Corporations Regulations (Amendment) 1997 No. 10
EXPLANATORY STATEMENT
STATUTORY RULES 1997 No. 10
Issued by the Authority of the Treasurer
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, inter alia, matters which are required by the Corporations Law to be prescribed by regulations, or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Corporations Law.
The Heads of Agreement on Future Corporate Regulation in Australia, reached between State, Northern Territory and Commonwealth Ministers who had responsibilities in relation to corporate regulation in June 1990 forms the political compact on which the national companies and securities scheme is based. It is envisaged that this Agreement will be supplemented by a more formal agreement, to be known as the Corporations Agreement.
Both the Heads of Agreement and the draft Corporations Agreement require the Commonwealth to consult the States and. the Northern Territory on legislative proposals relating to matters falling within Chapters 7 and 8 of the Corporations Law. The regulations relate to matters within Chapters 7 and 8. The responsible Ministers of the States and the Northern Territory were consulted about the regulations.
The purpose of the regulations is to provide that Chapter 8 of Corporations Law has no effect in relation to gaming and wagering contracts on sporting events.
Details of the regulations are contained in the Attachment.
The regulations commenced on the date of gazettal.
ATTACHMENT
Regulation 1
Regulation 1 provides that the Corporations Regulations are amended as set out in these regulations.
Regulation 2
Certain gaming and wagering contracts on sporting events may constitute 'futures contracts' under the Corporations Law. In view of this possibility it is necessary to exclude such transactions from the application of Chapter 8 of the Corporations Law. The Corporations Law authorises the establishment of futures markets essentially to enable businesses to insure or hedge against risks associated with movements in interest rates, share prices, foreign currencies and the prices of commodities. It was not intended that the Corporations Law regulate gaming and wagering contracts per se.
Reg 8.1.01A ensures that Chapter 8 of the Corporations Law does not have effect in relation to gaming and wagering contracts on sporting events which have the features of an 'adjustment agreement' (generally a cash settled futures contract).
The exemption of this form of gaming and wagering from the Corporations Law allows State and Territory earning and wagering laws to have their normal application to such transactions and allows the States and Territories to approve such betting or not within their jurisdictions.
Overview
The Corporations Regulations (Amendment) 1997 No. 10, issued under the authority of the Treasurer and in accordance with Section 22 of the Corporations Act 1989, aim to clarify the scope of the Corporations Law concerning gaming and wagering contracts on sporting events. This legislation was enacted to address a specific gap identified in the application of Chapter 8 of the Corporations Law, which was initially intended to govern futures contracts for business hedging purposes, rather than sporting events betting. The regulations were developed following consultations with the responsible Ministers of the States and the Northern Territory, as required by the Heads of Agreement on Future Corporate Regulation in Australia and the draft Corporations Agreement. The policy objective is to ensure that Chapter 8 of the Corporations Law does not inadvertently regulate gaming and wagering contracts on sporting events, allowing state and territory laws to appropriately govern these activities.
The regulations clarify that certain gaming and wagering contracts on sporting events, particularly those resembling adjustment agreements (cash-settled futures contracts), are exempt from the purview of Chapter 8 of the Corporations Law. This amendment ensures that the Corporations Law does not interfere with state and territory regulations on betting, thereby maintaining the intended regulatory balance and respecting jurisdictional authority over such activities. The Corporations Regulations (Amendment) 1997 No. 10 came into effect on the date of gazettal, thus providing immediate legal clarity and operational guidelines for entities involved in such contracts.
Scope and Application
The Corporations Regulations (Amendment) 1997 No. 10 applies to entities and persons involved in gaming and wagering contracts on sporting events in Australia, aiming to clarify the scope of the Corporations Law in relation to these activities. This regulatory amendment specifically excludes such contracts from the purview of Chapter 8 of the Corporations Law, thereby ensuring that these contracts are not subject to the regulations intended for futures markets. The intent behind this exclusion is to prevent the Corporations Law from regulating gaming and wagering activities, which are typically governed by State and Territory laws. These regulations were developed in consultation with the responsible Ministers from the States and the Northern Territory, in accordance with the Heads of Agreement on Future Corporate Regulation in Australia, and are designed to maintain the integrity of State and Territory laws in managing betting and wagering activities within their jurisdictions. The amendment came into effect on the date of gazettal and operates across the Commonwealth of Australia.
Key Provisions
The Corporations Regulations (Amendment) 1997 No. 10, made under Section 22 of the Corporations Act 1989, serve to modify existing regulations in relation to gaming and wagering contracts on sporting events. Regulation 2 specifically excludes such contracts from the purview of Chapter 8 of the Corporations Law, which governs financial products and services, ensuring that they do not fall under the regulatory scope intended for futures markets. This amendment is crucial to maintain the intended purpose of the Corporations Law, which is to regulate financial instruments for risk management and hedging purposes rather than to govern betting and wagering activities.
These regulations impose obligations on entities engaged in gaming and wagering contracts on sporting events, ensuring that these activities are not misclassified as financial products under the Corporations Law. Specifically, entities must ensure that their contracts do not fall under the definition of 'futures contracts' as provided in the Act, particularly those that could be construed as 'adjustment agreements'. This distinction is essential to prevent these contracts from being regulated under Chapter 8, thereby allowing State and Territory laws to appropriately govern such transactions. By doing so, the regulations enable State and Territory authorities to maintain control over their respective jurisdictions' betting and wagering laws.
Breach of these regulations could lead to significant consequences. If a gaming or wagering contract on a sporting event is incorrectly classified as a financial product under Chapter 8, it could result in regulatory oversight and penalties under the Corporations Act. The specific penalties for such breaches are not detailed in the explanatory statement, but they could include fines and other civil or administrative sanctions. Additionally, continued non-compliance might lead to criminal charges, depending on the severity of the breach and the intent behind it. The regulatory framework aims to ensure that these activities remain within the appropriate jurisdictional scope, avoiding unintended regulatory overlaps.