Corporations Amendment Regulations 1999 (No. 2) 1999 No. 47
STATUTORY RULES 1999 No. 47
EXPLANATORY STATEMENT
Issued by the authority of the Minister for Financial Services and Regulation
Corporations Act 1989
Corporations Amendment Regulations 1999 (No. 2)
Section 22 of the Corporations Act 1989 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act or the Corporations Law (the Law), prescribing matters required or permitted by the Law to be prescribed by regulations, or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Corporations Law.
Regulations 7.3.02B - 7.3.02D of the Corporations Regulations 1990 prescribe certain licence conditions which give effect to the recommendations made by the then Australian Securities Commission (ASC) in its 1995 report: 'Good Advice, Licensing Review of Investment Advisory Services'. These regulations require all licensees who provide investment advisory services to retail investors to give those investors an Advisory Services Guide.
The amendments to Corporations Regulations 7.3.02B - 7.3.021) are purely consequential changes to reflect amendments made to the Corporations Law on 1 July 1998 resulting from the passage of the Company Law Review Act 1998, the Managed Investments Act 1998 and the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998. The amendments therefore reflect a move to consistency with the Corporations Law.
In addition, Corporations Regulations 7.3.02B-7.3.02D provide who may be treated as non-retail investors and the list includes large proprietary companies. The regulations will clarify the intention that large unlisted public companies are also to be treated as non-retail investors.
Details of the regulations are contained in the Attachment.
The regulations commence on gazettal.
ATTACHMENT
Details of Proposed Regulations
Regulation 1
Regulation 1 provides that the regulations are the Corporations Amendment Regulations 1999 (No. 2)
Regulation 2
Regulation 2 provides that the regulations commence on gazettal.
Regulation 3
Regulation 3 provides that Schedule 1 amends the Corporations Regulations 1990.
Schedule 1
Item 1
Sub-regulation 7.3.02B(8)(f) is amended by changing the reference to 'bank' to 'an authorised deposit-taking institution'.
Items 2 and 3
Sub-regulations 7.3.02B(8)(i) and (j) are amended by changing the references:
* 'prescribed interest scheme' to 'managed investment scheme'; and
* 'trustee or management company' to 'responsible entity or other operator'.
Items 4 and 5
Sub-regulation 7.3.02B(8)(p) is amended by changing the reference:
* 'documents mentioned in subsection 3.17B(2)' to 'reports mentioned in subsection 319(1)'; and
* section 317B of the Corporations Law' to 'that subsection'.
Items 6 and 7
New sub-regulation 7.3.02B(8)(qa) is inserted to clarify the intention that large unlisted public companies are to be treated as non-retail investors. Where an unlisted public company satisfies any two of the listed criteria, it is to be treated as a non-retail investor. The criteria used is based on sub-section 45A(3) of the Corporations Law which is used to determine whether a proprietary company is large or small.
The new sub-paragraph is also to apply to foreign entities.
Items 8 -11
To clarify the interpretation, the term 'retail' is inserted before all references to 'investor' in subregulation 7.3.02D(1).
In addition, the definition of 'retail investor' as found in sub-regulation 7.3.02B(10) is inserted in sub-regulation 7.3.02D(3).
Overview
The Corporations Amendment Regulations 1999 (No. 2) were enacted to bring the Corporations Regulations 1990 into alignment with amendments to the Corporations Law made by the Company Law Review Act 1998, the Managed Investments Act 1998, and the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998. This regulatory change was essential to ensure consistency and coherence within the legislative framework governing corporations and financial services in Australia. The regulations were issued under the authority of the Minister for Financial Services and Regulation, reflecting the policy objective of maintaining an updated and effective regulatory environment that supports the efficient functioning of financial markets while protecting investors. The amendments, particularly those clarifying the definition and treatment of non-retail investors, aim to enhance regulatory clarity and effectiveness in the oversight of investment advisory services provided to retail investors.
Scope and Application
The Corporations Amendment Regulations 1999 (No. 2) amends the Corporations Regulations 1990 to ensure consistency with recent legislative changes in the Corporations Law, including the Company Law Review Act 1998, the Managed Investments Act 1998, and the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998. These amendments apply to all licensees who provide investment advisory services to retail investors, requiring them to provide an Advisory Services Guide as per the original regulations. The scope of these regulations extends to clarifying the definition and treatment of non-retail investors, specifically large proprietary companies and large unlisted public companies, by incorporating criteria from the Corporations Law. These changes are intended to reflect a consistent application of the law across various entities and services within the financial sector. The regulations are effective immediately upon gazette and apply nationally, overseen by the Minister for Financial Services and Regulation, with no specific exclusions noted in the explanatory statement.
Key Provisions
The key operative sections of the Corporations Amendment Regulations 1999 (No. 2) pertain to the amendments made to Corporations Regulations 7.3.02B to 7.3.02D. These amendments (referenced in Regulation 3, Item 1 to Item 11 of Schedule 1) are consequential changes to reflect the updates to the Corporations Law, aligning with the Company Law Review Act 1998, the Managed Investments Act 1998, and the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998. The amendments modify specific terms and definitions, such as changing "bank" to "authorised deposit-taking institution," "prescribed interest scheme" to "managed investment scheme," and "trustee or management company" to "responsible entity or other operator." Furthermore, the regulations insert a new sub-regulation 7.3.02B(8)(qa) to clarify that large unlisted public companies are to be treated as non-retail investors if they meet certain criteria, mirroring the criteria in subsection 45A(3) of the Corporations Law for determining large or small proprietary companies.
The obligations imposed by these regulations primarily concern licensees who provide investment advisory services to retail investors. These licensees must now adhere to the updated definitions and conditions outlined in the regulations, ensuring that their practices are consistent with the current legislative framework. Specifically, they must provide an Advisory Services Guide to retail investors, a requirement established under Corporations Regulations 7.3.02B to 7.3.02D. Additionally, the regulations mandate that large unlisted public companies be identified and treated as non-retail investors if they meet the specified criteria.
Failure to comply with these regulations can result in significant consequences. While the specific penalties for non-compliance are not detailed in the explanatory statement, breaches of the Corporations Act 1989 can generally lead to civil penalties, which may include fines up to a substantial amount determined by the court. In more severe cases, criminal penalties may apply, resulting in fines and/or imprisonment. It is important for licensees to understand and implement these regulations to avoid any potential legal repercussions.