EXPLANATORY STATEMENT
STATUTORY RULES 1986 NO. 35
ISSUED BY THE AUTHORITY OF THE ATTORNEY-GENERAL
SECURITIES REGULATIONS (AMENDMENT)
Section 150 of the Securities Industry Act 1980 (“the SIA”) provides in sub-section (1) 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. Sub-section 150(5) of the SIA 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 co-operative Commonwealth-State scheme for a uniform system of law and administration in relation to company law and the regulation of the securities industry in the six States and the Australian Capital Territory.
3. Under sub-clause 45(1) of the agreement, the Council may consider a proposal for the amendment of regulations made under the Commonwealth Acts enacted for the purpose of the co-operative companies and securities scheme. Should the Council approve any draft amending regulations which give effect to such a proposal, the Commonwealth is then required, under sub-clause 45(2) of the agreement, to submit the draft regulations to the Federal Executive Council for making by the Governor-General.
4. The accompanying regulations are consistent with a resolution passed by the majority of members of the Council.
5. The purpose of the accompanying regulations is to amend the Securities Industry Regulations (“SIR”):
(a) as a consequence of amendments proposed to be made to the SIA by the Companies and Securities Legislation (Miscellaneous Amendments) Act 1985 (“the 1985 Amending Act”);
(b) as a consequence of the making of the Public Trustee Ordinance 1985 (A.C.T.) and the Public Trustee (Miscellaneous Amendments) Ordinance 1985 (A.C.T.);
(c) to impose licensing conditions concerning the disclosure of commissions and the supervision of dealer’s representatives and investment representatives; and
(d) to provide that the SIA does not apply to transactions in certain futures contracts relating to securities that are effected on the Sydney Futures Exchange.
6. The accompanying regulations are expressed to be made in pursuance of section 4 of the Acts Interpretation Act 1901. That section provides that where an Act that does not come into operation immediately upon its enactment amends another Act in such a manner that the other Act, as amended, will confer power to make regulations then, unless the contrary intention appears, that power may be exercised before the amending Act comes into operation.
7. Any regulations made in pursuance of section 4 of the Acts Interpretation Act 1901 take effect on the day on which the amending Act comes into operation or on the day on which the regulations would have taken effect if the amending Act had
been in operation when the regulations were made, whichever is the later.
8. Various provisions of the 1985 Amending Act have been proclaimed to come into operation on 31 March 1986.
9. Details of the accompanying regulations are set out as follows.
Reg. 1: Prescribed offices under section 5 of the Act
10. Section 8 of the the Public Trustee Ordinance 1985 establishes a corporation sole by the name of the Public Trustee for the Australian Capital Territory. “Public Trustee” is defined to mean the person holding office as the Public Trustee for the Australian Capital Territory and, in relation to the exercise of the Public Trustee’s powers and the performance of the Public Trustee’s functions, the corporation referred to in section 8. The Public Trustee may act, inter alia, as a trustee, receiver, manager or as an executor or administrator of an estate and has wide powers to deal with property.
11. The Public Trustee (Miscellaneous Amendments) Ordinance 1985 amends the Administration and Probate Ordinance 1929 by replacing references to the Curator of Estates of Deceased Persons with references to the Public Trustee for the Australian Capital Territory. Any property previously vested in the Curator now vests in the Public Trustee.
12. Regulation 1 replaces the reference in SIR regulation 6(3)(zd) to the office of Curator of Deceased Persons under the Administration and Probate Ordinance 1929 with a reference to the office of the Public Trustee under the Administration and Probate Ordinance 1929 and the Public Trustee Ordinance 1985.
13. The effect of regulation 1 is that a relevant interest in securities held by the Public Trustee for the Australian Capital Territory in his official capacity will be disregarded for the purposes of the SIA.
Reg. 2: Repeal
14. By virtue of section 184 of the 1985 Amending Act, a body corporate proposing to establish a stock market will no longer have to apply in a prescribed form to the Ministerial Council for approval as a stock exchange. Approval will need only to be sought in writing.
15. SIR regulation 12 provides that an application for approval as a stock exchange shall be in accordance with Form 3. As a consequence of the amendment proposed by section 184 of the 1985 Amending Act, this regulation is repealed by regulation 2.
Reg. 3: Application for licence to be in sealed envelope
16. SIR regulation 16 provides for an application under regulation 12 to be in a sealed envelope marked with the applicant’s details. As a consequence of the repeal of SIR regulation 12, discussed above, regulation 3 omits the reference to this regulation from SIR regulation 16.
Reg. 4: Conditions to which licence is subject: property trusts
17. Part IV of the SIA provides for the licensing of dealers in securities, dealers’ representatives, investment advisers and investment representatives.
18. Paragraph 51(1)(a) of the SIA provides that a licence is subject to such conditions as are prescribed.
19. Regulation 4 introduces new regulation 19A which provides that where a licensee makes a recommendation with respect to the acquisition of an interest in a property trust to a person who may reasonably be expected to rely on the recommendation, the licensee must disclose particulars of any benefits or commissions that the licensee or his associates may receive. The aim of this regulation is to minimise the extent to which an investment adviser, in advising a client to invest in a property trust, may be influenced by financial inducements provided by the property trust rather than the best interests of the client.
20. Regulation 4 also introduces new regulation 19B which will require a licensee to supervise the licensee’s representatives who deal in, or advise on, interests in property trusts.
Reg. 5: Futures contracts
21. Regulation 5 introduces new regulation 50 which provides that the SIA does not apply to a transaction in a futures contract relating to securities that is effected on a market of the Sydney Futures Exchange Limited (SFE).
22. The aim of new regulation 50 is to ensure that a transaction in a futures contract traded on the SFE that could be settled by the delivery of Treasury bonds or other securities will not be subject to the SIA. It is intended that dealings in such futures contracts will be regulated by the proposed Futures Industry Act 1986.
Reg. 6: Form 3
23. Regulation 6 omits SIR Form 3. This is consequent upon the repeal of SIR regulation 12, discussed above.
Reg. 7: Further amendments relating to securities exchanges
24. The 1985 Amending Act introduces the term “securities exchange” to replace the term “stock exchange” in co-operative scheme legislation. “Securities exchange” will include a stock exchange or a secondary securities market approved by the Council.
25. The effect of regulation 7 is to replace various references to “stock exchange” with references to “securities exchange”.