EXPLANATORY STATEMENT
Statutory Rules 1990 No. 41
Issued by the Authority of the Attorney-General
Futures Industry Regulations (Amendment)
Subsection 160(1) of the Futures Industry Act 1986 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters that are necessary or convenient to be prescribed for carrying out or giving effect to the Act. Subsection 160(8) of the Act provides that the power of the Governor-General to make regulations shall be exercised only in accordance with advice that is consistent with resolutions of the Ministerial Council for Companies and Securities (the Council),
2. The Council was established under an Agreement between the Commonwealth and the States, executed on 22 December 1978 (the Agreement), that provides the framework for a cooperative Commonwealth-State scheme for a uniform system of law and administration in relation to company law and the regulation of the securities and futures industries in the six States, the Australian Capital Territory and the Northern Territory of Australia.
3. Under subclause 45(1) of the Agreement, the Council may consider a proposal for the amendment of regulations made under the Commonwealth Acts enacted for the purposes of the cooperative companies and securities scheme. Should the Council approve any draft amending regulation which gives effect to such a proposal, the Commonwealth is then required, under subclause 45(2) of the Agreement, to submit the draft regulations to the Federal Executive Council for making by the Governor-General.
4. The proposed Regulations are in accordance with a resolution of the Council.
5. The purpose of the proposed Regulations is to make changes to the Futures Industry Regulations to provide further limited exemptions from the licensing requirements of the Act consistent with the policy behind the current exemptions; to clarify the circumstances in which such exemptions are to operate; to modify the list of recognised futures exchanges in Schedule 1 to the Act; and, to renumber the regulations where duplication has occurred.
6. Details of the proposed Regulations are as follows:
Regulation 1: Principal Regulations
The Principal Regulations referred to are the Futures Industry Regulations.
Regulation 2: Register of holders of proper authorities
This regulation and the following two regulations relate to the relocation and renumbering of regulations to eliminate the inadvertent duplication of Regulation number 22A which occurred following amendments to the Principal Regulations in October and December last year.
This regulation adds a new subregulation 22(2) the wording of which previously constituted Regulation 22A in Statutory Rules 1989 No. 371.
Regulation 3: Repeal of Regulation 22A
This regulation repeals Regulation 22A that was inserted by Statutory Rules 1989 No. 371. The former provision has been relocated in subregulation 22(2) (see Regulation 2 above).
Regulation 4: Copy of register - prescribed amount
This regulation renumbers Regulation 22A that was inserted by Statutory Rules 1989 No. 300 as Regulation 22C.
Section 5: Exemptions from the provisions of Part IV of the ACT
This regulation amends Regulation 38 of the Principal Regulations to provide exemptions from the provisions of Part IV (Licences) of the Act for fund managers appointed by trustees of approved deposit funds (ADFs) or superannuation funds. Current exemptions apply to both trustees and appointed funds managers of prescribed interest schemes but only to trustees of ADFs and superannuation funds. The exclusion of appointed funds managers of ADFs and superannuation funds is unintentional as most trustees of ADFs and superannuation funds are also the funds’ managers. The regulation will ensure the same exemption for trustees applies in relation to appointed funds managers.
The regulation also provides a similar exemption for investment managers of individual discretionary accounts over $500,000. Both exemptions are consistent with the policy basis of Regulation 38 which recognises that there is a limited case for exempting persons from compliance with the licensing provisions under the Act where investor protection is not significantly diminished and cost savings are passed on to investors. In both cases the exemptions are qualified in that the dealings in future contracts must be executed by the holder of a futures broker’s licence and the total value of the futures contracts entered into are not permitted to exceed 15% of the fund managed.
The regulation also clarifies how the total value of futures contracts entered into is to be calculated and ensures that all contracts held at any one time are included in the calculation.
Regulation 6: Schedule 1
This regulation modifies the list in Schedule 1 to the Act of recognised futures exchanges which constitute the only overseas futures exchanges on which dealings in futures contracts may be entered into by futures brokers (see section 128 of the Act). The new list, which is based on recommendations received from industry participants, makes a number of changes to the former list which is now out of date.