional application of certain obligations introduced by the Future of Financial Advice reforms, ensuring Australian Financial Services Licensees and authorised representatives are not subject to conflicting regulatory requirements when providing services to offshore retail clients. Additionally, it extends relief from specific obligations under the Act to financial advice providers, where certain conditions outlined in Australian Securities and Investments Commission (ASIC) Class Orders are met. The policy objective is to provide clarity and consistency in the application of financial services regulation, particularly in relation to cross-border services and certain relief provisions. This regulation was subject to public consultation and received support from key stakeholders. The Corporations Amendment Regulation 2013 (No. 2) ensures that Australian Financial Services Licensees and authorised representatives are exempt from certain obligations under the Corporations Act 2001 when providing services to offshore retail clients. It also extends relief from specific obligations to financial advice providers under certain conditions outlined in ASIC Class Orders. The regulation was made under the authority of the Minister for Financial Services and Superannuation and was subject to both public and targeted stakeholder consultation. The regulation aims to provide clarity and consistency in the application of financial services regulation, particularly in relation to cross-border services and specific relief provisions. It is compatible with human rights as it does not raise any human rights issues.

Scope and Application

The Corporations Amendment Regulation 2013 (No. 2) amends the Corporations Regulations 2001 to modify the application of the Corporations Act 2001 for certain financial services providers. Specifically, it exempts Australian Financial Services Licensees and their representatives from certain obligations under Part 7.7A of the Act when providing services to retail clients who are not located in Australia. This exemption ensures that these financial services providers are not subject to multiple regulatory jurisdictions, aligning with the intent of previous exemptions under Corporations Amendment Regulations 2005 (No. 5). Furthermore, the Regulation extends existing Australian Securities and Investments Commission (ASIC) Class Order relief to the best interests obligations introduced under the Future of Financial Advice reforms, for providers meeting the conditions outlined in specific ASIC Class Orders, including those related to low value non-cash payment facilities, generic calculators, group purchasing bodies, and retirement estimates. The Regulation is applicable nationally and is a legislative instrument for the purposes of the Legislative Instruments Act 2003, commencing on 1 July 2013.

Key Provisions

The Corporations Amendment Regulation 2013 (No. 2) primarily serves to amend the Corporations Regulations 2001, introducing specific exemptions from certain obligations under the Corporations Act 2001. Section 1 of the Regulation specifies its name, while Section 2 confirms that it commences on 1 July 2013. The authority for making this Regulation is derived from the Corporations Act 2001, as detailed in Section 3. The substantive changes are outlined in Schedule 1, which amends the Corporations Regulations 2001. Specifically, regulation 7.7A.40 provides an exemption from Part 7.7A of the Act for Australian Financial Services Licensees or representatives when providing services to retail clients not located within Australia. This aims to prevent dual regulatory burdens on financial services providers interacting with offshore clients. Additionally, regulation 9.12.04 exempts financial advice providers from the best interests obligations in Division 2 of Part 7.7A of the Act if they meet the conditions specified in certain ASIC Class Orders, such as those related to low-value non-cash payment facilities, generic calculators, group purchasing bodies, and retirement estimates. The obligations imposed by the Regulation on the parties it governs are primarily focused on ensuring compliance with the specified exemptions. Australian Financial Services Licensees and representatives must ensure they are aware of the jurisdictional scope of their services and apply the relevant exemptions where appropriate. Financial advice providers must also verify that the conditions of the applicable ASIC Class Orders are met before claiming exemption from the best interests obligations. This necessitates a clear understanding of the terms of these Class Orders and diligent record-keeping to substantiate compliance. For breaches of the Corporations Act 2001, including non-compliance with the exemptions provided by the Regulation, there are potential civil and criminal penalties. Civil penalties can include substantial fines; for example, under section 1317E, the maximum penalty for a corporation for breaching certain provisions can be up to $1.7 million or three times the benefit obtained, whichever is the greater. Additionally, criminal penalties may apply, which can include fines and imprisonment for individuals responsible for the breach, as outlined in section 1311. These penalties underscore the importance of adhering to the regulatory framework and the exemptions provided by the Regulation to avoid severe legal consequences.

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Area of Law
Corporate Law & Governance
Financial Services Regulation
Instrument
Regulation
Concepts
Regulatory Standards
Licensing & Registration
Exemptions & Exclusions
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