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
| Opening Balance 2007-08 $’000 | Credits 2007-08 $’000 | Debits 2007-08 $’000 | Closing Balance 2007-08 $’000 |
ASIC Security Deposits Special Account | 443 | 20 | 0 | 463 |
| | | |
Overview
The Financial Management and Accountability Act 1997 was enacted to ensure that the Commonwealth Government's financial management adhered to sound and transparent practices. This Act provides the legal framework for the appropriation of funds, the management of public money, and the accountability of public sector entities. The Act was designed to address the need for improved financial management and accountability in government operations, ensuring that public funds are used efficiently, effectively, and in accordance with the law. Enacted by the Australian Parliament, the policy objective of the Act is to establish a robust financial management system that promotes transparency, responsibility, and compliance with legislative requirements. The Act allows for the establishment of Special Accounts through determinations, enabling the allocation and management of specific funds for designated purposes.
The Determination 2008/03 under the Financial Management and Accountability Act 1997 was introduced to establish a Special Account for the Australian Securities and Investments Commission (ASIC). This Special Account, named the ASIC Security Deposits Special Account, is intended to manage moneys held by ASIC as security deposits from various entities such as registered liquidators, licensed securities dealers, and financial services licensees. The primary purpose of this Special Account is to support ASIC's regulatory functions, ensuring that it can effectively manage and disburse these security deposits in accordance with legislative requirements. The establishment of this Special Account is a response to the need for improved governance arrangements within ASIC, following a review that highlighted the importance of robust financial management practices within the agency.
Scope and Application
The Financial Management and Accountability Act 1997 Determination 2008/03 establishes the ASIC Security Deposits Special Account to provide a specific financial management tool for the Australian Securities and Investments Commission (ASIC). This Special Account is designed to manage security deposits lodged by registered liquidators, licensed securities dealers, licensed investment advisers, and financial services licensees. ASIC, as an agency under the FMA Act, is responsible for regulating Australia’s corporations, financial services businesses, and financial markets, and this Special Account facilitates the administration of these regulatory functions by providing a dedicated financial resource. The creation of this account aligns with broader governance reforms aimed at improving the accountability frameworks of Commonwealth agencies. The Special Account operates under the appropriation specified in the FMA Act, ensuring that funds are used strictly for the purposes outlined in the determination, which includes discharging or returning security deposits, compensating for losses due to inadequate performance by registered liquidators, and covering incidental costs associated with the account's operation. The establishment of this Special Account is subject to disallowance by either House of Parliament, with any failure to disallow it within five sitting days resulting in its automatic enforcement.
Key Provisions
Determination 2008/03 under the Financial Management and Accountability Act 1997 (FMA Act) establishes a Special Account for the Australian Securities and Investments Commission (ASIC). This account, named the ASIC Security Deposits Special Account, is designed to manage moneys held by ASIC as security deposits from registered liquidators, licensed securities dealers, licensed investment advisers, and financial services licensees. The determination specifies the purposes for which amounts may be credited to and debited from this Special Account. The primary purpose, as outlined in Clause 5(1)(a), is to enable ASIC to manage security deposits, while Clause 5(1)(b) allows for the discharge, return, or release of these deposits. Clause 5(1)(c) provides for compensating individuals who suffer pecuniary loss due to the inadequate performance of registered liquidators. Clause 5(1)(d) allows for the balance of the account to be reduced without a real or notional payment, and Clause 5(1)(e) permits transactions that would otherwise be permitted by section 28 of the FMA Act. Additionally, incidental costs such as auditing, reporting, budgeting, accounting, and information technology services can be debited from the account, except where these activities are budget-funded (Clause 5(2)).
The establishment of this Special Account imposes certain obligations on ASIC. As the entity responsible for managing the account, ASIC must ensure that all transactions are in line with the provisions of the determination. This includes maintaining accurate records of all credits and debits to the account, ensuring that the purposes outlined in Clause 5(1) are strictly adhered to, and managing the account in a manner that is transparent and accountable. Furthermore, ASIC must report on the account's activities as required by the FMA Act and other relevant legislation. This includes providing regular updates to the relevant authorities and ensuring that any changes to the account's operations are communicated appropriately.
Breaches of the provisions outlined in Determination 2008/03 can result in both civil and criminal consequences. Under the FMA Act, any person who fails to comply with the requirements of the determination may be subject to penalties. For instance, Section 39(5) of the FMA Act specifies that upon realisation, the proceeds of investments must be credited to the ASIC Security Deposits Special Account from which the investment was originally debited. Failure to adhere to this requirement could result in significant financial penalties. Additionally, under Section 40 of the FMA Act, any person who contravenes the provisions of the Act or any determination made under it can be liable to a penalty of up to $10,000 for each contravention. In more severe cases, criminal charges can be laid, which may result in fines of up to $50,000 and/or imprisonment for up to two years for individuals, and fines of up to $250,000 for bodies corporate. The Financial Management and Accountability Regulations 1997 also outline additional penalties and enforcement measures that can be applied in cases of non-compliance.