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Corporations Act 2001

Authoritative Version
  • - C2013C00003
  • In force - Superseded Version
  • View Series
Act No. 50 of 2001 as amended, taking into account amendments up to Personal Liability for Corporate Fault Reform Act 2012
An Act to make provision in relation to corporations and financial products and services, and for other purposes
Administered by: Attorney-General's; Treasury
General Comments: This compilation is affected by retrospective amendments. Please see the Treasury Laws Amendment (2017 Measures No. 3) Act 2017 (Act No. 75 of 2017) for details.
Registered 03 Jan 2013
Start Date 03 Jan 2013
End Date 26 Jun 2013
Table of contents.

Corporations Act 2001

Act No. 50 of 2001 as amended

This compilation was prepared on 3 January 2013
taking into account amendments up to Act No. 180 of 2012

Volume 4 includes:     Table of Contents
                                    Chapters 7 and 8 (ss. 760A – 1200U)

The text of any of those amendments not in force
on that date is appended in the Notes section

The operation of amendments that have been incorporated may be
affected by application provisions that are set out in the Notes section

  

  

  


Contents

Chapter 7—Financial services and markets                                                          1

Part 7.1—Preliminary                                                                                                         1

Division 1—Object of Chapter and outline of Chapter                              1

760A..... Object of Chapter................................................................................ 1

760B..... Outline of Chapter............................................................................... 1

Division 2—Definitions                                                                                                3

761A..... Definitions.......................................................................................... 3

761B..... Meaning of arrangement—2 or more arrangements that together form a derivative or other financial product       15

761C..... Meaning of carry on a financial services business............................ 16

761CA.. Meaning of class and kind of financial products and financial services 16

761D..... Meaning of derivative....................................................................... 16

761E...... Meaning of issued, issuer, acquire and provide in relation to financial products     18

761EA... Meaning of margin lending facility, margin call and associated expressions           20

761F...... Meaning of person—generally includes a partnership...................... 24

761FA... Meaning of person—generally includes multiple trustees................. 24

761G..... Meaning of retail client and wholesale client..................................... 26

761GA.. Meaning of retail client—sophisticated investors............................. 31

761H..... References to this Chapter include references to regulations or other instruments made for the purposes of this Chapter.......................................................................................................... 32

Division 3—What is a financial product?                                                        33

Subdivision A—Preliminary                                                                                 33

762A..... Overview of approach to defining what a financial product is.......... 33

762B..... What if a financial product is part of a broader facility?.................... 33

762C..... Meaning of facility............................................................................ 34

Subdivision B—The general definition                                                              34

763A..... General definition of financial product............................................. 34

763B..... When a person makes a financial investment.................................... 35

763C..... When a person manages financial risk.............................................. 36

763D..... When a person makes non‑cash payments........................................ 36

763E...... What if a financial product is only incidental?................................... 37

Subdivision C—Specific inclusions                                                                      38

764A..... Specific things that are financial products (subject to Subdivision D) 38

Subdivision D—Specific exclusions                                                                     41

765A..... Specific things that are not financial products................................... 41

Division 4—When does a person provide a financial service?             44

766A..... When does a person provide a financial service?.............................. 44

766B..... Meaning of financial product advice................................................. 45

766C..... Meaning of dealing........................................................................... 48

766D..... Meaning of makes a market for a financial product.......................... 49

766E...... Meaning of provide a custodial or depository service....................... 50

Division 5—What is a financial market?                                                         52

767A..... What is a financial market?............................................................... 52

Division 6—What is a clearing and settlement facility?                          53

768A..... What is a clearing and settlement facility?......................................... 53

Division 7—General provisions relating to civil and criminal liability  55

769A..... Part 2.5 of Criminal Code does not apply......................................... 55

769B..... People are generally responsible for the conduct of their agents, employees etc.      55

769C..... Representations about future matters taken to be misleading if made without reasonable grounds           58

Part 7.2—Licensing of financial markets                                                              59

Division 1—Preliminary                                                                                            59

790A..... Definition.......................................................................................... 59

Division 2—Requirement to be licensed                                                           60

791A..... Need for a licence.............................................................................. 60

791B..... Other prohibitions on holding out..................................................... 60

791C..... Exemptions....................................................................................... 60

791D..... When a market is taken to be operated in this jurisdiction................. 61

Division 3—Regulation of market licensees                                                   62

Subdivision A—Licensee’s obligations                                                               62

792A..... General obligations........................................................................... 62

792B..... Obligation to notify ASIC of certain matters..................................... 63

792C..... Giving ASIC information about a listed disclosing entity................. 65

792D..... Obligation to assist ASIC................................................................. 65

792E...... Obligation to give ASIC access to market facilities........................... 65

792F...... Annual report.................................................................................... 65

792G..... Obligations to notify people about clearing and settlement arrangements in certain circumstances           66

792H..... Change of country by foreign licensee.............................................. 67

792I....... Making information about compensation arrangements publicly available               68

Subdivision B—The market’s operating rules and procedures                    68

793A..... Content of the operating rules and procedures.................................. 68

793B..... Legal effect of operating rules........................................................... 69

793C..... Enforcement of operating rules......................................................... 69

793D..... Changing the operating rules............................................................. 70

793E...... Disallowance of changes to operating rules...................................... 71

Subdivision C—Powers of the Minister and ASIC                                           72

794A..... Minister’s power to give directions................................................... 72

794B..... Minister’s power to require special report......................................... 72

794C..... ASIC to assess licensee’s compliance............................................... 72

794D..... ASIC’s power to give directions....................................................... 73

794E...... Additional directions to clearing and settlement facilities.................. 75

Division 4—The Australian market licence                                                    76

Subdivision A—How to get a licence                                                                   76

795A..... How to apply for a licence................................................................ 76

795B..... When a licence may be granted......................................................... 76

795C..... Publication of notice of licence grant................................................. 78

795D..... More than one licence in the same document.................................... 78

795E...... More than one market covered by the same licence........................... 79

Subdivision B—The conditions on the licence                                                  79

796A..... The conditions on the licence............................................................ 79

Subdivision C—When a licence can be varied, suspended or cancelled     80

797A..... Varying licences................................................................................ 80

797B..... Immediate suspension or cancellation............................................... 81

797C..... Suspension or cancellation following hearing and report.................. 81

797D..... Effect of suspension.......................................................................... 82

797E...... Variation or revocation of suspension............................................... 82

797F...... Publication of notice of licence suspension or cancellation............... 82

797G..... Suspension and cancellation only in accordance with this Subdivision 83

Division 5—Other matters                                                                                       84

798A..... Matters to be taken into account by the Minister............................... 84

798B..... ASIC may give advice to Minister.................................................... 85

798C..... Market licensee or related body corporate etc. listing on market....... 85

798D..... Exemptions and modifications for self‑listing licensees or related bodies corporate etc.          87

798DA.. Market licensee, related body corporate etc. or competitor participating in market   88

798E...... Other potential conflict situations...................................................... 89

Part 7.2A—Supervision of financial markets                                                     91

798F...... ASIC to supervise financial markets................................................. 91

798G..... Market integrity rules........................................................................ 91

798H..... Complying with market integrity rules.............................................. 92

798J...... Directions by ASIC.......................................................................... 92

798K..... Alternatives to civil proceedings....................................................... 93

798L...... Exemptions and modifications by regulations................................... 94

Part 7.3—Licensing of clearing and settlement facilities                              95

Division 1—Requirement to be licensed                                                           95

820A..... Need for a licence.............................................................................. 95

820B..... Other prohibitions on holding out..................................................... 95

820C..... Exemptions....................................................................................... 96

820D..... When a clearing and settlement facility is taken to be operated in this jurisdiction    96

Division 2—Regulation of CS facility licensees                                            97

Subdivision A—Licensee’s obligations                                                               97

821A..... General obligations........................................................................... 97

821B..... Obligation to notify ASIC of certain matters..................................... 98

821BA.. Obligation to notify Reserve Bank of certain matters........................ 99

821C..... Obligation to assist.......................................................................... 100

821D..... Obligation to give ASIC access to the facility................................. 100

821E...... Annual report.................................................................................. 101

821F...... Change of country by foreign licensee............................................ 101

Subdivision B—The facility’s operating rules and procedures                  102

822A..... Content of the operating rules and procedures................................ 102

822B..... Legal effect of operating rules......................................................... 103

822C..... Enforcement of operating rules....................................................... 103

822D..... Changing the operating rules........................................................... 104

822E...... Disallowance of changes to operating rules.................................... 105

Subdivision C—Powers of the Minister, ASIC and the Reserve Bank in relation to licensees    105

823A..... Minister’s power to give directions................................................. 105

823B..... Minister’s power to require special report....................................... 106

823C..... ASIC to assess licensee’s compliance............................................. 106

823CA.. Reserve Bank to assess licensee’s compliance................................ 107

823D..... Directions power—protecting dealings in financial products and ensuring fair and effective provision of services by CS facilities........................................................................................... 108

823E...... Directions power—reduction of systemic risk................................ 110

Division 3—The Australian CS facility licence                                           111

Subdivision A—How to get a licence                                                                 111

824A..... How to apply for a licence.............................................................. 111

824B..... When a licence may be granted....................................................... 111

824C..... Publication of notice of licence grant............................................... 113

824D..... More than one licence in the same document.................................. 113

824E...... More than one CS facility covered by the same licence................... 113

Subdivision B—The conditions on the licence                                                114

825A..... The conditions on the licence.......................................................... 114

Subdivision C—When a licence can be varied, suspended or cancelled   115

826A..... Varying licences.............................................................................. 115

826B..... Immediate suspension or cancellation............................................. 116

826C..... Suspension or cancellation following hearing and report................ 116

826D..... Effect of suspension........................................................................ 117

826E...... Variation or revocation of suspension............................................. 117

826F...... Publication of notice of licence suspension or cancellation............. 117

826G..... Suspension and cancellation only in accordance with this Subdivision 117

Division 4—Other matters                                                                                     118

827A..... Matters to be taken into account by the Minister............................. 118

827B..... ASIC may give advice to Minister.................................................. 119

827C..... Reserve Bank may give advice to Minister..................................... 119

827D..... Reserve Bank may determine financial stability standards.............. 119

Part 7.4—Limits on involvement with licensees                                               122

Division 1—Limit on control of certain licensees                                      122

Subdivision A—15% voting power limit                                                          122

850A..... Scope of Division........................................................................... 122

850B..... Meaning of unacceptable control situation...................................... 122

850C..... Acquisitions of shares..................................................................... 123

850D..... Remedial orders.............................................................................. 123

850E...... Injunctions...................................................................................... 124

Subdivision B—Approval to exceed 15% voting power limit                    124

851A..... Application for approval to exceed 15% voting power limit........... 124

851B..... Approval of application................................................................... 125

851C..... Duration of approval....................................................................... 126

851D..... Conditions of approval.................................................................... 126

851E...... Varying percentage approved.......................................................... 127

851F...... Revoking an approval..................................................................... 129

851G..... Further information about applications............................................ 129

851H..... Time limit for Minister’s decision................................................... 129

851I....... Preservation of voting power in relation to bodies specified in regulations made for section 850A         130

Subdivision C—Other matters                                                                            131

852A..... Acquisition of property................................................................... 131

852B..... Anti‑avoidance................................................................................ 131

Division 2—Individuals who are not fit and proper are disqualified 133

853A..... Who is disqualified......................................................................... 133

853B..... When an individual is involved in an operator................................. 133

853C..... Declaration by ASIC....................................................................... 133

853D..... Procedure for declaration................................................................ 134

853E...... Revoking a declaration.................................................................... 135

853F...... Obligations on disqualified individuals........................................... 135

853G..... Notification by ASIC...................................................................... 136

Division 3—Miscellaneous                                                                                     137

854A..... Record‑keeping and giving of information...................................... 137

854B..... Exemptions and modifications by regulations................................. 138

Part 7.5—Compensation regimes for financial markets                            139

Division 1—Preliminary                                                                                          139

880A..... Part does not apply to markets licensed under special provisions about overseas markets       139

880B..... Definitions...................................................................................... 139

Division 2—When there must be a compensation regime                     141

881A..... Licensed markets through which participants provide services for retail clients must generally have a compensation regime............................................................................................. 141

881B..... Additional requirements for the licence application......................... 141

881C..... What happens if an application contains information in accordance with paragraph 881B(2)(c)              142

881D..... What happens if an application contains a statement in accordance with paragraph 881B(2)(d)               142

Division 3—Approved compensation arrangements                               143

Subdivision A—Approval of compensation arrangements                         143

882A..... How to get compensation arrangements approved with grant of licence  143

882B..... How to get compensation arrangements approved after licence is granted               143

882C..... Revocation of approval................................................................... 144

882D..... Minister’s power to give directions................................................. 144

Subdivision B—Effect of compensation rules forming part of Division 3 arrangements           145

883A..... Legal effect of compensation rules.................................................. 145

883B..... Enforcement of compensation rules................................................ 145

883C..... Other sources of funds for compensation....................................... 146

883D..... Payment of levies............................................................................ 146

Subdivision C—Changing Division 3 arrangements                                     147

884A..... Division 3 arrangements must generally only be changed in accordance with this Subdivision               147

884B..... Changing Division 3 arrangements—matters required to be dealt with in the compensation rules           148

884C..... Changing Division 3 arrangements—matters not required to be dealt with in the compensation rules     149

Subdivision D—Are compensation arrangements adequate?                     150

885A..... Purpose of this Subdivision............................................................ 150

885B..... Requirements to be complied with for arrangements to be adequate 150

885C..... The losses to be covered................................................................. 151

885D..... Certain losses that are not Division 3 losses................................... 152

885E...... The amount of compensation.......................................................... 153

885F...... Method of payment of compensation.............................................. 154

885G..... Making and determination of claims............................................... 154

885H..... The source of funds—general......................................................... 155

885I....... Administration and monitoring....................................................... 155

885J...... The losses to be covered—other matters to be taken into account... 156

Subdivision E—Other provisions about Division 3 arrangements            156

886A..... Only one claim in respect of the same loss...................................... 156

886B..... Regulations relating to fidelity funds............................................... 156

Division 4—NGF Compensation regime                                                        157

Subdivision A—Application of Division                                                           157

887A..... Markets to which this Division applies........................................... 157

Subdivision B—Claims for and payment of compensation                         157

888A..... The situations in which compensation may be claimed................... 157

888B..... Kinds of compensation available..................................................... 157

888C..... Amount of compensation payable................................................... 157

888D..... Payment of compensation............................................................... 158

888E...... Making and determination of claims............................................... 158

888F...... The SEGC has power to determine claims...................................... 159

888G..... Allowing a claim does not constitute an admission of any other liability  159

888H..... Claimant may apply to Court if claim disallowed............................ 159

888I....... Non‑NGF property of the SEGC not available to meet claims........ 160

888J...... The SEGC may enter into contracts of insurance or indemnity....... 160

888K..... NGF may be used to acquire financial products to be transferred as compensation 161

Subdivision C—The NGF                                                                                     161

889A..... Continuation of the National Guarantee Fund................................. 161

889B..... Compensation to be provided out of the NGF................................ 161

889C..... The SEGC to keep the NGF........................................................... 161

889D..... What the NGF consists of............................................................... 162

889E...... Power to borrow etc. for purposes of the NGF.............................. 162

889F...... Money borrowed and paid to the SEGC......................................... 163

889G..... Money borrowed and not paid to the SEGC................................... 163

889H..... Payments out of the NGF............................................................... 163

889I....... Minimum amount of the NGF........................................................ 164

889J...... Levy by the SEGC.......................................................................... 165

889K..... Levy by market operator................................................................. 166

Subdivision D—The SEGC                                                                                  168

890A..... Minister to nominate the SEGC...................................................... 168

890B..... The SEGC’s functions and powers................................................. 169

890C..... Delegation....................................................................................... 169

890D..... Operating rules of the SEGC.......................................................... 170

890E...... Legal effect of the SEGC’s operating rules..................................... 170

890F...... Enforcement of the SEGC’s operating rules................................... 170

890G..... Changing the SEGC’s operating rules............................................ 171

890H..... Disallowance of changes to the SEGC’s operating rules................ 171

Subdivision E—Other provisions relating to compensation under this Division           171

891A..... Payment out of the NGF to prescribed body with arrangements covering clearing and settlement facility support  171

891B..... Markets operated by bodies corporate that become members of the SEGC—regulations may deal with transitional provisions and other matters........................................................... 172

891C..... Regulations may make different provision in respect of different markets etc.         173

Division 5—Provisions common to both kinds of compensation arrangements                174

892A..... Definitions...................................................................................... 174

892B..... How regulated funds are to be kept................................................. 174

892C..... Money in regulated funds may be invested..................................... 175

892D..... Powers of relevant authority to require production or delivery of documents or statements     176

892E...... Power to require assistance for purpose of dealing with a claim..... 177

892F...... Relevant authority’s right of subrogation if compensation is paid... 178

892G..... Excess money in compensation funds............................................. 178

892H..... Accounting and reporting for regulated funds................................. 178

892I....... Division 3 arrangements—reporting in situations where compensation does not come out of a regulated fund       180

892J...... Regulations may provide for qualified privilege in respect of certain matters           180

892K..... Risk assessment report.................................................................... 181

Division 6—Miscellaneous                                                                                     182

893A..... Exemptions and modifications by regulations................................. 182

Part 7.5A—Regulation of derivative transactions and derivative trade repositories       183

Division 1—Application of Part                                                                          183

900A..... Derivatives and transactions etc. to which this Part applies............. 183

Division 2—Regulation of derivative transactions: derivative transaction rules            184

Subdivision A—Power to make derivative transaction rules                     184

901A..... ASIC may make derivative transaction rules................................... 184

901B..... Derivatives in relation to which rules may impose requirements..... 187

901C..... Regulations may limit the transactions in relation to which rules may impose requirements    189

901D..... Regulations may limit the persons on whom requirements may be imposed            189

Subdivision B—Compliance with derivative transaction rules                  190

901E...... Obligation to comply with derivative transaction rules.................... 190

901F...... Alternatives to civil proceedings..................................................... 190

901G..... Failure to comply with derivative transaction rules does not invalidate transaction etc.            191

Subdivision C——The process of making of derivative transaction rules 191

901H..... Matters to which ASIC must have regard when making rules........ 191

901J...... ASIC to consult before making rules.............................................. 192

901K..... Ministerial consent to rules required............................................... 192

901L...... Emergency rules: consultation and consent not required................. 192

901M.... Amendment and revocation of derivative transaction rules............. 193

Division 3—Regulation of licensed derivative trade repositories: supervision by ASIC             194

902A..... ASIC to supervise licensed derivative trade repositories................. 194

Division 4—Regulation of licensed derivative trade repositories: derivative trade repository rules   195

Subdivision A—Power to make derivative trade repository rules            195

903A..... ASIC may make derivative trade repository rules........................... 195

903B..... Rules may only impose requirements on operators and officers of licensed derivative trade repositories                197

903C..... Regulations may limit how rules may deal with matters related to derivative trade data           198

Subdivision B—Compliance with derivative trade repository rules        198

903D..... Obligation to comply with derivative trade repository rules............ 198

903E...... Alternatives to civil proceedings..................................................... 198

Subdivision C—The process of making derivative trade repository rules 199

903F...... Matters to which ASIC has regard when making rules................... 199

903G..... ASIC to consult before making rules.............................................. 199

903H..... Ministerial consent to rules required............................................... 200

903J...... Emergency rules: consultation and consent not required................. 200

903K..... Amendment and revocation of derivative trade repository rules...... 201

Division 5—Regulation of licensed derivative trade repositories: other obligations and powers           202

Subdivision A—Obligations                                                                                202

904A..... General obligations......................................................................... 202

904B..... Obligations relating to derivative trade data..................................... 202

904C..... Obligation to notify ASIC of certain matters................................... 204

904D..... Obligation to assist ASIC, APRA and the Reserve Bank............... 205

904E...... Obligation to give ASIC access to derivative trade repository facilities 205

Subdivision B—Powers of Minister and ASIC to give directions etc.       205

904F...... Minister’s power to give directions to licensee not complying with obligations       205

904G..... ASIC’s power to give directions to licensee not complying with obligations           206

904H..... ASIC’s power to give directions requiring special reports.............. 207

904J...... ASIC may assess licensee’s compliance......................................... 207

904K..... Directions relating to derivative trade data if repository ceases to be licensed          208

Division 6—Regulation of licensed derivative trade repositories: licensing       210

Subdivision A—Requirement for some trade repositories to be licensed 210

905A..... Regulations may identify derivative trade repositories as being required to be licensed           210

Subdivision B—Granting of licences                                                                210

905B..... How to apply for a licence.............................................................. 210

905C..... When a licence may be granted....................................................... 211

905D..... Publication of notice of licence grant............................................... 211

905E...... More than one derivative trade repository covered by the same licence 212

Subdivision C—The conditions on a licence                                                    212

905F...... The conditions on the licence.......................................................... 212

Subdivision D—When a licence can be varied, suspended or cancelled   213

905G..... Varying licences.............................................................................. 213

905H..... Immediate suspension or cancellation............................................. 214

905J...... Suspension or cancellation following hearing and report................ 214

905K..... Effect of suspension........................................................................ 215

905L...... Variation or revocation of suspension............................................. 215

905M.... Publication of notice of licence suspension or cancellation............. 215

905N..... Suspension and cancellation only in accordance with this Subdivision 215

Subdivision E—Other matters                                                                            216

905P...... Matters to be taken into account by ASIC....................................... 216

Division 7—Regulation of prescribed derivative trade repositories 217

906A..... Regulations may impose obligations and confer powers................. 217

Division 8—Other matters                                                                                     218

907A..... Other prohibitions on holding out................................................... 218

907B..... Making provision by reference to instruments as in force from time to time            218

907C..... Compliance with requirements to provide derivative trade data or other information: protection from liability        219

907D..... Exemptions by ASIC...................................................................... 219

907E...... Exemptions and modifications by regulations................................. 220

Part 7.6—Licensing of providers of financial services                                222

Division 1—Preliminary                                                                                          222

910A..... Definitions...................................................................................... 222

Division 2—Requirement to be licensed or authorised                           223

911A..... Need for an Australian financial services licence............................ 223

911B..... Providing financial services on behalf of a person who carries on a financial services business              228

911C..... Prohibition on holding out.............................................................. 230

911D..... When a financial services business is taken to be carried on in this jurisdiction       230

Division 3—Obligations of financial services licensees                          231

912A..... General obligations......................................................................... 231

912B..... Compensation arrangements if financial services provided to persons as retail clients             232

912C..... Direction to provide a statement...................................................... 233

912CA.. Regulations may require information to be provided....................... 234

912D..... Obligation to notify ASIC of certain matters................................... 234

912E...... Surveillance checks by ASIC.......................................................... 236

912F...... Obligation to cite licence number in documents.............................. 236

Division 4—Australian financial services licences                                    237

Subdivision A—How to get a licence                                                                 237

913A..... Applying for a licence..................................................................... 237

913B..... When a licence may be granted....................................................... 237

913C..... Licence numbers............................................................................. 239

Subdivision B—The conditions on the licence                                                239

914A..... The conditions on the licence.......................................................... 239

Subdivision C—When a licence can be varied, suspended or cancelled   241

915A..... Varying licences.............................................................................. 241

915B..... Immediate suspension or cancellation............................................. 242

915C..... Suspension or cancellation after offering a hearing......................... 244

915D..... Effect of suspension........................................................................ 245

915E...... Revocation of suspension............................................................... 245

915F...... Date of effect and publication of cancellation or suspension........... 245

915G..... Statement of reasons....................................................................... 245

915H..... ASIC may allow licence to continue in effect.................................. 245

915I....... Special procedures for APRA‑regulated bodies.............................. 246

915J...... Variation, suspension and cancellation only under this Subdivision 247

Division 5—Authorised representatives                                                         248

916A..... How representatives are authorised................................................. 248

916B..... Sub‑authorisations.......................................................................... 248

916C..... Authorised representative of 2 or more licensees............................ 249

916D..... Licensees cannot authorise other licensees...................................... 250

916E...... Licensees acting under a binder....................................................... 251

916F...... Obligation to notify ASIC etc. about authorised representatives..... 251

916G..... ASIC may give licensee information about representatives............. 253

Division 6—Liability of financial services licensees for representatives               255

917A..... Application of Division................................................................... 255

917B..... Responsibility if representative of only one licensee....................... 256

917C..... Representatives of multiple licensees.............................................. 256

917D..... Exception if lack of authority is disclosed to client.......................... 257

917E...... Responsibility extends to loss or damage suffered by client........... 257

917F...... Effect of Division............................................................................ 258

Division 8—Banning or disqualification of persons from providing financial services 259

Subdivision A—Banning orders                                                                         259

920A..... ASIC’s power to make a banning order.......................................... 259

920B..... What is a banning order?................................................................ 260

920C..... Effect of banning orders.................................................................. 261

920D..... Variation or cancellation of banning orders..................................... 261

920E...... Date of effect and publication of banning order, variation or cancellation                262

920F...... Statement of reasons....................................................................... 262

Subdivision B—Disqualification by the Court                                                262

921A..... Disqualification by the Court.......................................................... 262

Division 9—Registers relating to financial services                                 264

922A..... Registers relating to financial services............................................. 264

922B..... Inspection of Registers.................................................................... 264

Division 10—Restrictions on use of terminology                                       265

923A..... Restriction on use of certain words or expressions......................... 265

923B..... Restriction on use of certain words or expressions unless authorised in licence conditions     267

Division 11—Agreements with unlicensed persons relating to the provision of financial services         270

Subdivision A—Agreements affected                                                                270

924A..... Agreements with certain unlicensed persons................................... 270

Subdivision B—Effect on agreements                                                              270

925A..... Client may give notice of rescission................................................ 270

925B..... Effect of notice under section 925A................................................ 271

925C..... Client may apply to Court for partial rescission.............................. 271

925D..... Court may make consequential orders............................................. 272

925E...... Agreement unenforceable against client.......................................... 272

925F...... Non‑licensee not entitled to recover commission............................ 273

925G..... Onus of establishing non‑application of section 925E or 925F....... 273

925H..... Client may recover commission paid to non‑licensee...................... 273

925I....... Remedies under this Division additional to other remedies............. 274

Division 12—Miscellaneous                                                                                   275

926A..... Exemptions and modifications by ASIC......................................... 275

926B..... Exemptions and modifications by regulations................................. 276

Part 7.7—Financial services disclosure                                                                 277

Division 1—Preliminary                                                                                          277

940A..... How Part applies if a financial services licensee is acting as authorised representative            277

940B..... What if there is no reasonable opportunity to give a document, information or statement required by this Part?      277

940C..... How documents, information and statements are to be given.......... 278

940D..... General approach to offence provisions.......................................... 280

Division 2—Person provided with financial service as retail client to be given a Financial Services Guide                                                                                                                    281

Subdivision A—Requirement for a Financial Services Guide to be given 281

941A..... Obligation on financial services licensee to give a Financial Services Guide if financial service provided to person as a retail client....................................................................................... 281

941B..... Obligation on authorised representative to give a Financial Services Guide if financial service provided to person as a retail client....................................................................................... 281

941C..... Situations in which a Financial Services Guide is not required....... 282

941D..... Timing of giving Financial Services Guide..................................... 283

941E...... Information must be up to date........................................................ 284

941F...... Obligation to give updated Financial Services Guide...................... 284

Subdivision B—Content and authorisation of Financial Services Guide 285

942A..... Title of Financial Services Guide.................................................... 285

942B..... Financial Services Guide given by financial services licensee—main requirements 285

942C..... Financial Services Guide given by authorised representative—main requirements  288

942D..... Financial Services Guide may consist of 2 or more separate documents given at same time    291

942DA.. Combining a Financial Services Guide and a Product Disclosure Statement in a single document          293

942E...... Altering a Financial Services Guide after its preparation and before giving it to a person        293

Subdivision C—Supplementary Financial Services Guides                        294

943A..... What a Supplementary Financial Services Guide is........................ 294

943B..... Title of Supplementary Financial Services Guide............................ 294

943C..... Form of Supplementary Financial Services Guide.......................... 294

943D..... Effect of giving a person a Supplementary Financial Services Guide 295

943E...... Situation in which only a Supplementary Financial Services Guide need be given  295

943F...... Altering a Supplementary Financial Services Guide after its preparation and before giving it to a person               295

Division 3—Additional requirements for personal advice provided to a retail client    297

Subdivision A—When this Division applies                                                     297

944A..... Situation in which Division applies................................................. 297

Subdivision C—Requirement for a Statement of Advice to be given        297

946A..... Obligation to give client a Statement of Advice............................... 297

946AA.. Small investments—Statement of Advice not required................... 297

946B..... Other situations in which a Statement of Advice is not required..... 299

946C..... Timing of giving Statement of Advice............................................ 304

Subdivision D—Content of Statement of Advice                                            305

947A..... Title of Statement of Advice............................................................ 305

947B..... Statement of Advice given by financial services licensee—main requirements        305

947C..... Statement of Advice given by authorised representative—main requirements          306

947D..... Additional requirements when advice recommends replacement of one product with another 308

947E...... Statement of Advice not to be combined with Financial Services Guide or Product Disclosure Statement              310

Subdivision E—Other matters                                                                            310

948A..... Qualified privilege if providing entity complies with this Division. 310

Division 4—Other disclosure requirements                                                  311

949A..... General advice provided to retail client—obligation to warn client that advice does not take account of client’s objectives, financial situation or needs.............................................................. 311

949B..... Regulations may impose disclosure requirements in certain situations 312

Division 6—Miscellaneous                                                                                     314

951A..... Part cannot be contracted out of...................................................... 314

951B..... Exemptions and modifications by ASIC......................................... 314

951C..... Exemptions and modifications by regulations................................. 315

Division 7—Enforcement                                                                                        316

Subdivision A—Offences                                                                                      316

952A..... Overview........................................................................................ 316

952B..... Definitions...................................................................................... 316

952C..... Offence of failing to give a disclosure document or statement........ 318

952D..... Offence of giving a disclosure document or statement knowing it to be defective    319

952E...... Offence of giving a defective disclosure document or statement (whether or not known to be defective)                320

952F...... Offences of financial services licensee knowingly providing defective disclosure material to an authorised representative........................................................................................................ 322

952G..... Offences of financial services licensee providing disclosure material to an authorised representative (whether or not known to be defective).................................................................... 323

952H..... Offence of financial services licensee failing to ensure authorised representative gives disclosure documents or statements as required..................................................................... 326

952I....... Offences if a Financial Services Guide (or Supplementary FSG) does not comply with certain requirements         326

952J...... Offence if a Statement of Advice does not comply with certain requirements          328

952K..... Offence if authorised representative gives out unauthorised Financial Services Guide (or Supplementary FSG)    328

952L...... Offences if financial services licensee or authorised representative becomes aware that a Financial Services Guide (or Supplementary FSG) is defective.................................................... 329

952M.... Offence of unauthorised alteration of Financial Services Guide or Supplementary Financial Services Guide          330

Subdivision B—Civil liability                                                                             330

953A..... Definitions...................................................................................... 330

953B..... Civil action for loss or damage........................................................ 332

953C..... Additional powers of court to make orders..................................... 334

Part 7.7A—Best interests obligations and remuneration                           336

Division 1—Preliminary                                                                                          336

960........ Definitions...................................................................................... 336

960A..... No contracting out........................................................................... 337

960B..... Obligations under this Part in addition to other obligations............. 337

Division 2—Best interests obligations                                                              338

Subdivision A—Preliminary                                                                               338

961........ Application of this Division............................................................ 338

961A..... Application to a financial services licensee acting as an authorised representative    338

Subdivision B—Provider must act in the best interests of the client         339

961B..... Provider must act in the best interests of the client.......................... 339

961C..... When is something reasonably apparent?...................................... 341

961D..... What is a reasonable investigation?................................................ 341

961E...... What would reasonably be regarded as in the best interests of the client?                341

961F...... What is a basic banking product?................................................... 342

Subdivision C—Resulting advice must be appropriate to the client          342

961G..... Resulting advice must be appropriate to the client........................... 342

Subdivision D—Where resulting advice still based on incomplete or inaccurate information  342

961H..... Resulting advice still based on incomplete or inaccurate information 342

Subdivision E—Provider to give priority to the client’s interests             343

961J...... Conflict between client’s interests and those of provider, licensee, authorised representative or associates             343

Subdivision F—Responsibilities of licensees under this Division               344

961K..... Civil penalty provision—sections 961B, 961G, 961H and 961J.... 344

961L...... Licensees must ensure compliance.................................................. 345

961M.... Civil action for loss or damage........................................................ 345

961N..... Additional powers of Court to make orders.................................... 346

961P...... Responsible licensee........................................................................ 346

Subdivision G—Responsibilities of authorised representatives under this Division     347

961Q..... Civil penalty provision—sections 961B, 961G, 961H and 961J.... 347

Division 3—Charging ongoing fees to clients                                              348

Subdivision A—Preliminary                                                                               348

962........ Application of this Division............................................................ 348

962A..... Ongoing fee arrangements.............................................................. 348

962B..... Ongoing fees................................................................................... 350

962C..... Fee recipients.................................................................................. 350

962CA.. Exemption from application of opt‑in requirement.......................... 350

Subdivision B—Termination, disclosure and renewal                                 351

962D..... Application of this Subdivision....................................................... 351

962E...... Client may terminate arrangement at any time................................. 352

962F...... Arrangement terminates if this Subdivision not complied with....... 352

962G..... Fee recipient must give fee disclosure statement............................. 352

962H..... Fee disclosure statements................................................................ 353

962J...... Disclosure day................................................................................ 354

962K..... Fee recipient must give renewal notice............................................ 354

962L...... Renewal notice day and renewal period.......................................... 355

962M.... If client notifies fee recipient that client does not wish to renew...... 355

962N..... If client does not notify fee recipient that client wishes to renew..... 355

962P...... Civil penalty provision—charging ongoing fees after arrangement terminated         355

962Q..... Effect of termination........................................................................ 356

Subdivision C—Disclosure for arrangements to which Subdivision B does not apply 356

962R..... Application of this Subdivision....................................................... 356

962S...... Fee recipient must give fee disclosure statement............................. 357

Division 4—Conflicted remuneration                                                              358

Subdivision A—Preliminary                                                                               358

963........ Application to a financial services licensee acting as an authorised representative    358

Subdivision B—What is conflicted remuneration?                                       358

963A..... Conflicted remuneration................................................................. 358

963B..... Monetary benefit given in certain circumstances not conflicted remuneration          358

963C..... Non‑monetary benefit given in certain circumstances not conflicted remuneration  360

963D..... Benefits for recommending basic banking products not conflicted remuneration    361

Subdivision C—Ban on conflicted remuneration                                          361

963E...... Licensee must not accept conflicted remuneration........................... 361

963F...... Licensee must ensure compliance.................................................... 362

963G..... Authorised representative must not accept conflicted remuneration 362

963H..... Other representatives must not accept conflicted remuneration....... 362

963J...... Employer must not give employees conflicted remuneration........... 362

963K..... Product issuer or seller must not give conflicted remuneration....... 363

963L...... Volume‑based benefits presumed to be conflicted remuneration..... 363

Division 5—Other banned remuneration                                                       364

Subdivision A—Volume‑based shelf‑space fees                                              364

964........ Application...................................................................................... 364

964A..... Platform operator must not accept volume‑based shelf‑space fees.. 364

Subdivision B—Asset‑based fees on borrowed amounts                              365

964B..... Application...................................................................................... 365

964C..... Application to a financial services licensee acting as an authorised representative    365

964D..... Financial services licensees must not charge asset‑based fees on borrowed amounts              366

964E...... Authorised representatives must not charge asset‑based fees on borrowed amounts               366

964F...... What is an asset‑based fee?............................................................. 367

964G..... Meaning of borrowed..................................................................... 367

964H..... When is something reasonably apparent?...................................... 367

Division 6—Anti‑avoidance                                                                                   368

965........ Anti‑avoidance [see Note 2]............................................................ 368

Division 7—Transition                                                                                             369

966........ Transition period............................................................................ 369

967........ Best interests obligations and remuneration provisions to apply during transition period        369

968........ Notice to clients in transition period................................................ 370

Part 7.8—Other provisions relating to conduct etc. connected with financial products and financial services, other than financial product disclosure                        372

Division 1—Preliminary                                                                                          372

980A..... Matters covered by this Part............................................................ 372

980B..... General approach to offence provisions.......................................... 372

Division 2—Dealing with clients’ money                                                        373

Subdivision A—Money other than loans                                                          373

981A..... Money to which Subdivision applies.............................................. 373

981B..... Obligation to pay money into an account........................................ 374

981C..... Regulations may deal with various matters relating to accounts maintained for the purposes of section 981B         375

981D..... Money related to derivatives may be used for general margining etc. purposes       375

981E...... Protection of money from attachment etc........................................ 376

981F...... Regulations may deal with how money to be dealt with if licensee ceases to be licensed etc.   376

981G..... Account provider not liable merely because of licensee’s contravention  377

981H..... Money to which Subdivision applies taken to be held in trust........ 377

Subdivision B—Loan money                                                                               377

982A..... Money to which this Subdivision applies....................................... 377

982B..... Obligation to pay money into an account........................................ 378

982C..... Licensee to give client statement setting out terms of loan etc......... 378

982D..... Permitted use of loan....................................................................... 379

Subdivision C—Powers of Court                                                                        379

983A..... Court may freeze certain accounts................................................... 379

983B..... Interim order freezing accounts....................................................... 380

983C..... Duty of person to whom order directed to make full disclosure...... 380

983D..... Further orders and directions.......................................................... 381

983E...... Power of Court to make order relating to payment of money.......... 381

Division 3—Dealing with other property of clients                                  383

984A..... Property to which Division applies................................................. 383

984B..... How property to which this Division applies is to be dealt with..... 383

Division 4—Special provisions relating to insurance                              385

985A..... Definitions etc................................................................................. 385

985B..... Status of amounts paid to financial services licensees in respect of contracts of insurance       385

985C..... Regulations may impose other requirements etc. if financial services licensee is not the insurer              386

985D..... Financial services licensees etc. not to deal in general insurance products from unauthorised insurers etc.              387

Division 4A—Special provisions relating to margin lending facilities 388

Subdivision A—Responsible lending conduct for margin lending facilities 388

985EA... Application of this Subdivision....................................................... 388

985E...... Requirements before issuing etc. margin lending facility................ 388

985F...... Assessment of unsuitability of margin lending facility.................... 389

985G..... Reasonable inquiries etc. about the retail client................................ 389

985H..... When margin lending facility must be assessed as unsuitable......... 390

985J...... Giving the retail client the assessment............................................. 391

985K..... Unsuitable margin lending facilities................................................ 393

Subdivision B—Notice of margin calls under margin lending facilities 394

985L...... Issue of margin lending facility must not be conditional on agreement to receive communications through agent   394

985M.... Notification of margin calls............................................................. 395

Division 5—Obligations to report                                                                      397

986A..... Reporting in relation to money to which Subdivision A or B of Division 2 applies or property to which Division 3 applies............................................................................................. 397

986B..... Reporting in relation to dealings in derivatives................................ 397

Division 6—Financial records, statements and audit                              398

Subdivision A—Preliminary                                                                               398

987A..... Application of Division................................................................... 398

Subdivision B—Financial records of financial services licensees             398

988A..... Obligation to keep financial records................................................ 398

988B..... Records to be kept so that profit and loss statements and balance sheet can be prepared and audited       399

988C..... Language of records........................................................................ 399

988D..... Location of records......................................................................... 399

988E...... Particular categories of information to be shown in records............ 399

988F...... Regulations may impose additional requirements............................ 400

988G..... Records taken to be made with licensee’s authority........................ 400

Subdivision C—Financial statements of financial services licensees       401

989A..... Meaning of financial year............................................................... 401

989B..... Financial services licensee to prepare and lodge annual profit and loss statement and balance sheet        401

989C..... Requirements as to contents and applicable accounting principles.. 401

989CA.. Audit to be conducted in accordance with auditing standards......... 402

989D..... Time of lodgment............................................................................ 402

Subdivision D—Appointment etc. of auditors                                                 403

990A..... Sections 990B to 990H not to apply to public companies............... 403

990B..... Appointment of auditor by licensee................................................. 403

990C..... When a person or firm is ineligible to act as auditor........................ 405

990D..... Ineligible person or firm must not consent to act or disqualify themselves etc.        405

990E...... Duration of appointment of auditors............................................... 405

990F...... Removal of auditors........................................................................ 406

990G..... Resignation of auditors—requirements for resignation................... 406

990H..... Resignation of auditors—when resignation takes effect.................. 407

990I....... Auditor’s right of access to records, information etc....................... 407

990J...... Auditor’s fees and expenses........................................................... 408

990K..... Auditor to report on certain matters................................................. 408

990L...... Qualified privilege for auditor etc.................................................... 409

Division 7—Other rules about conduct                                                           411

991A..... Financial services licensee not to engage in unconscionable conduct 411

991B..... Financial services licensee to give priority to clients’ orders........... 411

991C..... Regulations may deal with various matters relating to instructions to deal through licensed markets       412

991D..... Regulations may require records to be kept in relation to instructions to deal on licensed markets and foreign markets........................................................................................................ 412

991E...... Obligations of financial services licensee in relation to dealings with non‑licensees                413

991F...... Dealings involving employees of financial services licensees......... 414

Division 8—Miscellaneous                                                                                     416

992A..... Prohibition on hawking of certain financial products...................... 416

992AA.. Prohibition of hawking of managed investment products............... 418

992B..... Exemptions and modifications by ASIC......................................... 419

992C..... Exemptions and modifications by regulations................................. 420

Division 9—Enforcement                                                                                        421

993A..... Overview........................................................................................ 421

993B..... Offence of failing to pay client money into an account as required. 421

993C..... Offence of failing to comply with requirements relating to client money account     422

993D..... Offence of failing to pay loan money into an account as required... 422

Part 7.9—Financial product disclosure and other provisions relating to issue, sale and purchase of financial products                                                                                           423

Division 1—Preliminary                                                                                          423

1010A... Part generally does not apply to securities....................................... 423

1010B... Part does not apply to financial products not issued in the course of a business      423

1010BA Part does not apply to contribution plans........................................ 423

1010C... Special provisions about meaning of sale and offer........................ 424

1010D... General approach to offence provisions.......................................... 424

Division 2—Product Disclosure Statements                                                 425

Subdivision A—Preliminary                                                                               425

1011A... Jurisidictional scope of Division..................................................... 425

1011B... Definitions...................................................................................... 425

1011C... Treatment of offers of options over financial products.................... 426

Subdivision B—Requirement for a Product Disclosure Statement to be given              426

1012A... Obligation to give Product Disclosure Statement—personal advice recommending particular financial product      426

1012B... Obligation to give Product Disclosure Statement—situations related to issue of financial products         427

1012C... Obligation to give Product Disclosure Statement—offers related to sale of financial products                429

1012D... Situations in which Product Disclosure Statement is not required.. 433

1012DAA Rights issues for which Product Disclosure Statement is not required  438

1012DA Product Disclosure Statement not required for sale amounting to indirect issue       441

1012E.... Small scale offerings of managed investment and other prescribed financial products (20 issues or sales in 12 months)........................................................................................................ 446

1012F.... Product Disclosure Statement for certain superannuation products may be provided later       448

1012G... Product Disclosure Statement may sometimes be provided later..... 449

1012H... Obligation to take reasonable steps to ensure that Product Disclosure Statement is given to person electing to be covered by group financial product.............................................................. 450

1012I..... Obligation to give employer a Product Disclosure Statement in relation to certain superannuation products and RSA products.......................................................................................... 451

1012IA.. Treatment of arrangements under which a person can instruct another person to acquire a financial product           453

1012J.... Information must be up to date........................................................ 457

1012K... Anti‑avoidance determinations........................................................ 457

Subdivision C—Preparation and content of Product Disclosure Statements  458

1013A... Who must prepare Product Disclosure Statement........................... 458

1013B... Title of Product Disclosure Statement............................................. 458

1013C... Product Disclosure Statement content requirements........................ 459

1013D... Product Disclosure Statement content—main requirements............ 460

1013DA Information about ethical considerations etc.................................... 463

1013E.... General obligation to include other information that might influence a decision to acquire       463

1013F.... General limitations on extent to which information is required to be included          463

1013FA. Information not required to be included in PDS for continuously quoted securities 464

1013G... Product Disclosure Statement must be dated................................... 465

1013H... Requirements if Product Disclosure Statement states or implies that financial product will be able to be traded      465

1013I..... Extra requirements if Product Disclosure Statement relates to managed investment products that are ED securities........................................................................................................ 466

1013J.... Requirements if Statement has been lodged with ASIC.................. 467

1013K... Requirements relating to consents to certain statements.................. 467

1013L.... Product Disclosure Statement may consist of 2 or more separate documents given at same time             467

1013M.. Combining a Product Disclosure Statement and a Financial Services Guide in a single document          469

Subdivision D—Supplementary Product Disclosure Statements                469

1014A... What a Supplementary Product Disclosure Statement is................. 469

1014B... Title of Supplementary Product Disclosure Statement.................... 469

1014C... Form of Supplementary Product Disclosure Statement................... 469

1014D... Effect of giving person a Supplementary Product Disclosure Statement  470

1014E.... Situation in which only a Supplementary Product Disclosure Statement need be given           470

1014F.... Application of other provisions in relation to Supplementary Product Disclosure Statements 470

Subdivision DA—Replacement Product Disclosure Statements                 471

1014G... Application of this Subdivision—stapled securities........................ 471

1014H... What a Replacement Product Disclosure Statement is..................... 471

1014J.... Consequences of lodging a Replacement Product Disclosure Statement  471

1014K... Form, content and preparation of Replacement Product Disclosure Statements       472

1014L.... Giving, lodgment and notice of Replacement Product Disclosure Statements          472

Subdivision E—Other requirements relating to Product Disclosure Statements and Supplementary Product Disclosure Statements                                                              473

1015A... Subdivision applies to Product Disclosure Statements and Supplementary Product Disclosure Statements            473

1015B... Some Statements must be lodged with ASIC.................................. 473

1015C... How a Statement is to be given....................................................... 474

1015D... Notice, retention and access requirements for Statement that does not need to be lodged         475

1015E.... Altering a Statement after its preparation and before giving it to a person                476

Subdivision F—Other rights and obligations related to Product Disclosure Statements             476

1016A... Provisions relating to use of application forms............................... 476

1016B... If Statement lodged with ASIC, financial product is not to be issued or sold before specified period      481

1016C... Minimum subscription condition must be fulfilled before issue or sale 481

1016D... Condition about ability to trade on a market must be fulfilled before issue or sale   482

1016E.... Choices open to person making the offer if disclosure condition not met or Product Disclosure Statement defective........................................................................................................ 484

1016F.... Remedies for person acquiring financial product under defective Product Disclosure Document            489

Division 3—Other disclosure obligations of the issuer of a financial product   491

1017A... Obligation to give additional information on request....................... 491

1017B... Ongoing disclosure of material changes and significant events....... 493

1017C... Information for existing holders of superannuation products and RSA products     495

1017D... Periodic statements for retail clients for financial products that have an investment component               500

1017DA Trustees of superannuation entities—regulations may specify additional obligations to provide information          502

1017E.... Dealing with money received for financial product before the product is issued      503

1017F.... Confirming transactions.................................................................. 506

1017G... Certain product issuers and regulated persons must meet appropriate dispute resolution requirements    511

Division 4—Advertising for financial products                                          513

1018A... Advertising or other promotional material for financial product must refer to Product Disclosure Statement          513

1018B... Prohibition on advertising personal offers covered by section 1012E 516

Division 5—Cooling‑off periods                                                                          517

1019A... Situations in which this Division applies........................................ 517

1019B... Cooling‑off period for return of financial product........................... 518

Division 5A—Unsolicited offers to purchase financial products off‑market       520

1019C... Definitions...................................................................................... 520

1019D... Offers to which this Division applies.............................................. 520

1019E.... How offers are to be made.............................................................. 521

1019F.... Prohibition on inviting offers to sell................................................ 521

1019G... Duration and withdrawal of offers.................................................. 522

1019H... Terms of offer cannot be varied...................................................... 522

1019I..... Contents of offer document............................................................. 522

1019J.... Obligation to update market value................................................... 523

1019K... Rights if requirements of Division not complied with..................... 525

Division 5B—Disclosure etc. in relation to short sales covered by securities lending arrangement of listed section 1020B products                                                                 528

1020AA Definitions...................................................................................... 528

1020AB Seller disclosure.............................................................................. 529

1020AC Licensee disclosure......................................................................... 530

1020AD Public disclosure of information..................................................... 531

1020AE. Licensee’s obligation to ask seller about short sale......................... 532

1020AF. Regulations..................................................................................... 533

Division 5C—Information about CGS depository interests                534

1020AG Jurisdictional scope of Division...................................................... 534

1020AH Definitions...................................................................................... 534

1020AI.. Requirement to give information statements for CGS depository interest if recommending acquisition of interest  535

1020AJ. Information statement given must be up to date.............................. 537

1020AK How an information statement is to be given.................................. 537

1020AL. Civil action for loss or damage........................................................ 538

Division 6—Miscellaneous                                                                                     541

1020A... Offers etc. relating to certain managed investment schemes not to be made in certain circumstances       541

1020B Prohibition of certain short sales of securities, managed investment products and certain other financial products     541

1020D... Part cannot be contracted out of...................................................... 543

1020E.... Stop orders by ASIC...................................................................... 543

1020F.... Exemptions and modifications by ASIC......................................... 545

1020G... Exemptions and modifications by regulations................................. 547

Division 7—Enforcement                                                                                        548

Subdivision A—Offences                                                                                      548

1021A... Overview........................................................................................ 548

1021B... Definitions...................................................................................... 548

1021C... Offence of failing to give etc. a disclosure document or statement.. 550

1021D... Offence of preparer of defective disclosure document or statement giving the document or statement knowing it to be defective.......................................................................................... 552

1021E.... Offence of preparer of defective disclosure document or statement giving the document or statement (whether or not known to be defective).................................................................... 553

1021F.... Offence of regulated person (other than preparer) giving disclosure document or statement knowing it to be defective........................................................................................................ 554

1021FA. Paragraph 1012G(3)(a) obligation—offences relating to communication of information         554

1021FB. Paragraph 1012G(3)(a) obligation—offences relating to information provided by product issuer for communication by another person................................................................................. 555

1021G... Offence of financial services licensee failing to ensure authorised representative gives etc. disclosure documents or statements as required..................................................................... 558

1021H... Offences if a Product Disclosure Statement (or Supplementary PDS) does not comply with certain requirements 558

1021I..... Offence of giving disclosure document or statement that has not been prepared by the appropriate person             559

1021J.... Offences if preparer etc. of disclosure document or statement becomes aware that it is defective            560

1021K... Offence of unauthorised alteration of Product Disclosure Statement (or Supplementary PDS)               561

1021L.... Offences of giving, or failing to withdraw, consent to inclusion of defective statement           562

1021M.. Offences relating to keeping and providing copies of Product Disclosure Statements (or Supplementary PDSs)   563

1021N... Offence of failing to provide additional information requested under section 1017A               564

1021O... Offences of issuer or seller of financial product failing to pay money into an account as required           564

1021P.... Offences relating to offers to which Division 5A applies............... 565

Subdivision B—Civil liability                                                                             567

1022A... Definitions...................................................................................... 567

1022B... Civil action for loss or damage........................................................ 569

1022C... Additional powers of court to make orders..................................... 574

Part 7.10—Market misconduct and other prohibited conduct relating to financial products and financial services                                                                                                                   575

Division 1—Preliminary                                                                                          575

1040A... Content of Part................................................................................ 575

Division 2—The prohibited conduct (other than insider trading prohibitions)  576

1041A... Market manipulation....................................................................... 576

1041B... False trading and market rigging—creating a false or misleading appearance of active trading etc.          576

1041C... False trading and market rigging—artificially maintaining etc. trading price            578

1041D... Dissemination of information about illegal transactions.................. 579

1041E.... False or misleading statements........................................................ 579

1041F.... Inducing persons to deal................................................................. 580

1041G... Dishonest conduct........................................................................... 581

1041H... Misleading or deceptive conduct (civil liability only)...................... 582

1041I..... Civil action for loss or damage for contravention of sections 1041E to 1041H        583

1041J.... Sections of this Division have effect independently of each other... 585

1041K... Division applies to certain conduct to the exclusion of State Fair Trading Acts provisions      585

Division 2A—Proportionate liability for misleading and deceptive conduct      586

1041L.... Application of Division................................................................... 586

1041M.. Certain concurrent wrongdoers not to have benefit of apportionment 586

1041N... Proportionate liability for apportionable claims............................... 587

1041O... Defendant to notify plaintiff of concurrent wrongdoer of whom defendant aware   588

1041P.... Contribution not recoverable from defendant.................................. 588

1041Q... Subsequent actions.......................................................................... 589

1041R... Joining non‑party concurrent wrongdoer in the action.................... 589

1041S.... Application of Division................................................................... 589

Division 3—The insider trading prohibitions                                               590

Subdivision A—Preliminary                                                                               590

1042A... Definitions...................................................................................... 590

1042B... Application of Division................................................................... 591

1042C... When information is generally available......................................... 591

1042D... When a reasonable person would take information to have a material effect on price or value of Division 3 financial products.......................................................................................... 592

1042E.... Division 3 financial products taken to be able to be traded despite suspensions or section 794D directions           592

1042F.... Inciting, inducing or encouraging an act or omission constitutes procuring the omission        592

1042G... Information in possession of officer of body corporate.................. 593

1042H... Information in possession of partner or employee of partnership... 593

Subdivision B—The prohibited conduct                                                           594

1043A... Prohibited conduct by person in possession of inside information. 594

1043B... Exception for withdrawal from registered scheme.......................... 595

1043C... Exception for underwriters.............................................................. 596

1043D... Exception for acquisition pursuant to legal requirement.................. 596

1043E.... Exception for information communicated pursuant to a legal requirement                596

1043F.... Chinese wall arrangements by bodies corporate.............................. 597

1043G... Chinese wall arrangements by partnerships etc............................... 597

1043H... Exception for knowledge of person’s own intentions or activities.. 598

1043I..... Exception for bodies corporate........................................................ 598

1043J.... Exception for officers or agents of body corporate......................... 599

1043K... Transactions by holder of financial services licence or a representative of the holder of such a licence    599

1043L.... A specific situation in which a compensation order under section 1317HA may be made       600

1043M.. Defences to prosecution for an offence........................................... 604

1043N... Relief from civil liability.................................................................. 605

1043O... Powers of Court.............................................................................. 606

Division 4—Defences, relief and limits on liability                                    607

1044A... General defence or relief for publishers.......................................... 607

1044B... Limit on liability for misleading or deceptive conduct..................... 607

Division 5—Miscellaneous                                                                                     609

1045A... Exemptions and modifications by regulations................................. 609

Part 7.11—Title and transfer                                                                                      610

Division 1—Title to certain securities                                                              610

1070A... Nature of shares and certain other interests in a company or registered scheme       610

1070B... Numbering of shares....................................................................... 611

1070C... Matters to be specified in share certificate....................................... 612

1070D... Loss or destruction of title documents for certain securities............ 612

Division 2—Transfer of certain securities                                                    615

Subdivision A—General provisions                                                                  615

1071A... Application of the Subdivision to certain securities......................... 615

1071B... Instrument of transfer...................................................................... 615

1071C... Occupation need not appear in transfer document, register etc........ 617

1071D... Registration of transfer at request of transferor............................... 618

1071E.... Notice of refusal to register transfer................................................ 619

1071F.... Remedy for refusal to register transfer or transmission................... 619

1071G... Certification of transfers.................................................................. 620

1071H... Duties of company with respect to issue of certificates................... 621

Subdivision B—Special provisions for shares                                                623

1072A... Transmission of shares on death (replaceable rule—see section 135) 623

1072B... Transmission of shares on bankruptcy (replaceable rule—see section 135)            624

1072C... Rights of trustee of estate of bankrupt shareholder......................... 625

1072D... Transmission of shares on mental incapacity (replaceable rule—see section 135)   626

1072E.... Trustee etc. may be registered as owner of shares........................... 627

1072F.... Registration of transfers (replaceable rule—see section 135)......... 629

1072G... Additional general discretion for directors of proprietary companies to refuse to register transfers (replaceable rule—see section 135)..................................................................................... 630

1072H... Notices relating to non‑beneficial and beneficial ownership of shares 630

Division 3—Transfer of certain securities effected otherwise than through a prescribed CS facility  634

1073A... Application of the Division to certain securities.............................. 634

1073B... Definitions...................................................................................... 634

1073C... Application of Division to certain bodies as if they were companies 635

1073D... Regulations may govern transfer of certain securities..................... 635

1073E.... ASIC may extend regulations to securities not otherwise covered.. 637

1073F.... Operation of this Division and regulations made for its purposes... 638

Division 4—Transfer of financial products effected through prescribed CS facility     640

1074A... Financial products to which this Division applies........................... 640

1074B... Definitions...................................................................................... 640

1074C... Operating rules of prescribed CS facility may deal with transfer of title.. 640

1074D... Valid and effective transfer if operating rules complied with.......... 641

1074E.... Regulations may govern transfer of financial products in accordance with operating rules of prescribed CS facility........................................................................................................ 641

1074F.... Issuer protected from civil liability for person’s contravention of prescribed CS facility’s certificate cancellation rules........................................................................................................ 644

1074G... Operation of this Division and regulations made for its purposes... 644

Division 5—Exemptions and modifications                                                   646

1075A... ASIC’s power to exempt and modify............................................. 646

Part 7.12—Miscellaneous                                                                                              648

Division 1—Qualified privilege                                                                           648

1100A... Qualified privilege for information given to ASIC.......................... 648

1100B... Qualified privilege for the conduct of market licensees and CS facility licensees     648

1100C... Qualified privilege for information given to market licensees and CS facility licensees etc.     650

1100D... Extension of protections given by this Division.............................. 650

Division 2—Other matters                                                                                     651

1101A... Approved codes of conduct............................................................ 651

1101B... Power of Court to make certain orders............................................ 652

1101C... Preservation and disposal of records etc......................................... 656

1101D... Destruction of records by ASIC..................................................... 657

1101E.... Concealing etc. of books................................................................. 657

1101F.... Falsification of records.................................................................... 658

1101G... Precautions against falsification of records..................................... 659

1101GA How Part 9.3 applies to books required to be kept by this Chapter etc. 659

1101H... Contravention of Chapter does not generally affect validity of transactions etc.       660

1101I..... Gaming and wagering laws do not affect validity of contracts relating to financial products    660

1101J.... Delegation....................................................................................... 661

Chapter 8—Mutual recognition of securities offers                                     662

Part 8.1—Preliminary                                                                                                     662

1200A... Definitions...................................................................................... 662

Part 8.2—Foreign offers that are recognised in this jurisdiction          664

Division 1—Recognised offers                                                                             664

1200B... When an offer is a recognised offer................................................ 664

1200C... Conditions that must be met to be a recognised offer...................... 664

1200D... Required documents and information.............................................. 665

1200E.... Warning statement........................................................................... 667

Division 2—Effect of a recognised offer                                                        668

1200F.... Effect of a recognised offer............................................................. 668

Division 3—Ongoing conditions for recognised offers                           670

1200G... Offering conditions......................................................................... 670

1200H... Address for service condition......................................................... 673

1200J.... Dispute resolution condition........................................................... 674

Division 4—Modification of provisions of this Act                                   676

1200K... Additional operation of section 675 (continuous disclosure).......... 676

1200L.... Pre‑offer advertising....................................................................... 676

1200M.. Modification by the regulations....................................................... 677

Division 5—ASIC’s powers in relation to recognised offers               678

1200N... Stop orders...................................................................................... 678

1200P.... Ban on making subsequent recognised offers................................. 682

1200Q... Offence of breaching an ongoing condition.................................... 683

Division 6—Miscellaneous                                                                                     684

1200R... Service of documents...................................................................... 684

Part 8.3—Offers made under foreign recognition schemes                     685

1200S.... Notice to ASIC............................................................................... 685

1200T.... Extension of this Act to recognised jurisdictions............................ 685

1200U... ASIC stop order for advertising in a recognised jurisdiction.......... 686


Chapter 7Financial services and markets

Part 7.1Preliminary

Division 1Object of Chapter and outline of Chapter

760A  Object of Chapter

                   The main object of this Chapter is to promote:

                     (a)  confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and

                     (b)  fairness, honesty and professionalism by those who provide financial services; and

                     (c)  fair, orderly and transparent markets for financial products; and

                     (d)  the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.

760B  Outline of Chapter

                   An outline of this Chapter is set out in the table below.

 

Part‑by‑Part outline of Chapter 7

 

Part...

Covers...

1

7.1

definitions of key concepts and of commonly occurring expressions

2

7.2

licensing of financial markets

other matters relating to financial markets

2A

7.2A

supervision of financial markets

3

7.3

licensing of clearing and settlement facilities

other matters relating to clearing and settlement facilities

4

7.4

limitation on ownership of certain licensees

individuals who are disqualified from being involved in certain licensees

5

7.5

compensation regimes for financial markets

5A

7.5A

regulation of derivative transactions and derivative trade repositories

6

7.6

licensing of providers of financial services

other related matters (e.g. restrictions on use of terminology; agreements with unlicensed persons relating to provision of financial services)

7

7.7

disclosure requirements for financial services licensees and their authorised representatives

disclosure requirements for certain people who are not required to be licensed

7A

7.7A

best interests obligations

charging ongoing fees to clients

ban on conflicted remuneration and other remuneration

8

7.8

other conduct requirements for financial services licensees (e.g. dealing with client money and property; financial records, statements and audit)

special provisions relating to insurance

special provisions relating to margin lending facilities

9

7.9

financial product disclosure requirements

other requirements relating to issue, sale and purchase of financial products

10

7.10

market misconduct and other prohibited conduct relating to financial products and services

11

7.11

title to, and transfer of, certain securities and other financial products

12

7.12

qualified privilege in certain situations

other miscellaneous matters


 

Division 2Definitions

761A  Definitions

                   In this Chapter:

able to be traded, in relation to a market, includes (but is not limited to) admitted to quotation on the market.

acquire, in relation to a financial product, has a meaning affected by section 761E.

annual turnover, of a body corporate during a 12‑month period, means the sum of the values of all the supplies that the body corporate, and any body corporate related to the body corporate, have made, or are likely to make, during the 12‑month period, other than:

                     (a)  supplies made from any of those bodies corporate to any other of those bodies corporate; or

                     (b)  supplies that are input taxed; or

                     (c)  supplies that are not for consideration (and are not taxable supplies under section 72‑5 of the A New Tax System (Goods and Services Tax) Act 1999); or

                     (d)  supplies that are not made in connection with an enterprise that the body corporate carries on; or

                     (e)  supplies that are not connected with Australia.

Expressions used in this definition that are also used in the A New Tax System (Goods and Services Tax) Act 1999 have the same meaning as in that Act.

arrangement means, subject to section 761B, a contract, agreement, understanding, scheme or other arrangement (as existing from time to time):

                     (a)  whether formal or informal, or partly formal and partly informal; and

                     (b)  whether written or oral, or partly written and partly oral; and

                     (c)  whether or not enforceable, or intended to be enforceable, by legal proceedings and whether or not based on legal or equitable rights.

Australian CS facility licence means a licence under section 824B that authorises a person to operate a clearing and settlement facility.

Australian derivative trade repository licence: see section 905B.

Australian financial services licence means a licence under section 913B that authorises a person who carries on a financial services business to provide financial services.

Australian market licence means a licence under section 795B that authorises a person to operate a financial market.

authorised representative of a financial services licensee means a person authorised in accordance with section 916A or 916B to provide a financial service or financial services on behalf of the licensee.

basic deposit product means a deposit product that is a facility in relation to which the following conditions are satisfied:

                     (a)  the terms applicable to the facility (the governing terms) do not permit the amount from time to time standing to the credit of the facility to be reduced otherwise than in consequence of one or more of the following:

                              (i)  a withdrawal, transfer or debit on the instruction of, or by authority of, the depositor, not being on account of entry fees, exit fees or charges for the management of the funds (but this does not exclude charges for the maintenance of the facility itself);

                             (ii)  a payment of charges or duties on deposits into, or withdrawals from, the facility that are payable under a law of the Commonwealth or of a State or Territory;

                            (iii)  a payment that a law of the Commonwealth, or of a State or Territory, requires to be made out of the facility;

                            (iv)  a payment that an order of a court requires to be made out of the facility;

                             (v)  the exercise of a right to combine accounts;

                            (vi)  the correction of an error;

                           (vii)  any other circumstances specified in regulations made for the purposes of this subparagraph; and

                     (b)  any return to be generated for the depositor on the amount from time to time standing to the credit of the facility is an amount that is set out in, or that is calculated by reference to a rate or rates that are set out in, the governing terms; and

                     (c)  either:

                              (i)  there is no minimum period before which funds cannot be withdrawn or transferred from the facility without a reduction in the return generated for the depositor; or

                             (ii)  if there is such a period, it expires on or before the end of the period of 5 years starting on the day on which funds were first deposited in the facility; and

                     (d)  unless subparagraph (c)(ii) applies and the period referred to in that subparagraph expires on or before the end of the period of 2 years starting on the day on which funds were first deposited in the facility—funds are able to be withdrawn or transferred from the facility on the instruction of, or by authority of, the depositor:

                              (i)  without any prior notice to the ADI that makes the facility available; or

                             (ii)  if the ADI that makes the facility available is included in a class of ADIs specified in regulations made for the purposes of this subparagraph—subject to a prior notice requirement that does not exceed the period specified in those regulations in relation to that class of ADIs;

                            whether or not the withdrawal or transfer will attract a reduction in the return generated for the depositor as mentioned in subparagraph (c)(i); and

                   (da)  the facility is not an FHSA product; and

                     (e)  any other conditions specified in regulations made for the purposes of this paragraph.

binder means an authorisation given to a person by a financial services licensee who is an insurer to do either or both of the following:

                     (a)  enter into contracts that are risk insurance products on behalf of the insurer as insurer; or

                     (b)  deal with and settle, on behalf of the insurer, claims relating to risk insurance products against the insurer as insurer;

but does not include an authorisation of a kind referred to in paragraph (a) that is limited to effecting contracts of insurance by way of interim cover unless there is also in existence an authority given by the insurer to the person to enter into, on behalf of the insurer and otherwise than by way of interim cover, contracts of insurance.

carried on in this jurisdiction, in relation to a financial services business, has a meaning affected by section 911D.

certificate cancellation provisions, in relation to a prescribed CS facility, means the provisions of the facility’s operating rules that deal with:

                     (a)  the cancellation of documents of title to financial products transferred through the facility; and

                     (b)  matters incidental to the cancellation of those documents.

CGS depository interest means a depository interest, as defined in the Commonwealth Inscribed Stock Act 1911, that can be transferred through a licensed CS facility.

class, in relation to financial products or financial services, has a meaning affected by regulations made for the purposes of section 761CA.

clearing and settlement facility has the meaning given by Division 6.

clearing requirements (in relation to derivative transactions): see subsection 901A(7).

CS facility licensee means a person who holds an Australian CS facility licence.

current LVR:

                     (a)  in relation to a standard margin lending facility—has the meaning given by subsection 761EA(3); and

                     (b)  in relation to a non‑standard margin lending facility—has the meaning given by subsection 761EA(6).

custodial or depository service that a person provides has the meaning given by section 766E.

dealing in a financial product has the meaning given by section 766C (and deal has a corresponding meaning).

deposit product means a financial product described in paragraph 764A(1)(i).

derivative has the meaning given by section 761D.

derivative trade data means:

                     (a)  information about derivative transactions, or about positions relating to derivative transactions; or

                     (b)  information (including statistical data) that is created or derived from information referred to in paragraph (a).

derivative trade repository means a facility to which information about derivative transactions, or about positions relating to derivative transactions, can be reported (whether or not other information or data can also be reported to the facility).

derivative trade repository licensee means a person who holds an Australian derivative trade repository licence.

derivative trade repository rules: see subsection 903A(1).

derivative transaction means:

                     (a)  the entry into of an arrangement that is a derivative; or

                     (b)  the modification or termination of such an arrangement; or

                     (c)  the assignment, by a party to such an arrangement, of some or all of the party’s rights and obligations under the arrangement; or

                     (d)  any other transaction that relates to a derivative and that is in a class of transactions prescribed by the regulations for the purpose of this paragraph.

derivative transaction rules: see subsection 901A(1).

dispose, in relation to a financial product, includes terminate or close out the legal relationship that constitutes the financial product.

disqualified individual means an individual who is disqualified within the meaning given by section 853A.

employer‑sponsor has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

execution requirements (in relation to derivative transactions): see subsection 901A(5).

FHSA product means an FHSA (within the meaning of the First Home Saver Accounts Act 2008).

financial market has the meaning given by Division 5.

financial product has the meaning given by Division 3.

Note:          References in this Chapter to financial products have effect subject to particular express exclusions for particular purposes—see e.g. sections 1010A and 1074A.

financial product advice has the meaning given by section 766B.

financial product advice law means:

                     (a)  a provision of Chapter 7 that covers conduct relating to the provision of financial product advice (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial product advice; or

                     (b)  a provision of Chapter 9 as it applies in relation to a provision referred to in paragraph (a); or

                     (c)  a provision of Division 2 of Part 2 of the ASIC Act that covers conduct relating to the provision of financial product advice (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial product advice; or

                     (d)  any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial product advice (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial product advice.

financial service has the meaning given by Division 4.

financial services business means a business of providing financial services.

Note:          The meaning of carry on a financial services business is affected by section 761C.

Financial Services Guide means a Financial Services Guide required by section 941A or 941B to be given in accordance with Division 2 of Part 7.7.

financial services law means:

                     (a)  a provision of this Chapter or of Chapter 5C, 5D, 6, 6A, 6B, 6C or 6D; or

                     (b)  a provision of Chapter 9 as it applies in relation to a provision referred to in paragraph (a); or

                     (c)  a provision of Division 2 of Part 2 of the ASIC Act; or

                     (d)  any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial services (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial services; or

                     (e)  in relation to a financial services licensee that is a licensed trustee company (in addition to paragraphs (a) to (d))—any rule of common law or equity that covers conduct relating to the provision of financial services that are traditional trustee company services (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of such services.

financial services licensee means a person who holds an Australian financial services licence.

foreign exchange contract means a contract:

                     (a)  to buy or sell currency (whether Australian or not); or

                     (b)  to exchange one currency (whether Australian or not) for another (whether Australian or not).

funeral benefit means a benefit that consists of the provision of funeral, burial or cremation services, with or without the supply of goods connected with such services.

further market‑related advice means advice to which subsection 946B(1) applies.

general advice has the meaning given by subsection 766B(4).

general insurance product means a financial product described in paragraph 764A(1)(d).

holder, in relation to a financial product, means the person to whom the financial product was issued, or if it has (since issue) been disposed of to another person who has not themselves disposed of it, that other person (and hold has a corresponding meaning).

insurance product means a financial product described in paragraph 764A(1)(d), (e) or (f).

investment life insurance product means a financial product described in paragraph 764A(1)(f).

involved in a market licensee, CS facility licensee or derivative trade repository licensee, or in an applicant for such a licence, has the meaning given by section 853B.

issue, in relation to a financial product, has a meaning affected by section 761E.

issuer, in relation to a financial product, has a meaning affected by section 761E.

kind, in relation to financial products or financial services, has a meaning affected by regulations made for the purposes of section 761CA.

licensed CS facility means a clearing and settlement facility the operation of which is authorised by an Australian CS facility licence.

licensed derivative trade repository means a derivative trade repository the operation of which is authorised by an Australian derivative trade repository licence.

licensed market means a financial market the operation of which is authorised by an Australian market licence.

licensed trustee company has the same meaning as in Chapter 5D.

life risk insurance product means a financial product described in paragraph 764A(1)(e).

limit, in relation to a margin lending facility, has the meaning given by subsection 761EA(11).

listing rules of a financial market, or proposed financial market, means any rules (however described) that are made by the operator of the market, or contained in the operator’s constitution, and that deal with:

                     (a)  admitting entities to, or removing entities from, the market’s official list, whether for the purpose of enabling financial products of those entities to be traded on the market or for other purposes; or

                     (b)  the activities or conduct of entities that are included on that list.

lodge with ASIC, when used in a provision of this Chapter in relation to which regulations made for the purposes of this definition state that the lodgment is to be in a prescribed form, means lodge with ASIC in a prescribed form.

Note:          See section 350 for the meaning of lodge in a prescribed form.

makes a market for a financial product has the meaning given by section 766D.

managed investment product means a financial product described in paragraph 764A(1)(b).

margin call:

                     (a)  in relation to a standard margin lending facility—has the meaning given by subsection 761EA(4); and

                     (b)  in relation to a non‑standard margin lending facility—has the meaning given by subsection 761EA(7); and

                     (c)  in relation to a facility that ASIC has declared to be a margin lending facility under subsection 761EA(8)—has the meaning given in the declaration.

margin lending facility has the meaning given by subsection 761EA(1).

market integrity rules means the rules made by ASIC under section 798G.

market licensee means a person who holds an Australian market licence.

non‑standard margin lending facility has the meaning given by subsection 761EA(5).

operated in this jurisdiction:

                     (a)  in relation to a financial market, has a meaning affected by section 791D; and

                     (b)  in relation to a clearing and settlement facility, has a meaning affected by section 820D.

operating rules:

                     (a)  of a clearing and settlement facility, or proposed clearing and settlement facility, means any rules (however described) made by the operator of the facility, or contained in the operator’s constitution, that deal with:

                              (i)  the activities or conduct of the facility; or

                             (ii)  the activities or conduct of persons in relation to the facility;

                            but does not include any such rules that deal with matters in respect of which licensed CS facilities must have written procedures under regulations made for the purposes of subsection 822A(2); or

                     (b)  of a financial market, or proposed financial market, means any rules (however described), including the market’s listing rules (if any), that are made by the operator of the market, or contained in the operator’s constitution, and that deal with:

                              (i)  the activities or conduct of the market; or

                             (ii)  the activities or conduct of persons in relation to the market;

                            but does not include:

                            (iii)  any such rules that deal with matters in respect of which licensed markets must have written procedures under regulations made for the purposes of subsection 793A(2); or

                            (iv)  compensation rules within the meaning of Part 7.5.

participant:

                     (a)  in relation to a clearing and settlement facility, means a person who is allowed to directly participate in the facility under the facility’s operating rules and, when used in any of the following provisions, also includes a recognised affiliate in relation to the facility:

                              (i)  paragraph 821B(2)(b);

                             (ii)  section 822B;

                            (iii)  subsection 915F(2);

                            (iv)  any other provisions prescribed by regulations made for the purposes of this subparagraph; and

                     (b)  in relation to a financial market, means a person who is allowed to directly participate in the market under the market’s operating rules and, when used in any of the following provisions, also includes a recognised affiliate in relation to the market:

                              (i)  paragraph 792B(2)(b);

                             (ii)  section 793B;

                            (iii)  section 883A;

                            (iv)  subsection 915F(2);

                             (v)  paragraphs 923B(3)(a) and (b);

                            (vi)  any other provisions prescribed by regulations made for the purposes of this subparagraph.

person has a meaning affected by section 761F (which deals with partnerships) and section 761FA (which deals with multiple trustees).

personal advice has the meaning given by subsection 766B(3).

prescribed CS facility means a licensed CS facility that is prescribed by regulations made for the purposes of this definition.

prescribed derivative trade repository means a facility that is (or that is in a class that is) prescribed by the regulations for the purpose of paragraph 901A(6)(b).

Product Disclosure Statement means a Product Disclosure Statement:

                     (a)  required by section 1012A, 1012B, 1012C or 1012I to be given in accordance with Division 2 of Part 7.9; or

                     (b)  that section 1012H requires an issuer of a financial product to take reasonable steps to ensure is given to a new group member in accordance with Division 2 of Part 7.9.

Note:          For the effect of the lodgment of a Replacement Product Disclosure Statement, see section 1014J.

provide, in relation to a financial product, has a meaning affected by section 761E.

recognised affiliate, in relation to a clearing and settlement facility or a financial market, means a person who is:

                     (a)  recognised by the operating rules of the facility or market as a suitably qualified affiliate of the facility or market; and

                     (b)  involved in the carrying on of a financial services business (including as an employee, director or in some other capacity).

relevant personal circumstances, in relation to advice provided or to be provided to a person in relation to a matter, are such of the person’s objectives, financial situation and needs as would reasonably be considered to be relevant to the advice.

Replacement Product Disclosure Statement has the meaning given by section 1014H.

reporting requirements (in relation to derivative transactions): see subsection 901A(6).

retail client has the meaning given by sections 761G and 761GA.

risk insurance product means a financial product described in paragraph 764A(1)(d) or (e).

RSA product means a financial product described in paragraph 764A(1)(h).

security means:

                     (a)  a share in a body; or

                     (b)  a debenture of a body; or

                     (c)  a legal or equitable right or interest in a security covered by paragraph (a) or (b); or

                     (d)  an option to acquire, by way of issue, a security covered by paragraph (a), (b) or (c); or

                     (e)  a right (whether existing or future and whether contingent or not) to acquire, by way of issue, the following under a rights issue:

                              (i)  a security covered by paragraph (a), (b), (c) or (d);

                             (ii)  an interest or right covered by paragraph 764A(1)(b) or (ba); or

                      (f)  a CGS depository interest;

but does not include an excluded security. In Part 7.11, it also includes a managed investment product.

self‑managed superannuation fund has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

standard margin lending facility has the meaning given by subsection 761EA(2).

Statement of Advice means a Statement of Advice required by section 946A to be given in accordance with Subdivisions C and D of Division 3 of Part 7.7.

superannuation entity has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

superannuation product means a financial product described in paragraph 764A(1)(g).

Supplementary Financial Services Guide has the meaning given by section 943A.

Supplementary Product Disclosure Statement has the meaning given by section 1014A.

title document, for a financial product, means a certificate or other document evidencing ownership of the financial product.

traditional trustee company services has the same meaning as in Chapter 5D.

trustee company has the same meaning as in Chapter 5D.

wholesale client has the meaning given by section 761G.

761B  Meaning of arrangement—2 or more arrangements that together form a derivative or other financial product

                   If:

                     (a)  an arrangement, when considered by itself, does not constitute a derivative, or some other kind of financial product; and

                     (b)  that arrangement, and one or more other arrangements, if they had instead been a single arrangement, would have constituted a derivative or other financial product; and

                     (c)  it is reasonable to assume that the parties to the arrangements regard them as constituting a single scheme;

the arrangements are, for the purposes of this Part, to be treated as if they together constituted a single arrangement.

761C  Meaning of carry on a financial services business

                   In working out whether someone carries on a financial services business, Division 3 of Part 1.2 needs to be taken into account. However, paragraph 21(3)(e) does not apply for the purposes of this Chapter.

761CA  Meaning of class and kind of financial products and financial services

                   The regulations may include provisions identifying, or providing for the identification of, what constitutes a class or kind of financial products or financial services for the purposes of a provision or provisions of this Chapter.

761D  Meaning of derivative

             (1)  For the purposes of this Chapter, subject to subsections (2), (3) and (4), a derivative is an arrangement in relation to which the following conditions are satisfied:

                     (a)  under the arrangement, a party to the arrangement must, or may be required to, provide at some future time consideration of a particular kind or kinds to someone; and

                     (b)  that future time is not less than the number of days, prescribed by regulations made for the purposes of this paragraph, after the day on which the arrangement is entered into; and

                     (c)  the amount of the consideration, or the value of the arrangement, is ultimately determined, derived from or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, one or more of the following:

                              (i)  an asset;

                             (ii)  a rate (including an interest rate or exchange rate);

                            (iii)  an index;

                            (iv)  a commodity.

             (2)  Without limiting subsection (1), anything declared by the regulations to be a derivative for the purposes of this section is a derivative for the purposes of this Chapter. A thing so declared is a derivative despite anything in subsections (3) and (4).

             (3)  Subject to subsection (2), the following are not derivatives for the purposes of this Chapter even if they are covered by the definition in subsection (1):

                     (a)  an arrangement in relation to which subparagraphs (i), (ii) and (iii) are satisfied:

                              (i)  a party has, or may have, an obligation to buy, and another party has, or may have, an obligation to sell, tangible property (other than Australian or foreign currency) at a price and on a date in the future; and

                             (ii)  the arrangement does not permit the seller’s obligations to be wholly settled by cash, or by set‑off between the parties, rather than by delivery of the property; and

                            (iii)  neither usual market practice, nor the rules of a licensed market or a licensed CS facility, permits the seller’s obligations to be closed out by the matching up of the arrangement with another arrangement of the same kind under which the seller has offsetting obligations to buy;

                            but only to the extent that the arrangement deals with that purchase and sale;

                     (b)  a contract for the future provision of services;

                     (c)  anything that is covered by a paragraph of subsection 764A(1), other than paragraph (c) of that subsection;

                     (d)  anything declared by the regulations not to be a derivative for the purposes of this Chapter.

             (4)  Subject to subsection (2), an arrangement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative for the purposes of this Chapter merely because the arrangement provides for the consideration to be varied by reference to a general inflation index such as the Consumer Price Index.

761E  Meaning of issued, issuer, acquire and provide in relation to financial products

General

             (1)  This section defines when a financial product is issued to a person. It also defines who the issuer of a financial product is. If a financial product is issued to a person:

                     (a)  the person acquires the product from the issuer; and

                     (b)  the issuer provides the product to the person.

Note:          Some financial products can also be acquired from, or provided by, someone other than the issuer (e.g. on secondary trading in financial products).

Issuing a financial product

             (2)  Subject to this section, a financial product is issued to a person when it is first issued, granted or otherwise made available to a person.

             (3)  Subject to this section, a financial product specified in the table is issued to a person when the event specified for that product occurs:

 

When particular financial products are issued

Item

Financial product

Event

1

superannuation product

the person becomes a member of the fund concerned

2

RSA product

the account concerned is opened in the person’s name

2A

FHSA product

the person becomes the holder (within the meaning of the First Home Saver Accounts Act 2008) of the FHSA product

3

derivative

the person enters into the legal relationship that constitutes the financial product

4

margin lending facility

the person enters into the legal relationship that constitutes the margin lending facility, as the client under the facility

          (3A)  For the avoidance of doubt, none of the following are taken to give rise to the issue of a financial product to a person (the client):

                     (a)  the client making a further contribution to a superannuation fund of which the client is already a member;

                    (aa)  an employer of the client making a further contribution, for the benefit of the client, to a superannuation fund of which the client is already a member;

                     (b)  the client making a further deposit into an RSA maintained in the client’s name;

                   (ba)  the client making a further contribution (within the meaning of the First Home Saver Accounts Act 2008) into an FHSA product maintained in the client’s name;

                     (c)  the client making a further payment under a life insurance investment product;

                     (d)  the client making a further deposit into a deposit product;

                     (e)  the client engaging in conduct specified in regulations made for the purposes of this paragraph in relation to a financial product already held by the client.

Issuer of a financial product

             (4)  Subject to this section, the issuer, in relation to a financial product issued to a person (the client), is the person responsible for the obligations owed, under the terms of the facility that is the product:

                     (a)  to, or to a person nominated by, the client; or

                     (b)  if the product has been transferred from the client to another person and is now held by that person or another person to whom it has subsequently been transferred—to, or to a person nominated by, that person or that other person.

Note:          For example, the issuer of a direct debit facility is the financial institution with which the account to be debited is held, rather than the persons to whom payments can be made using the facility.

             (5)  Subject to subsection (7), each person who is a party to a financial product that:

                     (a)  is a derivative; and

                     (b)  is not entered into, or acquired, on a financial market;

is taken to be an issuer of the product.

Note 1:       Under paragraph (1)(a), each person who is a party to the derivative will also acquire the financial product at the time of its issue as specified in subsection (3).

Note 2:       Although each party to the derivative is an issuer, whether any particular party has disclosure or other obligations under this Chapter will depend on the circumstances (e.g. whether the issue occurs in the course of a business of issuing financial products and whether any of the other parties is a retail client).

             (6)  Subject to subsection (7), the issuer of a financial product that:

                     (a)  is a derivative; and

                     (b)  is entered into, or acquired, on a financial market;

is taken to be:

                     (c)  if the product is entered into, or acquired, on the market through an arrangement made by a financial services licensee acting on behalf of another person—the financial services licensee; or

                     (d)  if the product is entered into, or acquired, on the market through an arrangement made by an authorised representative of a financial services licensee acting on behalf of another person (not being the licensee)—the financial services licensee; or

                     (e)  if neither paragraph (c) nor (d) applies—the market operator.

             (7)  The regulations may make provision determining all or any of the following for the purposes of this Chapter:

                     (a)  the meaning of issue (and/or related parts of speech, including issuer) in relation to a class of financial products;

                     (b)  the meaning of acquire (and/or related parts of speech) in relation to a class of financial products;

                     (c)  the meaning of provide (and/or related parts of speech) in relation to a class of financial products.

Regulations made for the purposes of this subsection have effect despite anything else in this section.

761EA  Meaning of margin lending facility, margin call and associated expressions

             (1)  A margin lending facility is:

                     (a)  a standard margin lending facility; or

                     (b)  a non‑standard margin lending facility; or

                     (c)  a facility of a kind that has been declared by ASIC to be a margin lending facility under subsection (8);

unless the facility is of a kind that has been declared by ASIC not to be a margin lending facility under subsection (9).

Standard margin lending facilities

             (2)  A standard margin lending facility is a facility under the terms of which:

                     (a)  credit is, or may be, provided by a person (the provider) to a natural person (the client); and

                     (b)  the credit provided is, or must be, applied wholly or partly:

                              (i)  to acquire one or more financial products, or a beneficial interest in one or more financial products; or

                             (ii)  to repay, wholly or partly, another credit facility (within the meaning of subparagraph 765A(1)(h)(i)), the credit provided under which was applied, wholly or partly, to acquire one or more financial products, or a beneficial interest in one or more financial products; and

                     (c)  the credit provided is, or must be, secured by property (the secured property); and

                     (d)  the secured property consists, or must consist, wholly or partly of one or more marketable securities, or a beneficial interest in one or more marketable securities; and

                     (e)  if the current LVR of the facility exceeds a ratio, percentage, proportion or level (however described) determined under the terms of the facility, then:

                              (i)  the client becomes required to take action; or

                             (ii)  the provider becomes entitled to take action; or

                            (iii)  another person becomes required or entitled to take action;

                            in accordance with the terms of the facility to reduce the current LVR of the facility.

             (3)  The current LVR of a standard margin lending facility at a particular time is the ratio, percentage, proportion or level (however described) that:

                     (a)  is determined under the terms of the facility; and

                     (b)  under the terms of the facility, represents a particular relationship between:

                              (i)  the amount of the debt owing by the client, or credit provided by the provider, or both, under the facility at that time; and

                             (ii)  the value of the secured property determined at that time under the terms of the facility.

             (4)  A standard margin lending facility is in margin call when paragraph (2)(e) applies in relation to the facility.

Non‑standard margin lending facilities

             (5)  A non‑standard margin lending facility is a facility under the terms of which:

                     (a)  a natural person (the client) transfers one or more marketable securities, or a beneficial interest in one or more marketable securities (the transferred securities) to another person (the provider); and

                     (b)  the provider transfers property to the client (the transferred property) as consideration or security for the transferred securities; and

                     (c)  the transferred property is, or must be, applied wholly or partly to acquire one or more financial products, or a beneficial interest in one or more financial products; and

                     (d)  the client has a right, in the circumstances determined under the terms of the facility, to be given marketable securities equivalent to the transferred securities; and

                     (e)  if the current LVR of the facility exceeds a ratio, percentage, proportion or level (however described) determined under the terms of the facility, then:

                              (i)  the client becomes required to take action; or

                             (ii)  the provider becomes entitled to take action; or

                            (iii)  another person becomes required or entitled to take action;

                            in accordance with the terms of the facility to reduce the current LVR of the facility.

             (6)  The current LVR of a non‑standard margin lending facility at a particular time is the ratio, percentage, proportion or level (however described) that:

                     (a)  is determined under the terms of the facility; and

                     (b)  under the terms of the facility, represents a particular relationship between:

                              (i)  an amount determined at that time under the terms of the facility by reference to the value of the transferred property and any amount owing by the client to the provider; and

                             (ii)  the value of the transferred securities determined at that time under the terms of the facility.

             (7)  A non‑standard margin lending facility is in margin call when paragraph (5)(e) applies in relation to the facility.

ASIC declarations in relation to margin lending facilities

             (8)  ASIC may declare that a particular kind of facility is a margin lending facility. The declaration must give the meanings of margin call and limit in relation to that kind of facility.

             (9)  ASIC may declare that a particular kind of facility is not a margin lending facility.

           (10)  A declaration made under subsection (8) or (9):

                     (a)  must be in writing; and

                     (b)  is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Meaning of limit of a margin lending facility

           (11)  The limit of a margin lending facility:

                     (a)  in relation to a standard margin lending facility—means the maximum amount of credit that may be provided by the provider to the client under the facility; and

                     (b)  in relation to a non‑standard margin lending facility—means the maximum amount of property that may be transferred by the provider to the client under the facility; and

                     (c)  in relation to a facility of a kind that ASIC has declared to be a margin lending facility under subsection (8)—has the meaning given in the declaration.

761F  Meaning of person—generally includes a partnership

             (1)  This Chapter applies to a partnership as if the partnership were a person, but it applies with the following changes:

                     (a)  obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;

                     (b)  any contravention of a provision of this Chapter, or a provision of this Act that relates to a requirement in a provision of this Chapter, that would otherwise be a contravention by the partnership is taken (whether for the purposes of criminal or civil liability) to have been a contravention by each partner who:

                              (i)  aided, abetted, counselled or procured the relevant act or omission; or

                             (ii)  was in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the partner).

             (2)  For the purposes of this Chapter, a change in the composition of a partnership does not affect the continuity of the partnership.

             (3)  Subsections (1) and (2) have effect subject to:

                     (a)  an express or implied contrary intention in a provision or provisions of this Chapter; and

                     (b)  the regulations, which may exclude or modify the effect of those subsections in relation to specified provisions.

761FA  Meaning of person—generally includes multiple trustees

             (1)  This section applies in relation to a trust while the trust continues to have:

                     (a)  2 or more trustees; or

                     (b)  a single trustee who was a trustee of the trust at a time when it had 2 or more trustees.

             (2)  Subject to subsections (3) and (4), during a period while this section applies to a trust, this Chapter applies to the trust as if the trustee or trustees of the trust from time to time during the period constituted a single legal entity (the notional entity) that remained the same for the duration of that period.

Note:          So, for example, while this section applies to a trust, a licence granted under this Chapter to the trustees of the trust will continue in force, despite a change in the persons who are the trustees.

             (3)  During any period or part of a period while this section applies to a trust and the trust has 2 or more trustees, this Chapter applies to the trustees as mentioned in subsection (2), but it applies with the following changes:

                     (a)  obligations that would be imposed on the notional entity are imposed instead on each trustee, but may be discharged by any of the trustees;

                     (b)  any contravention of a provision of this Chapter, or a provision of this Act that relates to a requirement in a provision of this Chapter, that would otherwise be a contravention by the notional entity is taken (whether for the purposes of criminal or civil liability) to have been a contravention by each trustee who:

                              (i)  aided, abetted, counselled or procured the relevant act or omission; or

                             (ii)  was in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the trustee).

             (4)  During any period or part of a period while this section applies to a trust and the trust has only one trustee, this Chapter applies to the trustee as mentioned in subsection (2), but it applies with the following changes:

                     (a)  obligations that would be imposed on the notional entity are imposed instead on that single trustee;

                     (b)  any contravention of a provision of this Chapter, or a provision of this Act that relates to a requirement in a provision of this Chapter, that would otherwise be a contravention by the notional entity is taken (whether for the purposes of criminal or civil liability) to have been a contravention by that single trustee.

             (5)  Subsections (2), (3) and (4) have effect subject to:

                     (a)  an express or implied contrary intention in a provision or provisions of this Chapter; and

                     (b)  the regulations, which may exclude or modify the effect of those subsections in relation to specified provisions.

761G  Meaning of retail client and wholesale client

Providing a financial product or financial service to a person as a retail client

             (1)  For the purposes of this Chapter, a financial product or a financial service is provided to a person as a retail client unless subsection (5), (6), (6A) or (7), or section 761GA, provides otherwise.

Note:          The references in this section to providing a financial product to a person are not to be taken to imply that the provision of a financial product is not also the provision of a financial service (see the meaning of dealing in section 766C).

Acquiring a financial product or financial service as a retail client

             (2)  For the purposes of this Chapter, a person to whom a financial product or financial service is provided as a retail client is taken to acquire the product or service as a retail client.

Disposing of a financial product as a retail client

             (3)  If a financial product is provided to a person as a retail client, any subsequent disposal of all or part of that product by the person is, for the purposes of this Chapter, a disposal by the person as a retail client.

Wholesale clients

             (4)  For the purposes of this Chapter, a financial product or a financial service is provided to, or acquired by, a person as a wholesale client if it is not provided to, or acquired by, the person as a retail client.

General insurance products

             (5)  For the purposes of this Chapter, if a financial product is, or a financial service provided to a person relates to, a general insurance product, the product or service is provided to the person as a retail client if:

                     (a)  either:

                              (i)  the person is an individual; or

                             (ii)  the insurance product is or would be for use in connection with a small business (see subsection (12)); and

                     (b)  the general insurance product is:

                              (i)  a motor vehicle insurance product (as defined in the regulations); or

                             (ii)  a home building insurance product (as defined in the regulations); or

                            (iii)  a home contents insurance product (as defined in the regulations); or

                            (iv)  a sickness and accident insurance product (as defined in the regulations); or

                             (v)  a consumer credit insurance product (as defined in the regulations); or

                            (vi)  a travel insurance product (as defined in the regulations); or

                           (vii)  a personal and domestic property insurance product (as defined in the regulations); or

                          (viii)  a kind of general insurance product prescribed by regulations made for the purposes of this subparagraph.

In any other cases, the provision to a person of a financial product that is, or a financial service that relates to, a general insurance product does not constitute the provision of a financial product or financial service to the person as a retail client.

Superannuation products and RSA products

             (6)  For the purposes of this Chapter:

                     (a)  if a financial product provided to a person is a superannuation product or an RSA product, the product is provided to the person as a retail client; and

                    (aa)  however, if a trustee of a pooled superannuation trust (within the meaning of the Superannuation Industry (Supervision) Act 1993) provides a financial product that is an interest in the trust to a person covered by subparagraph (c)(i), the product is not provided to the person as a retail client; and

                     (b)  if a financial service (other than the provision of a financial product) provided to a person who is not covered by subparagraph (c)(i) or (ii) relates to a superannuation product or an RSA product, the service is provided to the person as a retail client; and

                     (c)  if a financial service (other than the provision of a financial product) provided to a person who is:

                              (i)  the trustee of a superannuation fund, an approved deposit fund, a pooled superannuation trust or a public sector superannuation scheme (within the meaning of the Superannuation Industry (Supervision) Act 1993) that has net assets of at least $10 million; or

                             (ii)  an RSA provider (within the meaning of the Retirement Savings Accounts Act 1997);

                            relates to a superannuation product or an RSA product, that does not constitute the provision of a financial service to the person as a retail client.

Traditional trustee company services

          (6A)  For the purpose of this Chapter, if a financial service provided to a person is a traditional trustee company service, the service is provided to the person as a retail client unless regulations made for the purpose of this subsection provide otherwise.

Other kinds of financial product

             (7)  For the purposes of this Chapter, if a financial product is not, or a financial service (other than a traditional trustee company service) provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the product or service is provided to the person as a retail client unless one or more of the following paragraphs apply:

                     (a)  the price for the provision of the financial product, or the value of the financial product to which the financial service relates, equals or exceeds the amount specified in regulations made for the purposes of this paragraph as being applicable in the circumstances (but see also subsection (10)); or

                     (b)  the financial product, or the financial service, is provided for use in connection with a business that is not a small business (see subsection (12));

                     (c)  the financial product, or the financial service, is not provided for use in connection with a business, and the person who acquires the product or service gives the provider of the product or service, before the provision of the product or service, a copy of a certificate given within the preceding 6 months by a qualified accountant (as defined in section 9) that states that the person:

                              (i)  has net assets of at least the amount specified in regulations made for the purposes of this subparagraph; or

                             (ii)  has a gross income for each of the last 2 financial years of at least the amount specified in regulations made for the purposes of this subparagraph a year;

                     (d)  the person is a professional investor.

Offence proceedings—defendant bears evidential burden in relation to matters referred to in paragraphs (7)(a) to (d)

             (8)  In a prosecution for an offence based on a provision of this Chapter, a defendant bears an evidential burden in relation to the matters in paragraphs (7)(a) to (d) as if those matters were exceptions for the purposes of subsection 13.3(3) of the Criminal Code.

Other proceedings relating to subsection (7) products—presumption in non‑criminal proceedings of retail client unless contrary established

             (9)  If:

                     (a)  it is alleged in a proceeding under this Chapter (not being a prosecution for an offence), or in any other proceeding (not being a prosecution for an offence) in respect of a matter arising under this Chapter, that a particular financial product or financial service was provided to a person as a retail client; and

                     (b)  the product or the service is one to which subsection (7) applies;

it is presumed that the product or service was provided to the person as a retail client unless the contrary is established.

Note 1:       There is no such presumption in relation to the provision of a product or service that is or relates to a general insurance product, a superannuation product or an RSA product. Whether or not such a product, or a service relating to such a product, was provided to a person as a retail client is to be resolved as provided in subsection (5) or (6), as the case requires.

Note 2:       In criminal proceedings, a defendant bears an evidential burden in relation to the matters in paragraphs (7)(a) to (d) (see subsection (8)).

Regulations and paragraph (7)(a)

           (10)  In addition to specifying an amount or amounts for the purposes of paragraph (7)(a), the regulations may do either or both of the following:

                     (a)  deal with how a price or value referred to in that paragraph is to be calculated, either generally or in relation to a specified class of financial products;

                     (b)  modify the way in which that paragraph applies in particular circumstances.

Regulations and paragraph (7)(c)

        (10A)  In addition to specifying amounts for the purposes of subparagraphs (7)(c)(i) and (ii), the regulations may do either or both of the following:

                     (a)  deal with how net assets referred to in subparagraph (7)(c)(i) are to be determined and valued, either generally or in specified circumstances;

                     (b)  deal with how gross income referred to in subparagraph (7)(c)(ii) is to be calculated, either generally or in specified circumstances.

What happens if a package of general insurance products and other kinds of financial products is provided?

           (11)  If:

                     (a)  either:

                              (i)  in a single transaction, 2 or more financial products are provided to a person; or

                             (ii)  a single financial service provided to a person relates to 2 or more financial products; and

                     (b)  one or more, but not all, of the financial products are general insurance products;

subsection (5) applies to the transaction or service so far as it relates to the general insurance products, and subsection (6) or (7), as the case requires, applies to the transaction or service so far as it relates to other financial products.

Definition

           (12)  In this section:

small business means a business employing less than:

                     (a)  if the business is or includes the manufacture of goods—100 people; or

                     (b)  otherwise—20 people.

761GA  Meaning of retail client—sophisticated investors

                   For the purposes of this Chapter, a financial product, or a financial service (other than a traditional trustee company service) in relation to a financial product, is not provided by one person to another person as a retail client if:

                     (a)  the first person (the licensee) is a financial services licensee; and

                     (b)  the financial product is not a general insurance product, a superannuation product or an RSA product; and

                     (c)  the financial product or service is not provided for use in connection with a business; and

                     (d)  the licensee is satisfied on reasonable grounds that the other person (the client) has previous experience in using financial services and investing in financial products that allows the client to assess:

                              (i)  the merits of the product or service; and

                             (ii)  the value of the product or service; and

                            (iii)  the risks associated with holding the product; and

                            (iv)  the client’s own information needs; and

                             (v)  the adequacy of the information given by the licensee and the product issuer; and

                     (e)  the licensee gives the client before, or at the time when, the product or advice is provided a written statement of the licensee’s reasons for being satisfied as to those matters; and

                      (f)  the client signs a written acknowledgment before, or at the time when, the product or service is provided that:

                              (i)  the licensee has not given the client a Product Disclosure Statement; and

                             (ii)  the licensee has not given the client any other document that would be required to be given to the client under this Chapter if the product or service were provided to the client as a retail client; and

                            (iii)  the licensee does not have any other obligation to the client under this Chapter that the licensee would have if the product or service were provided to the client as a retail client.

761H  References to this Chapter include references to regulations or other instruments made for the purposes of this Chapter

             (1)  A reference in a provision of this Chapter to this Chapter, or to a particular provision or group of provisions of this Chapter, includes (unless a contrary intention appears) a reference to regulations, or other instruments, made for the purposes of this Chapter, or for the purposes of that provision or any of those provisions, as the case requires.

             (2)  Subsection (1) has effect as if provisions in Part 10.2 (transitional provisions) that relate to matters dealt with in this Chapter were part of this Chapter.


 

Division 3What is a financial product?

Subdivision APreliminary

762A  Overview of approach to defining what a financial product is

General definition

             (1)  Subdivision B sets out a general definition of financial product. Subject to subsections (2) and (3), a facility is a financial product if it falls within that definition.

Specific inclusions

             (2)  Subdivision C identifies, or provides for the identification of, kinds of facilities that, subject to subsection (3), are financial products (whether or not they are within the general definition).

Overriding exclusions

             (3)  Subdivision D identifies, or provides for the identification of, kinds of facilities that are not financial products. These facilities are not financial products:

                     (a)  even if they are within the general definition; and

                     (b)  even if they are within a class of facilities identified as mentioned in subsection (2).

762B  What if a financial product is part of a broader facility?

                   If a financial product is a component of a facility that also has other components, this Chapter, in applying to the financial product, only applies in relation to the facility to the extent it consists of the component that is the financial product.

Note:          So, e.g., Part 7.9 does not require disclosures to be made in relation to those other components.

762C  Meaning of facility

                   In this Division:

facility includes:

                     (a)  intangible property; or

                     (b)  an arrangement or a term of an arrangement (including a term that is implied by law or that is required by law to be included); or

                     (c)  a combination of intangible property and an arrangement or term of an arrangement.

Note:          2 or more arrangements may be taken to constitute a single arrangement—see section 761B.

Subdivision BThe general definition

763A  General definition of financial product

             (1)  For the purposes of this Chapter, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:

                     (a)  makes a financial investment (see section 763B);

                     (b)  manages financial risk (see section 763C);

                     (c)  makes non‑cash payments (see section 763D).

This has effect subject to section 763E.

             (2)  For the purposes of this Chapter, a particular facility that is of a kind through which people commonly make financial investments, manage financial risks or make non‑cash payments is a financial product even if that facility is acquired by a particular person for some other purpose.

             (3)  A facility does not cease to be a financial product merely because:

                     (a)  the facility has been acquired by a person other than the person to whom it was originally issued; and

                     (b)  that person, in acquiring the product, was not making a financial investment or managing a financial risk.

763B  When a person makes a financial investment

                   For the purposes of this Chapter, a person (the investor) makes a financial investment if:

                     (a)  the investor gives money or money’s worth (the contribution) to another person and any of the following apply:

                              (i)  the other person uses the contribution to generate a financial return, or other benefit, for the investor;

                             (ii)  the investor intends that the other person will use the contribution to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated);

                            (iii)  the other person intends that the contribution will be used to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated); and

                     (b)  the investor has no day‑to‑day control over the use of the contribution to generate the return or benefit.

Note 1:       Examples of actions that constitute making a financial investment under this subsection are:

(a)    a person paying money to a company for the issue to the person of shares in the company (the company uses the money to generate dividends for the person and the person, as a shareholder, does not have control over the day‑to‑day affairs of the company); or

(b)    a person contributing money to acquire interests in a registered scheme from the responsible entity of the scheme (the scheme uses the money to generate financial or other benefits for the person and the person, as a member of the scheme, does not have day‑to‑day control over the operation of the scheme).

Note 2:       Examples of actions that do not constitute making a financial investment under this subsection are:

(a)    a person purchasing real property or bullion (while the property or bullion may generate a return for the person, it is not a return generated by the use of the purchase money by another person); or

(b)    a person giving money to a financial services licensee who is to use it to purchase shares for the person (while the purchase of the shares will be a financial investment made by the person, the mere act of giving the money to the licensee will not of itself constitute making a financial investment).

763C  When a person manages financial risk

                   For the purposes of this Chapter, a person manages financial risk if they:

                     (a)  manage the financial consequences to them of particular circumstances happening; or

                     (b)  avoid or limit the financial consequences of fluctuations in, or in the value of, receipts or costs (including prices and interest rates).

Note 1:       Examples of actions that constitute managing a financial risk are:

(a)    taking out insurance; or

(b)    hedging a liability by acquiring a futures contract or entering into a currency swap.

Note 2:       An example of an action that does not constitute managing a financial risk is employing a security firm (while that is a way of managing the risk that thefts will happen, it is not a way of managing the financial consequences if thefts do occur).

763D  When a person makes non‑cash payments

             (1)  For the purposes of this Chapter, a person makes non‑cash payments if they make payments, or cause payments to be made, otherwise than by the physical delivery of Australian or foreign currency in the form of notes and/or coins.

Note:          Examples of actions that constitute making non‑cash payments are:

(a)    making payments by means of a facility for direct debit of a deposit account; or

(b)    making payments by means of a facility for the use of cheques; or

(c)    making payments by means of a purchased payment facility within the meaning of the Payment Systems (Regulation) Act 1998, such as a smart card; or

(d)    making payments by means of traveller’s cheques (whether denominated in Australian or foreign currency).

             (2)  For the purposes of this Chapter, the following are not making non‑cash payments, even if they might otherwise be covered by subsection (1):

                     (a)  making payments by means of a facility in relation to which one of the following applies:

                              (i)  there is only one person to whom payments can be made by means of the facility;

                             (ii)  the facility is, or is of a kind, specified in the regulations as being a facility that is not to be covered by this section because of restrictions relating to the number of people to whom payments can be made by means of the facility, or relating to the number of persons who can use the facility to make payments;

                     (b)  making payments by means of:

                              (i)  a letter of credit from a financial institution; or

                             (ii)  a cheque drawn by a financial institution on itself; or

                            (iii)  a guarantee given by a financial institution.

763E  What if a financial product is only incidental?

             (1)  If:

                     (a)  something (the incidental product) that, but for this section, would be a financial product because of this Subdivision is:

                              (i)  an incidental component of a facility that also has other components; or

                             (ii)  a facility that is incidental to one or more other facilities; and

                     (b)  it is reasonable to assume that the main purpose of:

                              (i)  if subparagraph (a)(i) applies—the facility referred to in that subparagraph, when considered as a whole; or

                             (ii)  if subparagraph (a)(ii) applies—the incidental product, and the other facilities referred to in that subparagraph, when considered as a whole;

                            is not a financial product purpose;

the incidental product is not a financial product because of this Subdivision (however, it may still be a financial product because of Subdivision C).

             (2)  In this section:

financial product purpose means a purpose of:

                     (a)  making a financial investment; or

                     (b)  managing financial risk; or

                     (c)  making non‑cash payments.

Subdivision CSpecific inclusions

764A  Specific things that are financial products (subject to Subdivision D)

             (1)  Subject to Subdivision D, the following are financial products for the purposes of this Chapter:

                     (a)  a security;

                     (b)  any of the following in relation to a registered scheme:

                              (i)  an interest in the scheme;

                             (ii)  a legal or equitable right or interest in an interest covered by subparagraph (i);

                            (iii)  an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

                   (ba)  any of the following in relation to a managed investment scheme that is not a registered scheme, other than a scheme (whether or not operated in this jurisdiction) in relation to which none of paragraphs 601ED(1)(a), (b) and (c) are satisfied:

                              (i)  an interest in the scheme;

                             (ii)  a legal or equitable right or interest in an interest covered by subparagraph (i);

                            (iii)  an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

                     (c)  a derivative;

                     (d)  a contract of insurance that is not a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, but not including such a contract of insurance:

                              (i)  to the extent that it provides for a benefit to be provided by an association of employees that is registered as an organisation, or recognised, under the Fair Work (Registered Organisations) Act 2009 for a member of the association or a dependant of a member; or

                             (ii)  to the extent that it provides for benefits, pensions or payments described in paragraph 11(3)(c) of the Life Insurance Act 1995; or

                            (iii)  to the extent that it provides for the provision of a funeral benefit; or

                            (iv)  issued by an employer to an employee of the employer;

                     (e)  a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is a contract of insurance, but not including such a policy:

                              (i)  to the extent that it provides for a benefit to be provided by an association of employees that is registered as an organisation, or recognised, under the Fair Work (Registered Organisations) Act 2009 for a member of the association or a dependant of a member; or

                             (ii)  to the extent that it provides for benefits, pensions or payments described in paragraph 11(3)(c) of the Life Insurance Act 1995; or

                            (iii)  to the extent that it provides for the provision of a funeral benefit; or

                            (iv)  issued by an employer to an employee of the employer;

                      (f)  a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is not a contract of insurance, but not including such a policy:

                              (i)  to the extent that it provides for a benefit to be provided by an association of employees that is registered as an organisation, or recognised, under the Fair Work (Registered Organisations) Act 2009 for a member of the association or a dependant of a member; or

                             (ii)  to the extent that it provides for benefits, pensions or payments described in paragraph 11(3)(c) of the Life Insurance Act 1995; or

                            (iii)  to the extent that it provides for the provision of a funeral benefit; or

                            (iv)  issued by an employer to an employee of the employer;

                     (g)  a superannuation interest within the meaning of the Superannuation Industry (Supervision) Act 1993;

                     (h)  an RSA (retirement savings account) within the meaning of the Retirement Savings Accounts Act 1997;

                   (ha)  an FHSA (short for first home saver account) within the meaning of the First Home Saver Accounts Act 2008;

                      (i)  any deposit‑taking facility made available by an ADI (within the meaning of the Banking Act 1959) in the course of its banking business (within the meaning of that Act), other than an RSA (RSAs are covered by paragraph (h));

                      (j)  a debenture, stock or bond issued or proposed to be issued by a government;

                     (k)  a foreign exchange contract that is not:

                              (i)  a derivative (derivatives are covered by paragraph (c)); or

                             (ii)  a contract to exchange one currency (whether Australian or not) for another that is to be settled immediately;

                  (kaa)  a carbon unit;

                   (ka)  an Australian carbon credit unit;

                   (kb)  an eligible international emissions unit;

                      (l)  a margin lending facility;

                    (m)  anything declared by the regulations to be a financial product for the purposes of this section.

Note:          Even though something is expressly excluded from one of these paragraphs, it may still be a financial product (subject to Subdivision D) either because:

(a)    it is covered by another of these paragraphs; or

(b)    it is covered by the general definition in Subdivision B.

          (1A)  If a single contract of insurance provides 2 or more kinds of cover, paragraph (1)(d) applies separately in relation to that contract, in relation to each of those kinds of cover, as if the contract only provided that kind of cover.

Note:          Because of this subsection (including as it is affected by subsection (1B)), a single contract of insurance may constitute 2 or more separate general insurance products.

          (1B)  If a contract of insurance provides a kind of cover in relation to 2 or more kinds of asset, subsection (1A) applies to the contract, in relation to each of those kinds of asset, as if the cover provided by the contract in relation to that kind of asset constituted a separate kind of cover.

             (2)  For the purpose of paragraphs (1)(d), (e) and (f) and subsections (1A) and (1B), contract of insurance includes:

                     (a)  a contract that would ordinarily be regarded as a contract of insurance even if some of its provisions are not by way of insurance; and

                     (b)  a contract that includes provisions of insurance in so far as those provisions are concerned, even if the contract would not ordinarily be regarded as a contract of insurance.

Subdivision DSpecific exclusions

765A  Specific things that are not financial products

             (1)  Despite anything in Subdivision B or Subdivision C, the following are not financial products for the purposes of this Chapter:

                     (a)  an excluded security;

                     (b)  an undertaking by a body corporate to pay money to a related body corporate;

                     (c)  health insurance provided as part of a health insurance business (as defined in Division 121 of the Private Health Insurance Act 2007);

                    (ca)  insurance provided as part of a health‑related business (as defined by section 131‑15 of that Act) that is conducted through a health benefits fund (as defined by section 131‑10 of that Act);

                     (d)  insurance provided by the Commonwealth;

                     (e)  State insurance or Northern Territory insurance, including insurance entered into by:

                              (i)  a State or the Northern Territory; and

                             (ii)  some other insurer;

                            as joint insurers;

                      (f)  insurance entered into by the Export Finance and Insurance Corporation, other than a short‑term insurance contract within the meaning of the Export Finance and Insurance Corporation Act 1991;

                     (g)  reinsurance;

                     (h)  any of the following:

                              (i)  a credit facility within the meaning of the regulations (other than a margin lending facility);

                             (ii)  a facility for making non‑cash payments (see section 763D), if payments made using the facility will all be debited to a credit facility covered by subparagraph (i);

                      (i)  a facility:

                              (i)  that is an approved RTGS system within the meaning of the Payment Systems and Netting Act 1998; or

                             (ii)  for the transmission and reconciliation of non‑cash payments (see section 763D), and the establishment of final positions, for settlement through an approved RTGS system within the meaning of the Payment Systems and Netting Act 1998;

                      (j)  a facility that is a designated payment system for the purposes of the Payment Systems (Regulation) Act 1998;

                     (k)  a facility for the exchange and settlement of non‑cash payments (see section 763D) between providers of non‑cash payment facilities;

                      (l)  a facility that is:

                              (i)  a financial market; or

                             (ii)  a clearing and settlement facility; or

                            (iii)  a payment system operated as part of a clearing and settlement facility; or

                            (iv)  a derivative trade repository;

                    (m)  a contract to exchange one currency (whether Australian or not) for another that is to be settled immediately;

                     (n)  so much of an arrangement as is not a derivative because of paragraph 761D(3)(a);

                     (p)  an arrangement that is not a derivative because of subsection 761D(4);

                     (q)  an interest in a superannuation fund of a kind prescribed by regulations made for the purposes of this paragraph;

                      (r)  any of the following:

                              (i)  an interest in something that is not a managed investment scheme because of paragraph (c), (e), (f), (k), (l) or (m) of the definition of managed investment scheme in section 9;

                             (ii)  a legal or equitable right or interest in an interest covered by subparagraph (i);

                            (iii)  an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

                      (s)  any of the following in relation to a managed investment scheme (whether or not operated in this jurisdiction) in relation to which none of paragraphs 601ED(1)(a), (b) and (c) are satisfied and that is not a registered scheme:

                              (i)  an interest in the scheme;

                             (ii)  a legal or equitable right or interest in an interest covered by subparagraph (i);

                            (iii)  an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

                      (t)  a deposit‑taking facility that is, or is used for, State banking;

                     (u)  a benefit provided by an association of employees that is registered as an organisation, or recognised, under the Fair Work (Registered Organisations) Act 2009 for a member of the association or a dependant of a member;

                     (v)  either of the following:

                              (i)  a contract of insurance; or

                             (ii)  a life policy or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is not a contract of insurance;

                            issued by an employer to an employee of the employer;

                    (w)  a funeral benefit;

                     (x)  physical equipment or physical infrastructure by which something else that is a financial product is provided;

                     (y)  a facility, interest or other thing declared by regulations made for the purposes of this subsection not to be a financial product;

                     (z)  a facility, interest or other thing declared by ASIC under subsection (2) not to be a financial product.

             (2)  ASIC may declare that a specified facility, interest or other thing is not a financial product for the purposes of this Chapter. The declaration must be in writing and ASIC must publish notice of it in the Gazette.


 

Division 4When does a person provide a financial service?

766A  When does a person provide a financial service?

General

             (1)  For the purposes of this Chapter, subject to paragraph (2)(b), a person provides a financial service if they:

                     (a)  provide financial product advice (see section 766B); or

                     (b)  deal in a financial product (see section 766C); or

                     (c)  make a market for a financial product (see section 766D); or

                     (d)  operate a registered scheme; or

                     (e)  provide a custodial or depository service (see section 766E); or

                      (f)  engage in conduct of a kind prescribed by regulations made for the purposes of this paragraph.

Provision of traditional trustee company services by trustee company

          (1A)  Subject to paragraph (2)(b), the provision by a trustee company of a traditional trustee company service constitutes the provision, by the company, of a financial service.

Note:          Trustee companies may also provide other kinds of financial service mentioned in subsection (1).

          (1B)  The regulations may, in relation to a traditional trustee company service of a particular class, prescribe the person or persons to whom a service of that class is taken to be provided. This subsection does not limit (and is not limited by) subsection (2).

Note:          A traditional trustee company service is provided to a person as a retail client unless regulations provide otherwise (see subsection 761G(6A)).

Regulations may deal with various matters

             (2)  The regulations may set out:

                     (a)  the circumstances in which persons facilitating the provision of a financial service (for example, by publishing information) are taken also to provide that service; or

                     (b)  the circumstances in which persons are taken to provide, or are taken not to provide, a financial service.

Exception for work ordinarily done by clerks or cashiers

             (3)  To avoid doubt, a person’s conduct is not the provision of a financial service if it is done in the course of work of a kind ordinarily done by clerks or cashiers.

Meaning of operating a registered scheme

             (4)  For the purposes of this section, a person is not operating a registered scheme merely because:

                     (a)  they are acting as an agent or employee of another person; or

                     (b)  they are taking steps to wind up the scheme.

766B  Meaning of financial product advice

             (1)  For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:

                     (a)  is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or

                     (b)  could reasonably be regarded as being intended to have such an influence.

          (1A)  However, subject to subsection (1B), the provision or giving of an exempt document or statement does not constitute the provision of financial product advice.

          (1B)  Subsection (1A) does not apply for the purpose of determining whether a recommendation or statement of opinion made by an outside expert, or a report of such a recommendation or statement of opinion, that is included in an exempt document or statement is financial product advice provided by the outside expert.

             (2)  There are 2 types of financial product advice: personal advice and general advice.

             (3)  For the purposes of this Chapter, personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where:

                     (a)  the provider of the advice has considered one or more of the person’s objectives, financial situation and needs (otherwise than for the purposes of compliance with the Anti‑Money Laundering and Counter‑Terrorism Financing Act 2006 or with regulations, or AML/CTF Rules, under that Act); or

                     (b)  a reasonable person might expect the provider to have considered one or more of those matters.

             (4)  For the purposes of this Chapter, general advice is financial product advice that is not personal advice.

             (5)  The following advice is not financial product advice:

                     (a)  advice given by a lawyer in his or her professional capacity, about matters of law, legal interpretation or the application of the law to any facts;

                     (b)  except as may be prescribed by the regulations—any other advice given by a lawyer in the ordinary course of activities as a lawyer, that is reasonably regarded as a necessary part of those activities;

                     (c)  except as may be prescribed by the regulations—advice given by a registered tax agent or BAS agent (within the meaning of the Tax Agent Services Act 2009), that is given in the ordinary course of activities as such an agent and that is reasonably regarded as a necessary part of those activities.

             (6)  If:

                     (a)  in response to a request made by a person (the inquirer) to another person (the provider), the provider tells the inquirer the cost, or an estimate of the likely cost, of a financial product (for example, an insurance product); and

                     (b)  that cost or estimate is worked out, or said by the provider to be worked out, by reference to a valuation of an item (for example, a house or car to which an insurance policy would relate), being a valuation that the provider suggests or recommends to the inquirer;

the acts of telling the inquirer the cost, or estimated cost, and suggesting or recommending the valuation, do not, of themselves, constitute the making of a recommendation (or the provision of any other kind of financial product advice) relating to the financial product.

             (7)  If:

                     (a)  in response to a request made by a person (the inquirer) to another person (the provider), the provider tells the inquirer information about:

                              (i)  the cost of a financial product; or

                             (ii)  the rate of return on a financial product; or

                            (iii)  any other matter identified in regulations made for the purposes of this subparagraph; and

                     (b)  the request could also have been complied with (but was not also so complied with) by telling the inquirer equivalent information about one or more other financial products;

the act of telling the inquirer the information does not, of itself, constitute the making of a recommendation (or the provision of any other kind of financial product advice) in relation to the financial product referred to in paragraph (a).

             (8)  Subsections (5), (6) and (7) are not intended to affect, in any way, the determination of whether situations not covered by those subsections do, or do not, constitute the provision of financial product advice.

             (9)  In this section:

exempt document or statement means:

                     (a)  a document prepared, or a statement given, in accordance with requirements of this Chapter, other than:

                              (i)  a Statement of Advice; or

                             (ii)  a document or statement of a kind prescribed by regulations made for the purposes of this subparagraph; or

                     (b)  any other document or statement of a kind prescribed by regulations made for the purposes of this paragraph.

outside expert, in relation to an exempt document or statement, means an expert who is not:

                     (a)  the person by whom, or on whose behalf, the exempt document or statement was prepared; or

                     (b)  an employee or director of that person.

766C  Meaning of dealing

             (1)  For the purposes of this Chapter, the following conduct (whether engaged in as principal or agent) constitutes dealing in a financial product:

                     (a)  applying for or acquiring a financial product;

                     (b)  issuing a financial product;

                     (c)  in relation to securities or managed investment interests—underwriting the securities or interests;

                     (d)  varying a financial product;

                     (e)  disposing of a financial product.

             (2)  Arranging for a person to engage in conduct referred to in subsection (1) is also dealing in a financial product, unless the actions concerned amount to providing financial product advice.

             (3)  A person is taken not to deal in a financial product if the person deals in the product on their own behalf (whether directly or through an agent or other representative), unless:

                     (a)  the person is an issuer of financial products; and

                     (b)  the dealing is in relation to one or more of those products.

          (3A)  For the purposes of subsection (3), a person (the agent) who deals in a product as an agent or representative of another person (the principal) is not taken to deal in the product on the agent’s own behalf, even if that dealing, when considered as a dealing by the principal, is a dealing by the principal on the principal’s own behalf.

             (4)  Also, a transaction entered into by a person who is, or who encompasses or constitutes in whole or in part, any of the following entities:

                     (a)  a government or local government authority;

                     (b)  a public authority or instrumentality or agency of the Crown;

                     (c)  a body corporate or an unincorporated body;

is taken not to be dealing in a financial product by that person if the transaction relates only to:

                     (d)  securities of that entity; or

                     (e)  if the entity is a government—debentures, stocks or bonds issued or proposed to be issued by that government.

             (5)  Paragraph (4)(c) does not apply if the entity:

                     (a)  carries on a business of investment in securities, interests in land or other investments; and

                     (b)  in the course of carrying on that business, invests funds subscribed, whether directly or indirectly, after an offer or invitation to the public (within the meaning of section 82) made on terms that the funds subscribed would be invested.

             (6)  A transaction entered into by a sub‑underwriter of an issue of securities that relates only to the sub‑underwriting is taken not to be dealing in a financial product.

             (7)  The regulations may prescribe conduct that is taken to be, or not to be, dealing in a financial product. Regulations made for the purposes of this subsection have effect despite anything else in this section.

766D  Meaning of makes a market for a financial product

             (1)  For the purposes of this Chapter, a person makes a market for a financial product if:

                     (a)  either through a facility, at a place or otherwise, the person regularly states the prices at which they propose to acquire or dispose of financial products on their own behalf; and

                     (b)  other persons have a reasonable expectation that they will be able to regularly effect transactions at the stated prices; and

                     (c)  the actions of the person do not, or would not if they happened through a facility or at a place, constitute operating a financial market because of the effect of paragraph 767A(2)(a).

             (2)  Paragraph (1)(a) does not apply to a person stating prices at which they propose to acquire or dispose of financial products if:

                     (a)  the person is the issuer of the products; and

                     (b)  the products are superannuation products, managed investment products or financial products referred to in paragraph 764A(1)(ba) (which relates to unregistered managed investment schemes).

766E  Meaning of provide a custodial or depository service

             (1)  For the purposes of this Chapter, a person (the provider) provides a custodial or depository service to another person (the client) if, under an arrangement between the provider and the client, or between the provider and another person with whom the client has an arrangement, (whether or not there are also other parties to any such arrangement), a financial product, or a beneficial interest in a financial product, is held by the provider in trust for, or on behalf of, the client or another person nominated by the client.

             (2)  The following provisions apply in relation to a custodial or depository service:

                     (a)  subject to paragraph (b), for the purposes of this Chapter, the time at which a custodial or depository service is provided is the time when the financial product or beneficial interest concerned is first held by the provider as mentioned in subsection (1);

                     (b)  for the purposes of Part 7.6, and of any other provisions of this Act prescribed by regulations made for the purposes of this paragraph, the continued holding of the financial product or beneficial interest concerned by the provider as mentioned in subsection (1) also constitutes the provision of a custodial or depository service.

Note:          Because of paragraph (a) (subject to regulations made for the purposes of paragraph (b)), the requirements of Part 7.7 relating to financial services disclosure need only be complied with before the product or interest is first held by the provider. However, because of paragraph (b), the provider will be subject to the licensing and related requirements of Part 7.6 for so long as they continue to hold the product or interest.

             (3)  However, the following conduct does not constitute providing a custodial or depository service:

                     (a)  the operation of a clearing and settlement facility;

                     (b)  the operation of a registered scheme, or the holding of the assets of a registered scheme;

                     (c)  the operation of a regulated superannuation fund, an approved deposit fund or a pooled superannuation trust (within the meaning of the Superannuation Industry (Supervision) Act 1993) by the trustees of that fund or trust;

                    (ca)  the operation of a statutory fund by a life company (within the meaning of the Life Insurance Act 1995);

                   (cb)  the operation of an FHSA trust (within the meaning of the First Home Saver Accounts Act 2008) by an FHSA provider (within the meaning of that Act);

                     (d)  the provision of services to a related body corporate;

                     (e)  any other conduct of a kind prescribed by regulations made for the purposes of this paragraph.


 

Division 5What is a financial market?

767A  What is a financial market?

             (1)  For the purposes of this Chapter, a financial market is a facility through which:

                     (a)  offers to acquire or dispose of financial products are regularly made or accepted; or

                     (b)  offers or invitations are regularly made to acquire or dispose of financial products that are intended to result or may reasonably be expected to result, directly or indirectly, in:

                              (i)  the making of offers to acquire or dispose of financial products; or

                             (ii)  the acceptance of such offers.

             (2)  However, the following conduct does not constitute operating a financial market for the purposes of this Chapter:

                     (a)  a person making or accepting offers or invitations to acquire or dispose of financial products on the person’s own behalf, or on behalf of one party to the transaction only, unless the regulations specify circumstances in which such conduct does constitute operating a financial market and the person’s conduct occurs in circumstances so specified;

                     (b)  conducting treasury operations between related bodies corporate;

                     (c)  a person, being the holder of a licence under an Australian law relating to the licensing of auctioneers, conducting an auction of forfeited shares;

                     (d)  any other conduct of a kind prescribed by regulations made for the purposes of this paragraph.


 

Division 6What is a clearing and settlement facility?

768A  What is a clearing and settlement facility?

             (1)  For the purposes of this Chapter, a clearing and settlement facility is a facility that provides a regular mechanism for the parties to transactions relating to financial products to meet obligations to each other that:

                     (a)  arise from entering into the transactions; and

                     (b)  are of a kind prescribed by regulations made for the purposes of this paragraph.

Example 1: A facility that provides a regular mechanism for stockbrokers to pay for the shares they buy and to be paid for the shares they sell, and for records of those transactions to be processed to facilitate registration of the new ownership of the shares, would be a clearing and settlement facility (assuming that the relevant obligations are of a kind prescribed by regulations made for the purposes of this section).

Example 2: A facility that provides a regular mechanism for registering trade in derivatives on a futures market and that enables the calculation of payments that market participants owe by way of margins would also be a clearing and settlement facility (assuming that the relevant obligations are of a kind prescribed by regulations made for the purposes of this section).

             (2)  However, the following conduct does not constitute operating a clearing and settlement facility for the purposes of this Chapter:

                     (a)  an ADI (within the meaning of the Banking Act 1959) acting in the ordinary course of its banking business;

                     (b)  a person acting on their own behalf, or on behalf of one party to a transaction only;

                     (c)  a person who provides financial services to another person dealing with the other person’s accounts in the ordinary course of the first person’s business activities;

                     (d)  the actions of a participant in a clearing and settlement facility who has taken on the delivery or payment obligations, in relation to a particular financial product, of another person who is a party to a transaction relating to a financial product;

                     (e)  conducting treasury operations between related bodies corporate;

                     (h)  operating a facility for the exchange and settlement of non‑cash payments (see section 763D) between providers of non‑cash payment facilities;

                      (i)  any other conduct of a kind prescribed by regulations made for the purposes of this paragraph.


 

Division 7General provisions relating to civil and criminal liability

769A  Part 2.5 of Criminal Code does not apply

                   Despite section 1308A, Part 2.5 of the Criminal Code does not apply to any offences based on the provisions of this Chapter.

Note:          For the purposes of offences based on provisions of this Chapter, corporate criminal responsibility is dealt with by section 769B, rather than by Part 2.5 of the Criminal Code.

769B  People are generally responsible for the conduct of their agents, employees etc.

             (1)  Subject to subsections (7) and (8), conduct engaged in on behalf of a body corporate:

                     (a)  by a director, employee or agent of the body, within the scope of the person’s actual or apparent authority; or

                     (b)  by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent;

is taken, for the purposes of a provision of this Chapter, or a proceeding under this Chapter, to have been engaged in also by the body corporate.

             (2)  Conduct engaged in by a person (for example, the giving of money or property) in relation to:

                     (a)  a director, employee or agent of a body corporate, acting within the scope of their actual or apparent authority; or

                     (b)  any other person acting at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of a body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent;

is taken, for the purposes of a provision of this Chapter, or a proceeding under this Chapter, to have been engaged in also in relation to the body corporate.

             (3)  If, in a proceeding under this Chapter in respect of conduct engaged in by a body corporate, it is necessary to establish the state of mind of the body, it is sufficient to show that a director, employee or agent of the body, being a director, employee or agent by whom the conduct was engaged in within the scope of the person’s actual or apparent authority, had that state of mind. For this purpose, a person acting as mentioned in paragraph (1)(b) is taken to be an agent of the body corporate concerned.

             (4)  Subject to subsections (7) and (8), conduct engaged in on behalf of a person other than a body corporate:

                     (a)  by an employee or agent of the person, acting within the scope of the actual or apparent authority of the employee or agent; or

                     (b)  by any other person acting at the direction or with the consent or agreement (whether express or implied) of an employee or agent of the first‑mentioned person, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent;

is taken, for the purposes of a provision of this Chapter, or of a proceeding under this Chapter, to have been engaged in also by the first‑mentioned person.

             (5)  Conduct engaged in by a person (for example, the giving of money or property) in relation to:

                     (a)  an employee or agent of a person (the principal) other than a body corporate, acting within the scope of their actual or apparent authority; or

                     (b)  any other person acting at the direction or with the consent or agreement (whether express or implied) of an employee or agent of a person (the principal) other than a body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent;

is taken, for the purposes of a provision of this Chapter, or of a proceeding under this Chapter, to have been engaged in also in relation to the principal.

             (6)  If, in a proceeding under this Chapter in respect of conduct engaged in by a person other than a body corporate, it is necessary to establish the state of mind of the person, it is sufficient to show that an employee or agent of the person, being an employee or agent by whom the conduct was engaged in within the scope of the employee’s or agent’s actual or apparent authority, had that state of mind. For this purpose, a person acting as mentioned in paragraph (4)(b) is taken to be an agent of the person first referred to in subsection (4).

             (7)  Nothing in this section, or in any other law (including the common law), has the effect that, for the purposes of a provision of Part 7.7 or 7.7A, or a proceeding under this Chapter that relates to a provision of Part 7.7 or 7.7A, a financial service provided by person in their capacity as an authorised representative of a financial services licensee is taken, or taken also, to have been provided by that financial services licensee.

             (8)  Nothing in this section, or in any other law (including the common law), has the effect that, for the purposes of a provision of Division 2 of Part 7.9, or a proceeding under this Chapter that relates to a provision of Division 2 of Part 7.9, conduct engaged in by a person in their capacity as a regulated person (within the meaning of section 1011B) is taken, or taken also, to have been engaged in by another such regulated person.

          (8A)  Nothing in this section, other than subsections (7) and (8), excludes or limits the operation of subsection 601FB(2) in relation to the provisions of this Chapter or to proceedings under this Chapter.

             (9)  The regulations may provide that this section, or a particular provision of this section, has effect for specified purposes subject to modifications specified in the regulations. The regulations have effect accordingly.

           (10)  In this section:

                     (a)  a reference to a proceeding under this Chapter includes a reference to:

                              (i)  a prosecution for an offence based on a provision of this Chapter; and

                             (ii)  a proceeding under a provision of Part 9.4B that relates to a provision of this Chapter; and

                            (iii)  any other proceeding under any other provision of Chapter 9 that relates to a provision of this Chapter; and

                     (b)  a reference to conduct is a reference to an act, an omission to perform an act, or a state of affairs; and

                     (c)  a reference to the state of mind of a person includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person’s reasons for the person’s intention, opinion, belief or purpose.

Note:          For the meaning of offence based on a provision, see the definition in section 9.

769C  Representations about future matters taken to be misleading if made without reasonable grounds

             (1)  For the purposes of this Chapter, or of a proceeding under this Chapter, if:

                     (a)  a person makes a representation with respect to any future matter (including the doing of, or refusing to do, any act); and

                     (b)  the person does not have reasonable grounds for making the representation;

the representation is taken to be misleading.

             (2)  Subsection (1) does not limit the circumstances in which a representation may be misleading.

             (3)  In this section:

proceeding under this Chapter has the same meaning as it has in section 769B.


 

Part 7.2Licensing of financial markets

Division 1Preliminary

790A  Definition

                   In this Part:

clearing and settlement arrangements, for transactions effected through a financial market, means arrangements for the clearing and settlement of those transactions. The arrangements may be part of the market’s operating rules or be separate from those operating rules.


 

Division 2Requirement to be licensed

791A  Need for a licence

             (1)  A person must only operate, or hold out that the person operates, a financial market in this jurisdiction if:

                     (a)  the person has an Australian market licence that authorises the person to operate the market in this jurisdiction; or

                     (b)  the market is exempt from the operation of this Part.

Note 1:       A market licensee may also provide financial services incidental to the operation of the market: see paragraph 911A(2)(d).

Note 2:       Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  For the purposes of an offence based on subsection (1), strict liability applies to paragraph (1)(b).

Note:          For strict liability, see section 6.1 of the Criminal Code.

791B  Other prohibitions on holding out

                   A person must not hold out:

                     (a)  that the person has an Australian market licence; or

                     (b)  that the operation of a financial market by the person in this jurisdiction is authorised by an Australian market licence; or

                     (c)  that a financial market is exempt from the operation of this Part; or

                     (d)  that the person is a participant in a licensed market;

if that is not the case.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

791C  Exemptions

             (1)  The Minister may, by publishing a notice in the Gazette, exempt from the operation of this Part a particular financial market or type of financial market.

             (2)  The Minister may, at any time, by publishing a notice in the Gazette:

                     (a)  impose conditions, or additional conditions, on an exemption; or

                     (b)  vary or revoke the conditions on an exemption; or

                     (c)  revoke an exemption.

             (3)  However, the Minister may only take action under subsection (2) after:

                     (a)  giving notice, and an opportunity to make submissions on the proposed action, to the operator of each financial market known by the Minister to be covered by the exemption; and

                     (b)  if the exemption covers a type of financial market—causing a notice to be published in a newspaper or newspapers circulating generally in each State and internal Territory allowing a reasonable time within which the operator of each financial market covered by the exemption may make submissions on the proposed action.

This subsection does not apply to the Minister imposing conditions when an exemption is made.

791D  When a market is taken to be operated in this jurisdiction

             (1)  For the purposes of this Chapter, a financial market is taken to be operated in this jurisdiction if it is operated by a body corporate that is registered under Chapter 2A.

             (2)  Subsection (1) does not limit the circumstances in which a financial market is operated in this jurisdiction for the purposes of this Chapter.


 

Division 3Regulation of market licensees

Subdivision ALicensee’s obligations

792A  General obligations

                   A market licensee must:

                     (a)  to the extent that it is reasonably practicable to do so, do all things necessary to ensure that the market is a fair, orderly and transparent market; and

                     (b)  comply with the conditions on the licence; and

                     (c)  have adequate arrangements (which may involve the appointment of an independent person or related entity) for operating the market, including arrangements for:

                              (i)  handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the market operates in the way mentioned in paragraph (a); and

                             (ii)  monitoring and enforcing compliance with the market’s operating rules; and

                     (d)  have sufficient resources (including financial, technological and human resources) to operate the market properly; and

                     (e)  if section 881A requires there to be compensation arrangements in relation to the market that are approved in accordance with Division 3 of Part 7.5—ensure that there are such approved compensation arrangements in relation to the market; and

                      (f)  if the licensee is a foreign body corporate—be registered under Division 2 of Part 5B.2; and

                     (g)  if the licence was granted under subsection 795B(2) (overseas markets)—both:

                              (i)  remain authorised to operate a financial market in the foreign country in which the licensee’s principal place of business is located; and

                             (ii)  get the Minister’s approval under section 792H before that principal place of business becomes located in any other foreign country; and

                     (h)  if the licensee, or a holding company of the licensee, is a widely held market body (within the meaning of Division 1 of Part 7.4)—take all reasonable steps to ensure that an unacceptable control situation (within the meaning of that Division) does not exist in relation to the body; and

                      (i)  take all reasonable steps to ensure that no disqualified individual becomes, or remains, involved in the licensee (see Division 2 of Part 7.4).

792B  Obligation to notify ASIC of certain matters

             (1)  A market licensee must give written notice to ASIC, as soon as practicable, if it becomes aware that it may no longer be able to meet, or has breached, an obligation under section 792A. If ASIC considers it appropriate to do so, ASIC may give the Minister advice about the matter.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  A market licensee must give written notice to ASIC, as soon as practicable, as required by the following paragraphs:

                     (a)  if the licensee provides a new class of financial service incidental to the operation of the market, the licensee must give notice that includes details of the new class;

                     (b)  if the licensee takes any kind of disciplinary action against a participant in the market, the licensee must give notice that includes:

                              (i)  the participant’s name; and

                             (ii)  the reason for and nature of the action taken;

                     (c)  if the licensee has reason to suspect that a person has committed, is committing, or is about to commit a significant contravention of the market’s operating rules or this Act, the licensee must give notice that includes:

                              (i)  the person’s name; and

                             (ii)  details of the contravention or impending contravention; and

                            (iii)  the licensee’s reasons for that belief.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (3)  If a market licensee becomes aware of:

                     (a)  a matter that the licensee considers has adversely affected, is adversely affecting, or may adversely affect the ability of a participant in the market, who is a financial services licensee, to meet the participant’s obligations as a financial services licensee; or

                     (b)  a matter, concerning a participant in the market who is a financial services licensee, that is of a kind prescribed by regulations made for the purposes of this paragraph;

the market licensee must give a written report to ASIC on the matter and send a copy of it to the participant.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  A market licensee whose licence was granted under subsection 795B(2) (overseas markets) must, as soon as practicable, give written notice to ASIC if:

                     (a)  the licensee ceases to be authorised to operate a financial market in the foreign country in which the licensee’s principal place of business is located; or

                     (b)  there is a significant change to the regulatory regime applying in relation to the market in the foreign country in which the licensee’s principal place of business is located.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (5)  As soon as practicable after:

                     (a)  a person becomes or ceases to be a director, secretary or senior manager of a market licensee or of a holding company of a market licensee (including when a person changes from one of those positions to another); or

                     (b)  a market licensee becomes aware that a person has come to have, or has ceased to have, more than 15% of the voting power in the licensee or in a holding company of the licensee;

the licensee must give written notice of this to ASIC. The notice must include such other information about the matter as is prescribed by regulations made for the purposes of this subsection.

Note 1:       To the extent that the licensee is required to give the notice and information under any other provision of this Act, the licensee may comply with this subsection by doing so. It need not provide the same information twice.

Note 2:       Failure to comply with this subsection is an offence (see subsection 1311(1)).

792C  Giving ASIC information about a listed disclosing entity

             (1)  If a market licensee makes information about a listed disclosing entity available to participants in the market (whether or not the licensee also makes the information available to anyone else), the licensee must give ASIC the same information as soon as practicable.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  However, the licensee is not required to give ASIC any information of a kind that is excluded by the regulations.

             (3)  ASIC may require the information to be given in a particular form.

792D  Obligation to assist ASIC

             (1)  A market licensee must give such assistance to ASIC, or a person authorised by ASIC, as ASIC or the authorised person reasonably requests in relation to the performance of ASIC’s functions.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  Such assistance may include showing ASIC the licensee’s books or giving ASIC other information.

792E  Obligation to give ASIC access to market facilities

                   A market licensee must give a person authorised by ASIC such reasonable access to the market’s facilities as the person requests for any of the purposes of this Chapter.

Note:          Failure to comply with this section is an offence (see subsection 1311(1)).

792F  Annual report

             (1)  A market licensee must, within 3 months after the end of its financial year, give ASIC an annual report on the extent to which the licensee complied with its obligations as a market licensee under this Chapter.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  The licensee must ensure that the annual report is accompanied by any information and statements prescribed by regulations made for the purposes of this subsection.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (3)  The licensee must also ensure that the annual report is accompanied by any audit report that the Minister requires under subsection (4).

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  The Minister may, by giving written notice to a market licensee, require the licensee to obtain an audit report on the annual report and on any information or statements accompanying it. The Minister must nominate to prepare the audit report:

                     (a)  ASIC; or

                     (b)  a specified person or body that is suitably qualified.

             (5)  ASIC must give the annual report and accompanying material to the Minister.

792G  Obligations to notify people about clearing and settlement arrangements in certain circumstances

             (1)  If, in relation to a category of transactions, being all transactions or a class of transactions effected through a licensed market, the market licensee:

                     (a)  does not have any clearing and settlement arrangements for transactions in that category; or

                     (b)  has clearing and settlement arrangements for transactions in that category, but they are not arrangements with the operator of a clearing and settlement facility for the clearing and settlement of such transactions through the facility;

the market licensee must, before a person becomes a participant in the market, give the person written advice:

                     (c)  if paragraph (a) applies—that the licensee does not have any clearing and settlement arrangements for transactions in that category, and that it is the responsibility of the parties to such transactions to make their own arrangements for the clearing and settlement of such transactions; or

                     (d)  if paragraph (b) applies—setting out particulars of the clearing and settlement arrangements for transactions in that category.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  Within a reasonable time before a market licensee ceases, in relation to a category of transactions, being all transactions or a class of transactions effected through a licensed market, to have clearing and settlement arrangements (the terminating arrangements) with the operator of a particular clearing and settlement facility for the clearing and settlement of such transactions through the facility, the market licensee must give the participants in the market written advice:

                     (a)  if the terminating arrangements are not being replaced by any other clearing and settlement arrangements—that the licensee will no longer have clearing and settlement arrangements for that category of transactions, and that it will be the responsibility of the parties to such transactions to make their own arrangements for the clearing and settlement of such transactions; or

                     (b)  if the terminating arrangements are being replaced by new clearing and settlement arrangements—setting out particulars of the new arrangements.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

792H  Change of country by foreign licensee

             (1)  In the case of a licence granted under subsection 795B(2), the Minister may approve the location of the licensee’s principal place of business in a new country only if:

                     (a)  the new country is not Australia; and

                     (b)  the operation of the market in that country will be subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of investor protection and market integrity they achieve, to the requirements and supervision to which financial markets are subject under this Act in relation to those matters.

             (2)  If, in relation to a licence granted under subsection 795B(2), the licensee’s principal place of business changes to become a place in Australia:

                     (a)  the licence ceases to be in force from the time of the change; and

                     (b)  if the licensee wishes the market to continue to be licensed, the licensee may apply for the grant of a new licence under subsection 795B(1); and

                     (c)  the application must be assessed in accordance with Subdivision A of Division 4, subject to such modifications (if any) of that Subdivision as are set out in regulations made for the purposes of this paragraph.

             (3)  An application referred to in paragraph (2)(b) may be made in advance of the change of location of the principal place of business, and a decision on the application may be made before that time. However, any licence granted pursuant to the application does not come into force until the change occurs.

792I  Making information about compensation arrangements publicly available

                   A market licensee must take reasonable steps to ensure that information about the compensation arrangements that are in place under Part 7.5 is available to the public free of charge.

Note:          Failure to comply with this section is an offence (see subsection 1311(1)).

Subdivision BThe market’s operating rules and procedures

793A  Content of the operating rules and procedures

             (1)  The operating rules of a licensed market must deal with the matters prescribed by regulations made for the purposes of this subsection.

             (2)  The regulations may also prescribe matters in respect of which a licensed market must have written procedures.

             (3)  However, subsections (1) and (2) do not apply if the licensee is also authorised to operate the market in the foreign country in which its principal place of business is located and the licence was granted under subsection 795B(2) (overseas markets).

             (4)  In a subsection (3) case, ASIC may determine, by giving written notice to the licensee, matters in respect of which the licensed market must have written procedures.

793B  Legal effect of operating rules

             (1)  The operating rules (other than listing rules) of a licensed market have effect as a contract under seal:

                     (a)  between the licensee and each participant in the market; and

                     (b)  between a participant and each other participant;

under which each of those persons agrees to observe the operating rules to the extent that they apply to the person and to engage in conduct that the person is required by the operating rules to engage in.

             (2)  However, if there is an inconsistency between the operating rules of a financial market, and any of the following other rules:

                     (a)  the market integrity rules;

                     (b)  the derivative transaction rules;

                     (c)  the derivative trade repository rules;

those other rules prevail over the operating rules to the extent of the inconsistency.

Note 1:       If there is an inconsistency between the market integrity rules and the derivative transaction rules or the derivative trade repository rules, the market integrity rules prevail: see subsection 798H(3).

Note 2:       If there is an inconsistency between the derivative transaction rules and the derivative trade repository rules, the derivative transaction rules prevail: see subsection 901E(2).

             (3)  Subsection (2) does not apply in relation to a financial market the operator of which is licensed under subsection 795B(2) (overseas markets).

793C  Enforcement of operating rules

             (1)  If a person who is under an obligation to comply with or enforce any of a licensed market’s operating rules fails to meet that obligation, an application to the Court may be made by:

                     (a)  ASIC; or

                     (b)  the licensee; or

                     (c)  the operator of a clearing and settlement facility with which the licensee has clearing and settlement arrangements; or

                     (d)  a person aggrieved by the failure.

             (2)  After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

                     (a)  the person against whom the order is sought; or

                     (b)  if that person is a body corporate—the directors of the body corporate;

about compliance with, or enforcement of, the operating rules.

             (3)  For the purposes of this section, a body corporate that is, with its acquiescence, included in the official list of a licensed market, or an associate of such a body corporate, is taken to be under an obligation to comply with the operating rules of that market to the extent to which those rules purport to apply to the body corporate or associate.

             (4)  For the purposes of this section, if a disclosing entity that is an undertaking to which interests in a registered scheme relate is, with the responsible entity’s acquiescence, included in the official list of a licensed market, the responsible entity, or an associate of the responsible entity, is taken to be under an obligation to comply with the operating rules of that market to the extent to which those rules purport to apply to the responsible entity or associate.

             (5)  For the purposes of this section, if a body corporate fails to comply with or enforce provisions of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the market is taken to be a person aggrieved by the failure.

             (6)  There may be other circumstances in which a person may be aggrieved by a failure for the purposes of this section.

793D  Changing the operating rules

Licensed markets other than subsection 795B(2) markets

             (1)  As soon as practicable after a change is made to the operating rules of a licensed market, other than a market licensed under subsection 795B(2) (overseas markets), the licensee must lodge with ASIC written notice of the change. The notice must:

                     (a)  set out the text of the change; and

                     (b)  specify the date on which the change was made; and

                     (c)  contain an explanation of the purpose of the change.

             (2)  If no notice is lodged as required by subsection (1) with ASIC within 21 days after the change is made, the change ceases to have effect at the end of that period.

Subsection 795B(2) markets

             (3)  As soon as practicable after a change is made to the operating rules of a market the operation of which is licensed under subsection 795B(2) (overseas markets), the licensee must lodge with ASIC written notice of the change. The notice must:

                     (a)  set out the text of the change; and

                     (b)  specify the date on which the change was made; and

                     (c)  contain an explanation of the purpose of the change.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

793E  Disallowance of changes to operating rules

             (1)  This section does not apply in respect of an Australian market licence granted under subsection 795B(2) (overseas markets).

             (2)  As soon as practicable after receiving a notice under section 793D from a market licensee, ASIC must send a copy of the notice to the Minister.

             (3)  Within 28 days after ASIC receives the notice from the licensee, the Minister may disallow all or a specified part of the change to the operating rules.

             (4)  In deciding whether to do so, the Minister must have regard to the consistency of the change with the licensee’s obligations under this Part (including in particular the obligation mentioned in paragraph 792A(a)).

Note:          The Minister must also have regard to the matters in section 798A.

             (5)  As soon as practicable after all or a part of a change is disallowed, ASIC must give notice of the disallowance to the licensee. The change ceases to have effect, to the extent of the disallowance, when the licensee receives the notice.

Subdivision CPowers of the Minister and ASIC

794A  Minister’s power to give directions

             (1)  If the Minister considers that a market licensee is not complying with its obligations as a market licensee under this Chapter, the Minister may give the licensee a written direction to do specified things that the Minister believes will promote compliance by the licensee with those obligations.

             (2)  The licensee must comply with the direction.

             (3)  If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

             (4)  The Minister may vary or revoke a direction at any time by giving written notice to the licensee.

794B  Minister’s power to require special report

             (1)  The Minister may give a market licensee a written notice requiring the licensee to give ASIC a special report on specified matters. ASIC must give the report to the Minister.

             (2)  The notice may also require the licensee to give ASIC an audit report on the special report. The Minister must nominate to prepare the audit report:

                     (a)  ASIC; or

                     (b)  a specified person or body that is suitably qualified.

             (3)  The licensee must give the special report, and audit report (if any), to ASIC within the time required by the notice.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

794C  ASIC to assess licensee’s compliance

             (1)  ASIC may do an assessment of how well a market licensee is complying with any or all of its obligations as a market licensee under this Chapter. In doing the assessment, ASIC may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

             (2)  In respect of the obligation in paragraph 792A(c), ASIC must do such an assessment at least once a year for each market licensee.

             (3)  As soon as practicable after doing an assessment under this section, ASIC must give a written report on the assessment to the licensee and to the Minister.

             (4)  If an assessment, or part of an assessment, relates to any other person’s affairs to a material extent, ASIC may, at the person’s request or of its own motion, give the person a copy of the written report on the assessment or the relevant part of the report.

             (5)  If an assessment, or part of an assessment, relates to a serious contravention of a law of the Commonwealth or of a State or Territory, ASIC may give a copy of the written report on the assessment, or the relevant part of the report, to:

                     (a)  the Australian Federal Police; or

                     (b)  the Chief Executive Officer of the Australian Crime Commission or a member of the staff of the ACC (within the meaning of the Australian Crime Commission Act 2002); or

                     (c)  the Director of Public Prosecutions; or

                     (d)  an agency prescribed by regulations made for the purposes of this paragraph.

             (6)  Either the Minister or ASIC may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.

794D  ASIC’s power to give directions

             (1)  If ASIC is of the opinion that it is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products by:

                     (a)  giving a direction to a market licensee to suspend dealings in the financial product or class of financial products; or

                     (b)  giving some other direction in relation to those dealings;

ASIC may give written advice to the licensee of that opinion and the reasons for it.

Example:    Under paragraph (b), ASIC could give a direction to limit the kinds of dealings that are allowed in the financial product or class of financial products or to require a participant in the market to act in a specified manner in relation to dealings in the financial product or class of financial products.

             (2)  If, after receiving ASIC’s advice and reasons, the licensee does not take:

                     (a)  in the case of a proposed direction to suspend dealings in the financial products—action to prevent such dealings; or

                     (b)  in any other case—such other action as in ASIC’s view is adequate to address the situation raised in the advice;

and ASIC still considers that it is appropriate to give the direction to the licensee, ASIC may give the licensee the written direction with a statement setting out its reasons for making the direction.

             (3)  The direction has effect for the period specified in it (which may be up to 21 days). During that period, the licensee must comply with the direction and must not allow any dealings to take place contrary to it.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

             (5)  As soon as practicable after making or varying (see subsection (7)) a direction, ASIC must:

                     (a)  give a copy of the direction or variation to the operator of each clearing and settlement facility with which the market licensee has clearing and settlement arrangements for transactions effected through the market; and

                     (b)  give a written report to the Minister setting out ASIC’s reasons for making the direction or variation; and

                     (c)  give a copy of the report to the licensee.

             (6)  If, at any time after the licensee receives ASIC’s advice under subsection (1), the licensee requests in writing that ASIC refer the matter to the Minister, ASIC must do so immediately. In that event, the Minister may, if he or she considers it appropriate, require ASIC not to make, or to revoke, the direction. ASIC must immediately comply with such a requirement.

             (7)  ASIC may vary a direction by giving written notice to the licensee if ASIC is of the opinion that the variation is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products.

             (8)  ASIC may revoke a direction by giving written notice to the licensee. ASIC must also give written notice of the revocation to the operator of each clearing and settlement facility with which the market licensee has clearing and settlement arrangements for transactions effected through the market.

794E  Additional directions to clearing and settlement facilities

             (1)  If ASIC gives a direction under section 794D, it may also give a written direction to the operator of each clearing and settlement facility with which the market licensee has clearing and settlement arrangements for transactions effected through the market:

                     (a)  prohibiting the operator from acting in a manner inconsistent with the section 794D direction; and

                     (b)  requiring the operator to do all that the operator is reasonably capable of doing to give effect to the section 794D direction.

             (2)  The operator must comply with the direction given to it under this section.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (3)  If the operator fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the operator comply with the direction.


 

Division 4The Australian market licence

Subdivision AHow to get a licence

795A  How to apply for a licence

             (1)  A body corporate may apply for an Australian market licence by lodging with ASIC an application that:

                     (a)  includes the information required by regulations made for the purposes of this paragraph; and

                     (b)  is accompanied by the documents (if any) required by regulations made for the purposes of this paragraph; and

                     (c)  complies with the requirements of section 881B (relating to compensation arrangements).

Note:          For fees in respect of lodging applications, see Part 9.10.

             (2)  ASIC must, within a reasonable time, give the application to the Minister with advice about the application.

795B  When a licence may be granted

General

             (1)  The Minister may grant an applicant an Australian market licence if the Minister is satisfied that:

                     (a)  the application was made in accordance with section 795A; and

                     (b)  the applicant will comply with the obligations that will apply if the licence is granted; and

                     (c)  the applicant has adequate operating rules, and procedures, (see Subdivision B of Division 3) to ensure, as far as is reasonably practicable, that the market will operate as mentioned in paragraph 792A(a); and

                     (d)  the applicant has adequate arrangements (which may involve the appointment of an independent person or related entity) for operating the market, including arrangements for:

                              (i)  handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the market operates in the way mentioned in paragraph 792A(a); and

                             (ii)  monitoring and enforcing compliance with the market’s operating rules; and

                     (e)  the applicant has adequate clearing and settlement arrangements for transactions effected through the market, if the Minister considers that the applicant should have such arrangements; and

                      (f)  neither subsection 881D(2) nor 882A(2) (relating to compensation arrangements) requires the Minister to reject the application; and

                     (g)  no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

                     (h)  no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4).

This subsection has effect subject to subsections (3) and (4).

Note:          The Minister must also have regard to the matters in section 798A in deciding whether to grant a licence.

Alternative criteria for granting licence for overseas market

             (2)  If an applicant is authorised to operate a financial market in the foreign country in which its principal place of business is located, the Minister may grant the applicant an Australian market licence authorising the applicant to operate the same market in this jurisdiction. The Minister must be satisfied that:

                     (a)  the application was made in accordance with section 795A; and

                     (b)  the applicant will comply with the obligations that will apply if the licence is granted; and

                     (c)  the operation of the market in that country is subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of investor protection and market integrity they achieve, to the requirements and supervision to which financial markets are subject under this Act in relation to those matters; and

                     (d)  the applicant undertakes to cooperate with ASIC by sharing information and in other appropriate ways; and

                     (e)  no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

                      (f)  no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4); and

                     (g)  any other requirements that are prescribed by regulations made for the purposes of this paragraph are satisfied.

This subsection has effect subject to subsections (3) and (4).

Note:          The Minister must also have regard to the matters in section 798A in deciding whether to grant a licence.

Foreign bodies

             (3)  If the applicant is a foreign body corporate, the Minister:

                     (a)  must not grant the applicant a licence unless the applicant is registered under Division 2 of Part 5B.2; and

                     (b)  may otherwise grant a licence under either subsection (1) or (2) (if the relevant criteria are satisfied).

Disqualified individuals

             (4)  The Minister must not grant the applicant a licence unless:

                     (a)  ASIC has notified the Minister that, as far as ASIC is aware, no disqualified individual is involved in the applicant (see Division 2 of Part 7.4); or

                     (b)  42 days have passed since the application was made and ASIC has not given a notice under subsection 853D(2) to the applicant within that 42 days.

795C  Publication of notice of licence grant

                   If the Minister grants an Australian market licence, the Minister must publish a notice in the Gazette stating:

                     (a)  the name of the licensee; and

                     (b)  when the licence was granted; and

                     (c)  the conditions on the licence.

795D  More than one licence in the same document

                   If the Minister grants a person 2 or more of the following:

                     (a)  an Australian market licence;

                     (b)  an Australian CS facility licence;

they may be included in the same document.

795E  More than one market covered by the same licence

             (1)  The same Australian market licence may authorise the licensee to operate 2 or more financial markets.

             (2)  In that case, a reference in this Chapter to the market to which an Australian market licence relates is taken instead to be a reference to each of those financial markets severally.

             (3)  Before varying the conditions on an Australian market licence so as to add another market that the licensee is authorised to operate, the Minister must be satisfied of the matters listed in subsection 795B(1) or (2) (as appropriate) in relation to the market.

             (4)  An Australian market licence that authorises the licensee to operate 2 or more financial markets may be suspended or cancelled under Subdivision C in respect of one or some of those markets only, as if the licensee held a separate licence for each of the markets.

Subdivision BThe conditions on the licence

796A  The conditions on the licence

             (1)  The Minister may, at any time:

                     (a)  impose conditions, or additional conditions, on an Australian market licence; or

                     (b)  vary or revoke conditions imposed on such a licence;

by giving written notice to the licensee. The Minister must also publish a notice in the Gazette with details of the action and when it took effect.

Note:          As well as the requirements in this section, the Minister must also have regard to the matters in section 798A.

             (2)  The Minister may do so:

                     (a)  on his or her own initiative, subject to subsection (3); or

                     (b)  if the licensee lodges with ASIC an application for the Minister to do so, which is accompanied by the prescribed documents, if any.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (3)  The Minister may only impose conditions or additional conditions, or vary the conditions, on the licence on his or her own initiative if:

                     (a)  he or she considers it appropriate to do so having regard to:

                              (i)  the licensee’s obligations as a market licensee under this Chapter; and

                             (ii)  any change in market operations or the conditions in which the market is operating; and

                     (b)  the Minister gives the licensee written notice of the proposed action and an opportunity to make a submission before it takes effect.

This subsection does not apply to the Minister imposing conditions when a licence is granted.

             (4)  The Minister must ensure that each Australian market licence is subject to conditions that specify:

                     (a)  the particular market that the licensee is authorised to operate; and

                     (b)  the class or classes of financial products that can be dealt with on the market; and

                     (c)  if the Minister considers that the licensee should have clearing and settlement arrangements for transactions effected through the market—the type of clearing and settlement arrangements that are adequate.

Note:          If compensation arrangements in relation to the market are approved under Division 3 of Part 7.5, there must also be conditions as required by subsection 882A(4) or paragraph 882B(4)(b).

             (6)  ASIC must give the Minister any application and documents lodged under subsection (2).

Subdivision CWhen a licence can be varied, suspended or cancelled

797A  Varying licences

             (1)  The Minister may vary an Australian market licence to take account of a change in the licensee’s name if the licensee lodges with ASIC an application for the variation, accompanied by the prescribed documents, if any.

Note 1:       The conditions on the licence can be varied under section 796A.

Note 2:       For fees in respect of lodging applications, see Part 9.10.

             (2)  The Minister must give written notice of the variation to the licensee.

             (3)  ASIC must give the Minister any application and documents lodged under subsection (1).

797B  Immediate suspension or cancellation

                   The Minister may, by giving written notice to a market licensee, suspend the licence for a specified period, or cancel it, if:

                     (a)  the licensee ceases to carry on the business of operating the market; or

                     (b)  the licensee becomes an externally‑administered body corporate; or

                     (c)  the licensee asks the Minister to do so; or

                     (d)  in the case of a licence granted under subsection 795B(2) (overseas markets):

                              (i)  the licensee ceases to be authorised to operate a financial market in the foreign country in which the licensee’s principal place of business is located; or

                             (ii)  there is a change to the regulatory regime applying in relation to the market to which the licence relates in the country in which the licensee’s principal place of business is located, and, because of that change, the Minister is no longer satisfied as mentioned in paragraph 795B(2)(c).

797C  Suspension or cancellation following hearing and report

             (1)  If the Minister considers that a market licensee has breached, or is in breach of, one or more of its obligations as a market licensee under this Chapter, the Minister may give the licensee a written notice that requires the licensee to show cause, at a hearing before a specified person, why the licence should not be suspended or cancelled.

             (2)  The notice must specify:

                     (a)  the grounds on which it is proposed to suspend or cancel the licence; and

                     (b)  a reasonable time and place at which the hearing is to be held.

However, if the licensee consents, the person conducting the hearing may fix a different time or place.

             (3)  The person conducting the hearing must:

                     (a)  give the licensee an opportunity to be heard at the hearing; and

                     (b)  give the Minister:

                              (i)  a report about the hearing; and

                             (ii)  a recommendation about the grounds in the notice on which it is proposed to suspend or cancel the licence.

             (4)  After considering the report and recommendation, the Minister may:

                     (a)  decide to take no further action in relation to the matter and give written advice of that decision to the licensee; or

                     (b)  suspend the licence for a specified period, or cancel the licence, by giving written notice to the licensee.

Note:          The Minister must also have regard to the matters in section 798A.

797D  Effect of suspension

             (1)  A person whose Australian market licence is suspended is taken not to hold that licence while it is suspended.

             (2)  However, the Minister may specify in the written notice to the licensee that subsection (1) does not apply for specified purposes.

797E  Variation or revocation of suspension

                   The Minister may at any time vary or revoke a suspension of an Australian market licence by giving written notice to the licensee.

797F  Publication of notice of licence suspension or cancellation

             (1)  If the Minister:

                     (a)  suspends, or varies or revokes a suspension of, an Australian market licence; or

                     (b)  cancels an Australian market licence;

the Minister must publish a notice in the Gazette to that effect.

             (2)  The notice must state when the action took effect.

797G  Suspension and cancellation only in accordance with this Subdivision

                   An Australian market licence cannot be varied, suspended or cancelled otherwise than in accordance with this Subdivision.

Note:          The conditions on the licence can be varied under section 796A.


 

Division 5Other matters

798A  Matters to be taken into account by the Minister

             (1)  The Minister must have regard to certain matters in deciding whether to:

                     (a)  grant an applicant an Australian market licence under section 795B; or

                     (b)  impose, vary or revoke conditions on such a licence under section 796A; or

                     (c)  suspend or cancel such a licence under section 797C; or

                     (d)  disallow a change to the operating rules of a licensed market under section 793E.

             (2)  These are the matters the Minister must have regard to:

                     (a)  the structure, or proposed structure, of the market;

                     (b)  the nature of the activities conducted, or proposed to be conducted, on the market;

                     (c)  the size, or proposed size, of the market;

                     (d)  the nature of the financial products dealt with, or proposed to be dealt with, on the market;

                     (e)  the participants, or proposed participants, in the market and:

                              (i)  whether those participants, in effecting transactions through the market, are, or will be, providing financial services to other persons; and

                             (ii)  whether those participants acquire or dispose, or will acquire or dispose, of financial products through the market as retail clients or as wholesale clients; and

                            (iii)  whether those participants are also, or will also be, participants in any other financial markets;

                      (f)  the technology used, or proposed to be used, in the operation of the market;

                     (g)  whether it would be in the public interest to take the action referred to in subsection (1);

                     (h)  any relevant advice received from ASIC.

The Minister may also have regard to any other matter that the Minister considers relevant.

             (3)  If the Minister is deciding whether to take the action referred to in paragraph (1)(a), (b) or (c) in respect of an Australian market licence granted under subsection 795B(2) (overseas markets), the Minister must also have regard to:

                     (a)  the criteria that the licensee or applicant satisfied to obtain an authorisation to operate the same market in the foreign country in which their principal place of business is located; and

                     (b)  the obligations they must continue to satisfy to keep the authorisation; and

                     (c)  the level of supervision to which the operation of the market in that country is subject; and

                     (d)  whether adequate arrangements exist for cooperation between ASIC and the authority that is responsible for that supervision.

798B  ASIC may give advice to Minister

                   ASIC may give advice to the Minister in relation to:

                     (a)  any matter in respect of which the Minister has a discretion under this Part; or

                     (b)  any other matter concerning financial markets.

Note:          In some cases, the Minister must have regard to ASIC’s advice: see paragraph 798A(2)(h).

798C  Market licensee or related body corporate etc. listing on market

             (1)  Any of the following kinds of entity or scheme (the listed entity) may be included in a market’s official list:

                     (a)  the market licensee for the market;

                     (b)  a related body corporate of the market licensee;

                     (c)  a managed investment scheme whose responsible entity is a related body corporate of the market licensee;

                     (d)  a trust whose trustee is a related body corporate of the market licensee.

Note:          There are certain matters that must be included in the market’s listing rules before such an entity or scheme is included in the official list (see subsection (4)).

             (2)  In such a case, the financial products of the listed entity may be traded on the market, if either or both the listed entity and the market licensee have entered into such arrangements as ASIC requires:

                     (a)  for dealing with possible conflicts of interest that might arise from the listed entity’s financial products being able to be traded on the market; and

                     (b)  for the purposes of ensuring the integrity of trading in the listed entity’s financial products.

Note:          For fees in respect of ASIC performing functions under such arrangements, see Part 9.10.

             (3)  The listed entity, and the market licensee (if applicable), with whom ASIC has entered into arrangements for the purposes of subsection (2) must comply with the arrangements.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  Before, and at all times while, the listed entity is included in the market’s official list, the market’s listing rules must provide for ASIC, instead of the market licensee, to make decisions and to take action (or to require the market licensee to take action on ASIC’s behalf) in relation to these matters, and matters related to these matters:

                     (a)  the admission of the listed entity to the market’s official list; and

                     (b)  the removal of the listed entity from that list; and

                     (c)  allowing, stopping or suspending the trading on the market of the listed entity’s financial products.

Note:          For fees in respect of ASIC performing this function, see Part 9.10.

             (5)  ASIC has the powers and functions that are provided for it in any listing rules or arrangements made for the purposes of this section.

             (6)  The products of an entity or scheme referred to in subsection (1) must not be traded on the market licensee’s market otherwise than as allowed by this section.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (7)  This section does not apply if the licence of the market licensee was granted under subsection 795B(2) (overseas markets). Instead, the law of the country in which the market licensee’s principal place of business is located applies for all purposes connected with the inclusion of the listed entity in the market’s official list.

798D  Exemptions and modifications for self‑listing licensees or related bodies corporate etc.

             (1)  ASIC may:

                     (a)  exempt an entity or scheme referred to in subsection 798C(1) whose financial products are able to be traded on the market from a modifiable provision (see subsection (7)); or

                     (b)  declare that a modifiable provision applies to an entity or scheme referred to in subsection 798C(1) whose financial products are able to be traded on the market as if specified provisions were omitted, modified or varied as specified in the declaration.

             (2)  An exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

             (3)  An exemption may apply unconditionally or subject to specified conditions.

             (4)  If an exemption is granted subject to specified conditions, the entity or scheme must comply with those conditions.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (5)  If an exemption is granted subject to specified conditions, the Court may, on ASIC’s application, order the entity or scheme to comply with one or more of those conditions in a specified way.

             (6)  If conduct (including an omission) of a person would not have constituted an offence if:

                     (a)  a particular condition had not been imposed on an exemption under paragraph (1)(a); or

                     (b)  a particular declaration under paragraph (1)(b) had not been made;

that conduct does not constitute an offence unless, before the conduct occurred (in addition to complying with the gazettal requirement of subsection (2)), ASIC gave written notice setting out the text of the condition or the declaration to the person. In a prosecution for an offence to which this subsection applies, the prosecution must prove that this additional notification requirement was complied with before the conduct occurred.

             (7)  In this section:

modifiable provision means:

                     (a)  section 205G and any of the provisions of Chapter 6, 6A, 6B, 6C, 6CA or 7; or

                     (b)  regulations made for the purposes of that section or any of those provisions.

798DA  Market licensee, related body corporate etc. or competitor participating in market

             (1)  This section applies if any of the following is a participant (the participant) in a market:

                     (a)  the market licensee;

                     (b)  a related body corporate of the market licensee;

                     (c)  a partnership if a partner in the partnership is a related entity of the market licensee;

                     (d)  an entity if:

                              (i)  the entity conducts, or participates in, a business that is in competition with a business conducted by the market licensee, or by a related body corporate of the market licensee; and

                             (ii)  the entity requests that ASIC make decisions and take action in relation to the matters referred to in subsection (2).

             (2)  Before, and at all times while, the participant is participating in the market, the market’s operating rules must provide for ASIC, instead of the market licensee, to make decisions and to take action (or to require the market licensee to take action on ASIC’s behalf) in relation to these matters, and matters related to these matters:

                     (a)  the admission of the participant to the market; and

                     (b)  the expulsion and suspension of the participant from the market; and

                     (c)  the disciplining of the participant; and

                     (d)  the participant’s compliance with the operating rules or this Act, including:

                              (i)  the method of determining whether the participant has complied with those rules or this Act; and

                             (ii)  any action (including the imposition of a fine or penalty) to be taken in respect of contraventions of those rules or this Act.

Note:          For fees in respect of ASIC performing this function, see Part 9.10.

             (3)  ASIC has the powers and functions that are provided for it in any operating rules made for the purposes of this section.

             (4)  A participant referred to in subsection (1) must not participate in the market licensee’s market otherwise than as allowed by this section.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (5)  This section does not apply if the licence of the market licensee was granted under subsection 795B(2) (overseas markets). Instead, the law of the country in which the market licensee’s principal place of business is located applies for all purposes connected with the participation of the participant in the market.

             (6)  To avoid doubt, subsection (1) does not authorise a market licensee to participate in its own market.

798E  Other potential conflict situations

             (1)  The regulations may make provision in relation to the rules and procedures that are to apply in the case of conflicts, or potential conflicts, between the commercial interests of the licensee and the need for the licensee to ensure that the market operates in the way mentioned in paragraph 792A(a).

             (2)  In particular, such regulations may deal with the following:

                     (a)  identifying when such a conflict, or potential conflict, is taken to arise;

                     (b)  empowering ASIC, instead of the licensee, to make decisions and to take action under the market’s operating rules in relation to such a conflict or potential conflict;

                     (c)  empowering ASIC to require the licensee to take action under the market’s operating rules (whether or not on ASIC’s behalf) in relation to such a conflict or potential conflict.

Note:          For fees in respect of ASIC performing this function, see Part 9.10.

             (3)  Subsection (2) does not limit the generality of subsection (1).


 

Part 7.2ASupervision of financial markets

  

798F  ASIC to supervise financial markets

                   ASIC has the function of supervising financial markets the operators of which are licensed under subsection 795B(1).

798G  Market integrity rules

             (1)  ASIC may, by legislative instrument, make rules (the market integrity rules) that deal with the following:

                     (a)  the activities or conduct of licensed markets;

                     (b)  the activities or conduct of persons in relation to licensed markets;

                     (c)  the activities or conduct of persons in relation to financial products traded on licensed markets.

Note:          The market integrity rules will not apply in relation to all licensed markets: see subsection 798H(2).

             (2)  The market integrity rules may include a penalty amount for a rule. A penalty amount must not exceed $1,000,000.

             (3)  ASIC must not make a market integrity rule unless the Minister has consented, in writing, to the making of the rule.

Emergency rules

             (4)  Despite subsection (3), ASIC may make a market integrity rule without the consent of the Minister if ASIC is of the opinion that it is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products.

             (5)  However, if ASIC does so, ASIC must:

                     (a)  provide the Minister, on the following day, with a written explanation of the need for the rule; and

                     (b)  amend or revoke the rule in accordance with any written directions of the Minister.

Minister’s instruments are not legislative instruments

             (6)  None of the following is a legislative instrument:

                     (a)  a consent given under subsection (3);

                     (b)  a direction given under paragraph (5)(b).

798H  Complying with market integrity rules

             (1)  The following entities must comply with the market integrity rules:

                     (a)  operators of licensed markets;

                     (b)  participants in licensed markets;

                     (c)  entities prescribed by the regulations for the purposes of this paragraph.

Note:          This subsection is a civil penalty provision (see section 1317E). For relief from liability to a civil penalty relating to this subsection, see section 1317S.

             (2)  Subsection (1) does not apply in relation to a financial market the operator of which is licensed under subsection 795B(2) (overseas markets).

             (3)  If there is an inconsistency between the market integrity rules and the derivative transaction rules or the derivative trade repository rules, the market integrity rules prevail to the extent of the inconsistency.

798J  Directions by ASIC

             (1)  If ASIC is of the opinion that it is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products by:

                     (a)  giving a direction to an entity to suspend dealings in the financial product or class of financial products; or

                     (b)  giving some other direction in relation to those dealings;

ASIC may give written advice to the entity of that opinion and the reasons for it.

Note:          ASIC may also give directions to entities that are market licensees under section 794D. A failure to comply with a direction under that section is an offence (see subsection 1311(1)).

             (2)  If, after receiving ASIC’s advice and reasons, the entity does not take:

                     (a)  in the case of a proposed direction to suspend dealings in the financial products—action to prevent such dealings; or

                     (b)  in any other case—such other action as in ASIC’s view is adequate to address the situation raised in the advice;

and ASIC still considers that it is appropriate to give the direction to the entity, ASIC may give the entity the written direction with a statement setting out its reasons for making the direction.

             (3)  The direction has effect for the period specified in it (which may be up to 21 days). During that period, the entity must comply with the direction and must not allow any dealings to take place contrary to it.

             (4)  If the entity fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the entity comply with the direction.

             (5)  If, at any time after the entity receives ASIC’s advice under subsection (1), the entity requests in writing that ASIC refer the matter to the Minister, ASIC must do so immediately. In that event, the Minister may, if he or she considers it appropriate, require ASIC not to make, or to revoke, the direction. ASIC must immediately comply with such a requirement.

             (6)  ASIC may vary a direction by giving written notice to the entity if ASIC is of the opinion that the variation is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products.

             (7)  ASIC may revoke a direction by giving written notice to the entity.

             (8)  A direction given under subsection (2) is not a legislative instrument.

798K  Alternatives to civil proceedings

             (1)  The regulations may provide for a person who is alleged to have contravened subsection 798H(1) (complying with market integrity rules) to do one or more of the following as an alternative to civil proceedings:

                     (a)  pay a penalty to the Commonwealth;

                     (b)  undertake or institute remedial measures (including education programs);

                     (c)  accept sanctions other than the payment of a penalty to the Commonwealth;

                     (d)  enter into a legally enforceable undertaking.

             (2)  The penalty payable under regulations made under paragraph (1)(a) in relation to a market integrity rule must not exceed three‑fifths of the penalty amount set out in the market integrity rules for the rule.

             (3)  Without limiting regulations that may be made under paragraph (1)(d), those regulations may provide for one or more of the following kinds of undertakings:

                     (a)  an undertaking to take specified action within a specified period;

                     (b)  an undertaking to refrain from taking specified action;

                     (c)  an undertaking to pay a specified amount within a specified period to the Commonwealth or to some other specified person.

798L  Exemptions and modifications by regulations

             (1)  The regulations may:

                     (a)  exempt a person or class of persons from all or specified provisions of this Part; or

                     (b)  exempt a financial market or class of financial markets from all or specified provisions of this Part; or

                     (c)  provide that this Part applies in relation to a person or a financial market, or a class of persons or financial markets, as if specified provisions were omitted, modified or varied as specified in the regulations.

             (2)  For the purpose of this section, the provisions of this Part include definitions in this Act, or in the regulations, as they apply to references in this Part.


 

Part 7.3Licensing of clearing and settlement facilities

Division 1Requirement to be licensed

820A  Need for a licence

             (1)  A person must only operate, or hold out that the person operates, a clearing and settlement facility in this jurisdiction if:

                     (a)  the person has an Australian CS facility licence that authorises the person to operate the facility in this jurisdiction; or

                     (b)  the facility is exempt from the operation of this Part.

Note 1:       A CS facility licensee may also provide financial services incidental to the operation of the facility: see paragraph 911A(2)(d).

Note 2:       Failure to comply with this subsection is an offence: see subsection 1311(1).

             (2)  For the purposes of an offence based on subsection (1), strict liability applies to paragraph (1)(b).

Note:          For strict liability, see section 6.1 of the Criminal Code.

820B  Other prohibitions on holding out

                   A person must not hold out:

                     (a)  that the person has an Australian CS facility licence; or

                     (b)  that the operation of a clearing and settlement facility by the person in this jurisdiction is authorised by an Australian CS facility licence; or

                     (c)  that a clearing and settlement facility is exempt from the operation of this Part;

if that is not the case.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

820C  Exemptions

             (1)  The Minister may, by publishing a notice in the Gazette, exempt from the operation of this Part a particular clearing and settlement facility or type of clearing and settlement facility.

             (2)  The Minister may, at any time, by publishing a notice in the Gazette:

                     (a)  impose conditions, or additional conditions, on an exemption; or

                     (b)  vary or revoke the conditions on an exemption; or

                     (c)  revoke an exemption.

             (3)  However, the Minister may only take action under subsection (2) after:

                     (a)  giving notice, and an opportunity to make submissions on the proposed action, to the operator of each clearing and settlement facility known by the Minister to be covered by the exemption; and

                     (b)  if the exemption covers a type of clearing and settlement facility—causing a notice to be published in a newspaper or newspapers circulating generally in each State and internal Territory allowing a reasonable time within which the operator of each facility covered by the exemption may make submissions on the proposed action.

This subsection does not apply to the Minister imposing conditions when an exemption is made.

820D  When a clearing and settlement facility is taken to be operated in this jurisdiction

             (1)  For the purposes of this Chapter, a clearing and settlement facility is taken to be operated in this jurisdiction if it is operated by a body corporate that is registered under Chapter 2A.

             (2)  Subsection (1) does not limit the circumstances in which a clearing and settlement facility is operated in this jurisdiction for the purposes of this Chapter.


 

Division 2Regulation of CS facility licensees

Subdivision ALicensee’s obligations

821A  General obligations

                   A CS facility licensee must:

                    (aa)  to the extent that it is reasonably practicable to do so:

                              (i)  comply with standards determined under section 827D; and

                             (ii)  do all other things necessary to reduce systemic risk; and

                     (a)  to the extent that it is reasonably practicable to do so, do all things necessary to ensure that the facility’s services are provided in a fair and effective way; and

                     (b)  comply with the conditions on the licence; and

                     (c)  have adequate arrangements (whether they involve a self‑regulatory structure or the appointment of an independent person or related entity) for supervising the facility, including arrangements for:

                              (i)  handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the facility’s services are provided in a fair and effective way; and

                             (ii)  enforcing compliance with the facility’s operating rules; and

                     (d)  have sufficient resources (including financial, technological and human resources) to operate the facility properly and for the required supervisory arrangements to be provided; and

                     (e)  if the licensee is a foreign body corporate—be registered under Division 2 of Part 5B.2; and

                      (f)  if the licence was granted under subsection 824B(2) (overseas clearing and settlement facilities)—both:

                              (i)  remain authorised to operate a clearing and settlement facility in the foreign country in which the licensee’s principal place of business is located; and

                             (ii)  get the Minister’s approval under section 821F before that principal place of business becomes located in any other foreign country; and

                     (g)  if the licensee, or a holding company of the licensee, is a widely held market body (within the meaning of Division 1 of Part 7.4)—take all reasonable steps to ensure that an unacceptable control situation (within the meaning of that Division) does not exist in relation to the body; and

                     (h)  take all reasonable steps to ensure that no disqualified individual becomes, or remains, involved in the licensee (see Division 2 of Part 7.4).

821B  Obligation to notify ASIC of certain matters

             (1)  A CS facility licensee must give written notice to ASIC, as soon as practicable, if it becomes aware that it may no longer be able to meet, or has breached, an obligation under section 821A. If ASIC considers it appropriate to do so, ASIC may give the Minister advice about the matter.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  A CS facility licensee must give written notice to ASIC, as soon as practicable, as required by the following paragraphs:

                     (a)  if the licensee provides a new class of financial service incidental to the operation of the facility, the licensee must give notice that includes details of the new class;

                     (b)  if the licensee takes any kind of disciplinary action against a participant in the facility, the licensee must give notice that includes:

                              (i)  the participant’s name; and

                             (ii)  the reason for and nature of the action taken;

                     (c)  if the licensee has reason to suspect that a person has committed, is committing, or is about to commit a significant contravention of the facility’s operating rules or this Act, the licensee must give notice that includes:

                              (i)  the person’s name; and

                             (ii)  details of the contravention or impending contravention; and

                            (iii)  the licensee’s reasons for that belief.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (3)  A CS facility licensee whose licence was granted under subsection 824B(2) (overseas clearing and settlement facilities) must, as soon as practicable, give written notice to ASIC if:

                     (a)  the licensee ceases to be authorised to operate a clearing and settlement facility in the foreign country in which the licensee’s principal place of business is located; or

                     (b)  there is a significant change to the regulatory regime applying in relation to the facility in the foreign country in which the licensee’s principal place of business is located.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  As soon as practicable after:

                     (a)  a person becomes or ceases to be a director, secretary or senior manager of a CS facility licensee or of a holding company of a CS facility licensee (including when a person changes from one of those positions to another); or

                     (b)  a CS facility licensee becomes aware that a person has come to have, or has ceased to have, more than 15% of the voting power in the licensee or in a holding company of the licensee;

the licensee must give written notice of this to ASIC. The notice must include such other information about the matter as is prescribed by regulations made for the purposes of this subsection.

Note 1:       Failure to comply with this subsection is an offence (see subsection 1311(1)).

Note 2:       To the extent that the licensee is required to give the notice and information under any other provision of this Act, the licensee may comply with this subsection by doing so. It need not provide the same information twice.

821BA  Obligation to notify Reserve Bank of certain matters

             (1)  A CS facility licensee must give written notice to the Reserve Bank of Australia (the Reserve Bank), as soon as practicable, if:

                     (a)  the licensee becomes aware that it has failed to comply with standards determined under section 827D, or is likely to fail to comply with such standards; or

                     (b)  the licensee becomes aware that it may no longer be able to meet, or has breached, its obligation under subparagraph 821A(aa)(ii).

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  If the Reserve Bank considers it appropriate to do so, the Reserve Bank may give the Minister advice about the matter.

821C  Obligation to assist

ASIC

             (1)  A CS facility licensee must give such assistance to ASIC, or a person authorised by ASIC, as ASIC or the authorised person reasonably requests in relation to the performance of ASIC’s functions.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  Such assistance may include showing ASIC the licensee’s books or giving ASIC other information.

Reserve Bank

             (3)  A CS facility licensee must give such assistance to the Reserve Bank of Australia (the Reserve Bank), or a person authorised by the Reserve Bank, as the Reserve Bank or the authorised person reasonably requests in relation to the performance of the Reserve Bank’s functions under this Part.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  Such assistance may include showing the Reserve Bank the licensee’s books or giving the Reserve Bank other information.

821D  Obligation to give ASIC access to the facility

                   A CS facility licensee must give a person authorised by ASIC such reasonable access to the facility as the person requests for any of the purposes of this Chapter.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

821E  Annual report

             (1)  A CS facility licensee must, within 3 months after the end of its financial year, give ASIC an annual report on the extent to which the licensee complied with its obligations as a CS facility licensee under this Chapter.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  The licensee must ensure that the annual report is accompanied by any information and statements prescribed by regulations made for the purposes of this subsection.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (3)  The licensee must also ensure that the annual report is accompanied by any audit report that the Minister requires under subsection (4).

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (4)  The Minister may, by giving written notice to a CS facility licensee, require the licensee to obtain an audit report on the annual report and on any information or statements accompanying it. The Minister must nominate to prepare the audit report:

                     (a)  ASIC; or

                     (b)  a specified person or body that is suitably qualified.

             (5)  ASIC must give the annual report and accompanying material to the Minister.

821F  Change of country by foreign licensee

             (1)  In the case of a licence granted under subsection 824B(2), the Minister may approve the location of the licensee’s principal place of business in a new country only if:

                     (a)  the new country is not Australia; and

                     (b)  the operation of the facility in that country will be subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of protection from systemic risk and the level of effectiveness and fairness of services they achieve, to the requirements and supervision to which clearing and settlement facilities are subject under this Act in relation to those matters.

             (2)  If, in relation to a licence granted under subsection 824B(2), the licensee’s principal place of business changes to become a place in Australia:

                     (a)  the licence ceases to be in force from the time of the change; and

                     (b)  if the licensee wishes the facility to continue to be licensed, the licensee may apply for the grant of a new licence under subsection 824B(1); and

                     (c)  the application must be assessed in accordance with Subdivision A of Division 3, subject to such modifications (if any) of that Subdivision as are set out in regulations made for the purposes of this paragraph.

             (3)  An application referred to in paragraph (2)(b) may be made in advance of the change of location of the principal place of business, and a decision on the application may be made before that time. However, any licence granted pursuant to the application does not come into force until the change occurs.

Subdivision BThe facility’s operating rules and procedures

822A  Content of the operating rules and procedures

             (1)  The operating rules of a licensed CS facility must deal with the matters prescribed by regulations made for the purposes of this subsection.

             (2)  The regulations may also prescribe matters in respect of which a licensed CS facility must have written procedures.

             (3)  However, subsections (1) and (2) do not apply if the licensee is also authorised to operate the facility in the foreign country in which its principal place of business is located and the licence was granted under subsection 824B(2) (overseas clearing and settlement facilities).

             (4)  In a subsection (3) case, ASIC may determine, by giving written notice to the licensee, matters in respect of which the licensed CS facility must have written procedures.

822B  Legal effect of operating rules

             (1)  The operating rules of a licensed CS facility have effect as a contract under seal:

                     (a)  between the licensee and each issuer of financial products in respect of which the facility provides its services; and

                     (b)  between the licensee and each participant in the facility; and

                     (c)  between each issuer of financial products in respect of which the facility provides its services and each participant in the facility; and

                     (d)  between a participant in the facility and each other participant in the facility;

under which each of those persons agrees to observe the operating rules to the extent that they apply to the person and to engage in conduct that the person is required by the operating rules to engage in.

             (2)  However, if there is an inconsistency between the operating rules of a licensed CS facility and any of the following other rules:

                     (a)  the derivative transaction rules;

                     (b)  the derivative trade repository rules;

those other rules prevail over the operating rules to the extent of the inconsistency.

Note:          If there is an inconsistency between the derivative transaction rules and the derivative trade repository rules, the derivative transaction rules prevail: see subsection 901E(2).

822C  Enforcement of operating rules

             (1)  If a person who is under an obligation to comply with or enforce any of a licensed CS facility’s operating rules fails to meet that obligation, an application to the Court may be made by:

                     (a)  ASIC; or

                     (b)  the licensee; or

                     (c)  the operator of a financial market with which the facility has arrangements to provide services for transactions effected through the market; or

                     (d)  a person aggrieved by the failure.

             (2)  After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

                     (a)  the person against whom the order is sought; or

                     (b)  if that person is a body corporate—the directors of the body corporate;

about compliance with, or enforcement of, the operating rules.

822D  Changing the operating rules

Licensed CS facilities other than subsection 824B(2) facilities

             (1)  As soon as practicable after a change is made to the operating rules of a licensed CS facility, other than a facility licensed under subsection 824B(2) (overseas clearing and settlement facilities), the licensee must lodge with ASIC written notice of the change. The notice must:

                     (a)  set out the text of the change; and

                     (b)  specify the date on which the change was made; and

                     (c)  contain an explanation of the purpose of the change.

             (2)  If no notice is lodged with ASIC, as required by subsection (1), within 21 days after the change is made, the change ceases to have effect at the end of that period.

Subsection 824B(2) facilities

             (3)  As soon as practicable after a change is made to the operating rules of a clearing and settlement facility the operation of which is licensed under subsection 824B(2) (overseas clearing and settlement facilities), the licensee must lodge with ASIC written notice of the change. The notice must:

                     (a)  set out the text of the change; and

                     (b)  specify the date on which the change was made; and

                     (c)  contain an explanation of the purpose of the change.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

822E  Disallowance of changes to operating rules

             (1)  This section does not apply in respect of an Australian CS facility licence granted under subsection 824B(2) (overseas clearing and settlement facilities).

             (2)  As soon as practicable after receiving a notice under section 822D from a CS facility licensee, ASIC must send a copy of the notice to the Minister.

             (3)  Within 28 days after ASIC receives the notice from the licensee, the Minister may disallow all or a specified part of the change to the operating rules.

             (4)  In deciding whether to do so, the Minister must have regard to the consistency of the change with the licensee’s obligations under this Part (including in particular the obligations mentioned in paragraphs 821A(aa) and (a)).

Note:          The Minister must also have regard to the matters in section 827A.

             (5)  As soon as practicable after all or a part of a change is disallowed, ASIC must give notice of the disallowance to the licensee. The change ceases to have effect, to the extent of the disallowance, when the licensee receives the notice.

Subdivision CPowers of the Minister, ASIC and the Reserve Bank in relation to licensees

823A  Minister’s power to give directions

             (1)  If the Minister considers that a CS facility licensee is not complying with its obligations as a CS facility licensee under this Chapter, the Minister may give the licensee a written direction to do specified things that the Minister believes will promote compliance by the licensee with those obligations.

             (2)  The licensee must comply with the direction.

             (3)  If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

             (4)  The Minister may vary or revoke a direction at any time by giving written notice to the licensee.

823B  Minister’s power to require special report

             (1)  The Minister may give a CS facility licensee a written notice requiring the licensee to give ASIC a special report on specified matters. ASIC must give the report to the Minister.

             (2)  The notice may also require the licensee to give ASIC an audit report on the special report. The Minister must nominate to prepare the report:

                     (a)  ASIC; or

                     (b)  a specified person or body that is suitably qualified.

             (3)  The licensee must give the special report, and audit report (if any), to ASIC within the time required by the notice.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

823C  ASIC to assess licensee’s compliance

             (1)  ASIC may do an assessment of how well a CS facility licensee is complying with its obligations as a CS facility licensee under this Chapter (other than its obligation under paragraph 821A(aa)). In doing the assessment, ASIC may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

             (2)  In respect of the obligation in paragraph 821A(c), ASIC must do such an assessment at least once a year for each CS facility licensee.

             (3)  As soon as practicable after doing an assessment under this section, ASIC must give a written report on the assessment to the Minister and a copy of the written report to the Reserve Bank of Australia.

             (4)  If an assessment, or part of an assessment, relates to any other person’s affairs to a material extent, ASIC may, at the person’s request or of its own motion, give the person a copy of the written report on the assessment or the relevant part of the report.

             (5)  If an assessment, or part of an assessment, relates to a serious contravention of a law of the Commonwealth or of a State or Territory, ASIC may give a copy of the written report on the assessment, or the relevant part of the report, to:

                     (a)  the Australian Federal Police; or

                     (b)  the Chief Executive Officer of the Australian Crime Commission or a member of the staff of the ACC (within the meaning of the Australian Crime Commission Act 2002); or

                     (c)  the Director of Public Prosecutions; or

                     (d)  an agency prescribed by regulations made for the purposes of this paragraph.

             (6)  Either the Minister or ASIC may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.

823CA  Reserve Bank to assess licensee’s compliance

             (1)  At least once each year, the Reserve Bank of Australia (the Reserve Bank) must do an assessment of how well each CS facility licensee is complying with its obligation under paragraph 821A(aa). In doing the assessment, the Reserve Bank may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

             (2)  As soon as practicable after doing an assessment under this section, the Reserve Bank must give a written report on the assessment to the Minister and a copy of the written report to ASIC.

             (3)  If an assessment, or part of an assessment, relates to any other person’s affairs to a material extent, the Reserve Bank may, at the person’s request or of its own motion, give the person a copy of the written report on the assessment or the relevant part of the report.

             (4)  If an assessment, or part of an assessment, relates to a serious contravention of a law of the Commonwealth or of a State or Territory, the Reserve Bank may give a copy of the written report on the assessment, or the relevant part of the report, to:

                     (a)  the Australian Federal Police; or

                     (b)  the Chief Executive Officer of the Australian Crime Commission or a member of the staff of the ACC (within the meaning of the Australian Crime Commission Act 2002); or

                     (c)  the Director of Public Prosecutions; or

                     (d)  an agency prescribed by regulations made for the purposes of this paragraph.

             (5)  Either the Minister or the Reserve Bank may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.

823D  Directions power—protecting dealings in financial products and ensuring fair and effective provision of services by CS facilities

             (1)  If ASIC:

                     (a)  considers that it is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products; or

                     (b)  considers that a CS facility licensee has not done all things reasonably practicable to ensure the facility’s services are provided in a fair and effective way;

ASIC may give the licensee written advice that it intends to give the licensee a specified direction under this section. The advice must include the reasons for ASIC’s intention to give the direction.

             (2)  As soon as practicable after giving the advice to the licensee, ASIC must give notice of the advice to the operator of each financial market with which the facility has arrangements to provide services for transactions effected through the market.

             (3)  For the purpose of remedying the matter mentioned in subsection (1), ASIC may give the following directions to the licensee under this section:

                     (a)  a direction not to provide the licensee’s services in relation to any transactions, of which the licensee receives notice after the direction takes effect, that relate to a specified financial product or class of financial products;

                     (b)  any other direction concerning dealings with transactions that relate to a specified financial product or class of financial products.

             (4)  If, after receiving ASIC’s advice and reasons:

                     (a)  the licensee does not take steps that in ASIC’s view are adequate to address the situation; and

                     (b)  ASIC still considers that it is appropriate to give the direction to the licensee;

ASIC may give the licensee the direction, in writing, with a statement setting out the reasons for giving the direction.

             (5)  The direction has effect until the earlier of the following times:

                     (a)  the time ASIC revokes the direction in accordance with subsection (10);

                     (b)  the end of the period (which may be up to 21 days) specified in the direction as the period during which the direction is effective ends.

While the direction has effect, the licensee must comply with the direction and must not provide any services contrary to it.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (6)  If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

             (7)  As soon as practicable after making or varying (see subsection (9)) a direction, ASIC must:

                     (a)  give a copy of the direction or variation to:

                              (i)  if the direction relates to a specified financial product—the issuer of that product; and

                             (ii)  each of the operators mentioned in subsection (2); and

                     (b)  give a written report to the Minister setting out ASIC’s reasons for making the direction or variation; and

                     (c)  give a copy of the report to the licensee.

             (8)  If, at any time after the licensee receives ASIC’s advice under subsection (1), the licensee requests in writing that ASIC refer the matter to the Minister, ASIC must do so immediately. In that event, the Minister may, if he or she considers it appropriate, require ASIC not to make, or to revoke, the direction. ASIC must immediately comply with such a requirement.

             (9)  ASIC may vary a direction by giving written notice to the licensee.

           (10)  ASIC may revoke a direction by giving written notice to the licensee. ASIC must also give written notice of the revocation to each of the operators mentioned in subsection (2).

823E  Directions power—reduction of systemic risk

             (1)  If ASIC considers that a CS facility licensee has not done all things reasonably practicable to reduce systemic risk in the provision of the facility’s services, ASIC may give the licensee a direction, in writing, to take:

                     (a)  specified measures to comply with the whole or a part of a standard determined under section 827D; or

                     (b)  any other action that ASIC considers will reduce systemic risk in the provision of the facility’s services.

             (2)  The direction may deal with the time by which, or period during which, it is to be complied with. The time or period must be reasonable.

             (3)  The licensee must comply with the direction.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

          (3A)  If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

             (4)  ASIC may vary the direction by giving written notice to the licensee.

             (5)  The direction has effect until ASIC revokes it by giving written notice to the licensee.

             (6)  ASIC may revoke the direction if, at the time of revocation, it considers that the direction is no longer necessary or appropriate.

             (7)  Before giving, varying or revoking the direction, ASIC must consult the Reserve Bank of Australia. However, a failure to consult the Reserve Bank of Australia does not invalidate the direction, variation or revocation.

             (8)  The Reserve Bank of Australia may at any time request ASIC to make a direction under this section. However, ASIC is not required to comply with the request.


 

Division 3The Australian CS facility licence

Subdivision AHow to get a licence

824A  How to apply for a licence

             (1)  A body corporate may apply for an Australian CS facility licence by lodging with ASIC an application that:

                     (a)  includes the information required by regulations made for the purposes of this paragraph; and

                     (b)  is accompanied by the documents (if any) required by regulations made for the purposes of this paragraph.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (2)  ASIC must, within a reasonable time, give the application to the Minister with advice about the application.

824B  When a licence may be granted

General

             (1)  The Minister may grant an applicant an Australian CS facility licence if the Minister is satisfied that:

                     (a)  the application was made in accordance with section 824A; and

                     (b)  the applicant will comply with the obligations that will apply if the licence is granted; and

                     (c)  the applicant has adequate operating rules, and procedures, (see Subdivision B of Division 2) for the facility to ensure, as far as is reasonably practicable, that systemic risk is reduced and the facility is operated in a fair and effective way; and

                     (d)  the applicant has adequate arrangements (whether they involve a self‑regulatory structure or the appointment of an independent person or related entity) for supervising the facility, including arrangements for:

                              (i)  handling conflicts between the commercial interests of the licensee and the need for the licensee to reduce systemic risk and ensure that the facility’s services are provided in a fair and effective way; and

                             (ii)  enforcing compliance with the facility’s operating rules; and

                     (e)  no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

                      (f)  no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4).

This subsection has effect subject to subsections (3) and (4).

Note:          The Minister must also have regard to the matters in section 827A in deciding whether to grant a licence.

Alternative criteria for granting licence to overseas clearing and settlement facility

             (2)  If an applicant is authorised to operate a clearing and settlement facility in the foreign country in which its principal place of business is located, the Minister may grant the applicant an Australian CS facility licence authorising the applicant to operate the same facility in this jurisdiction. The Minister must be satisfied that:

                     (a)  the application was made in accordance with section 824A; and

                     (b)  the applicant will comply with the obligations that will apply if the licence is granted; and

                     (c)  the operation of the facility in that country is subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of protection from systemic risk and the level of effectiveness and fairness of services they achieve, to the requirements and supervision to which clearing and settlement facilities are subject under this Act in relation to those matters; and

                     (d)  the applicant undertakes to cooperate with ASIC and the Reserve Bank of Australia by sharing information and in other ways; and

                     (e)  no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

                      (f)  no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4); and

                     (g)  any other requirements that are prescribed by regulations made for the purposes of this subsection are satisfied.

This subsection has effect subject to subsections (3) and (4).

Note:          The Minister must also have regard to the matters in section 827A in deciding whether to grant a licence.

Foreign bodies

             (3)  If the applicant is a foreign body corporate, the Minister:

                     (a)  must not grant the applicant a licence unless the applicant is registered under Division 2 of Part 5B.2; and

                     (b)  may otherwise grant a licence under either subsection (1) or (2) (subject to the relevant criteria being satisfied).

Disqualified individuals

             (4)  The Minister must not grant the applicant a licence unless:

                     (a)  ASIC has notified the Minister that, as far as ASIC is aware, no disqualified individual is involved in the applicant (see Division 2 of Part 7.4); or

                     (b)  42 days have passed since the application was made and ASIC has not given a notice under subsection 853D(2) to the applicant within that 42 days.

824C  Publication of notice of licence grant

                   If the Minister grants an Australian CS facility licence, the Minister must publish a notice in the Gazette stating:

                     (a)  the name of the licensee; and

                     (b)  the date on which the licence was granted; and

                     (c)  the conditions on the licence.

824D  More than one licence in the same document

                   If the Minister grants a person 2 or more of the following:

                     (a)  an Australian CS facility licence;

                     (b)  an Australian market licence;

they may be included in the same document.

824E  More than one CS facility covered by the same licence

             (1)  The same Australian CS facility licence may authorise the licensee to operate 2 or more clearing and settlement facilities.

             (2)  In that case, a reference in this Chapter to the clearing and settlement facility to which an Australian CS facility licence relates is taken instead to be a reference to each of those facilities severally.

             (3)  Before varying the conditions on an Australian CS facility licence so as to add another facility that the licensee is authorised to operate, the Minister must be satisfied of the matters listed in subsection 824B(1) or (2) (as appropriate) in relation to the facility.

             (4)  An Australian CS facility licence that authorises the licensee to operate 2 or more clearing and settlement facilities may be suspended or cancelled under Subdivision C in respect of one or some of those facilities only, as if the licensee held a separate licence for each of the facilities.

Subdivision BThe conditions on the licence

825A  The conditions on the licence

             (1)  The Minister may, at any time:

                     (a)  impose conditions, or additional conditions, on an Australian CS facility licence; or

                     (b)  vary or revoke conditions imposed on such a licence;

by giving written notice to the licensee. The Minister must also publish a notice in the Gazette with details of the action and when it took effect.

Note:          As well as the requirements in this section, the Minister must also have regard to the matters in section 827A.

             (2)  The Minister may do so:

                     (a)  on the Minister’s own initiative, subject to subsection (3); or

                     (b)  if the licensee lodges with ASIC an application for the Minister to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (3)  The Minister may only impose conditions or additional conditions, or vary the conditions, on the licence on his or her own initiative if:

                     (a)  he or she considers it appropriate to do so having regard to:

                              (i)  the licensee’s obligations as a CS facility licensee under this Chapter; and

                             (ii)  any change in the facility’s operations or the conditions in which the facility is operating; and

                     (b)  the Minister gives the licensee written notice of the proposed action and an opportunity to make a submission before it takes effect.

This subsection does not apply to the Minister imposing conditions when a licence is granted.

             (4)  The Minister must ensure that each Australian CS facility licence is subject to conditions that specify:

                     (a)  the particular facility that the licensee is authorised to operate; and

                     (b)  the class or classes of financial products in respect of which the facility can provide services.

             (5)  ASIC must give the Minister any application and documents lodged under subsection (2).

Subdivision CWhen a licence can be varied, suspended or cancelled

826A  Varying licences

             (1)  The Minister may vary an Australian CS facility licence to take account of a change in the licensee’s name if the licensee lodges with ASIC an application for the variation, accompanied by the documents, if any, required by regulations made for the purposes of this subsection.

Note 1:       The conditions on the licence can be varied under section 825A.

Note 2:       For fees in respect of lodging applications, see Part 9.10.

             (2)  The Minister must give written notice of the variation to the licensee.

             (3)  ASIC must give the Minister any application and documents lodged under subsection (1).

826B  Immediate suspension or cancellation

                   The Minister may, by giving written notice to a CS facility licensee, suspend the licence for a specified period, or cancel it, if:

                     (a)  the licensee ceases to carry on the business of operating the facility; or

                     (b)  the licensee becomes an externally‑administered body corporate; or

                     (c)  the licensee asks the Minister to do so; or

                     (d)  in the case of a licence granted under subsection 824B(2) (overseas clearing and settlement facilities):

                              (i)  the licensee ceases to be authorised to operate a clearing and settlement facility in the foreign country in which the licensee’s principal place of business is located; or

                             (ii)  there is a change to the regulatory regime applying in relation to the facility to which the licence relates in the country in which the licensee’s principal place of business is located, and, because of that change, the Minister is no longer satisfied as mentioned in paragraph 824B(2)(c).

826C  Suspension or cancellation following hearing and report

             (1)  If the Minister considers that a CS facility licensee has breached one or more of its obligations as a CS facility licensee under this Chapter, the Minister may give the licensee a written notice that requires the licensee to show cause, at a hearing before a specified person, why the licence should not be suspended or cancelled.

             (2)  The notice must specify:

                     (a)  the grounds on which it is proposed to suspend or cancel the licence; and

                     (b)  a reasonable time and place at which the hearing is to be held.

However, if the licensee consents, the person conducting the hearing may fix a different time or place.

             (3)  The person conducting the hearing must:

                     (a)  give the licensee an opportunity to be heard at the hearing; and

                     (b)  give the Minister:

                              (i)  a report about the hearing; and

                             (ii)  a recommendation about the grounds in the notice on which it is proposed to suspend or cancel the licence.

             (4)  After considering the report and recommendation, the Minister may:

                     (a)  decide to take no further action in relation to the matter and give written advice of that decision to the licensee; or

                     (b)  suspend the licence for a specified period, or cancel the licence, by giving written notice to the licensee.

Note:          The Minister must have regard to the matters in section 827A.

826D  Effect of suspension

             (1)  A person whose Australian CS facility licence is suspended is taken not to hold that licence while it is suspended.

             (2)  However, the Minister may specify in the written notice to the licensee that subsection (1) does not apply for specified purposes.

826E  Variation or revocation of suspension

                   The Minister may at any time vary or revoke a suspension of an Australian CS facility licence by giving written notice to the licensee.

826F  Publication of notice of licence suspension or cancellation

             (1)  If the Minister:

                     (a)  suspends, or varies or revokes a suspension of, an Australian CS facility licence; or

                     (b)  cancels an Australian CS facility licence;

the Minister must publish a notice in the Gazette to that effect.

             (2)  The notice must state when the action took effect.

826G  Suspension and cancellation only in accordance with this Subdivision

                   An Australian CS facility licence cannot be varied, suspended or cancelled otherwise than in accordance with this Subdivision.

Note:          The conditions on the licence can be varied under section 825A.


 

Division 4Other matters

827A  Matters to be taken into account by the Minister

             (1)  The Minister must have regard to certain matters in deciding whether to:

                     (a)  grant an applicant an Australian CS facility licence under section 824B; or

                     (b)  impose, vary or revoke conditions on such a licence under section 825A; or

                     (c)  suspend or cancel such a licence under section 826C; or

                     (d)  disallow a change to the operating rules of a licensed CS facility under section 822E.

             (2)  These are the matters the Minister must have regard to:

                     (a)  the structure, or proposed structure, of the facility;

                     (b)  the nature of the services provided, or proposed to be provided, by the facility;

                     (c)  the size, or proposed size, of the facility;

                     (d)  the nature of the financial products in respect of which the facility provides services or proposes to provide services;

                     (e)  the participants, or proposed participants, in the facility and whether those participants:

                              (i)  in using the facility’s services, are, or will be, providing financial services to other persons; or

                             (ii)  use, or will use, the facility’s services in respect of financial products they acquire or dispose of as retail clients or as wholesale clients; or

                            (iii)  are, or will be, participants in a financial market, or other clearing and settlement facilities, as well;

                      (f)  the technology used, or proposed to be used, in the operation of the facility;

                     (g)  whether it would be in the public interest to take the action referred to in subsection (1);

                     (h)  any relevant advice received from ASIC or the Reserve Bank of Australia.

The Minister may also have regard to any other matter that the Minister considers relevant.

             (3)  If the Minister is deciding whether to take the action mentioned in paragraph (1)(a), (b) or (c) in respect of an Australian CS facility licence granted under subsection 824B(2) (overseas clearing and settlement facilities), the Minister must also have regard to:

                     (a)  the criteria that the licensee or applicant satisfied to obtain an authorisation to operate the same facility in the foreign country in which their principal place of business is located; and

                     (b)  the obligations they must continue to satisfy to keep the authorisation; and

                     (c)  the level of supervision to which the facility is subject in that country; and

                     (d)  whether adequate arrangements exist for cooperation between ASIC, the Reserve Bank of Australia and the authority, or authorities, that are responsible for that supervision.

827B  ASIC may give advice to Minister

                   ASIC may give advice to the Minister in relation to:

                     (a)  any matter in respect of which the Minister has a discretion under this Part; or

                     (b)  any other matter concerning clearing and settlement facilities.

Note:          In some cases, the Minister must have regard to ASIC’s advice: see paragraph 827A(2)(h).

827C  Reserve Bank may give advice to Minister

                   The Reserve Bank of Australia may give advice to the Minister in relation to any matter concerning clearing and settlement facilities.

Note:          In some cases, the Minister must have regard to the Reserve Bank’s advice: see paragraph 827A(2)(h).

827D  Reserve Bank may determine financial stability standards

             (1)  The Reserve Bank of Australia (the Reserve Bank) may, in writing, determine standards for the purposes of ensuring that CS facility licensees conduct their affairs in a way that causes or promotes overall stability in the Australian financial system.

             (2)  The standards are to be complied with by:

                     (a)  all CS facility licensees; or

                     (b)  a specified class of CS facility licensees, in the case of a standard that is expressed to apply only in relation to that class.

          (2A)  If there is an inconsistency between the standards and the derivative transaction rules or the derivative trade repository rules, the standards prevail to the extent of the inconsistency.

             (3)  Before the Reserve Bank determines a standard, it must consult with:

                     (a)  the CS facility licensees that will be required to comply with the standard; and

                     (b)  ASIC.

             (4)  A standard may impose different requirements to be complied with in different situations or in respect of different activities.

             (5)  A standard:

                     (a)  comes into force:

                              (i)  unless subparagraph (ii) applies—on the day on which the determination of the standard is made; or

                             (ii)  if that determination specifies a later day as the day on which the standard comes into force—on the day so specified; and

                     (b)  continues in force until it is revoked.

             (6)  The Reserve Bank may vary a standard in writing. Before it does so, it must consult with:

                     (a)  the CS facility licensees that will be required to comply with the standard if it is varied as proposed; and

                     (b)  ASIC.

             (7)  If the Reserve Bank determines or varies a standard, it must, as soon as practicable:

                     (a)  cause a notice advising of the determination of the standard, or of the variation of the standard, and summarising the purpose and effect of the standard or variation, to be published in the Gazette; and

                     (b)  make the text of the notice available on the internet; and

                     (c)  give a copy of the standard, or of the variation, to the following:

                              (i)  each CS facility licensee to which the standard applies;

                             (ii)  the Minister;

                            (iii)  ASIC.

             (8)  The Reserve Bank may revoke a standard in writing. Before it does so, it must consult with ASIC.

             (9)  If the Reserve Bank revokes a standard, it must, as soon as practicable:

                     (a)  cause a notice advising of the revocation of the standard to be published in the Gazette; and

                     (b)  make the text of the notice available on the internet; and

                     (c)  give notice of the revocation of the standard to the following:

                              (i)  each CS facility licensee to which the standard applied;

                             (ii)  the Minister;

                            (iii)  ASIC.

           (10)  The Reserve Bank must take reasonable steps to ensure that copies of the current text of the standards are available for inspection and purchase.


 

Part 7.4Limits on involvement with licensees

Division 1Limit on control of certain licensees

Subdivision A15% voting power limit

850A  Scope of Division

             (1)  This Division applies in relation to a body corporate that:

                     (a)  has an Australian market licence or an Australian CS facility licence; or

                     (b)  is the holding company of a body corporate that has an Australian market licence or an Australian CS facility licence;

and that is specified in regulations made for the purposes of this section.

             (2)  In this Division, such a body is called a widely held market body.

850B  Meaning of unacceptable control situation

             (1)  For the purposes of this Division, an unacceptable control situation exists in relation to a widely held market body and in relation to a particular person if the person’s voting power in the body is more than:

                     (a)  15%; or

                     (b)  in relation to a body other than the Australian Stock Exchange Limited—if an approval of a higher percentage is in force under Subdivision B in relation to the body and in relation to the person, that higher percentage; or

                     (c)  in relation to the Australian Stock Exchange Limited—if the regulations prescribe a higher percentage in relation to the Australian Stock Exchange Limited in relation to the person, that higher percentage.

             (2)  Regulations made for the purposes of paragraph (1)(c) may not take effect earlier than the day after the last day on which the regulations may be disallowed under Part 5 of the Legislative Instruments Act 2003.

850C  Acquisitions of shares

                   If:

                     (a)  a person, or 2 or more persons under an arrangement, acquire shares in a body corporate; and

                     (b)  the acquisition has the result, in relation to a widely held market body, that:

                              (i)  an unacceptable control situation comes into existence in relation to the body and in relation to a person; or

                             (ii)  if an unacceptable control situation already exists in relation to the body and in relation to a person—there is an increase in the voting power of the person in the body;

the person or persons mentioned in paragraph (a) contravene this section.

Note:          A contravention of this section is an offence (see subsection 1311(1)).

850D  Remedial orders

             (1)  If an unacceptable control situation exists in relation to a widely held market body, the Court may make such orders as the Court considers appropriate for the purpose of ensuring that the unacceptable control situation ceases to exist.

             (2)  However, the Court may only make orders under this section on application by:

                     (a)  the Minister; or

                     (b)  ASIC; or

                     (c)  the body; or

                     (d)  a person who has any voting power in the body.

             (3)  The Court’s orders may include:

                     (a)  an order directing the disposal of shares; or

                     (b)  an order restraining the exercise of any rights attached to shares; or

                     (c)  an order prohibiting or deferring the payment of any sums due to a person in respect of shares held by the person; or

                     (d)  an order that any exercise of rights attached to shares be disregarded; or

                     (e)  an order directing any person to do or refrain from doing a specified act, for the purpose of securing compliance with any other order made under this section; or

                      (f)  an order containing such ancillary or consequential provisions as the Court thinks just.

             (4)  Subsection (3) does not, by implication, limit subsection (1).

             (5)  Before making an order under this section, the Court may direct that notice of the application be given to such persons as the Court thinks fit or be published in such manner as the Court thinks fit, or both.

             (6)  The Court may, by order:

                     (a)  rescind, vary or discharge an order made by the Court under this section; or

                     (b)  suspend the operation of such an order.

850E  Injunctions

             (1)  If any conduct (including a refusal or failure to act) amounts or would amount to a contravention of this Division in relation to a particular widely held market body, the body is taken, for the purposes of section 1324, to be a person whose interests are affected by the conduct.

             (2)  Subsection (1) does not, by implication, limit the class of persons whose interests are affected by the conduct.

             (3)  The Minister has the same powers as ASIC to apply for an injunction under section 1324 in relation to a contravention of this Division.

             (4)  The powers in sections 850D and 1324 do not, by implication, limit each other.

Subdivision BApproval to exceed 15% voting power limit

851A  Application for approval to exceed 15% voting power limit

             (1)  A person may apply for approval to have voting power of more than 15% in a particular widely held market body (other than the Australian Stock Exchange Limited) by lodging with ASIC an application that:

                     (a)  specifies the percentage of voting power (if any) the person currently has in the widely held market body; and

                     (b)  specifies the percentage of voting power the person is seeking approval to have in the body; and

                     (c)  sets out the person’s reasons for making the application.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (2)  ASIC must give the application to the Minister as soon as possible.

851B  Approval of application

             (1)  If the Minister is satisfied that it is in the national interest to approve the applicant having voting power in the widely held market body of more than 15%, the Minister may grant the application.

             (2)  If the Minister grants the application, the Minister must:

                     (a)  give written notice of the approval to the applicant; and

                     (b)  specify the percentage of the voting power the Minister approves the applicant having in the widely held market body (which may or may not be the percentage the applicant applied for); and

                     (c)  either:

                              (i)  specify the period during which the approval remains in force; or

                             (ii)  specify that the approval remains in force indefinitely.

             (3)  If the Minister refuses the application, the Minister must give written notice of the refusal to the applicant.

             (4)  As soon as practicable, the Minister must arrange for a copy of a notice of approval under this section to be:

                     (a)  published in the Gazette; and

                     (b)  given to the body concerned.

851C  Duration of approval

             (1)  An approval under section 851B remains in force:

                     (a)  if the notice of approval specifies a period during which the approval remains in force—until the end of that period, or if the Minister extends that period, until the end of that extended period; or

                     (b)  otherwise—indefinitely.

Extension of approval

             (2)  A person who holds an approval under section 851B that is in force for a specified period may apply to extend that period by lodging with ASIC an application that sets out the person’s reasons for making the application.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (3)  ASIC must give the application to the Minister as soon as possible.

             (4)  If the Minister is satisfied that it is in the national interest to grant the extension, the Minister may grant the application.

             (5)  If the Minister grants the application, the Minister must:

                     (a)  give written notice of the extension to the applicant; and

                     (b)  specify the extended period during which the approval remains in force (which may or may not be the period the applicant applied for).

             (6)  If the Minister refuses the application, the Minister must give written notice of the refusal to the applicant.

             (7)  As soon as practicable, the Minister must arrange for a copy of a notice of extension under this section to be:

                     (a)  published in the Gazette; and

                     (b)  given to the widely held market body concerned.

851D  Conditions of approval

             (1)  An approval under section 851B is subject to such conditions (if any) as are specified in the notice of approval.

             (2)  The Minister may, by written notice given to a person who holds an approval under section 851B:

                     (a)  impose one or more conditions or further conditions to which the approval is subject; or

                     (b)  revoke or vary any condition:

                              (i)  imposed under paragraph (a); or

                             (ii)  specified in the notice of approval.

             (3)  The Minister’s power under subsection (2) may be exercised:

                     (a)  on the Minister’s own initiative; or

                     (b)  on application by the person who holds the approval.

             (4)  An application made by a person under paragraph (3)(b) must be lodged with ASIC and must set out the person’s reasons for making the application.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (5)  ASIC must give the application to the Minister as soon as possible.

             (6)  If the Minister refuses an application under paragraph (3)(b), the Minister must give written notice of the refusal to the applicant.

             (7)  As soon as practicable, the Minister must arrange for a copy of a notice under subsection (2) to be:

                     (a)  published in the Gazette; and

                     (b)  given to the widely held market body concerned.

             (8)  A person who holds an approval under section 851B must give written notice to ASIC if they become aware that they have breached a condition to which the approval is subject.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

851E  Varying percentage approved

Application by holder of approval

             (1)  A person who holds an approval under section 851B may apply to vary the percentage specified in the approval by lodging with ASIC an application that:

                     (a)  specifies the percentage of the voting power the person currently has in the widely held market body concerned; and

                     (b)  specifies the percentage of the voting power the person is seeking approval to have in the body; and

                     (c)  sets out the person’s reasons for making the application.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (2)  ASIC must give the application to the Minister as soon as possible.

             (3)  If the Minister is satisfied that it is in the national interest to vary the percentage, the Minister may grant the application.

             (4)  If the Minister grants the application, the Minister must:

                     (a)  give written notice of the variation to the applicant; and

                     (b)  specify the variation granted (which may or may not be the variation the applicant applied for).

             (5)  If the Minister refuses an application, the Minister must give written notice of the refusal to the applicant.

Minister’s own initiative

             (6)  The Minister may, by written notice given to a person who holds an approval under section 851B, vary the percentage specified in the approval if the Minister is satisfied that it is in the national interest to do so.

Percentage varied upwards

             (7)  If the Minister varies a percentage upwards, the variation takes effect on the day the notice of variation is given.

Percentage varied downwards

             (8)  If the Minister varies a percentage downwards, the variation takes effect on the day specified in the notice of variation. The specified day must be a day at least 90 days after the day on which the notice is given.

Notification of variation

             (9)  As soon as practicable, the Minister must arrange for a copy of a notice of variation under this section to be:

                     (a)  published in the Gazette; and

                     (b)  given to the widely held market body concerned.

851F  Revoking an approval

             (1)  The Minister may, by written notice given to a person who holds an approval under section 851B in relation to a widely held market body, revoke the approval if the Minister is satisfied that:

                     (a)  it is in the national interest to do so; or

                     (b)  an unacceptable control situation exists in relation to the widely held market body and in relation to the person; or

                     (c)  there has been a contravention of a condition to which the approval is subject.

             (2)  The revocation takes effect on the day specified in the notice of revocation. The specified day must be a day at least 90 days after the day on which the notice is given.

             (3)  If a person who holds an approval under section 851B requests the Minister to revoke the approval, the Minister must, by written notice given to the person, revoke the approval. The revocation takes effect on the day specified in the notice of revocation.

             (4)  As soon as practicable, the Minister must arrange for a copy of a notice of revocation under this section to be:

                     (a)  published in the Gazette; and

                     (b)  given to the widely held market body concerned.

851G  Further information about applications

             (1)  This section applies to an application under this Subdivision.

             (2)  The Minister may, by written notice given to the applicant, require the applicant to give the Minister, within a specified period, further information about the application.

             (3)  The Minister may refuse to consider the application until the applicant gives the Minister the information.

851H  Time limit for Minister’s decision

             (1)  The Minister must make a decision on an application under this Subdivision within 30 days after receiving the application.

             (2)  However, before the end of the 30 days, the Minister may decide to extend the period for considering the application until the end of 60 days after the application was received.

             (3)  If the Minister has not made a decision within the 30 days (or the 60 days, if subsection (2) applies), the Minister is taken to have granted whatever was applied for. As soon as practicable after that happens, the Minister must arrange for a notice to that effect to be:

                     (a)  published in the Gazette; and

                     (b)  given to the widely held market body concerned.

             (4)  The time for making the decision stops running if the Minister gives a notice under section 851G in relation to the application, and does not start again until the notice is complied with.

             (5)  The time limit in this section does not apply to an application under section 851A or 851E if an unacceptable control situation exists in relation to the applicant and in relation to the relevant widely held market body at any time before the Minister makes a decision.

851I  Preservation of voting power in relation to bodies specified in regulations made for section 850A

             (1)  A person holding a particular percentage of voting power in a body at its specification time (see subsection (3)) is taken at that time to be granted an approval under section 851B to hold that percentage of voting power in the body if:

                     (a)  in a case where the body’s specification time occurs at the same time as the commencement of this section—the person holding the percentage of voting power in the body immediately before the specification time did not, to any extent, constitute a contravention of previous law (see subsection (3)); and

                     (b)  whether the body’s specification time occurs at the same time as, or after, the commencement of this section—on the body’s specification time, the person holding that percentage of voting power in the body would (apart from this section) constitute an unacceptable control situation.

Note:          Conditions can be imposed on the approval under section 851D and then varied or revoked in accordance with that section.

             (2)  The Minister is taken to have complied with the Minister’s obligations under section 851B in relation to the granting of the approval to the person.

             (3)  In this section:

contravention of previous law means a contravention of a provision of Part 7.1A of this Act as in force immediately before the commencement of this section.

specification time, in relation to a body, means the time a body first becomes specified in regulations made for the purposes of section 850A.

Subdivision COther matters

852A  Acquisition of property

             (1)  The Court must not make an order under section 850D if:

                     (a)  the order would result in the acquisition of property from a person otherwise than on just terms; and

                     (b)  the order would be invalid because of paragraph 51(xxxi) of the Constitution.

             (2)  Section 1350 does not apply in relation to the making of an order under section 850D.

             (3)  In this section:

acquisition of property has the same meaning as in paragraph 51(xxxi) of the Constitution.

just terms has the same meaning as in paragraph 51(xxxi) of the Constitution.

852B  Anti‑avoidance

             (1)  If:

                     (a)  one or more persons enter into, begin to carry out or carry out a scheme; and

                     (b)  it would be concluded that the person, or any of the persons, who entered into, began to carry out or carried out the scheme or any part of the scheme did so for the sole or dominant purpose of avoiding the application of any provision of Subdivision A in relation to any person or persons (whether or not mentioned in paragraph (a)); and

                     (c)  as a result of the scheme or a part of the scheme, a person (the controller) increases the controller’s voting power in a widely held market body;

the Minister may give the controller a written direction to cease having that voting power within a specified time.

             (2)  A person who is subject to a written direction under subsection (1) must comply with the direction.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (3)  In this section:

increase voting power includes increasing it from a starting point of nil.


 

Division 2Individuals who are not fit and proper are disqualified

853A  Who is disqualified

                   For the purposes of this Division, an individual is disqualified if:

                     (a)  a declaration by ASIC that the individual is disqualified is in effect under section 853C; or

                     (b)  the individual is disqualified from managing a corporation under section 206B; or

                     (c)  the individual is on the Register that ASIC must keep under section 1274AA.

853B  When an individual is involved in an operator

                   For the purposes of this Division, an individual is involved in a market licensee, a CS facility licensee or a derivative trade repository licensee, or an applicant for such a licence, if:

                     (a)  the individual is a director, secretary or senior manager of the licensee or applicant, or in a holding company of the licensee or applicant; or

                     (b)  the individual has more than 15% of the total voting power in the licensee or applicant, or in a holding company of the licensee or applicant.

853C  Declaration by ASIC

             (1)  ASIC may declare in writing that an individual who is involved in a market licensee, a CS facility licensee or a derivative trade repository licensee, or in an applicant for a licence of any of those kinds, is disqualified for the purposes of this Division.

             (2)  ASIC may make such a declaration only if ASIC is satisfied that, because the individual is unfit to be involved in the licensee or applicant, there is a risk that the licensee or applicant will breach its obligations under this Chapter if the declaration is not made.

             (3)  In deciding whether an individual is unfit as mentioned in subsection (2), ASIC must take into account such matters as the individual’s fame, character and integrity, rather than his or her competence, experience, knowledge or other such attributes.

             (4)  A declaration may be expressed to remain in effect for a specified period or until a specified event occurs. Otherwise, it remains in effect indefinitely (unless it is revoked under section 853E).

853D  Procedure for declaration

             (1)  ASIC must not make a declaration under section 853C unless it has followed the procedure in this section.

             (2)  Within 42 days after:

                     (a)  a body corporate applies for an Australian market licence, an Australian CS facility licence or an Australian derivative trade repository licence; or

                     (b)  ASIC receives other information that may be relevant to deciding whether to make a declaration under section 853C about an individual who is involved in an applicant for an Australian market licence, an Australian CS facility licence or an Australian derivative trade repository licence, or in an existing licensee;

ASIC may give the applicant or licensee written notice that ASIC proposes to make a declaration under section 853C about the individual in question.

             (3)  ASIC must give a copy of the notice to the individual and to the Minister.

             (4)  The notice must:

                     (a)  state the grounds on which ASIC proposes to make the declaration; and

                     (b)  require the applicant or licensee, and the individual, to show, at a hearing before a specified person, why the declaration should not be made; and

                     (c)  specify a reasonable time and place at which the hearing is to be held.

However, if the applicant or licensee, and the individual, consent, the person conducting the hearing may fix a different time or place.

             (5)  The person conducting the hearing must:

                     (a)  give the applicant or licensee, and the individual, an opportunity to be heard at the hearing; and

                     (b)  give ASIC:

                              (i)  a report about the hearing; and

                             (ii)  a recommendation about the grounds in the notice on which it is proposed to make the declaration.

             (6)  As soon as practicable after the hearing, ASIC must:

                     (a)  decide whether to make the declaration; and

                     (b)  give each of the following persons a copy of the declaration, or a written notice of its decision not to make the declaration:

                              (i)  the applicant or licensee;

                             (ii)  the individual;

                            (iii)  the Minister.

853E  Revoking a declaration

             (1)  ASIC may, in writing, revoke a declaration under section 853C if it is no longer satisfied as mentioned in subsection 853C(2) in relation to the individual in question.

             (2)  ASIC must give a copy of the revocation to the relevant applicant or licensee, the individual and the Minister.

853F  Obligations on disqualified individuals

             (1)  A disqualified individual must not become involved in a market licensee, a CS facility licensee or a derivative trade repository licensee.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

             (2)  A disqualified individual who is involved in a market licensee, a CS facility licensee or a derivative trade repository licensee must take all reasonable steps to ensure that he or she ceases to be involved in the licensee.

Note:          Failure to comply with this subsection is an offence (see subsection 1311(1)).

853G  Notification by ASIC

                   If ASIC becomes aware that an individual who is involved in a market licensee, a CS facility licensee or a derivative trade repository licensee is disqualified because of paragraph 853A(b) or (c), ASIC must notify the individual, the licensee and the Minister as soon as practicable.


 

Division 3Miscellaneous

854A  Record‑keeping and giving of information

             (1)  The regulations may make provision for and in relation to requiring a person:

                     (a)  to keep and retain records that are relevant to whether a person has voting power in a widely held market body and, if so, how much; and

                     (b)  to keep and retain records that are relevant to determining whether any disqualified individual is involved in a market licensee, a CS facility licensee or a derivative trade repository licensee; and

                     (c)  to give the Minister or ASIC information that is relevant to the matters mentioned in paragraphs (a) and (b); and

                     (d)  to give a widely held market body information that is relevant to the matter mentioned in paragraph (a).

             (2)  The regulations may provide that information given in accordance with a requirement covered by paragraph (1)(c) or (d) must be verified by statutory declaration.

             (3)  However, an individual is not required to give information in accordance with a requirement covered by paragraph (1)(c) or (d) if the information might tend to incriminate the individual or expose the individual to a penalty.

             (4)  A person contravenes this section if:

                     (a)  the person makes or keeps a record in compliance, or purported compliance, with a requirement covered by subsection (1); and

                     (b)  the person does so knowing that the record:

                              (i)  is false or misleading; or

                             (ii)  omits any matter or thing without which the record is misleading.

Note:          A contravention of this subsection is an offence (see subsection 1311(1)).

             (5)  Regulations made for the purposes of this section may make provision for or in relation to a matter by conferring a power on the Minister.

854B  Exemptions and modifications by regulations

             (1)  The regulations may:

                     (a)  exempt a person or class of persons from all or specified provisions of this Part; or

                     (b)  provide that this Part applies as if specified provisions were omitted, modified or varied as specified in the regulations.

             (3)  For the purpose of this section, the provisions of this Part include:

                     (a)  definitions in this Act, or in the regulations, as they apply to references in this Part; and

                     (b)  any provisions of Part 10.2 (transitional provisions) that relate to provisions of this Part.


 

Part 7.5Compensation regimes for financial markets

Division 1Preliminary

880A  Part does not apply to markets licensed under special provisions about overseas markets

                   Nothing in this Part applies in relation to:

                     (a)  a financial market the operation of which is licensed under subsection 795B(2); or

                     (b)  an application for the grant of a licence under that subsection.

880B  Definitions

             (1)  In this Part:

adequate has a meaning affected by subsection (2).

borrowing includes obtaining credit.

compensation arrangements are arrangements that consist of:

                     (a)  a set of rules about compensation; and

                     (b)  a source of funds from which compensation is payable; and

                     (c)  associated administrative and monitoring arrangements.

compensation rules means rules referred to in paragraph (a) of the definition of compensation arrangements.

Division 3 arrangements means compensation arrangements approved under Division 3.

Division 3 loss means a loss described in section 885C, other than a loss that section 885D provides is to be taken not to be a Division 3 loss.

Division 4 arrangements means the arrangements constituted by Division 4.

fidelity fund, in relation to a financial market, means a fund consisting principally of contributions made by:

                     (a)  participants and past participants in the market; or

                     (b)  participants and past participants in:

                              (i)  the market; and

                             (ii)  one or more other financial markets;

the purpose, or the main purpose, of which is to provide a source of funds for the payment of compensation to clients of participants. Any investments made using money in the fund are taken to form part of the fund.

NGF means the National Guarantee Fund that continues in existence under section 889A.

operating rules, in relation to the SEGC, means the rules referred to in section 890D.

Part 7.5 arrangements means Division 3 arrangements or Division 4 arrangements.

pay compensation includes provide compensation in a form other than money.

SEGC means the body corporate in relation to which a nomination as the Securities Exchanges Guarantee Corporation is in force under section 890A.

             (2)  For the purposes of this Part, the question whether proposed compensation arrangements, compensation arrangements as proposed to be changed, or compensation arrangements that have been approved, are adequate is to be determined in accordance with Subdivision D of Division 3.


 

Division 2When there must be a compensation regime

881A  Licensed markets through which participants provide services for retail clients must generally have a compensation regime

             (1)  If:

                     (a)  any of the participants in a licensed market, in effecting transactions through the market, provide financial services for persons as retail clients; and

                     (b)  in connection with the provision of those financial services, those persons will or may give money or other property, or authority over property, to those participants; and

                     (c)  the market is not a financial market to which Division 4 applies;

there must be compensation arrangements in relation to the market that are approved in accordance with Division 3.

             (2)  The compensation regime applicable in relation to financial markets to which Division 4 applies is as constituted by that Division.

881B  Additional requirements for the licence application

             (1)  A person who is applying for an Australian market licence must state in their application:

                     (a)  whether any of the participants in the market, in effecting transactions through the market, will provide financial services for persons as retail clients; and

                     (b)  if any participants will so provide financial services to persons as retail clients—whether, in connection with the provision of those financial services, those persons will or may give money or other property, or authority over property, to those participants.

             (2)  If:

                     (a)  participants in the market will provide financial services to persons as retail clients as mentioned in paragraph (1)(a); and

                     (b)  in connection with the provision of those financial services, those persons will or may give money or property, or authority over property, to those participants;

the application must:

                     (c)  contain the information, in relation to the proposed compensation arrangements, required by regulations made for the purposes of this paragraph and be accompanied by a copy of the proposed compensation rules; or

                     (d)  state that the market is or will be covered by Division 4, and set out evidence, in accordance with the requirements (if any) of the regulations, in support of that statement.

881C  What happens if an application contains information in accordance with paragraph 881B(2)(c)

                   If a licence application contains information in relation to proposed compensation arrangements as required by paragraph 881B(2)(c), the Minister must deal with the application in accordance with section 882A.

881D  What happens if an application contains a statement in accordance with paragraph 881B(2)(d)

             (1)  If a licence application contains a statement in accordance with paragraph 881B(2)(d), the Minister must consider whether he or she is satisfied that the market will be covered by Division 4.

             (2)  If the Minister is not so satisfied, the application for the licence must be rejected.

             (3)  If the Minister is so satisfied, the Minister may (subject to the other provisions about granting licences) grant the licence.

Note:          The other provisions about granting licences are in Subdivision A of Division 4 of Part 7.2.


 

Division 3Approved compensation arrangements

Subdivision AApproval of compensation arrangements

882A  How to get compensation arrangements approved with grant of licence

             (1)  If an application for an Australian market licence contains information in relation to proposed compensation arrangements in accordance with paragraph 881B(2)(c), the Minister must treat the application as also being an application for approval of the compensation arrangements and, for that purpose, must consider whether the proposed arrangements are adequate.

             (2)  If the Minister does not consider that the proposed compensation arrangements are adequate, the application for the licence must be rejected.

             (3)  If the Minister considers that the proposed compensation arrangements are adequate, the Minister may (subject to the other provisions about granting licences) grant the licence. On the granting of the licence, the Minister is taken to have approved the compensation arrangements.

Note:          The other provisions about granting licences are in Subdivision A of Division 4 of Part 7.2.

             (4)  In the conditions of the licence, the Minister must:

                     (a)  deal with the minimum amount of cover required in relation to the compensation arrangements in such manner as the Minister thinks appropriate; and

                     (b)  identify the source of funds available to cover claims, on the basis of which the Minister approves the arrangements (see section 885H).

882B  How to get compensation arrangements approved after licence is granted

             (1)  If the operator of a licensed market wants to have compensation arrangements for the market approved after the licence has been granted, the operator must apply for approval in accordance with this section.

             (2)  The application must:

                     (a)  contain the information, in relation to the proposed compensation arrangements, required by regulations made for the purposes of this paragraph and be accompanied by a copy of the proposed compensation rules; and

                     (b)  be made to the Minister by lodging the application with ASIC.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (3)  If the Minister does not consider that the proposed compensation arrangements are adequate, the application for approval must be rejected.

             (4)  If the Minister considers that the proposed compensation arrangements are adequate, the Minister must:

                     (a)  approve the compensation arrangements in writing; and

                     (b)  vary the conditions of the operator’s licence so as to:

                              (i)  deal with the minimum amount of cover required in relation to the compensation arrangements in such manner as the Minister thinks appropriate; and

                             (ii)  identify the source of funds available to cover claims, on the basis of which the Minister approves the arrangements (see section 885H).

             (5)  In varying licence conditions as mentioned in paragraph (4)(b), the Minister must proceed under section 796A as though the licensee had applied for the variation to be made.

882C  Revocation of approval

                   The Minister may at any time revoke an approval of compensation arrangements if the Minister considers that the arrangements are not adequate.

882D  Minister’s power to give directions

             (1)  If the Minister considers that a market licensee’s approved compensation arrangements are no longer adequate, the Minister may give the licensee a written direction to do specified things that the Minister believes will ensure that the arrangements become adequate once more.

             (2)  The licensee must comply with the direction.

             (3)  If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

             (4)  The Minister may vary or revoke a direction at any time by giving written notice to the licensee.

Subdivision BEffect of compensation rules forming part of Division 3 arrangements

883A  Legal effect of compensation rules

                   Compensation rules forming part of Division 3 arrangements for a financial market have effect as a contract under seal between the operator of the market and each participant in the market under which each of those persons agrees to observe the rules to the extent that they apply to the person and engage in conduct that the person is required by the rules to engage in.

883B  Enforcement of compensation rules

             (1)  If a person who is under an obligation to comply with or enforce any of the compensation rules forming part of Division 3 arrangements for a financial market fails to meet that obligation, an application to the Court may be made by:

                     (a)  ASIC; or

                     (b)  the operator of the market; or

                     (c)  the operator of a clearing and settlement facility, if:

                              (i)  there are clearing and settlement arrangements (as defined in section 790A) for some or all transactions effected through the market; and

                             (ii)  those arrangements are with the operator of the facility; or

                     (d)  a person aggrieved by the failure.

             (2)  After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

                     (a)  the person against whom the order is sought; or

                     (b)  if that person is a body corporate—the directors of the body corporate;

about compliance with, or enforcement of, the compensation rules.

             (3)  For the purposes of this section, if the operator of the market fails to comply with or enforce provisions of the compensation rules, a person who is, under the rules, entitled to make a claim for compensation is (whether or not they have actually made a claim) taken to be a person aggrieved by the failure.

             (4)  There may be other circumstances in which a person may be aggrieved by a failure for the purposes of this section.

883C  Other sources of funds for compensation

                   Nothing in this Division makes the operator of a financial market liable to pay compensation from any source of funds other than the source identified in the licence conditions under paragraph 882A(4)(b) or subparagraph 882B(4)(b)(ii).

883D  Payment of levies

             (1)  This section applies if, under the compensation rules forming part of Division 3 arrangements for a particular financial market, a levy is payable by all or some of the participants in the market in order to ensure that adequate funds are available for the purposes of the arrangements.

             (2)  The levy is payable to the operator of the market, as agent for the Commonwealth, by each of the participants affected.

Note:          For the imposition and amount of the levy, see the Corporations (Compensation Arrangements Levies) Act 2001.

             (3)  An amount of levy payable under subsection (2) must be paid within the time and in the manner specified by the operator either generally or in relation to a particular case.

             (4)  Whenever an amount of levy (the levy amount) is paid under this section, or under section 6 of the Corporations (Compensation Arrangements Levies) Act 2001, to the operator of a market as agent for the Commonwealth:

                     (a)  the operator must pay an amount equal to the levy amount to the Commonwealth; and

                     (b)  the Consolidated Revenue Fund is appropriated by that amount for the purpose of payment to the operator; and

                     (c)  the Commonwealth must pay the amount so appropriated to the operator; and

                     (d)  the operator must deal with the amount it receives under paragraph (c) in accordance with the compensation rules.

             (5)  A payment of an amount to the operator of a market as required by paragraph (4)(c) in respect of a particular levy amount is subject to a condition that, if the Commonwealth becomes liable to refund the whole or a part of the levy amount, the operator must pay the Commonwealth an amount equal to the amount that the Commonwealth is liable to refund.

             (6)  The Financial Management and Accountability Act 1997 does not apply in relation to the payment of an amount of levy under this section to the operator of a market as agent for the Commonwealth. However, the operation of that Act in relation to the following payments is not affected:

                     (a)  the payment of an amount to the Commonwealth as required by paragraph (4)(a); or

                     (b)  the payment of an amount by the Commonwealth as required by paragraph (4)(c).

The operator must, in accordance with the regulations, notify the Commonwealth of payments of levy it receives as agent for the Commonwealth.

             (7)  An amount payable by an operator as required by paragraph (4)(a) may be set off against an amount payable to the operator as required by paragraph (4)(c).

Subdivision CChanging Division 3 arrangements

884A  Division 3 arrangements must generally only be changed in accordance with this Subdivision

             (1)  The operator of a financial market in relation to which there are Division 3 arrangements must not change those arrangements except in accordance with this Subdivision.

             (2)  However, a change may be made to Division 3 arrangements otherwise than in accordance with this Subdivision if:

                     (a)  the change is not to a matter required by section 885B to be dealt with in the compensation rules; and

                     (b)  the change is merely a minor administrative change.

884B  Changing Division 3 arrangements—matters required to be dealt with in the compensation rules

             (1)  If the proposed change is to a matter required by section 885B to be dealt with in the compensation rules, the change may only be made by changing the rules.

             (2)  As soon as practicable after the change is made, the operator must lodge with ASIC written notice of the change.

             (3)  The notice must:

                     (a)  set out the text of the change; and

                     (b)  specify the date on which the change was made; and

                     (c)  contain an explanation of the purpose of the change.

             (4)  If no notice is lodged with ASIC within 21 days after the change is made, the change ceases to have effect.

             (5)  As soon as practicable after receiving a notice under subsection (2), ASIC must send a copy of the notice to the Minister.

             (6)  Within 28 days after receiving the copy of the notice, the Minister may disallow all or a specified part of the change to the compensation rules.

             (7)  The Minister must not disallow all or part of the change unless the Minister considers that, because of the change, or that part of the change, the compensation arrangements are not adequate.

             (8)  As soon as practicable after all or part of a change is disallowed, ASIC must give notice of the disallowance to the operator of the market concerned. The change ceases to have effect, to the extent of the disallowance, when the operator receives the notice.

884C  Changing Division 3 arrangements—matters not required to be dealt with in the compensation rules

             (1)  If:

                     (a)  the proposed change is to a matter that is not required by section 885B to be dealt with in the compensation rules (including a matter that is dealt with in the compensation rules even though it is not required to be dealt with in those rules); and

                     (b)  the change is not merely a minor administrative change;

the operator must not make the change unless:

                     (c)  the operator has applied for approval of the change; and

                     (d)  the change has been approved by the Minister.

             (2)  The application for approval must:

                     (a)  include the information, required by regulations made for the purposes of this paragraph, in relation to the proposed change; and

                     (b)  be made to the Minister by lodging the application with ASIC.

Note:          For fees in respect of lodging applications, see Part 9.10.

             (3)  If the Minister does not consider that the compensation arrangements as proposed to be changed are adequate, the application for approval must be rejected.

             (4)  If the Minister considers that the compensation arrangements as proposed to be changed are adequate, the Minister must approve the change.

             (5)  If:

                     (a)  the proposed change is to a matter that is dealt with in the compensation rules even though it is not required to be dealt with in those rules; and

                     (b)  the change is approved;

the operator may make any change to the compensation rules that is necessary to give effect to the change that has been approved or that is incidental to giving effect to that change.

             (6)  If a change to the compensation rules is made as permitted by subsection (5), the operator must, as soon as practicable after the change is made, give ASIC written notice of the change.

             (7)  A notice required by subsection (6) must:

                     (a)  set out the text of the change; and

                     (b)  specify the date on which it was made; and

                     (c)  contain an explanation of why it is a change that is permitted to be made by subsection (5).

Subdivision DAre compensation arrangements adequate?

885A  Purpose of this Subdivision

             (1)  This Subdivision applies for the purpose of determining, for the purposes of a provision of this Division:

                     (a)  whether:

                              (i)  proposed compensation arrangements are adequate; or

                             (ii)  compensation arrangements as proposed to be changed are adequate; or

                     (b)  whether compensation arrangements that have been approved are adequate.

             (2)  A reference in this Subdivision to the arrangements is a reference to the proposed arrangements, the arrangements as proposed to be changed, or the arrangements that have been approved, as the case requires.

             (3)  A reference in this Subdivision to the compensation rules is a reference to the compensation rules, or the proposed compensation rules, forming part of the arrangements under consideration.

885B  Requirements to be complied with for arrangements to be adequate

             (1)  The arrangements are adequate if, and only if, the Minister is satisfied that:

                     (a)  the compensation rules provide adequate coverage for Division 3 losses (see sections 885C and 885D); and

                     (b)  the compensation rules provide for adequate compensation to be paid in respect of Division 3 losses (see section 885E); and

                     (c)  the compensation rules deal adequately with how compensation in respect of Division 3 losses is to be paid (see section 885F); and

                     (d)  the compensation rules deal adequately with the making and determination of claims in respect of Division 3 losses, and with the notification of the outcome of such claims (see section 885G); and

                     (e)  the arrangements provide for an adequate source of funds for paying compensation in respect of Division 3 losses and in respect of any other losses covered by the arrangements (see section 885H); and

                      (f)  the arrangements include adequate arrangements for administration and monitoring (see section 885I); and

                     (g)  under the arrangements, potential claimants have reasonable and timely access to the compensation regime; and

                     (h)  if the licensee ceases (for whatever reason) to be required to have Division 3 arrangements, the rights of people to seek compensation under the arrangements, being rights that accrued while the licensee was required to have such arrangements, will be adequately protected.

             (2)  In considering the matters mentioned in subsection (1), the Minister must also have regard to the matters mentioned in section 885J.

             (3)  The matters that may be dealt with in compensation rules are not limited to matters mentioned in this section.

885C  The losses to be covered

             (1)  Subject to section 885D, the compensation rules must cover losses (Division 3 losses) of a kind described in the following paragraphs:

                     (a)  a person (the client) gave money or other property, or authority over property, to a person (the participant):

                              (i)  who was a participant in the market at that time; or

                             (ii)  who the client reasonably believed to be a participant in the market at that time and who was a participant in the market at some earlier time; and

                     (b)  the money or other property, or the authority, was given to the participant in connection with effecting a transaction, or proposed transaction, covered by provisions of the operating rules of the market relating to transactions effected through the market; and

                     (c)  the effecting of the transaction through the market constitutes or would constitute the provision of a financial service to the client as a retail client; and

                     (d)  the client suffers a loss because of:

                              (i)  if the client gave the participant money or other property—the defalcation or fraudulent misuse of the money or other property by the participant; or

                             (ii)  if the client gave the participant authority over property—the fraudulent misuse of that authority by the participant.

             (2)  The compensation rules must provide that a claim relating to an alleged loss caused by defalcation or fraudulent misuse may be allowed even if:

                     (a)  the person against whom the defalcation or misuse is alleged has not been convicted or prosecuted; and

                     (b)  the evidence on which the claim is allowed would not be sufficient to establish the guilt of that person on a criminal trial in respect of the defalcation or fraudulent misuse.

             (3)  The compensation rules may exclude losses of a kind described above that occur in specified situations. However, the compensation arrangements will not be adequate unless the Minister is satisfied that those exclusions are appropriate.

885D  Certain losses that are not Division 3 losses

             (1)  If, in relation to a loss suffered by a person:

                     (a)  the requirements of subsection 885C(1) are satisfied in relation to a participant and 2 or more financial markets; and

                     (b)  the person did not (expressly or impliedly) instruct the participant to use a particular one of those markets; and

                     (c)  it is not reasonably apparent from the usual business practice of the participant which of those markets the participant would use when acting for the person;

the loss is taken not to be a Division 3 loss.

             (2)  If, in relation to a loss suffered by a person:

                     (a)  the requirements of subsection 885C(1) are satisfied in relation to a participant and a financial market; and

                     (b)  the loss is also connected (see section 888A) with a financial market to which Division 4 applies; and

                     (c)  the person did not (expressly or impliedly) instruct the participant to use a particular one of those markets; and

                     (d)  it is not reasonably apparent from the usual business practice of the participant which of those markets the participant would use when acting for the person;

the loss is taken not to be a Division 3 loss.

             (3)  If, in relation to a loss suffered by a person:

                     (a)  the transaction referred to in paragraph 885C(1)(b) could have been effected otherwise than through a financial market; and

                     (b)  the person did not (expressly or impliedly) instruct the participant concerned to effect the transaction through a financial market; and

                     (c)  it is not reasonably apparent from the usual business practice of the participant that the transaction would be effected through a financial market;

the loss is taken not to be a Division 3 loss.

885E  The amount of compensation

             (1)  Subject to this section, the compensation rules must provide that the amount of compensation to be paid in respect of a Division 3 loss is to be not less than the sum of:

                     (a)  the actual pecuniary loss suffered by the claimant, calculated by reference to the market value of any relevant assets or liabilities as at the date on which the loss was suffered; and

                     (b)  the claimant’s reasonable costs of, and disbursements incidental to, the making and proof of the claim.

             (2)  The compensation rules may provide for the amount of compensation payable in respect of a Division 3 loss to be reduced by reference to a right of set‑off available to the claimant.

             (3)  The compensation rules may impose an upper limit on the amount of compensation to which a person is entitled in respect of a claim in particular circumstances, or an upper limit on the total amount of compensation to which persons are entitled in respect of claims referable to a particular event or circumstance.

             (4)  That upper limit may be specified in the compensation rules or determined by a method specified in the rules.

             (5)  The compensation rules must also provide for the payment to the claimant of interest at the rate applicable under the regulations on the amount of the actual pecuniary loss, or so much of that loss as from time to time has not been compensated by an instalment or instalments of compensation, in respect of the period starting on the day when the loss was suffered and ending on the day when the compensation, or the last instalment of compensation, is paid.

             (6)  The compensation rules may provide for what is to happen if there are insufficient funds to meet claims in respect of Division 3 losses and in respect of any other losses covered by the arrangements. For example, they may provide for the prioritisation of claims, or the apportionment of available funds between claims.

             (7)  In other provisions of this Division a reference to compensation in respect of a Division 3 loss includes (unless the contrary intention appears) a reference to interest referred to in subsection (5).

885F  Method of payment of compensation

             (1)  The compensation rules must deal with how compensation in respect of Division 3 losses is to be paid.

             (2)  Without limiting subsection (1), the compensation rules may provide for compensation to be paid in a lump sum or by instalments.

885G  Making and determination of claims

             (1)  The compensation rules must provide for how claims in respect of Division 3 losses are to be made and determined, and for how claimants are notified of the outcome of their claims.

             (2)  Without limiting subsection (1), the compensation rules may:

                     (a)  require a person making a claim to pay money, or transfer other property, in support of a claim; and

                     (b)  provide for claims to be disallowed unless persons exercise rights of set‑off; and

                     (c)  set time limits for the making of claims; and

                     (d)  provide for claims to be partially allowed (including, for example, in a case where the operator considers that the claimant’s conduct contributed to the loss).

885H  The source of funds—general

                   There must be an adequate source of funds available to cover claims made under the compensation arrangements in respect of Division 3 losses and in respect of any other losses covered by the arrangements.

Note 1:       For example, the source of funds may consist of:

(a)    a fidelity fund; or

(b)    insurance arrangements; or

(c)    an irrevocable letter of credit.

Note 2:       The source of funds does not have to consist of a single thing. It may consist of a combination of different things.

885I  Administration and monitoring

             (1)  The arrangements must include arrangements for:

                     (a)  the administration of the compensation arrangements; and

                     (b)  monitoring compliance with the compensation arrangements and reporting breaches of the arrangements to the board of the operator of the market; and

                     (c)  monitoring the adequacy of the arrangements and reporting to the board of the operator of the market on the need for, or desirability of, changes to the compensation arrangements.

             (2)  Without limiting subsection (1), the arrangements may give responsibilities to:

                     (a)  the operator of the market, or a related company, or a director or employee of the operator or a related company; or

                     (b)  a committee; or

                     (c)  another person acting under an arrangement with the operator.

             (3)  The people who may be members of a committee referred to in paragraph (2)(b) include, but are not limited to:

                     (a)  participants in the market, or representatives of such participants; and

                     (b)  members of the board of the operator of the market.

885J  The losses to be covered—other matters to be taken into account

             (1)  In considering whether the arrangements are adequate, the Minister must also have regard to:

                     (a)  the services provided by the market and by the participants in the market; and

                     (b)  any risk assessment report in relation to the market given to the Minister under section 892K.

             (2)  The Minister may take into account such other matters as the Minister thinks appropriate.

Subdivision EOther provisions about Division 3 arrangements

886A  Only one claim in respect of the same loss

                   If:

                     (a)  a claim by a person for compensation in respect of a particular Division 3 loss suffered by the person has been allowed under Division 3 arrangements; and

                     (b)  the person makes or has made another claim under those Division 3 arrangements, or under other Division 3 arrangements, in respect of the same loss;

that other claim must not be allowed.

886B  Regulations relating to fidelity funds

                   The regulations may include provisions