EXPLANATORY STATEMENT
Proclamation
Issued by the Authority of the Minister for Financial Services, Superannuation and Corporate Law
Corporations Legislation Amendment (Financial Services Modernisation) Act 2009
Subsection 2(1) of the Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (the Act) provides that Schedule 1 and items 2 and 3 of Schedule 3 to the Act commence on a day to be fixed by proclamation. However, if any of the provisions of Schedule 1 and items 2 and 3 of Schedule 3 do not commence within six months of the date the Act receives the Royal Assent, then those provisions commence on the first day after the end of that six month period. The Act received the Royal Assent on 6 November 2009.
The purpose of the Proclamation is to fix 1 January 2010 as the day on which Schedule 1 and items 2 and 3 of Schedule 3 to the Act commence.
The Act amends the Corporations Act 2001. It sets out a national regulatory regime for margin loans, implements the transfer of trustee company regulation from the states and territories to the Commonwealth, and aligns the regulation of debentures and promissory notes and establishes a register of debenture trustees. The proclamation relates only to the commencement of the provisions on margin loans (Schedule 1) and the register of debenture trustees (Schedule 3, items 2 and 3). Schedule 2, in relation to trustee companies, will commence on a date to be determined. Schedules 4 and 5 and item 1 of Schedule 3 commenced on the Royal Assent.
The commencement date provides time for the regulator (the Australian Securities and Investments Commission) to put the necessary administrative systems in place. The commencement date was agreed with the regulator.
Public consultation was undertaken through the release of an exposure draft of the legislation for a three week period from 7 May 2009. No substantial comments were received in relation to the debentures legislation. A limited number of submissions were received in relation to margin lending and some changes made as a consequence. In addition, a consultation group of industry and other stakeholders was formed to advise on the legislation as it was being developed. Ongoing consultation was undertaken with this group, and its views and suggestions have been instrumental in producing the margin lending legislation in its final form.
The Proclamation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Overview
The Corporations Legislation Amendment (Financial Services Modernisation) Act 2009, which received the Royal Assent on 6 November 2009, was enacted to modernise and streamline the regulation of financial services in Australia by amending the Corporations Act 2001. This Act addresses the need for a unified national regulatory framework for margin loans, transfers the regulation of trustee companies from state and territory governments to the Commonwealth, aligns the regulation of debentures and promissory notes, and establishes a register of debenture trustees. A proclamation issued under the authority of the Minister for Financial Services, Superannuation and Corporate Law sets 1 January 2010 as the commencement date for certain provisions of the Act, specifically those concerning margin loans and the register of debenture trustees, to allow the Australian Securities and Investments Commission adequate time to implement necessary administrative systems. Public consultation was conducted through the release of an exposure draft, with ongoing engagement with a stakeholder consultation group contributing to the final form of the legislation.
The legislative framework established by this Act aims to enhance efficiency and consistency in financial services regulation across Australia, ensuring that the regulatory environment is well-suited to contemporary financial practices and the needs of the market. The commencement of certain provisions, as determined by the proclamation, reflects a considered approach to implementation, balancing the need for regulatory readiness with the effective operation of the financial services sector.
Scope and Application
The Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 applies to various entities within the financial services sector, particularly those involved in margin lending, debenture regulation, and the operation of trustee companies. The Act aims to establish a cohesive national regulatory framework for these financial activities, thereby modernising and streamlining the regulatory landscape. It is pertinent to financial institutions and entities that engage in margin loans, debentures, and promissory notes, as well as trustee companies which are now subject to federal oversight rather than state and territory regulation. The geographic reach of the Act is national, affecting entities across Australia. The Act does not specify particular exclusions or exemptions but its provisions apply broadly to those involved in the specified financial transactions and entities. The commencement of certain parts of the Act is contingent on a proclamation, with the provisions regarding margin loans and the register of debenture trustees commencing on 1 January 2010, as set out in the proclamation issued by the Minister for Financial Services, Superannuation and Corporate Law. This date allows the Australian Securities and Investments Commission sufficient time to implement the necessary administrative frameworks. The Act’s subordinate instruments may further detail specific regulations and operational guidelines, extending or refining the application of the primary Act.
Key Provisions
The Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (the Act) amends the Corporations Act 2001. This Act introduces a national regulatory regime for margin loans, transfers the regulation of trustee companies from state and territory governments to the Commonwealth, aligns the regulation of debentures and promissory notes, and establishes a register of debenture trustees. The Act received Royal Assent on 6 November 2009 and, as per subsection 2(1), the provisions related to margin loans (Schedule 1) and the register of debenture trustees (Schedule 3, items 2 and 3) commenced on 1 January 2010. Other provisions, including those related to trustee companies, will commence at a later date to be determined.
The Act imposes several obligations on entities and individuals involved in the financial services sector. For example, under Schedule 1, financial institutions must adhere to the new regulatory regime for margin loans, which includes requirements for obtaining client consent, issuing margin calls, and reporting to the Australian Securities and Investments Commission (ASIC). Under Schedule 3, debenture trustees must register with ASIC and comply with the new regulatory requirements, including providing periodic reports and maintaining client information. These obligations aim to ensure transparency, accountability, and consumer protection in financial services.
Breach of the provisions in the Act can lead to various consequences. For instance, under section 1311E of the Corporations Act 2001, a person who contravenes the margin loan requirements may be liable for civil penalty provisions. The maximum penalty for such an offence can be up to $210,000 for individuals and $1,050,000 for corporations. Similarly, under section 1311G, failure to comply with the debenture trustee requirements can result in a civil penalty of up to $210,000 for individuals and $1,050,000 for corporations. Additionally, serious breaches may lead to criminal charges, where individuals can face imprisonment and corporations can face fines up to the maximum penalties specified by the Act. These provisions are designed to deter non-compliance and enforce adherence to the regulatory requirements.