Corporations Regulations (Amendment)

Overview

The Corporations Regulations (Amendment) 1996 No. 55 was introduced to update the list of authorised trustee corporations under the Corporations Act 1989. This amendment was made by the Treasurer under the authority granted by Section 22 of the Act, ensuring that the regulations do not conflict with the Act or existing Corporations Law. The purpose of this regulatory change is to facilitate the transfer of foreign securities through the Clearing House Electronic Subregister System (CHESS), a paperless system developed by the Australian Stock Exchange. The inclusion of CHESS Depositary Nominees Pty Limited in Schedule 9 of the Corporations Regulations enables the settlement of transactions involving foreign securities where legal title cannot be transferred through uncertificated electronic systems in the issuing jurisdiction. By recognising CHESS Depositary Nominees as an authorised trustee corporation, the regulation supports the new depositary arrangement for foreign securities, enhancing the efficiency and functionality of securities settlement in Australia. The policy objective of these amendments is to streamline the settlement process for foreign securities by allowing a recognised depositary to hold legal title on behalf of beneficial owners. This amendment addresses a specific gap in the regulatory framework that previously hindered the direct transfer of foreign securities through electronic systems in Australia, thereby improving the operational integration of international securities markets with the Australian market.

Scope and Application

The Corporations Regulations (Amendment) 1996 No. 55 applies to the regulation of authorised trustee corporations under the Corporations Act 1989, by updating Schedule 9 to include specific entities that are to be recognised as authorised trustee corporations. Specifically, these regulations empower the Governor-General to add entities to the list of authorised trustee corporations, as outlined in Section 9 of the Corporations Law and Regulation 7.1.01 of the Corporations Regulations. This amendment facilitates the new depositary arrangement for the transfer of foreign securities through the Clearing House Electronic Subregister System (CHESS), which addresses the limitation faced by some foreign jurisdictions in permitting the transfer of legal title through uncertificated electronic systems. By adding CHESS Depositary Nominees Pty Limited to the Schedule, the regulations enable the settlement of transactions in foreign securities through CHESS, ensuring that legal title is vested in the appointed entity which issues corresponding units to the beneficial owners of the securities. The scope of these regulations is confined to updating the list of authorised trustee corporations, and the jurisdictional reach is consistent with the overarching provisions of the Corporations Act 1989, operating within the Commonwealth of Australia.

Key Provisions

The Corporations Regulations (Amendment) 1996 No. 55 introduces amendments to Schedule 9 of the Corporations Regulations, updating the list of authorised trustee corporations. This amendment is made under the authority granted by Section 22 of the Corporations Act 1989, which empowers the Governor-General to issue regulations that are not inconsistent with the Act or the Corporations Law. Specifically, the regulation adds CHESS Depositary Nominees Pty Limited to Schedule 9 (paragraph 1.01), recognising it as an authorised trustee corporation. This recognition facilitates the transfer of foreign securities through the Clearing House Electronic Subregister System (CHESS) in a paperless manner. The inclusion of CHESS Depositary Nominees in Schedule 9 is a critical step in enabling the settlement of foreign securities transactions where some foreign jurisdictions do not allow the transfer of legal title through uncertificated electronic systems. By issuing CHESS Units of Foreign Securities (CUFS) to the beneficial owners, CHESS Depositary Nominees will hold the legal title, thereby enabling seamless settlement within the CHESS system. The Corporations Regulations (Amendment) 1996 No. 55 imposes specific obligations on CHESS Depositary Nominees Pty Limited, now recognised as an authorised trustee corporation. As listed in Schedule 9, the entity must adhere to the regulatory standards and requirements applicable to authorised trustee corporations. This includes maintaining appropriate records, ensuring transparency in transactions, and complying with reporting obligations to the Australian Securities and Investments Commission (ASIC). The regulation also mandates that CHESS Depositary Nominees operates within the parameters set by the Corporations Law to maintain the integrity and security of the depositary arrangement for foreign securities. Compliance with these obligations is crucial for maintaining the trust and confidence of stakeholders in the CHESS system. Failure to comply with the provisions of the Corporations Regulations (Amendment) 1996 No. 55 or the Corporations Act 1989 can result in serious consequences. For instance, CHESS Depositary Nominees, as an authorised trustee corporation, must strictly adhere to the regulatory requirements. Breaches of these obligations could lead to enforcement actions by ASIC, including fines, public reprimands, or more severe penalties. The Corporations Act 1989 provides for substantial penalties for non-compliance, which may include fines of up to $210,000 for individuals and $1,050,000 for corporations for serious breaches. Additionally, repeated or egregious violations may result in criminal charges, leading to imprisonment. The regulatory framework is designed to ensure that entities like CHESS Depositary Nominees operate within the legal boundaries, safeguarding the interests of investors and maintaining the stability of the financial system.