Futures Industry Act 1986
No. 72 of 1986
TABLE OF PROVISIONS
PART I—PRELIMINARY
Clause
1. Short title
2. Commencement
3. Object
4. Interpretation
5. Agreements
6. Associated persons
7. Dealing in futures contracts
8. Dealings and transactions on a person’s own account
9. Discretionary accounts
10. Exempt brokers
11. Certain persons not to be taken to be recognised licensees
PART II—ADMINISTRATION
Division 1—General
12. Interpretation
13. Power of Commission to require production of books
14. Power of magistrate to issue warrant to seize books
15. Offences
16. Copies or extracts to be admitted in evidence
17. Privilege
18. Disclosure to Commission
19. Investigation of certain matters
20. Power of Court to make certain orders
TABLE OF PROVISIONS—continued
Clause
Division 2—Investigations
21. Interpretation
22. Investigations
23. Conduct of investigations
24. Powers of Commission and inspectors appointed under corresponding laws
25. Powers of inspectors
26. Investigation deemed to be a proceeding
27. Record of examination
28. Record to accompany report
29. Admissibility of record of examination in evidence in proceedings against person examined
30. Admissibility in other proceedings of statements made at an examination
31. Weight of evidence
32. Credibility of person who made statements
33. Determination of objection to admissibility of statements
34. Delegation by inspector
35. Reports of investigations
36. Report of inspector
37. Commission’s powers in respect of books
38. Privileged communications
39. Expenses of investigation
40. Concealing, &c, of books relating to futures contracts
41. Power of Commission to make certain orders
42. Certain powers not to be delegated
Division 3—Futures Consultative Committee
43. Constitution and functions of Futures Consultative Committee
44. Meetings of Futures Consultative Committee
PART III—FUTURES EXCHANGES, CLEARING HOUSES AND FUTURES ASSOCIATIONS
45. Establishment of futures markets
46. Power of Ministerial Council to approve futures exchange
47. Provision of clearing house facilities
48. Power of Ministerial Council to approve clearing house
49. Publication of instruments executed under section 40, 41 and 43
50. Power of Ministerial Council to approve futures association
51. Suspension or cancellation of approval
52. Notification of approval, &c, of futures association
53. Appeal to the Court against certain decisions of futures exchanges and futures associations
54. Commission to be notified of amendments of business rules
55. Orderly markets in futures contracts—functions and powers of futures exchanges and clearing houses
56. Orderly markets in futures contracts—powers of Commission
57. Futures exchanges and others to assist Commission
58. Power of Court to order observance or enforcement of business rules of futures exchange, clearing house or futures association
59. Effect of certain laws on certain agreements
PART IV—LICENCES
60. Proclaimed day
61. Futures broker’s licence
62. Futures broker’s representatives
63. Futures advisers
64. Futures adviser’s representatives
65. Application for grant of licence
66. Grant of futures broker’s licence or futures adviser’s licence
67. Grant of representative’s licence
TABLE OF PROVISIONS—continued
Clause
68. Change of principals of…
Overview
The Futures Industry Act 1986, enacted by the Queen and the Senate and House of Representatives of the Commonwealth of Australia, is a legislative framework designed to regulate the futures industry within the Australian Capital Territory. The Act was introduced to address the need for a comprehensive legal structure governing futures markets, including the establishment and operation of futures exchanges, the conduct of futures brokers and advisers, and the implementation of administrative and investigative powers to ensure market integrity and investor protection. This legislation aims to maintain orderly and fair markets, prevent fraud and manipulation, and establish clear guidelines for industry participants. The Act is administered by the National Companies and Securities Commission and overseen by the Ministerial Council, which has the authority to approve futures exchanges, clearing houses, and futures associations, ensuring they meet the standards set forth to protect public interest.
Scope and Application
The Futures Industry Act 1986 applies to the futures industry within the Australian Capital Territory, governing the conduct of futures brokers, futures advisers, their representatives, futures exchanges, clearing houses, and futures associations. It regulates the establishment and operation of futures markets, and imposes licensing requirements on futures brokers and advisers, as well as their representatives, prohibiting unlicensed persons from dealing in futures contracts on behalf of others. The Act also mandates the maintenance of fidelity funds by futures exchanges and associations to compensate clients in the event of fraud or misconduct by licensed members. The Act's jurisdiction is limited to the Australian Capital Territory, although it may incorporate regulations and standards from other Australian jurisdictions through subordinate instruments. Exempt brokers, recognised licensees from other territories, and certain public authorities are excluded from some of its licensing and conduct requirements. The Act provides for the administration and enforcement of its provisions through the National Companies and Securities Commission, and allows for the issuance of penalty notices, the institution of civil and criminal proceedings, and the imposition of fines and imprisonment for breaches. The Act’s scope can be extended through regulations made by the Governor-General in accordance with the Act, which may include exemptions and modifications for specific persons or transactions.
Key Provisions
- The Futures Industry Act 1986 is primarily concerned with the regulation of the futures industry within the Australian Capital Territory. The Act defines various terms and sets out specific requirements and restrictions for those who wish to operate within this sector. Key sections include the definition of "futures contract" (Section 7) and the requirements for dealing in futures contracts on behalf of others (Section 128). The Act stipulates that a person must not deal in a futures contract on behalf of another unless the dealing is conducted on a futures market of a futures exchange, on an exempt futures market, or as permitted by the business rules of a relevant organisation. Furthermore, a futures broker must not deal in a futures contract on behalf of another person unless the broker is an exempt broker, the holder of a futures broker's licence, or a recognised futures broker (Section 61).
- The Act imposes various obligations on the parties it governs. For instance, futures brokers and futures advisers are required to keep detailed records of their transactions and dealings, including the segregation of client money and property (Section 86). Additionally, licensed futures brokers must provide monthly statements to their clients, detailing the particulars of futures contracts and the amounts involved (Section 84). Failure to comply with these obligations can result in significant penalties.
- The Act also outlines specific offences and penalties for breaches. Engaging in futures market manipulation (Section 130) or making false or misleading statements in connection with futures contracts (Section 132) are considered serious offences, with penalties reaching up to $50,000 or 5 years imprisonment for natural persons, and $100,000 or 5 years imprisonment for other entities. Other offences include prohibiting certain representations (Section 128), insider dealing (Section 129), and fraudulent inducement to deal in futures contracts (Section 133). The Act provides for civil and criminal consequences for these offences, with the severity of the penalty often dependent on the nature and extent of the breach. For example, dealing in futures contracts on behalf of others without the proper licence or approval is subject to a penalty of $10,000 or 2 years imprisonment, or both (Section 128). The Act also includes provisions for the establishment and operation of fidelity funds (Part VII), and the imposition of conditions and restrictions on licences (Part IV). It is crucial for practitioners to understand these provisions to effectively advise their clients and ensure compliance with the Act.
- Area of Law
- Commercial Law
- Financial Regulation
- Consumer Law
- Instrument
- Act
- Concepts
- Definitions & Interpretation
- Licence Provisions
- Reporting & Disclosure Obligations
- Offence Provisions
- Regulatory Standards
- Enforcement Powers
- Judicial Review
- Transitional Provisions
