EXPLANATORY STATEMENT
Statutory Rules 2004 No. 398
Issued by the Parliamentary Secretary to the Treasurer
Corporations Act 2001
Corporations Amendment Regulations 2004 (No. 8)
Section 1364 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.
Chapter 7 of the Act provides for the regulation of financial services and markets, including the licensing of financial markets (Part 7.2) and clearing and settlement facilities (Part 7.3), the limiting of the ownership of certain licensees (Part 7.4) and the title and transfer of securities (Part 7.11).
Chapter 6 of the Act provides for the regulation of takeovers, including specifying the prohibition on the acquisition of relevant interests in the voting shares of a company and the exemptions to the prohibition.
Chapter 6C provides for the regulation of information about the ownership of listed companies and managed investment schemes, allowing a company or responsible entity to direct information about the beneficial ownership of shares or interests to be provided to them, and maintaining a register of information obtained.
The purpose of the Regulations is to:
• prescribe additional obligations for the purposes of defining a clearing and settlement facility;
• prescribe two additional ‘widely held market bodies’ for the purposes of controlling ownership of significant clearing and settlement facilities;
• prescribe Australia Pacific Exchange Limited (APX) as a ‘prescribed financial market’ with the result that entities that are listed on APX will need to comply with the additional obligations contained in the Act;
• delete an unnecessary reference to the President of the Takeovers Panel; and
• prescribe fees which a company or a responsible entity may charge for inspecting the register of relevant interests (register), or obtaining a copy of or part of the register.
Details of the Regulations are in the Attachment.
ATTACHMENT
Details of the Corporations Amendment Regulations 2004 (No. 8)
Regulation 1: Name of Regulations
Regulation 1 provides that the Regulations are to be known as the Corporations Amendment Regulations 2004 (No. 8).
Regulation 2: Commencement
Regulation 2 provides that the Regulations commence on the date of their notification in the Gazette.
Regulation 3: Amendment of Corporations Regulations 2001
Regulation 3 provides that Schedule 1 amends the Corporations Regulations 2001 (the Principal Regulations).
Schedule 1
Items [1] – [2], [15] – OCH / ACH name change
The name of the Options Clearing House Pty Limited has been changed to Australian Clearing House Pty Limited. The reason for the change of name is that this body now provides services in relation to a wider class of financial products than options.
Items [1], [2] and [15] removes all references to the Options Clearing House Pty Limited in the Principal Regulations and replace these with references to the Australian Clearing House Pty Limited.
Item [3] – additional ‘prescribed financial market’
The Act imposes additional obligations on entities that are listed on financial markets that are ‘prescribed financial markets’. Regulation 7.1.01 prescribes these financial markets. Currently, the following financial markets are prescribed:
• Australian Stock Exchange Limited;
• Bendigo Stock Exchange Ltd; and
• Stock Exchange of Newcastle Limited.
Item 3 adds Australia Pacific Exchange Limited (APX) to Regulation 7.1.01 as it now holds an Australian market licence.
The reason for the prescription of APX is that APX is proposing to operate a financial market of some significance and that it is therefore necessary that the additional obligations that are imposed on entities that are listed on the other prescribed financial markets apply to the entities that are listed on APX. Some of the additional obligations that apply to entities that are listed on prescribed financial markets relate to:
• continuous disclosure (subsection 674(1));
• substantial holding information (section 671);
• takeover provisions (Chapter 6); and
• notification of director’s interests (section 205G).
Items [4] – [7] – additional prescribed obligations – definition of clearing and settlement facility
The phrase ‘clearing and settlement facility’ is defined in section 768A of the Act. The definition is broad – it refers to a facility that provides a regular mechanism for the parties to transactions relating to financial products to meet obligations to each other that arise from those transactions. To assist in applying it, the definition is limited to those obligations which are prescribed in the Principal Regulations.
Regulation 7.1.09 prescribes, among other things, each obligation arising from a contract to transfer securities.
Items [4] – [7] inserts into Regulation 7.1.09 additional obligations. The additional obligations arise from the following financial products:
• foreign exchange contracts (under paragraph 764A(1)(k) and defined in section 761A of the the Act);
• contracts to transfer rights that include an undertaking by a body to repay a debt as money deposited with or lent to the body (including Commonwealth Government Securities, semi-government bonds and corporate bonds); and
• repurchase agreements.
Item [7] inserts a new subregulation 7.1.09(2) providing a definition of ‘repurchase agreement’ for the purposes of Regulation 7.1.09.
The reason for these amendments is to ensure consistent regulatory treatment of the clearing and settlement of obligations arising from these financial products, by Austraclear Limited (Austraclear) and SFE Clearing Corporation Pty Limited (SFE Clearing).
Items [8] – [10] – additional prescribed ‘widely held market bodies’
Division 1 of Part 7.4 of the Act applies limits upon the control of clearing and settlement facilities that are specified by the Principal Regulations as ‘widely held market bodies’.
Paragraph 850B(1)(a) of the Act imposes upon prescribed bodies an ownership limitation of 15% of voting power. This may be exceeded with approval of the Minister, upon application (section 851B). Under section 851I of the Act, a person holding in excess of 15% of voting power in a widely held market body at the time the body is prescribed as such in the Principal Regulations is taken to be granted approval.
Regulation 7.4.01 prescribes these bodies. Currently the following bodies are prescribed:
• Australian Stock Exchange Limited (ASX);
• ASX Settlement and Transfer Corporation Pty Limited (ASTC);
• SFE Corporation Limited;
• SFE Clearing Corporation Pty Limited; and
• Sydney Futures Exchange Limited.
Items [8] – [10] amend Regulation 7.4.01 to:
• change the reason for the inclusion of SFE Corporation Limited as it no longer holds a licence but is the holding company of Austraclear, SFE Clearing and Sydney Futures Exchange Limited; and
• prescribe Austraclear, which holds an Australian CS Facility licence, deals with a high volume of wholesale transactions on a daily basis and has approximately 660 members.
The reasons for the prescription of Austraclear are:
• Austraclear is considered to be of national significance and perform significant roles in the economy and the financial services industry;
• it is appropriate to apply the same ownership limitation as is imposed upon the other major clearing and settlement facilities in Australia, for reasons of market integrity and regulatory neutrality; and
• accordingly, it is appropriate to impose mechanisms to prevent a situation of unacceptable control from arising.
Item [11] – removal of jurisdiction requirement
Section 1071B relates to (paper) instruments of transfer. This section does not relate to transfers by electronic means through the Australian Stock Exchange’s CHESS system. (CHESS stands for the Clearing House Electronic Subregister System.)
Subsection 1071B(3) provides that an instrument of transfer is not a proper instrument of transfer for the purposes of the section if it does not show the details, specified in the regulations, in relation to the company concerned.
Regulation 7.11.22 requires that the State or Territory in which the company is taken to be registered is a prescribed detail.
Item [11] of the Regulations amends Principal Regulation 7.11.22 so that the requirement to include the State or Territory does not apply to transfers of quoted securities. In practice, this means that these details are no longer be required where quoted securities are transferred off-market.
The reason for the amendment is that stamp duty is no longer payable on the transfer of quoted securities. There is therefore no purpose in requiring the jurisdiction of registration to be included on the transfer.
Item [12] – removal of an acquisition of a relevant interest in voting shares by a person that results from the person holding the office of the President of the Takeovers Panel
Part 6.1 prohibits the acquisition of relevant interests in voting shares in a listed company, or an unlisted company with more than 50 members, if the acquisition increases the persons relevant interest in the entity from:
• 20 per cent to more than 20 per cent ; or
• a starting point that is above 20 per cent and below 90 per cent.
Part 6.2 provides exceptions to the prohibition. The exceptions include an acquisition made in a manner or in circumstances prescribed by the Principal Regulations (Item 20 of section 611). For that purpose, Regulation 6.2.02 prescribes the acquisition of a relevant interest in voting shares by a person that results from a person holding an office specified in Schedule 3. Item 6 of Schedule 3 specifies a list of persons and that includes the President of the Takeovers Panel and Members of the Takeovers Panel.
Section 173 of the Australian Securities and Investments Commission Act 2001 (the ASIC Act) states that the Governor-General is to appoint as the President of the Takeovers Panel a person who is, or is to be a member of the Takeovers Panel.
Item [12] deletes the reference to the President of the Takeovers Panel.
The reason for the amendment is to avoid the question of “who is the President” in any given circumstances. The Takeovers Panel is the body of 43 members appointed under subsection 172(2) of the ASIC Act. The sitting Takeovers Panel is the group of people constituted to preside over an application under subsection 184(2). The substantive President is the person appointed under section 173. The sitting President is the person appointed under s184(3) of the ASIC Act.
The exemption in relation to Members of the Takeovers Panel will continue to apply to the substantive or sitting President of the Takeovers Panel.
Items [13]-[14] – inspecting or obtaining a copy of the register of relevant interests
Part 6C.2 of the Act enables the Australian Securities and Investments Commission (ASIC), companies or responsible entities to direct a member of a company or scheme to disclose the beneficial owner of shares or interests (a ‘tracing request’) in that company of scheme. The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 imposed the requirement that the answers to tracing requests be kept on a publicly available register.
Subsection 672DA(7) of the Act requires that the register must be kept open for inspection by members without charge. Non-members must be able to inspect the register either without charge or for a fee (subparagraph 672DA(7)(b)(i)), which, if required, must not exceed the amount prescribed by the Principal Regulations.
Subsection 672DA(8) entitles a company or responsible entity to charge a fee for a copy of the register or part of the register, which, if required must not exceed the amount prescribed by the Principal Regulations.
Section 173(2) permits a person who is not a member of a company or a registered scheme, a registered option holder or a registered debenture holder to inspect a register kept under Chapter 2C.1 upon the payment of a fee required by the company or scheme, which, if required must not exceed the amount prescribed by the Principal Regulations.
Regulation 1.1.01 of the Principal Regulations states that the amount specified in an item in column 3 of Schedule 4 is prescribed in relation to the matter specified in the item in column 2. Item 1 of Schedule 4 prescribes the following amounts for each of subsection 173(2):
• if the register is not on a computer, $5.00 as the amount for inspecting and $0.50 per page for copying the register;
• if the register is on a computer, then the fee will be ‘a reasonable amount that does not exceed the marginal cost to the company of providing an [inspection/copy]’.
Items [13] and [14] of the Regulations will add each of subparagraph 672DA(7)(b)(i) and subsection 672DA(8) to item 1 of Schedule 4. The effect of the amendments is to enable a company or entity to charge a person for inspecting the register, or obtaining a copy of the register or part of the register.
Therefore, the fees are the same as the current amounts prescribed for the purposes of inspecting and copying a register in accordance with subsection 173(2). These fees are payable to the company or entity providing the inspection or copies, not to ASIC.
The reason for this amendment is to enable companies or responsible entities to recover the reasonable costs of making the register available for inspection and copying.
Commencement
The Regulations commenced upon gazettal.