Securities Exchanges (Membership) Fidelity Funds Contribution Act 1989

Overview

The Securities Exchanges (Membership) Fidelity Funds Contribution Act 1989 was enacted to establish a tax on members of certain securities exchanges, as a component of the broader financial regulatory framework. This Act was introduced to address the need for a financial contribution mechanism from securities exchange members to support fidelity funds, which are intended to protect investors in case of financial difficulties faced by clearing and settlement facilities. The Act was assented to on 14 July 1989 and was enacted by the Queen, in accordance with the authority of the Parliament of the Commonwealth of Australia. The policy objective of the Act is to ensure the financial stability and integrity of securities exchanges by imposing a tax that contributes to the fidelity funds, thereby safeguarding investor interests and maintaining market confidence. The Act incorporates the Corporations Act 1989, treating it as part of Part 7.9 of that Act, thereby integrating the tax imposition and regulatory provisions seamlessly within the existing legislative structure. The amount of the tax is determined by the relevant securities exchange, with a minimum of $100 and a maximum set by prescribed amounts, allowing flexibility depending on the specific needs and circumstances of each exchange. The Governor-General is authorised to make regulations to prescribe these maximum amounts, which can vary between different securities exchanges.

Scope and Application

The Securities Exchanges (Membership) Fidelity Funds Contribution Act 1989 applies to members of certain securities exchanges as defined under the Corporations Act 1989. This Act imposes a tax, referred to as a securities exchange (membership) fidelity fund contribution, on these members and is incorporated into Part 7.9 of the Corporations Act 1989. The tax amount is set by the relevant securities exchange, within the limits of not less than $100 and not more than a prescribed amount, and may vary depending on the exchange or class of members. The Act extends across the Commonwealth of Australia and is not limited to specific states or territories. The Governor-General has the authority to make regulations to prescribe maximum amounts for the tax, allowing for flexibility in application across different securities exchanges. Any regulations made under this Act must align with the broader objectives and provisions of the Corporations Act 1989.

Key Provisions

The Securities Exchanges (Membership) Fidelity Funds Contribution Act 1989 (referred to as the Act) imposes a tax on members of certain securities exchanges, as specified under section 4. This tax, known as the securities exchange (membership) fidelity fund contribution, is payable by members as outlined in subsection 902(2) of the Corporations Act 1989, which the Act incorporates as if it were part of Part 7.9 of that Act (sections 1 and 3). The amount of the tax is determined by the securities exchange itself and must be within the range of not less than $100 and not more than the prescribed maximum amount, as set out in section 5. The Governor-General is authorised to make regulations under section 6 to prescribe these maximum amounts, with the flexibility to set different amounts for different securities exchanges. Under the Act, the obligations primarily fall upon the members of the specified securities exchanges to pay the imposed tax. The securities exchanges themselves have the responsibility to determine the specific amount of the tax within the prescribed range. Furthermore, the Governor-General’s power to make regulations ensures that the maximum amounts can be tailored to the needs and circumstances of different exchanges, providing a measure of flexibility in tax imposition. Breaches of the Act may incur both civil and criminal consequences. While the Act does not explicitly detail these consequences, the underlying provisions of the Corporations Act 1989, which the Act incorporates, provide a framework for potential penalties. Typically, failure to comply with tax obligations under the Corporations Act can result in fines and, in severe cases, imprisonment. For example, under section 1311 of the Corporations Act, a person who contravenes a civil penalty provision can be fined up to $222,000 for a company offence and $44,400 for an individual offence. Additionally, directors and officers of a corporation may face disqualification orders under section 206C of the Corporations Act, which can prevent them from managing corporations for a specified period.