Corporations Regulations (Amendment) 1991 No. 479
EXPLANATORY STATEMENT
STATUTORY RULES 1991 No. 479
Issued by the Authority of the Attorney-General
Corporations Act 1989
Corporations Regulations (Amendment)
Section 22 of the Corporations Act 1989 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act or the Corporations Law, prescribing matters required or permitted by the Corporations Law, or necessary or convenient to be prescribed for the carrying out or giving effect to the Corporations Law.
In accordance with the Heads of Agreement between Commonwealth, State and Northern Territory Ministers having responsibilities in relation to corporate regulation, the Attorney-General has consulted with the relevant State and Northern Territory Ministers on the proposed amendments. Under the terms of the agreement, the Attorney-General is required only to consult Ministers on matters falling within Chapter 7 of the Corporations Law. The proposed Regulations are in this category.
The purpose of the Regulations is to update regulation 7.11.01 of the Corporations Regulations in consequence of amendments made to the insider trading provisions of the Corporations Law by the Corporations Legislation Amendment Act 1991.
Details of the Regulations are given in the Attachment.
ATTACHMENT
Regulation 1
Commencement
This regulation provides that regulation 3, which amends regulation 7.11.01 of the Corporations Regulations, is taken to have commenced on 1 August 1991.
The amendments of regulation 7.11.01, which provides for exemptions from the prohibition against insider trading, are necessary in consequence of amendments made to the insider trading provisions of the Corporations Law by the Corporations Legislation Amendment Act 1991 which were proclaimed to take effect from 1 August. With these amendments to the insider trading provisions the cross references in the regulation to sections of the Corporations Law are no longer appropriate and in consequence the regulation has been inoperative since 1 August. It is desirable, therefore for regulation 3 to be given retrospective effect to 1 August to maintain the continuity of the exemptions. To do otherwise would create a hiatus in the operation of the exemptions.
As regulation 7.11.01 is an exempting provision, no person is likely to be prejudicially affected by giving the amending regulation retrospective effect, thus subsections 6(3) and (5) of the Corporations Act 1989 would not operate to give regulation 3 effect from the date of notification rather than retrospectively from 1 August.
Regulation 2
Amendment
This regulation provides that the Corporations Regulations are to be amended as set out in these Regulations.
Regulation 3
Regulation 7.11.01 (Prohibition of dealings in securities by insiders)
Regulation 7.11.01 exempts certain classes of person from the prohibition in the Corporations Law against dealing in securities by insiders, for example, directors obtaining a share qualification. The insider trading provisions of the Corporations Law were completely redrafted by the Corporations Legislation Amendment Act 1991. The prohibitions against insider trading which were previously contained in subsections 1002(1), (2), (3) and (6) of the Corporations Law are now provided for by subsection 1002G(2). Further, subsection 1002G(2) prohibits 'subscribing for, purchasing or selling' securities whilst in possession of inside information, compared with the wider 'dealing' in securities under the former provisions.
Regulation 3 therefore omits subregulations 7.11.01(1) and (2) and substitutes a new regulation 7.11.01 to take account of these changes. References to subsections 1002(1), (2), (3) and (6) are replaced by a reference to subsection 1002G(2).
Former subregulation 7.11.01(2)(b) is recast in new subregulation 7.11.01(1)(e) by replacing the words 'a transaction by way of or arising out of' by 'a sale of securities under', as subsection 1002G(2) only prohibits subscriptions for, purchasing or selling securities. For the same reason, former subregulations 7.11.01(2)(c) and (d), which dealt with the acquisition of securities under a will or on intestacy and the transfer of the legal estate in securities from one trustee to another, respectively, are omitted.
Overview
The Corporations Regulations (Amendment) 1991 No. 479 were introduced to update the Corporations Regulations in response to changes made to the insider trading provisions of the Corporations Law by the Corporations Legislation Amendment Act 1991. These amendments necessitated a revision to the exemptions from the prohibition against insider trading, as outlined in regulation 7.11.01 of the Corporations Regulations. The amendments aim to ensure that the exemptions remain effective and applicable following the legislative changes. The Attorney-General, having consulted with relevant state and territory ministers in accordance with the Heads of Agreement on corporate regulation, issued these statutory rules to provide retrospective effect to maintain continuity in the operation of the exemptions.
The policy objective of these amendments is to prevent any operational gaps or inconsistencies that could arise from the changes to the insider trading provisions. By updating the relevant regulations, the government seeks to maintain a cohesive and effective regulatory framework for corporate activities in Australia. The Corporations Regulations (Amendment) 1991 No. 479, thus, ensure that the Corporations Regulations align with the updated legislative landscape, thereby supporting the integrity and functionality of the Corporations Act 1989.
Scope and Application
The Corporations Regulations (Amendment) 1991 No. 479 applies to entities and individuals involved in corporate regulation under the Corporations Act 1989, specifically focusing on the insider trading provisions. The Act and its regulations are applicable across the Commonwealth of Australia, ensuring a uniform approach to corporate regulation. The amendments are designed to update and align regulation 7.11.01 with the new insider trading provisions introduced by the Corporations Legislation Amendment Act 1991. Regulation 3, which amends regulation 7.11.01, is given retrospective effect to 1 August 1991 to maintain the continuity of exemptions, ensuring no hiatus in the operation of these exemptions. The amendments are necessary to address the changes in the insider trading provisions and to ensure that the regulatory framework remains effective and relevant.
Key Provisions
The Corporations Regulations (Amendment) 1991 No. 479 outlines amendments made to the Corporations Regulations to address changes in the Corporations Law brought about by the Corporations Legislation Amendment Act 1991. The main operative sections of these Regulations, as outlined in the Explanatory Statement, involve updating regulation 7.11.01, which pertains to the prohibition on insider trading by insiders (regulation 3). This regulation is designed to reflect the new insider trading provisions in the Corporations Law and to ensure that the exemptions from the prohibition remain applicable. Regulation 1 specifies the commencement of the amendment to regulation 7.11.01, backdated to 1 August 1991 to avoid any operational gaps in the exemptions.
The obligations and requirements imposed by these Regulations are primarily administrative and technical in nature. They necessitate that the Corporations Regulations be amended to reflect the new legislative framework concerning insider trading. The key obligation is to update the references in regulation 7.11.01 to align with the new subsection 1002G(2) of the Corporations Law, which now specifies the activities prohibited under the insider trading provisions. Additionally, the Regulations require the omission of certain subregulations that dealt with acquisitions of securities under wills or on intestacy and transfers between trustees, as these activities are no longer explicitly covered by the new prohibitions.
The Regulations do not explicitly detail offences or penalties for non-compliance. However, the underlying legislation, the Corporations Act 1989, provides a framework for enforcement. Violations of the insider trading provisions could result in civil penalties, including fines and compensation orders. Under section 1317E of the Corporations Act, individuals found guilty of insider trading can face penalties of up to three times the value of the benefit obtained or loss avoided, along with additional fines of up to $275,000 for individuals and $1.375 million for bodies corporate. These provisions underscore the importance of adhering to the updated regulatory framework to avoid severe legal consequences.