Corporations Amendment Regulations 2004 (No. 4) 2004 No. 36
EXPLANATORY STATEMENT
Statutory Rules 2004 No 36
Issued by the Parliamentary Secretary to the Treasurer
Corporations Act 2001
Corporations Amendment Regulations 2004 (No. 4)
Subection 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 by regulations or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act.
The Financial Services Reform Act 2001 (FSRA) commenced on 11 March 2002. It amended the Act to introduce a uniform licensing, conduct and disclosure regime for financial service providers. Under the FSRA, a two-year transition period was established to allow time for existing industry participants to enter the new regime.
The purpose of the Regulations is to make amendments to:
• correct a numbering error for a regulation made earlier this year. The regulation was given the number of a regulation already in existence.
• make a minor drafting correction to another regulation made earlier this year by omitting one phrase.
Details of the Regulations are set out in the Attachment.
The regulations commence on gazettal.
ATTACHMENT
DETAILS OF THE CORPORATIONS AMENDMENT REGULATIONS 2004 (NO. 4)
Regulation 1 provides that the name of the Regulations is the Corporations Amendment Regulations 2004 (No. 4).
Regulation 2 provides that regulations 1 to 3 and Schedule 1 commence on gazettal.
Regulation 3 provides that Schedule 1 of the Regulations amend the Corporations Regulations 2001 (the Principal Regulations).
Schedule 1 - amendments commencing on gazettal
Item 1 Meaning of class of financial services - renumbering of Regulation 7.1.04E.
Regulation 7.1.04E was made as part of Corporations Amendment Regulations 2004 (No. 2). The regulation number allocated to this regulation is already in existence. Therefore, it is necessary to amend the regulation by renumbering it as 7.1.04F
Item 2 Meaning of excluded person - amendment to Regulation 7.5.04(1)
Prior to the making of Corporations Amendment Regulations 2004 (No. 3):
• subregulation 7.5.04(1A) provided a definition of the term 'excluded person' for the purpose of Subdivision 4.9; and
• subregulation 7.5.04(1) provided a definition of the same term for other purposes in Part 7.5 of the Regulations.
Prior to the making of the Corporations Amendment Regulations 2004 (No. 3):
• subregulation 7.5.04(1A) provided a definition of the term 'excluded person' for the purpose of Subdivision 4.9; and
• subregulation 7.5.04(1) provided a definition of the same term for other purposes in Part 7.5 of the Regulations.
'Excluded person' includes spouses, business partners and officers of a company which is a participant on the Australian Stock Exchange. The definition is used in determining who may claim on the National Guarantee Fund (NGF). The NGF provides investor protection and clearing support for transactions executed on the Australian Stock Exchange. For example, a person may claim compensation from the NGF in the event of an unauthorised transfer of uncertificated securities. The definition of 'excluded person' ensures that a person close to the party in breach is not entitled to make a claim on the NGF, as that person is assumed to have known about the breach.
The Corporations Amendment Regulations 2004 (No. 3) omitted subregulation 7.5.04(1A) because this subregulation and 7.5.04(1) had been aligned. However, the amended Regulations did not omit the phrase '(other than Subdivision 4.9)' in subregulation 7.5.04(1). The result is that there was no current definition of 'excluded person' for the purpose of Subdivision 4.9. This is rectified by omitting the phrase '(other than subdivision 4.9)' from subregulation 7.5.04(1)
Overview
The Corporations Amendment Regulations 2004 (No. 4) were enacted to correct a numbering error and a minor drafting issue within earlier regulations, ensuring the Corporations Act 2001 operates smoothly. This amendment was made by the Parliament of Australia, under the authority given in Section 1364(1) of the Corporations Act 2001, allowing for the creation of regulations to carry out or give effect to the Act. The underlying policy objective of these regulations is to maintain the integrity and effectiveness of the financial services regime, ensuring that the regulatory framework remains robust and free from technical errors that could impede its operation.
The regulations specifically address two issues: the renumbering of a regulation due to an existing regulation occupying the same number, and the removal of an extraneous phrase from another regulation to correct an oversight made during a previous amendment. These changes are intended to streamline and clarify the regulations, thereby supporting the broader goal of providing investor protection and maintaining the stability of the financial services sector. The Corporations Amendment Regulations 2004 (No. 4) came into effect upon gazettal, ensuring that the necessary corrections are implemented without delay.
Scope and Application
The Corporations Amendment Regulations 2004 (No. 4) pertains to the Corporations Act 2001, impacting financial services providers under the uniform licensing, conduct, and disclosure regime introduced by the Financial Services Reform Act 2001. The Regulations apply to individuals and entities involved in financial services in Australia, ensuring compliance with the legislative framework that governs financial conduct. The scope of these regulations extends nationally, aligning with the broader provisions of the Corporations Act 2001 and its subsidiary legislation. The Regulations correct a numbering error and a minor drafting oversight in earlier issued regulations, thereby ensuring the integrity and coherence of the regulatory framework. Notably, these Regulations do not introduce new substantive provisions but serve to rectify inconsistencies and ensure that the regulatory language aligns with the intended legislative outcomes.
Key Provisions
The main operative sections of the Corporations Amendment Regulations 2004 (No. 4) include Regulation 1, which provides the name of the Regulations, and Regulation 2, which states that regulations 1 to 3 and Schedule 1 commence on gazettal. Regulation 3 specifies that Schedule 1 of the Regulations amends the Corporations Regulations 2001 (the Principal Regulations). Schedule 1 contains the substantive amendments to the Principal Regulations, including the renumbering of Regulation 7.1.04E as Regulation 7.1.04F (Item 1) and the amendment to Regulation 7.5.04(1) (Item 2).
The Regulations impose specific obligations and requirements on the parties and entities they govern. For instance, Regulation 7.1.04F, which replaces Regulation 7.1.04E, now correctly defines the meaning of 'class of financial services'. This definition is essential for ensuring that financial service providers comply with the licensing, conduct, and disclosure regime established under the Financial Services Reform Act 2001 (FSRA). Additionally, Regulation 7.5.04(1) now correctly defines the term 'excluded person' for the purpose of Subdivision 4.9, ensuring that individuals who are closely associated with a party in breach are ineligible to claim compensation from the National Guarantee Fund (NGF).
There are no specific offences, penalties, or consequences outlined for breach of these Regulations. However, failure to comply with the Corporations Act 2001 or the Financial Services Reform Act 2001 could result in civil or criminal penalties. For example, under the Corporations Act 2001, an officer of a corporation can be subject to fines and imprisonment for breaches of the Act, with maximum penalties varying according to the specific offence committed. The Corporations Amendment Regulations 2004 (No. 4) aim to ensure that the regulatory framework is correctly and accurately applied to maintain compliance and protect investors and the financial system.