Corporations Amendment Regulations 2003 (No. 9)

Overview

The Corporations Amendment Regulations 2003 (No. 9) were introduced to address an unintended burden on foreign-based financial market licensees operating under the Corporations Act 2001. These regulations were enacted to modify certain obligations for foreign-based licensees to report breaches and disciplinary actions to the Australian Securities and Investments Commission (ASIC), aiming to alleviate the regulatory strain on such entities when the issues do not affect Australian persons or when compliance would breach the licensee's home jurisdiction's regulatory framework. The regulations were issued by the authority of the Parliamentary Secretary to the Treasurer, and the policy objective was to streamline reporting requirements without compromising regulatory oversight. The regulations were subject to consultation with the Ministerial Council for Corporations as mandated by the Corporations Agreement 2002, although their approval was not necessary for these specific amendments. The regulations came into effect upon gazettement.

Scope and Application

The Corporations Amendment Regulations 2003 (No. 9) apply to entities holding a licence to operate a financial market in Australia, including both domestic and foreign-based licensees. These regulations are made under the authority of Section 1364 of the Corporations Act 2001, and their purpose is to amend the requirements for notifying the Australian Securities and Investments Commission (ASIC) of breaches or disciplinary actions involving market participants and other persons. Specifically, the regulations provide a partial exemption for foreign-based market licensees from the requirement to inform ASIC of breaches or disciplinary action involving non-Australian market participants and other persons, particularly where such information does not affect Australian persons or where compliance would breach the licensee's home jurisdiction's regulatory regime. The regulations come into effect upon gazettal and are subject to consultation with the Ministerial Council for Corporations, although approval from the council is not required for amendments relating to the securities industry. The regulations specify that for foreign-based licensees, the requirement to notify ASIC would be limited to disciplinary actions or contraventions involving Australian participants or actions that may impact Australian participants or clients. Additionally, if a foreign-based licensee's home jurisdiction does not permit direct notification to ASIC, the licensee will be deemed to have complied if they notify the relevant overseas regulator, inform ASIC that they have notified the overseas regulator, and if arrangements exist for the information to be passed to ASIC by that regulator.

Key Provisions

The Corporations Amendment Regulations 2003 (No. 9) introduce significant modifications to the Corporations Regulations 2001, primarily targeting the notification requirements for foreign-based market licensees under the Corporations Act 2001. Section 1364(1) of the Act empowers the Governor-General to make regulations that are necessary for the effective implementation of the Act. The regulations aim to address an unintended burden placed on foreign-based market licensees, who previously had to notify the Australian Securities and Investments Commission (ASIC) of breaches or disciplinary actions involving non-Australian market participants and other persons. This requirement often conflicted with their home jurisdiction's regulatory regimes, making compliance impossible for some. Under the new regulations, foreign-based market licensees are partially exempt from notifying ASIC about breaches or disciplinary actions involving non-Australian participants, provided these actions do not impact Australian participants or clients. Specifically, Regulation 9.12.03, as amended, limits the notification requirement to cases where the disciplinary action or contravention affects an Australian participant, or where the action or contravention may have an impact on an Australian participant or client. This amendment ensures that foreign-based licensees only need to notify ASIC when there is a direct or potential impact on Australian market participants or clients. The obligations imposed on foreign-based market licensees include ensuring they notify ASIC only in cases outlined by the amended regulations. If a foreign-based licensee cannot directly notify ASIC due to restrictions in their home jurisdiction, they must instead provide the relevant information to their home regulator, inform ASIC that this has been done, and ensure that there are arrangements in place for the information to be passed to ASIC by the overseas regulator. This ensures that ASIC still receives the necessary information without imposing undue burdens on foreign-based licensees. Breaching the requirements set out in these regulations may lead to civil or criminal consequences, although the specific penalties are not detailed within the explanatory statement. However, under the Corporations Act 2001, general penalties for non-compliance with regulatory requirements can include fines and imprisonment. The precise penalties would depend on the nature and severity of the breach, with potential maximum penalties outlined in the Act for various offences. The regulations are designed to balance the need for regulatory oversight with the practicalities faced by foreign-based market licensees.