Securities Exchanges (Application for Membership) Fidelity Funds Contribution Act 1989

Overview

The Securities Exchanges (Application for Membership) Fidelity Funds Contribution Act 1989 was enacted to address a specific gap in the regulatory framework concerning the admission of members to securities exchanges and partnerships in member firms. The primary objective of the Act is to impose a tax on applicants for such membership, as stipulated in subsection 902(1) of the Corporations Act 1989. This Act was enacted by the Parliament of Australia and commenced on the same day as Part 7.9 of the Corporations Act 1989. The Act integrates with the Corporations Act 1989, ensuring that it functions cohesively as part of the regulatory system. The tax imposed by this Act is intended to contribute to the fidelity funds of the relevant securities exchanges, thereby providing a financial resource for these entities to manage their operations and regulatory obligations effectively.

Scope and Application

The Securities Exchanges (Application for Membership) Fidelity Funds Contribution Act 1989 applies to individuals and entities that seek admission to membership of certain securities exchanges or partnerships in member firms recognised by those exchanges. The Act imposes a tax on these applicants, referred to as the securities exchange (application for membership) fidelity fund contribution. The tax amount is set by the securities exchange and must be between a minimum of $500 and a maximum amount prescribed by regulations under the Act. The Act incorporates the Corporations Act 1989, which delineates the scope of the tax, and it commenced on the same day as Part 7.9 of the Corporations Act. The Governor-General has the authority to make regulations that prescribe maximum amounts for the tax, allowing for flexibility across different securities exchanges. This Act, therefore, applies nationally across Australia, impacting all securities exchanges operating within the country.

Key Provisions

The Securities Exchanges (Application for Membership) Fidelity Funds Contribution Act 1989 (the "Act") imposes a tax on applicants for membership of certain securities exchanges or to partnerships in member firms recognised by those exchanges. The primary operative sections of the Act include the imposition of the tax (section 4), the determination of the amount of the tax (section 5), and the power of the Governor-General to make regulations prescribing maximum amounts for the tax (section 6). Section 4 specifies that the tax, referred to as the securities exchange (application for membership) fidelity fund contribution, is payable by individuals seeking admission to a securities exchange or to a partnership in a member firm recognised by the exchange. Section 5 outlines that the tax amount is determined by the securities exchange itself, with a minimum of $500 and a maximum prescribed amount. Section 6 grants the Governor-General the authority to make regulations that set the maximum tax amounts, which may vary between different securities exchanges. The Act imposes several obligations and requirements on the parties it governs. Firstly, applicants for membership of a securities exchange or partnerships in member firms recognised by those exchanges must pay the specified tax. Secondly, the securities exchanges themselves have the responsibility to determine the amount of the tax for each applicant or class of applicants. Furthermore, the Governor-General, in exercising the powers conferred by section 6, must ensure that regulations are made in good faith and in accordance with the purpose of the Act, which is to provide a mechanism for the imposition of the fidelity fund contribution tax. The Act also delineates specific offences, penalties, and consequences for breaches. Although the Act does not explicitly state the penalties for non-compliance, the Corporations Act 1989, which is incorporated by reference, likely applies. Generally, failure to comply with tax obligations under the Corporations Act can result in civil penalties, including fines and, in severe cases, criminal charges. The maximum penalties for tax-related offences under the Corporations Act can include substantial fines for both individuals and corporations, as well as potential imprisonment terms for serious breaches. Additionally, regulatory actions such as disqualification from managing corporations may be imposed on individuals found to be in breach of the Act’s provisions.