EXPLANATORY STATEMENT

Issued by the authority of the Minister for Finance and Deregulation

Financial Management and Accountability Act 1997

Determination 2008/03 to establish a Special Account

Purposes of Determination 2008/03

The attached instrument makes a determination under subsection 20(1) of the Financial Management and Accountability Act 1997 (FMA Act) to establish a Special Account entitled the ASIC Security Deposits Special Account.  It also specifies the nature of amounts that may be credited to, and the purposes for which amounts may be debited from, the ASIC Security Deposits Special Account.

Special Accounts generally

In accordance with the Constitution, all revenues or moneys raised or received by the Government of the Commonwealth form one Consolidated Revenue Fund (CRF) and may not be spent unless under an appropriation by the Parliament for the purposes of the Commonwealth.  A Special Account is established by a determination that sets out the amounts that may be credited to and the purposes for which amounts may be debited from the Special Account.  Special Accounts established by determination are supported by an appropriation under section 20 of the FMA Act.  In effect, Special Accounts allow amounts from the CRF to be spent on a purpose specified in the determination.

Determinations that establish Special Accounts, or vary determinations that establish Special Accounts, are subject to section 22 of the FMA Act.  Section 22 of the FMA Act requires the Finance Minister to table a copy of the establishing or varying determination in each House of Parliament.  Either House may disallow a determination within five sitting days of tabling.  If the determination is not disallowed, it comes into effect on the calendar day after the last day on which it could have been disallowed.

Regulation 10 of the Legislative Instruments Regulations 2004 preserves the disallowance provisions under section 22 of the FMA Act by exempting Special Account determinations from subsections 57(2) and 57(5) of the Legislative Instruments Act 2003.

Special Accounts can be abolished by a determination of the Finance Minister.  However, there is no requirement to table such a determination.

Operation of Determination 2008/03

Purpose of the ASIC Security Deposits Special Account

This determination will establish a single Special Account for the Australian Securities and Investments Commission (ASIC).

The purpose of this Special Account is to enable ASIC to manage moneys held by ASIC as security deposits lodged by registered liquidators, licensed securities dealers, licensed investment advisers and financial services licensees.

ASIC is responsible for protecting consumers' choice of superannuation fund, making Australian financial services laws more effective, managing enforcement actions, tackling insolvent trading, regulating company auditors and supporting new accounting standards.  In addition, ASIC regulates Australia’s corporations, financial services businesses and financial markets.  It works to improve Australia’s financial systems, covering superannuation, managed funds, insurance, credit, deposit-taking and financial advice and cooperates with Australian and international regulatory bodies.

A separate instrument will be made delegating investment provisions to ASIC under section 39 of the FMA Act.  Subsection 39(5) provides that upon realisation the proceeds of investments must be credited to the ASIC Security Deposits Special Account, from which the investment was originally debited. 

ASIC, as an agency subject to the FMA Act, is Budget funded for expenses incurred in administering this Special Account.

Reasons for establishing a new Special Account

The ASIC Security Deposits Special Account is required in order to give effect to changes to the governance arrangements for ASIC.  

In 2002, the Government appointed Mr John Uhrig AC to conduct a review of the corporate governance of bodies subject to the Commonwealth Authorities and Companies Act 1997 to develop a template of governance principles aimed at improving the performance of these bodies and their accountability frameworks.

An assessment of ASIC has led to it becoming prescribed in Part 1 of Schedule 1 of the Financial Management and Accountability Regulations 1997.

Clause 5(1) specifies the purposes for which amounts may be debited from the Special Account.

• Paragraph 5(1)(a) describes the primary purposes for which expenditure can be made from the Special Account.
• Paragraph 5(1)(b) allows amounts to be debited from the Special Account for the purpose of discharging, returning or releasing a security deposit.
• Paragraph 5(1)(c) allows amounts to be debited from the Special Account for the purpose of compensating a person who has suffered a pecuniary loss due to the failure of a registered liquidator to carry out his or her duties adequately and properly.
• Paragraph 5(1)(d) allows the balance of the Special Account to be reduced without a notional or real payment occurring, such as depositing amounts in to the Official Public Account.
• Paragraph 5(1)(e) allows the Special Account to be debited, in a manner that would otherwise be permitted by section 28 of the FMA Act.  It is included to simplify accounting for these transactions.
• Paragraph 5(2) allows incidental costs, including such items as auditing, reporting, budgeting, accounting and information technology services incurred in the course of operating the Special Account, to be debited from the Special Account, except where these activities are Budget funded.

Consultation

ASIC is the agency affected by this instrument, and was provided with drafts of the instrument and agrees with its form.  As the instrument is for internal machinery of government purposes only, no consultation was considered necessary with other persons (see sections 17 and 18 of the Legislative Instruments Act 2003).

Estimates of transactions on the ASIC Security Deposits Special Account