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Corporations Act 2001

Authoritative Version
  • - C2018C00275
  • In force - Superseded Version
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Act No. 50 of 2001 as amended, taking into account amendments up to Corporations Amendment (Asia Region Funds Passport) Act 2018
An Act to make provision in relation to corporations and financial products and services, and for other purposes
Administered by: Attorney-General's; Treasury
Registered 17 Jul 2018
Start Date 01 Jul 2018
End Date 17 Sep 2018
Table of contents.

Commonwealth Coat of Arms of Australia

Corporations Act 2001

No. 50, 2001

Compilation No. 88

Compilation date:                              1 July 2018

Includes amendments up to:            Act No. 61, 2018

Registered:                                         17 July 2018

This compilation is in 6 volumes

Volume 1:       sections 1–260E

Volume 2:       sections 283AA–601DJ

Volume 3:       sections 601EA–742

Volume 4:       sections 760A–993D

Volume 5:       sections 1010A–1369A

Volume 6:       sections 1370–1642

                        Schedules

                        Endnotes

Each volume has its own contents

 

 

 

This compilation includes commenced amendments made by Act No. 112, 2017. Amendments made by Act No. 61, 2018 have not commenced but are noted in the endnotes.

 

About this compilation

This compilation

This is a compilation of the Corporations Act 2001 that shows the text of the law as amended and in force on 1 July 2018 (the compilation date).

The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of provisions of the compiled law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the compiled law. Any uncommenced amendments affecting the law are accessible on the Legislation Register (www.legislation.gov.au). The details of amendments made up to, but not commenced at, the compilation date are underlined in the endnotes. For more information on any uncommenced amendments, see the series page on the Legislation Register for the compiled law.

Application, saving and transitional provisions for provisions and amendments

If the operation of a provision or amendment of the compiled law is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes.

Editorial changes

For more information about any editorial changes made in this compilation, see the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as modified but the modification does not amend the text of the law. Accordingly, this compilation does not show the text of the compiled law as modified. For more information on any modifications, see the series page on the Legislation Register for the compiled law.

Self‑repealing provisions

If a provision of the compiled law has been repealed in accordance with a provision of the law, details are included in the endnotes.

  

  

  


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       20

761C..... Meaning of carry on a financial services business............................ 20

761CA.. Meaning of class and kind of financial products and financial services 21

761D..... Meaning of derivative....................................................................... 21

761E...... Meaning of issued, issuer, acquire and provide in relation to financial products     23

761EA... Meaning of margin lending facility, margin call and associated expressions           26

761F...... Meaning of person—generally includes a partnership...................... 29

761FA... Meaning of person—generally includes multiple trustees................. 30

761G..... Meaning of retail client and wholesale client..................................... 31

761GA.. Meaning of retail client—sophisticated investors............................. 37

761H..... References to this Chapter include references to regulations or other instruments made for the purposes of this Chapter.......................................................................................................... 38

Division 3—What is a financial product?                                                        39

Subdivision A—Preliminary                                                                                 39

762A..... Overview of approach to defining what a financial product is.......... 39

762B..... What if a financial product is part of a broader facility?.................... 39

762C..... Meaning of facility............................................................................ 40

Subdivision B—The general definition                                                              40

763A..... General definition of financial product............................................. 40

763B..... When a person makes a financial investment.................................... 41

763C..... When a person manages financial risk............................................. 42

763D..... When a person makes non‑cash payments........................................ 42

763E...... What if a financial product is only incidental?................................... 43

Subdivision C—Specific inclusions                                                                      44

764A..... Specific things that are financial products (subject to Subdivision D) 44

Subdivision D—Specific exclusions                                                                     47

765A..... Specific things that are not financial products................................... 47

Division 4—When does a person provide a financial service?             51

766A..... When does a person provide a financial service?.............................. 51

766B..... Meaning of financial product advice................................................. 52

766C..... Meaning of dealing........................................................................... 55

766D..... Meaning of makes a market for a financial product.......................... 57

766E...... Meaning of provide a custodial or depository service....................... 57

766F...... Meaning of provides a crowd‑funding service.................................. 59

Division 5—What is a financial market?                                                         60

767A..... What is a financial market?............................................................... 60

Division 6—What is a clearing and settlement facility?                          61

768A..... What is a clearing and settlement facility?......................................... 61

Division 7—General provisions relating to civil and criminal liability  63

769A..... Part 2.5 of Criminal Code does not apply......................................... 63

769B..... People are generally responsible for the conduct of their agents, employees etc.      63

769C..... Representations about future matters taken to be misleading if made without reasonable grounds           66

Part 7.2—Licensing of financial markets                                                              68

Division 1—Preliminary                                                                                            68

790A..... Definition.......................................................................................... 68

Division 2—Requirement to be licensed                                                           69

791A..... Need for a licence.............................................................................. 69

791B..... Other prohibitions on holding out..................................................... 69

791C..... Exemptions by Minister.................................................................... 69

791D..... When a market is taken to be operated in this jurisdiction................. 71

Division 3—Regulation of market licensees                                                   72

Subdivision A—Licensee’s obligations                                                               72

792A..... General obligations........................................................................... 72

792B..... Obligation to notify ASIC of certain matters..................................... 73

792C..... Giving ASIC information about a listed disclosing entity................. 75

792D..... Obligation to assist ASIC................................................................. 75

792E...... Obligation to give ASIC access to market facilities........................... 76

792F...... Annual report.................................................................................... 76

792G..... Obligations to notify people about clearing and settlement arrangements in certain circumstances           77

792H..... Change of country by foreign licensee.............................................. 78

792I....... Making information about compensation arrangements publicly available               79

Subdivision B—The market’s operating rules and procedures                    79

793A..... Content of the operating rules and procedures.................................. 79

793B..... Legal effect of operating rules........................................................... 79

793C..... Enforcement of operating rules......................................................... 80

793D..... Changing the operating rules............................................................. 82

793E...... Disallowance of changes to operating rules...................................... 82

Subdivision C—Powers of the Minister and ASIC                                           83

794A..... Minister’s power to give directions................................................... 83

794B..... Minister’s power to require special report......................................... 83

794C..... ASIC assessment of licensee’s compliance....................................... 84

794D..... ASIC’s power to give directions....................................................... 85

794E...... Additional directions to clearing and settlement facilities.................. 87

Division 4—The Australian market licence                                                    88

Subdivision A—How to get a licence                                                                   88

795A..... How to apply for a licence................................................................ 88

795B..... When a licence may be granted......................................................... 88

795C..... Publication of notice of licence grant................................................. 90

795D..... More than one licence in the same document.................................... 91

795E...... More than one market covered by the same licence........................... 91

Subdivision B—The conditions on the licence                                                  91

796A..... The conditions on the licence............................................................ 91

Subdivision C—When a licence can be varied, suspended or cancelled     93

797A..... Varying licences................................................................................ 93

797B..... Immediate suspension or cancellation............................................... 93

797C..... Suspension or cancellation following hearing and report.................. 94

797D..... Effect of suspension.......................................................................... 95

797E...... Variation or revocation of suspension............................................... 95

797F...... Publication of notice of licence suspension or cancellation............... 95

797G..... Suspension and cancellation only in accordance with this Subdivision 96

Division 5—Other matters                                                                                       97

798A..... Matters to be taken into account by the Minister............................... 97

798B..... ASIC may give advice to Minister.................................................... 98

798C..... Market licensee or related body corporate etc. listing on market....... 98

798D..... Exemptions and modifications for self‑listing licensees or related bodies corporate etc.          100

798DA.. Market licensee, related body corporate etc. or competitor participating in market   101

798E...... Other potential conflict situations.................................................... 103

Part 7.2A—Supervision of financial markets                                                   104

798F...... ASIC to supervise financial markets............................................... 104

798G..... Market integrity rules...................................................................... 104

798H..... Complying with market integrity rules............................................ 105

798J...... Directions by ASIC........................................................................ 105

798K..... Alternatives to civil proceedings..................................................... 107

798L...... Exemptions and modifications by regulations................................. 107

798M.... Exemptions by Minister.................................................................. 108

Part 7.3—Licensing of clearing and settlement facilities                            110

Division 1—Requirement to be licensed                                                         110

820A..... Need for a licence............................................................................ 110

820B..... Other prohibitions on holding out................................................... 110

820C..... Exemptions by Minister.................................................................. 111

820D..... When a clearing and settlement facility is taken to be operated in this jurisdiction    112

Division 2—Regulation of CS facility licensees                                          113

Subdivision A—Licensee’s obligations                                                             113

821A..... General obligations......................................................................... 113

821B..... Obligation to notify ASIC of certain matters................................... 114

821BA.. Obligation to notify Reserve Bank of certain matters...................... 116

821C..... Obligation to assist.......................................................................... 116

821D..... Obligation to give ASIC access to the facility................................. 117

821E...... Annual report.................................................................................. 117

821F...... Change of country by foreign licensee............................................ 118

Subdivision B—The facility’s operating rules and procedures                  119

822A..... Content of the operating rules and procedures................................ 119

822B..... Legal effect of operating rules......................................................... 119

822C..... Enforcement of operating rules....................................................... 120

822D..... Changing the operating rules........................................................... 121

822E...... Disallowance of changes to operating rules.................................... 121

Subdivision C—Powers of the Minister, ASIC and the Reserve Bank in relation to licensees    122

823A..... Minister’s power to give directions................................................. 122

823B..... Minister’s power to require special report....................................... 123

823C..... ASIC assessment of licensee’s compliance..................................... 123

823CA.. Reserve Bank assessment of licensee’s compliance........................ 124

823D..... Directions power—protecting dealings in financial products and ensuring fair and effective provision of services by CS facilities........................................................................................... 125

823E...... Directions power—reduction of systemic risk................................ 127

Division 3—The Australian CS facility licence                                           129

Subdivision A—How to get a licence                                                                 129

824A..... How to apply for a licence.............................................................. 129

824B..... When a licence may be granted....................................................... 129

824C..... Publication of notice of licence grant............................................... 131

824D..... More than one licence in the same document.................................. 132

824E...... More than one CS facility covered by the same licence................... 132

Subdivision B—The conditions on the licence                                                132

825A..... The conditions on the licence.......................................................... 132

Subdivision C—When a licence can be varied, suspended or cancelled   134

826A..... Varying licences.............................................................................. 134

826B..... Immediate suspension or cancellation............................................. 134

826C..... Suspension or cancellation following hearing and report................ 135

826D..... Effect of suspension........................................................................ 136

826E...... Variation or revocation of suspension............................................. 136

826F...... Publication of notice of licence suspension or cancellation............. 136

826G..... Suspension and cancellation only in accordance with this Subdivision 136

Division 4—Other matters                                                                                     138

827A..... Matters to be taken into account by the Minister............................. 138

827B..... ASIC may give advice to Minister.................................................. 139

827C..... Reserve Bank may give advice to Minister..................................... 139

827D..... Reserve Bank may determine financial stability standards.............. 140

Part 7.4—Limits on involvement with licensees                                               142

Division 1—Limit on control of certain licensees                                      142

Subdivision A—15% voting power limit                                                          142

850A..... Scope of Division........................................................................... 142

850B..... Meaning of unacceptable control situation...................................... 142

850C..... Acquisitions of shares..................................................................... 143

850D..... Remedial orders.............................................................................. 143

850E...... Injunctions...................................................................................... 144

Subdivision B—Approval to exceed 15% voting power limit                    145

851A..... Application for approval to exceed 15% voting power limit........... 145

851B..... Approval of application................................................................... 145

851C..... Duration of approval....................................................................... 146

851D..... Conditions of approval.................................................................... 147

851E...... Varying percentage approved.......................................................... 148

851F...... Revoking an approval..................................................................... 149

851G..... Further information about applications............................................ 150

851H..... Time limit for Minister’s decision................................................... 150

851I....... Preservation of voting power in relation to bodies specified in regulations made for section 850A         151

Subdivision C—Other matters                                                                            152

852A..... Acquisition of property................................................................... 152

852B..... Anti‑avoidance................................................................................ 152

Division 2—Individuals who are not fit and proper are disqualified 154

853A..... Who is disqualified......................................................................... 154

853B..... When an individual is involved in an operator................................. 154

853C..... Declaration by ASIC....................................................................... 154

853D..... Procedure for declaration................................................................ 155

853E...... Revoking a declaration.................................................................... 156

853F...... Obligations on disqualified individuals........................................... 157

853G..... Notification by ASIC...................................................................... 157

Division 3—Miscellaneous                                                                                     158

854A..... Record‑keeping and giving of information...................................... 158

854B..... Exemptions and modifications by regulations................................. 159

Part 7.5—Compensation regimes for financial markets                            160

Division 1—Preliminary                                                                                          160

880A..... Part does not apply to markets licensed under special provisions about overseas markets       160

880B..... Definitions...................................................................................... 160

Division 2—When there must be a compensation regime                     162

881A..... Licensed markets through which participants provide services for retail clients must generally have a compensation regime............................................................................................. 162

881B..... Additional requirements for the licence application......................... 162

881C..... What happens if an application contains information in accordance with paragraph 881B(2)(c)              163

881D..... What happens if an application contains a statement in accordance with paragraph 881B(2)(d)               163

Division 3—Approved compensation arrangements                               164

Subdivision A—Approval of compensation arrangements                         164

882A..... How to get compensation arrangements approved with grant of licence  164

882B..... How to get compensation arrangements approved after licence is granted               165

882C..... Revocation of approval................................................................... 166

882D..... Minister’s power to give directions................................................. 166

Subdivision B—Effect of compensation rules forming part of Division 3 arrangements           166

883A..... Legal effect of compensation rules.................................................. 166

883B..... Enforcement of compensation rules................................................ 166

883C..... Other sources of funds for compensation....................................... 167

883D..... Payment of levies............................................................................ 168

Subdivision C—Changing Division 3 arrangements                                     169

884A..... Division 3 arrangements must generally only be changed in accordance with this Subdivision               169

884B..... Changing Division 3 arrangements—matters required to be dealt with in the compensation rules           169

884C..... Changing Division 3 arrangements—matters not required to be dealt with in the compensation rules     170

Subdivision D—Are compensation arrangements adequate?                     172

885A..... Purpose of this Subdivision............................................................ 172

885B..... Requirements to be complied with for arrangements to be adequate 172

885C..... The losses to be covered................................................................. 173

885D..... Certain losses that are not Division 3 losses................................... 174

885E...... The amount of compensation.......................................................... 175

885F...... Method of payment of compensation.............................................. 176

885G..... Making and determination of claims............................................... 177

885H..... The source of funds—general......................................................... 177

885I....... Administration and monitoring....................................................... 177

885J...... The losses to be covered—other matters to be taken into account... 178

Subdivision E—Other provisions about Division 3 arrangements            178

886A..... Only one claim in respect of the same loss...................................... 178

886B..... Regulations relating to fidelity funds............................................... 179

Division 4—NGF Compensation regime                                                        180

Subdivision A—Application of Division                                                           180

887A..... Markets to which this Division applies........................................... 180

Subdivision B—Claims for and payment of compensation                         180

888A..... The situations in which compensation may be claimed................... 180

888B..... Kinds of compensation available..................................................... 180

888C..... Amount of compensation payable................................................... 180

888D..... Payment of compensation............................................................... 181

888E...... Making and determination of claims............................................... 182

888F...... The SEGC has power to determine claims...................................... 182

888G..... Allowing a claim does not constitute an admission of any other liability  182

888H..... Claimant may apply to Court if claim disallowed............................ 183

888I....... Non‑NGF property of the SEGC not available to meet claims........ 183

888J...... The SEGC may enter into contracts of insurance or indemnity....... 183

888K..... NGF may be used to acquire financial products to be transferred as compensation 184

Subdivision C—The NGF                                                                                     184

889A..... Continuation of the National Guarantee Fund................................. 184

889B..... Compensation to be provided out of the NGF................................ 185

889C..... The SEGC to keep the NGF........................................................... 185

889D..... What the NGF consists of............................................................... 185

889E...... Power to borrow etc. for purposes of the NGF.............................. 186

889F...... Money borrowed and paid to the SEGC......................................... 186

889G..... Money borrowed and not paid to the SEGC................................... 187

889H..... Payments out of the NGF............................................................... 187

889I....... Minimum amount of the NGF........................................................ 188

889J...... Levy by the SEGC.......................................................................... 188

889K..... Levy by market operator................................................................. 190

Subdivision D—The SEGC                                                                                  192

890A..... Minister to nominate the SEGC...................................................... 192

890B..... The SEGC’s functions and powers................................................. 193

890C..... Delegation....................................................................................... 193

890D..... Operating rules of the SEGC.......................................................... 194

890E...... Legal effect of the SEGC’s operating rules..................................... 194

890F...... Enforcement of the SEGC’s operating rules................................... 194

890G..... Changing the SEGC’s operating rules............................................ 195

890H..... Disallowance of changes to the SEGC’s operating rules................ 195

Subdivision E—Other provisions relating to compensation under this Division           196

891A..... Payment out of the NGF to prescribed body with arrangements covering clearing and settlement facility support  196

891B..... Markets operated by bodies corporate that become members of the SEGC—regulations may deal with transitional provisions and other matters........................................................... 196

891C..... Regulations may make different provision in respect of different markets etc.         197

Division 5—Provisions common to both kinds of compensation arrangements                198

892A..... Definitions...................................................................................... 198

892B..... How regulated funds are to be kept................................................. 198

892C..... Money in regulated funds may be invested..................................... 199

892D..... Powers of relevant authority to require production or delivery of documents or statements     200

892E...... Power to require assistance for purpose of dealing with a claim..... 201

892F...... Relevant authority’s right of subrogation if compensation is paid... 202

892G..... Excess money in compensation funds............................................. 202

892H..... Accounting and reporting for regulated funds................................. 203

892I....... Division 3 arrangements—reporting in situations where compensation does not come out of a regulated fund       205

892J...... Regulations may provide for qualified privilege in respect of certain matters           205

892K..... Risk assessment report.................................................................... 205

Division 6—Miscellaneous                                                                                     207

893A..... Exemptions and modifications by regulations................................. 207

893B..... Exemptions by Minister.................................................................. 207

Part 7.5A—Regulation of derivative transactions and derivative trade repositories       209

Division 1—Application of Part                                                                          209

900A..... Derivatives and transactions etc. to which this Part applies............. 209

Division 2—Regulation of derivative transactions: derivative transaction rules            210

Subdivision A—Power to make derivative transaction rules                     210

901A..... ASIC may make derivative transaction rules................................... 210

901B..... Derivatives in relation to which rules may impose requirements..... 213

901C..... Regulations may limit the transactions in relation to which rules may impose requirements    216

901D..... Regulations may limit the persons on whom requirements may be imposed            216

Subdivision B—Compliance with derivative transaction rules                  217

901E...... Obligation to comply with derivative transaction rules.................... 217

901F...... Alternatives to civil proceedings..................................................... 217

901G..... Failure to comply with derivative transaction rules does not invalidate transaction etc.            218

Subdivision C——The process of making of derivative transaction rules 218

901H..... Matters to which ASIC must have regard when making rules........ 218

901J...... ASIC to consult before making rules.............................................. 219

901K..... Ministerial consent to rules required............................................... 219

901L...... Emergency rules: consultation and consent not required................. 220

901M.... Amendment and revocation of derivative transaction rules............. 220

Division 3—Regulation of licensed derivative trade repositories: supervision by ASIC             221

902A..... ASIC to supervise licensed derivative trade repositories................. 221

Division 4—Regulation of licensed derivative trade repositories: derivative trade repository rules   222

Subdivision A—Power to make derivative trade repository rules            222

903A..... ASIC may make derivative trade repository rules........................... 222

903B..... Rules may only impose requirements on operators and officers of licensed derivative trade repositories                225

903C..... Regulations may limit how rules may deal with matters related to derivative trade data           225

Subdivision B—Compliance with derivative trade repository rules        225

903D..... Obligation to comply with derivative trade repository rules............ 225

903E...... Alternatives to civil proceedings..................................................... 226

Subdivision C—The process of making derivative trade repository rules 227

903F...... Matters to which ASIC has regard when making rules................... 227

903G..... ASIC to consult before making rules.............................................. 227

903H..... Ministerial consent to rules required............................................... 228

903J...... Emergency rules: consultation and consent not required................. 228

903K..... Amendment and revocation of derivative trade repository rules...... 228

Division 5—Regulation of licensed derivative trade repositories: other obligations and powers           230

Subdivision A—Obligations                                                                                230

904A..... General obligations......................................................................... 230

904B..... Obligations relating to derivative trade data..................................... 230

904C..... Obligation to notify ASIC of certain matters................................... 232

904D..... Obligation to assist ASIC, APRA and the Reserve Bank............... 233

904E...... Obligation to give ASIC access to derivative trade repository facilities 234

Subdivision B—Powers of Minister and ASIC to give directions etc.       234

904F...... Minister’s power to give directions to licensee not complying with obligations       234

904G..... ASIC’s power to give directions to licensee not complying with obligations           234

904H..... ASIC’s power to give directions requiring special reports.............. 236

904J...... ASIC may assess licensee’s compliance......................................... 236

904K..... Directions relating to derivative trade data if repository ceases to be licensed          237

Division 6—Regulation of licensed derivative trade repositories: licensing       239

Subdivision A—Requirement for some trade repositories to be licensed 239

905A..... Regulations may identify derivative trade repositories as being required to be licensed           239

Subdivision B—Granting of licences                                                                239

905B..... How to apply for a licence.............................................................. 239

905C..... When a licence may be granted....................................................... 240

905D..... Publication of notice of licence grant............................................... 240

905E...... More than one derivative trade repository covered by the same licence 241

Subdivision C—The conditions on a licence                                                    241

905F...... The conditions on the licence.......................................................... 241

Subdivision D—When a licence can be varied, suspended or cancelled   243

905G..... Varying licences.............................................................................. 243

905H..... Immediate suspension or cancellation............................................. 243

905J...... Suspension or cancellation following hearing and report................ 244

905K..... Effect of suspension........................................................................ 245

905L...... Variation or revocation of suspension............................................. 245

905M.... Publication of notice of licence suspension or cancellation............. 245

905N..... Suspension and cancellation only in accordance with this Subdivision 245

Subdivision E—Other matters                                                                            245

905P...... Matters to be taken into account by ASIC....................................... 245

Division 7—Regulation of prescribed derivative trade repositories 247

906A..... Regulations may impose obligations and confer powers................. 247

Division 8—Other matters                                                                                     248

907A..... Other prohibitions on holding out................................................... 248

907B..... Making provision by reference to instruments as in force from time to time            248

907C..... Compliance with requirements to provide derivative trade data or other information: protection from liability        249

907D..... Exemptions by ASIC...................................................................... 249

907E...... Exemptions and modifications by regulations................................. 250

Part 7.5B—Regulation of financial benchmarks                                            252

Division 1—Preliminary                                                                                          252

908AA.. Simplified outline of this Part.......................................................... 252

908AB.. Meaning of financial benchmark..................................................... 252

908AC.. Meaning of significant financial benchmark.................................... 253

908AD.. Emergency declarations: consultation and consent not required...... 254

908AE... Notifying administrator about declarations...................................... 255

908AF... ASIC to supervise financial benchmarks that are specified in benchmark administrator licences             255

908AG.. Extraterritorial application............................................................... 255

Division 2—Licensing of financial benchmarks                                          256

Subdivision A—Requirement to be licensed                                                    256

908BA.. Administrators of significant financial benchmarks must be licensed 256

908BB... Other prohibitions on holding out................................................... 257

Subdivision B—Granting licences                                                                     257

908BC... When a licence may be granted....................................................... 257

908BD.. Applying for a licence..................................................................... 258

908BE... More than one financial benchmark may be specified in the same licence                259

908BF... Publishing details of licences.......................................................... 259

Subdivision C—Conditions on licences                                                             259

908BG.. Conditions, including varying and revoking conditions.................. 259

Subdivision D—When a licence can be varied, suspended or cancelled   261

908BH.. Varying licences.............................................................................. 261

908BI.... Immediate suspension or cancellation............................................. 261

908BJ.... Suspension or cancellation following hearing and report................ 262

908BK... Effect of suspension........................................................................ 263

908BL... Varying or revoking a suspension.................................................. 263

908BM.. Publishing details of suspensions or cancellations of licences........ 263

908BN.. Variations, suspensions or cancellations only in accordance with this Subdivision 263

Subdivision E—Matters to which ASIC must have regard                          264

908BO.. Matters to which ASIC must have regard....................................... 264

Subdivision F—Other obligations of licensees                                               265

908BP... General obligations......................................................................... 265

908BQ.. Obligation to notify ASIC of certain matters................................... 265

908BR... Obligation to assist ASIC, APRA and the Reserve Bank............... 266

908BS... Obligation to give ASIC access to licensee’s facilities.................... 266

Subdivision G—Directions to licensees                                                             267

908BT... ASIC’s power to give directions to licensee not complying with obligations           267

908BU.. Minister may disallow all or part of an ASIC direction etc............. 267

908BV.. ASIC’s power to give directions requiring reports......................... 268

Subdivision H—Other matters                                                                            269

908BW.. ASIC may assess licensee’s compliance......................................... 269

908BX.. Basis of licences.............................................................................. 270

Division 3—Financial benchmark rules and compelled financial benchmark rules        271

Subdivision A—Power to make financial benchmark rules                        271

908CA.. ASIC may make financial benchmark rules.................................... 271

908CB... Main permitted matters that may be dealt with in the rules.............. 271

908CC... Other permitted matters that may be dealt with in the rules............. 273

Subdivision B—Power to make compelled financial benchmark rules   273

908CD.. ASIC may make compelled financial benchmark rules................... 273

908CE... Permitted powers and matters that may be dealt with in the rules.... 274

Subdivision C—Compliance with each set of rules etc.                                275

908CF... Obligation to comply with each set of rules.................................... 275

908CG.. Alternatives to civil proceedings..................................................... 275

908CH.. Infringement notices........................................................................ 276

908CI.... Enforceable undertakings................................................................ 276

908CJ.... Protection from liability for compliance in good faith..................... 277

Subdivision D—Matters relating to the making of each set of rules         277

908CK... Matters to which ASIC has regard when making rules................... 277

908CL... ASIC to consult before making rules.............................................. 278

908CM.. Ministerial consent to rules required............................................... 279

908CN.. Emergency rules: consultation and consent not required................. 279

908CO.. Requirements and penalty amounts................................................. 279

908CP... Regulations may limit how rules may deal with certain matters...... 280

908CQ.. Varying or revoking the rules......................................................... 280

Division 4—Offences and civil penalties relating to manipulation of financial benchmarks      281

908DA.. Manipulation of financial benchmarks............................................ 281

908DB.. False or misleading statements or information that could affect financial benchmarks             282

908DC.. Penalties for offences against this Division..................................... 283

908DD.. Geographical scope of offences and civil penalty provisions.......... 284

Division 5—Other provisions                                                                               287

908EA... Making provision by referring to instruments as in force from time to time             287

908EB... Exemptions by the regulations or by ASIC..................................... 287

Part 7.6—Licensing of providers of financial services                                289

Division 1—Preliminary                                                                                          289

910A..... Definitions...................................................................................... 289

Division 2—Requirement to be licensed or authorised                           293

911A..... Need for an Australian financial services licence............................ 293

911B..... Providing financial services on behalf of a person who carries on a financial services business              298

911C..... Prohibition on holding out.............................................................. 300

911D..... When a financial services business is taken to be carried on in this jurisdiction       301

Division 3—Obligations of financial services licensees                          302

912A..... General obligations......................................................................... 302

912B..... Compensation arrangements if financial services provided to persons as retail clients             304

912C..... Direction to provide a statement...................................................... 305

912CA.. Regulations may require information to be provided....................... 306

912D..... Obligation to notify ASIC of certain matters................................... 306

912E...... Surveillance checks by ASIC.......................................................... 308

912F...... Obligation to cite licence number in documents.............................. 308

Division 4—Australian financial services licences                                    309

Subdivision A—How to get a licence                                                                 309

913A..... Applying for a licence..................................................................... 309

913B..... When a licence may be granted....................................................... 309

913C..... Licence numbers............................................................................. 311

Subdivision B—The conditions on the licence                                                311

914A..... The conditions on the licence.......................................................... 311

Subdivision C—When a licence can be varied, suspended or cancelled   314

915A..... Varying licences.............................................................................. 314

915B..... Immediate suspension or cancellation............................................. 314

915C..... Suspension or cancellation after offering a hearing......................... 317

915D..... Effect of suspension........................................................................ 318

915E...... Revocation of suspension............................................................... 319

915F...... Date of effect and publication of cancellation or suspension........... 319

915G..... Statement of reasons....................................................................... 319

915H..... ASIC may allow licence to continue in effect.................................. 319

915I....... Special procedures for APRA‑regulated bodies.............................. 320

915J...... Variation, suspension and cancellation only under this Subdivision 321

Division 5—Authorised representatives                                                         322

916A..... How representatives are authorised................................................. 322

916B..... Sub‑authorisations.......................................................................... 322

916C..... Authorised representative of 2 or more licensees............................ 324

916D..... Licensees cannot authorise other licensees...................................... 324

916E...... Licensees acting under a binder....................................................... 325

916F...... Obligation to notify ASIC etc. about authorised representatives..... 325

916G..... ASIC may give licensee information about representatives............. 327

Division 6—Liability of financial services licensees for representatives               330

917A..... Application of Division................................................................... 330

917B..... Responsibility if representative of only one licensee....................... 331

917C..... Representatives of multiple licensees.............................................. 331

917D..... Exception if lack of authority is disclosed to client.......................... 332

917E...... Responsibility extends to loss or damage suffered by client........... 333

917F...... Effect of Division............................................................................ 333

Division 8—Banning or disqualification of persons from providing financial services 335

Subdivision A—Banning orders                                                                         335

920A..... ASIC’s power to make a banning order.......................................... 335

920B..... What is a banning order?................................................................ 337

920C..... Effect of banning orders.................................................................. 338

920D..... Variation or cancellation of banning orders..................................... 338

920E...... Date of effect and publication of banning order, variation or cancellation                339

920F...... Statement of reasons....................................................................... 339

Subdivision B—Disqualification by the Court                                                340

921A..... Disqualification by the Court.......................................................... 340

Division 8A—Professional standards for relevant providers             341

Subdivision A—Education and training standards                                       341

921B..... Meaning of education and training standards................................ 341

921C..... Limitation on authorisation to provide personal advice unless conditions met          342

921D..... Relevant providers to meet continuing professional development standard              343

Subdivision B—Ethical standards                                                                     344

921E...... Relevant providers to comply with the Code of Ethics.................... 344

Subdivision C—Provisional relevant providers                                            344

921F...... Requirements relating to provisional relevant providers.................. 344

Division 8B—Compliance schemes                                                                    347

Subdivision A—Compliance schemes to cover relevant providers           347

921G..... Meaning of compliance scheme...................................................... 347

921H..... Financial services licensees to ensure compliance scheme covers relevant providers               348

921J...... When a compliance scheme covers a relevant provider................... 348

Subdivision B—Approval of compliance schemes                                        349

921K..... Approval of compliance schemes.................................................... 349

Subdivision C—Investigations by monitoring body                                      352

921L...... Investigations by monitoring body.................................................. 352

921M.... Offences relating to investigations by monitoring body.................. 354

921N..... Obligation to notify licensee of failure to comply with Code of Ethics 355

Subdivision D—Other provisions                                                                       356

921P...... Obligation to ensure that compliance scheme is publicly available.. 356

921Q..... Obligation to provide ASIC with information................................. 356

921R..... Modification of compliance scheme................................................ 356

921S...... Obligation to review compliance scheme........................................ 357

921T...... Obligation to notify ASIC of changes to monitoring body............. 358

Division 8C—The standards body                                                                     359

Subdivision A—Functions of the standards body                                           359

921U..... Functions of the standards body..................................................... 359

921V..... Approval of foreign qualifications.................................................. 361

921W.... Commencement of Code of Ethics and amendments of Code of Ethics 363

Subdivision B—Declaration of the standards body                                       363

921X..... Minister to declare a body corporate to be the standards body........ 363

921Y..... Minister may revoke declaration under section 921X..................... 364

Subdivision C—Other provisions relating to the standards body              366

921Z...... Modification of the standards body’s constitution.......................... 366

921ZA... Disallowance of modifications of the standards body’s constitution 366

921ZB... Minister may direct the standards body to do certain things............ 366

921ZC... Annual report.................................................................................. 367

Division 9—Registers relating to financial services                                 368

Subdivision A—Registers generally                                                                  368

922A..... Registers relating to financial services............................................. 368

922B..... Fees for searching registers............................................................. 368

Subdivision B—Notice requirements relating to the Register of Relevant Providers  369

922D..... Obligation to notify ASIC about a person who becomes a relevant provider           369

922E...... Information about a relevant provider who is a financial services licensee               369

922F...... Information about a relevant provider who is not a financial services licensee         370

922G..... Meaning of recent advising history................................................. 373

922H..... Ongoing obligation to notify ASIC when there is a change in a matter for a relevant provider                373

922HA.. Obligation to notify ASIC of financial services licensee’s CPD year 374

922HB.. Obligation to notify ASIC of non‑compliance with continuing professional development standard        375

922HC.. Requirement to retain information................................................... 375

922HD.. Obligation to notify ASIC in relation to failures to comply with the Code of Ethics                376

922J...... Obligation to notify ASIC about a person who starts to have control of a body corporate licensee         377

922K..... Obligation to notify ASIC about a person who ceases to have control of a body corporate licensee        377

922L...... Requirement for notice to be lodged................................................ 378

922M.... Offence for failing to comply with obligation to notify ASIC......... 379

922N..... Obligation for relevant providers to provide information to financial services licensees          380

922P...... Change in matter within 30 business days...................................... 381

Subdivision C—Register of Relevant Providers                                            382

922Q..... Register of Relevant Providers........................................................ 382

922R..... Relevant provider number............................................................... 385

922S...... Correcting the Register.................................................................... 385

Division 10—Restrictions on use of terminology                                       386

923A..... Restriction on use of certain words or expressions......................... 386

923B..... Restriction on use of certain words or expressions unless authorised in licence conditions     388

923C..... Restriction on use of terms “financial adviser” and “financial planner” 391

Division 11—Agreements with unlicensed persons relating to the provision of financial services         395

Subdivision A—Agreements affected                                                                395

924A..... Agreements with certain unlicensed persons................................... 395

Subdivision B—Effect on agreements                                                              395

925A..... Client may give notice of rescission................................................ 395

925B..... Effect of notice under section 925A................................................ 396

925C..... Client may apply to Court for partial rescission.............................. 397

925D..... Court may make consequential orders............................................. 397

925E...... Agreement unenforceable against client.......................................... 398

925F...... Non‑licensee not entitled to recover commission............................ 398

925G..... Onus of establishing non‑application of section 925E or 925F....... 399

925H..... Client may recover commission paid to non‑licensee...................... 399

925I....... Remedies under this Division additional to other remedies............. 399

Division 12—Miscellaneous                                                                                   400

926A..... Exemptions and modifications by ASIC......................................... 400

926B..... Exemptions and modifications by regulations................................. 401

Part 7.7—Financial services disclosure                                                                 402

Division 1—Preliminary                                                                                          402

940A..... How Part applies if a financial services licensee is acting as authorised representative            402

940B..... What if there is no reasonable opportunity to give a document, information or statement required by this Part?      402

940C..... How documents, information and statements are to be given.......... 403

940D..... General approach to offence provisions.......................................... 405

Division 2—Person provided with financial service as retail client to be given a Financial Services Guide                                                                                                                    406

Subdivision A—Requirement for a Financial Services Guide to be given 406

941A..... Obligation on financial services licensee to give a Financial Services Guide if financial service provided to person as a retail client....................................................................................... 406

941B..... Obligation on authorised representative to give a Financial Services Guide if financial service provided to person as a retail client....................................................................................... 406

941C..... Situations in which a Financial Services Guide is not required....... 407

941D..... Timing of giving Financial Services Guide..................................... 409

941E...... Information must be up to date........................................................ 409

941F...... Obligation to give updated Financial Services Guide...................... 410

Subdivision B—Content and authorisation of Financial Services Guide 410

942A..... Title of Financial Services Guide.................................................... 410

942B..... Financial Services Guide given by financial services licensee—main requirements 411

942C..... Financial Services Guide given by authorised representative—main requirements  414

942D..... Financial Services Guide may consist of 2 or more separate documents given at same time    418

942DA.. Combining a Financial Services Guide and a Product Disclosure Statement in a single document          419

942E...... Altering a Financial Services Guide after its preparation and before giving it to a person        419

Subdivision C—Supplementary Financial Services Guides                        420

943A..... What a Supplementary Financial Services Guide is........................ 420

943B..... Title of Supplementary Financial Services Guide............................ 420

943C..... Form of Supplementary Financial Services Guide.......................... 421

943D..... Effect of giving a person a Supplementary Financial Services Guide 421

943E...... Situation in which only a Supplementary Financial Services Guide need be given  422

943F...... Altering a Supplementary Financial Services Guide after its preparation and before giving it to a person               422

Division 3—Additional requirements for personal advice provided to a retail client    423

Subdivision A—When this Division applies                                                     423

944A..... Situation in which Division applies................................................. 423

Subdivision C—Requirement for a Statement of Advice to be given        423

946A..... Obligation to give client a Statement of Advice............................... 423

946AA.. Small investments—Statement of Advice not required................... 424

946B..... Other situations in which a Statement of Advice is not required..... 426

946C..... Timing of giving Statement of Advice............................................ 430

Subdivision D—Content of Statement of Advice                                            431

947A..... Title of Statement of Advice............................................................ 431

947B..... Statement of Advice given by financial services licensee—main requirements        431

947C..... Statement of Advice given by authorised representative—main requirements          433

947D..... Additional requirements when advice recommends replacement of one product with another 435

947E...... Statement of Advice not to be combined with Financial Services Guide or Product Disclosure Statement              437

Subdivision E—Other matters                                                                            437

948A..... Qualified privilege if providing entity complies with this Division. 437

Division 4—Other disclosure requirements                                                  438

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.............................................................. 438

949B..... Regulations may impose disclosure requirements in certain situations 439

Division 6—Miscellaneous                                                                                     442

951A..... Part cannot be contracted out of...................................................... 442

951B..... Exemptions and modifications by ASIC......................................... 442

951C..... Exemptions and modifications by regulations................................. 443

Division 7—Enforcement                                                                                        444

Subdivision A—Offences                                                                                      444

952A..... Overview........................................................................................ 444

952B..... Definitions...................................................................................... 444

952C..... Offence of failing to give a disclosure document or statement........ 446

952D..... Offence of giving a disclosure document or statement knowing it to be defective    448

952E...... Offence of giving a defective disclosure document or statement (whether or not known to be defective)                449

952F...... Offences of financial services licensee knowingly providing defective disclosure material to an authorised representative........................................................................................................ 451

952G..... Offences of financial services licensee providing disclosure material to an authorised representative (whether or not known to be defective).................................................................... 452

952H..... Offence of financial services licensee failing to ensure authorised representative gives disclosure documents or statements as required..................................................................... 455

952I....... Offences if a Financial Services Guide (or Supplementary FSG) does not comply with certain requirements         455

952J...... Offence if a Statement of Advice does not comply with certain requirements          457

952K..... Offence if authorised representative gives out unauthorised Financial Services Guide (or Supplementary FSG)    457

952L...... Offences if financial services licensee or authorised representative becomes aware that a Financial Services Guide (or Supplementary FSG) is defective.................................................... 458

952M.... Offence of unauthorised alteration of Financial Services Guide or Supplementary Financial Services Guide          459

Subdivision B—Civil liability                                                                             460

953A..... Definitions...................................................................................... 460

953B..... Civil action for loss or damage........................................................ 462

953C..... Additional powers of court to make orders..................................... 464

Part 7.7A—Best interests obligations and remuneration                           466

Division 1—Preliminary                                                                                          466

960........ Definitions...................................................................................... 466

960A..... No contracting out........................................................................... 468

960B..... Obligations under this Part in addition to other obligations............. 468

Division 2—Best interests obligations                                                              469

Subdivision A—Preliminary                                                                               469

961........ Application of this Division............................................................ 469

961A..... Application to a financial services licensee acting as an authorised representative    469

Subdivision B—Provider must act in the best interests of the client         470

961B..... Provider must act in the best interests of the client.......................... 470

961C..... When is something reasonably apparent?...................................... 472

961D..... What is a reasonable investigation?................................................ 472

961E...... What would reasonably be regarded as in the best interests of the client?                473

961F...... What is a basic banking product?................................................... 473

Subdivision C—Resulting advice must be appropriate to the client          473

961G..... Resulting advice must be appropriate to the client........................... 473

Subdivision D—Where resulting advice still based on incomplete or inaccurate information  474

961H..... Resulting advice still based on incomplete or inaccurate information 474

Subdivision E—Provider to give priority to the client’s interests             475

961J...... Conflict between client’s interests and those of provider, licensee, authorised representative or associates             475

Subdivision F—Responsibilities of licensees under this Division               476

961K..... Civil penalty provision—sections 961B, 961G, 961H and 961J.... 476

961L...... Licensees must ensure compliance.................................................. 476

961M.... Civil action for loss or damage........................................................ 476

961N..... Additional powers of Court to make orders.................................... 478

961P...... Responsible licensee........................................................................ 478

Subdivision G—Responsibilities of authorised representatives under this Division     479

961Q..... Civil penalty provision—sections 961B, 961G, 961H and 961J.... 479

Division 3—Charging ongoing fees to clients                                              480

Subdivision A—Preliminary                                                                               480

962........ Application of this Division............................................................ 480

962A..... Ongoing fee arrangements.............................................................. 480

962B..... Ongoing fees................................................................................... 482

962C..... Fee recipients.................................................................................. 482

962CA.. Exemption from application of opt‑in requirement.......................... 482

Subdivision B—Termination, disclosure and renewal                                 483

962D..... Application of this Subdivision....................................................... 483

962E...... Client may terminate arrangement at any time................................. 484

962F...... Arrangement terminates if this Subdivision not complied with....... 484

962G..... Fee recipient must give fee disclosure statement............................. 485

962H..... Fee disclosure statements................................................................ 485

962J...... Disclosure day................................................................................ 486

962K..... Fee recipient must give renewal notice............................................ 486

962L...... Renewal notice day and renewal period.......................................... 487

962M.... If client notifies fee recipient that client does not wish to renew...... 487

962N..... If client does not notify fee recipient that client wishes to renew..... 488

962P...... Civil penalty provision—charging ongoing fees after arrangement terminated         488

962Q..... Effect of termination........................................................................ 488

Subdivision C—Disclosure for arrangements to which Subdivision B does not apply 488

962R..... Application of this Subdivision....................................................... 488

962S...... Fee recipient must give fee disclosure statement............................. 489

Division 4—Conflicted remuneration                                                              491

Subdivision A—Preliminary                                                                               491

963........ Application to a financial services licensee acting as an authorised representative    491

Subdivision B—What is conflicted remuneration?                                       491

963A..... Conflicted remuneration................................................................. 491

963AA.. Benefits given in relation to life risk insurance products................. 491

963B..... Monetary benefit given in certain circumstances not conflicted remuneration          492

963BA.. Benefit ratio and clawback requirements......................................... 495

963C..... Non‑monetary benefit given in certain circumstances not conflicted remuneration  496

963D..... Benefits for employees etc. of ADIs............................................... 497

Subdivision C—Ban on conflicted remuneration                                          498

963E...... Licensee must not accept conflicted remuneration........................... 498

963F...... Licensee must ensure compliance.................................................... 499

963G..... Authorised representative must not accept conflicted remuneration 499

963H..... Other representatives must not accept conflicted remuneration....... 499

963J...... Employer must not give employees conflicted remuneration........... 500

963K..... Product issuer or seller must not give conflicted remuneration....... 500

963L...... Volume‑based benefits presumed to be conflicted remuneration..... 500

Division 5—Other banned remuneration                                                       502

Subdivision A—Volume‑based shelf‑space fees                                              502

964........ Application...................................................................................... 502

964A..... Platform operator must not accept volume‑based shelf‑space fees.. 503

Subdivision B—Asset‑based fees on borrowed amounts                              504

964B..... Application...................................................................................... 504

964C..... Application to a financial services licensee acting as an authorised representative    504

964D..... Financial services licensees must not charge asset‑based fees on borrowed amounts              504

964E...... Authorised representatives must not charge asset‑based fees on borrowed amounts               505

964F...... What is an asset‑based fee?............................................................. 506

964G..... Meaning of borrowed..................................................................... 506

964H..... When is something reasonably apparent?...................................... 506

Division 6—Anti‑avoidance                                                                                   507

965........ Anti‑avoidance................................................................................ 507

Division 7—Transition                                                                                             508

966........ Transition period............................................................................ 508

967........ Best interests obligations and remuneration provisions to apply during transition period        508

968........ Notice to clients in transition period................................................ 509

Part 7.8—Other provisions relating to conduct etc. connected with financial products and financial services, other than financial product disclosure                        511

Division 1—Preliminary                                                                                          511

980A..... Matters covered by this Part............................................................ 511

980B..... General approach to offence provisions.......................................... 511

Division 2—Dealing with clients’ money                                                        512

Subdivision A—Money other than loans                                                          512

981A..... Money to which Subdivision applies.............................................. 512

981B..... Obligation to pay money into an account........................................ 513

981C..... Regulations may deal with various matters relating to accounts maintained for the purposes of section 981B         514

981D..... Money related to derivatives may be used for general margining etc. purposes       515

981E...... Protection of money from attachment etc........................................ 515

981F...... Regulations may deal with how money to be dealt with if licensee ceases to be licensed etc.   516

981G..... Account provider not liable merely because of licensee’s contravention  516

981H..... Money to which Subdivision applies taken to be held in trust........ 517

Subdivision AA—Client money reporting rules                                             517

981J...... Client money reporting rules........................................................... 517

981K..... Matters that may be dealt with in client money reporting rules........ 518

981L...... ASIC to consult before making rules.............................................. 519

981M.... Complying with client money reporting rules................................. 519

981N..... Alternatives to civil proceedings..................................................... 520

981P...... Compliance with requirements to provide data or other information to ASIC: protection from liability   521

Subdivision B—Loan money                                                                               521

982A..... Money to which this Subdivision applies....................................... 521

982B..... Obligation to pay money into an account........................................ 522

982C..... Licensee to give client statement setting out terms of loan etc......... 522

982D..... Permitted use of loan....................................................................... 523

Subdivision C—Powers of Court                                                                        523

983A..... Court may freeze certain accounts................................................... 523

983B..... Interim order freezing accounts....................................................... 524

983C..... Duty of person to whom order directed to make full disclosure...... 524

983D..... Further orders and directions.......................................................... 525

983E...... Power of Court to make order relating to payment of money.......... 525

Division 3—Dealing with other property of clients                                  527

984A..... Property to which Division applies................................................. 527

984B..... How property to which this Division applies is to be dealt with..... 528

Division 4—Special provisions relating to insurance                              529

985A..... Definitions etc................................................................................. 529

985B..... Status of amounts paid to financial services licensees in respect of contracts of insurance       529

985C..... Regulations may impose other requirements etc. if financial services licensee is not the insurer              530

985D..... Financial services licensees etc. not to deal in general insurance products from unauthorised insurers etc.              531

Division 4A—Special provisions relating to margin lending facilities 533

Subdivision A—Responsible lending conduct for margin lending facilities 533

985EA... Application of this Subdivision....................................................... 533

985E...... Requirements before issuing etc. margin lending facility................ 533

985F...... Assessment of unsuitability of margin lending facility.................... 534

985G..... Reasonable inquiries etc. about the retail client................................ 535

985H..... When margin lending facility must be assessed as unsuitable......... 536

985J...... Giving the retail client the assessment............................................. 537

985K..... Unsuitable margin lending facilities................................................ 538

Subdivision B—Notice of margin calls under margin lending facilities 540

985L...... Issue of margin lending facility must not be conditional on agreement to receive communications through agent   540

985M.... Notification of margin calls............................................................. 541

Division 5—Obligations to report                                                                      543

986A..... Reporting in relation to money to which Subdivision A or B of Division 2 applies or property to which Division 3 applies............................................................................................. 543

986B..... Reporting in relation to dealings in derivatives................................ 543

Division 6—Financial records, statements and audit                              544

Subdivision A—Preliminary                                                                               544

987A..... Application of Division................................................................... 544

Subdivision B—Financial records of financial services licensees             544

988A..... Obligation to keep financial records................................................ 544

988B..... Records to be kept so that profit and loss statements and balance sheet can be prepared and audited       545

988C..... Language of records........................................................................ 545

988D..... Location of records......................................................................... 545

988E...... Particular categories of information to be shown in records............ 546

988F...... Regulations may impose additional requirements............................ 546

988G..... Records taken to be made with licensee’s authority........................ 547

Subdivision C—Financial statements of financial services licensees       547

989A..... Meaning of financial year............................................................... 547

989B..... Financial services licensee to prepare and lodge annual profit and loss statement and balance sheet        547

989C..... Requirements as to contents and applicable accounting principles.. 548

989CA.. Audit to be conducted in accordance with auditing standards......... 548

989D..... Time of lodgment............................................................................ 549

Subdivision D—Appointment etc. of auditors                                                 549

990A..... Sections 990B to 990H not to apply to public companies............... 549

990B..... Appointment of auditor by licensee................................................. 550

990C..... When a person or firm is ineligible to act as auditor........................ 551

990D..... Ineligible person or firm must not consent to act or disqualify themselves etc.        552

990E...... Duration of appointment of auditors............................................... 552

990F...... Removal of auditors........................................................................ 553

990G..... Resignation of auditors—requirements for resignation................... 553

990H..... Resignation of auditors—when resignation takes effect.................. 554

990I....... Auditor’s right of access to records, information etc....................... 554

990J...... Auditor’s fees and expenses........................................................... 555

990K..... Auditor to report on certain matters................................................. 555

990L...... Qualified privilege for auditor etc.................................................... 556

Division 7—Other rules about conduct                                                           558

991A..... Financial services licensee not to engage in unconscionable conduct 558

991B..... Financial services licensee to give priority to clients’ orders........... 558

991C..... Regulations may deal with various matters relating to instructions to deal through licensed markets       559

991D..... Regulations may require records to be kept in relation to instructions to deal on licensed markets and foreign markets........................................................................................................ 560

991E...... Obligations of financial services licensee in relation to dealings with non‑licensees                560

991F...... Dealings involving employees of financial services licensees......... 562

Division 8—Miscellaneous                                                                                     564

992A..... Prohibition on hawking of certain financial products...................... 564

992AA.. Prohibition of hawking of managed investment products............... 566

992B..... Exemptions and modifications by ASIC......................................... 567

992C..... Exemptions and modifications by regulations................................. 568

Division 9—Enforcement                                                                                        569

993A..... Overview........................................................................................ 569

993B..... Offence of failing to pay client money into an account as required. 569

993C..... Offence of failing to comply with requirements relating to client money account     570

993D..... Offence of failing to pay loan money into an account as required... 570


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.

AFCA (short for the Australian Financial Complaints Authority) means the operator of the AFCA scheme.

AFCA scheme means the external dispute resolution scheme for which an authorisation under Part 7.10A is in force.

AFCA staff member means:

                     (a)  a director, officer or employee of AFCA; or

                     (b)  a person engaged as a consultant to, or to perform services for, AFCA for the purposes of the AFCA scheme.

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.

annuity policy means a life policy in relation to an annuity that is declared to be a superannuation policy under regulations made for the purposes of paragraph (b) of the definition of superannuation policy in the Dictionary in the Life Insurance Act 1995.

approved deposit fund has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

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 entity means:

                     (a)  an Australian citizen; or

                     (b)  a resident of Australia (within the meaning of the Criminal Code); or

                     (c)  a body corporate incorporated by or under a law of the Commonwealth or of a State or Territory.

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 clearing and settlement facility means:

                     (a)  a licensed CS facility; or

                     (b)  a clearing and settlement facility that satisfies the following requirements:

                              (i)  the operator of the facility is authorised to operate the facility in the foreign country in which the operator’s principal place of business is located;

                             (ii)  any requirements specified in regulations made for the purposes of this subparagraph.

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

                     (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).

client money reporting rules has the meaning given by section 981J.

crowd‑funding service that a person provides has the meaning given by section 766F.

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).

dealing in a financial product has the meaning given by section 766C (and deal has a corresponding meaning).

death benefit decision‑maker means any of the following persons:

                     (a)  the trustee of a regulated superannuation fund or approved deposit fund;

                     (b)  an insurer in relation to a superannuation complaint;

                     (c)  an RSA provider.

deposit product means a financial product described in paragraph 764A(1)(i).

derivative has the meaning given by section 761D.

derivative retail client money: money paid as mentioned in subsection 981A(1) is derivative retail client money if:

                     (a)  either:

                              (i)  the financial service referred to in subparagraph 981A(1)(a)(i) is or relates to a dealing in a derivative; or

                             (ii)  the financial product referred to in subparagraph 981A(1)(a)(ii) is a derivative; and

                     (b)  the financial service or product would be provided to the client as a retail client if:

                              (i)  the service or product were provided to the client when the money is paid; and

                             (ii)  section 761GA (about sophisticated investors) did not apply.

derivative retail client property: property given as mentioned in subsection 984A(1) is derivative retail client property if:

                     (a)  either:

                              (i)  the financial service referred to in subparagraph 984A(1)(a)(i) is or relates to a dealing in a derivative; or

                             (ii)  the financial product referred to in subparagraph 984A(1)(a)(ii) is a derivative; and

                     (b)  the financial service or product would be provided to the client as a retail client if:

                              (i)  the service or product were provided to the client when the property is given; and

                             (ii)  section 761GA (about sophisticated investors) did not apply.

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).

exempt public sector superannuation scheme has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

financial market has the meaning given by Division 5.

financial product has the meaning given by Division 3.

Note:          Some references in this Chapter to financial products have effect subject to particular express exclusions (for example, see sections 1010A and 1074A) or inclusions (see section 1040B).

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).

holder, in relation to an RSA, has the same meaning as in the Retirement Savings Accounts Act 1997.

insurance product means a financial product described in paragraph 764A(1)(d), (e) or (f).

insurer, in relation to a superannuation complaint, means the life company (within the meaning of the Life Insurance Act 1995) that is a party to the policy to which the complaint relates.

investigating authority means a tribunal, authority or person having power to require the production of documents or the answering of questions.

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.

life policy has the same meaning as in the Life Insurance Act 1995.

life policy fund means a regulated superannuation fund for the purpose of which the trustee maintains, in relation to at least some of the members of the fund:

                     (a)  individual life policies covering each of those members; or

                     (b)  a single life policy covering all of those members.

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).

registrable superannuation entity has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

regulated superannuation fund:

                     (a)  has the same meaning as in the Superannuation Industry (Supervision) Act 1993; and

                     (b)  includes the scheme provided for by the Australian Defence Force Cover Act 2015; and

                     (c)  if, under the AFCA scheme, an exempt public sector superannuation scheme may elect to join the AFCA scheme, and such a superannuation scheme so elects—includes that superannuation scheme.

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 has the same meaning as in the Retirement Savings Accounts Act 1997.

RSA product means a financial product described in paragraph 764A(1)(h).

RSA provider has the same meaning as in the Retirement Savings Accounts Act 1997.

sale, in relation to an annuity policy, includes any activity undertaken, or representation made:

                     (a)  at the time of, or preliminary to, the entry into the policy, so that the policy as so entered into extends to a particular person; and

                     (b)  at the time of, or preliminary to, the variation of the policy, so that the policy as so varied affects a particular person.

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; or

                     (g)  a simple corporate bonds 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 complaint has the meaning given by subsection 1053(3).

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).

superannuation provider means a person who is a superannuation provider within the meaning of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 or the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997.

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, of a regulated superannuation fund that is the scheme provided for by the Australian Defence Force Cover Act 2015, means CSC (within the meaning of the Governance of Australian Government Superannuation Schemes Act 2011).

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

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;

                     (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 or Part 6D.3A, 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 or a crowd‑funding 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;

                      (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;

                   (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

                    (ea)  provide a crowd‑funding service (see section 766F); 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.

          (2A)  Despite subsections (1) and (2), providing a crowd‑funding service does not constitute dealing in a financial product.

             (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)  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), 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);

                     (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.

766F  Meaning of provides a crowd‑funding service

Meaning of provides a crowd‑funding service

             (1)  A person provides a crowd‑funding service if:

                     (a)  a CSF offer document for a CSF offer of securities of a company is published on a platform operated by the person; and

                     (b)  applications may be made to the person for the issue, by the company, of securities pursuant to the offer.

Note:          CSF offers are dealt with in Part 6D.3A (Crowd‑sourced funding).

             (2)  The financial service constituted by providing a crowd‑funding service is taken to include (in addition to the matters mentioned in subsection (1)), performing all other aspects of the role of a CSF intermediary under Part 6D.3A.

To whom, and when, a crowd‑funding service is provided

             (3)  A person who uses the application facility for the CSF offer to make an application pursuant to the offer is a person to whom the crowd‑funding service is provided. The time at which the crowd‑funding service is provided to the person is the time when the person first uses the application facility to make an application pursuant to the offer.

Note:          For the meaning of application facility, see subsection 738ZA(3).

             (4)  The company making the CSF offer is a person to whom the crowd‑funding service is provided. The time at which the crowd‑funding service is provided to the company is the time when the company enters into the hosting arrangement for the offer.

Note:          For the meaning of hosting arrangement, see subsection 738L(2).

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 by Minister

             (1)  The Minister may exempt a particular financial market, or a class of financial market, from all or specified provisions of this Part. An exemption may be unconditional, or subject to conditions specified in the exemption.

Note:          The provisions of this Part include regulations made for the purposes of this Part (see section 761H).

             (2)  The Minister may, at any time:

                     (a)  vary an exemption to:

                              (i)  impose conditions, or additional conditions, on the exemption; or

                             (ii)  vary or revoke any of the conditions on the exemption; or

                     (b)  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 class of financial markets—a notice has been published on ASIC’s website allowing a reasonable period within which the operator of each financial market covered by the exemption may make submissions on the proposed action, and that period has ended.

             (4)  If an exemption is expressed to apply in relation to a class of financial markets (whether or not it is also expressed to apply in relation to one or more financial markets otherwise than by reference to membership of a class), then the exemption, and any variation or revocation of the exemption, is a legislative instrument.

             (5)  If subsection (4) does not apply to an exemption, then the exemption, and any variation or revocation of the exemption, must be in writing and the Minister must publish notice of it in the Gazette.

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;

                     (d)  the client money reporting 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).

Note 3:       If there is an inconsistency between the market integrity rules, the derivative transaction rules or the derivative trade repository rules and the client money reporting rules, the market integrity rules, the derivative transaction rules or the derivative trade repository rules prevail: see subsection 981M(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 assessment of 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)  If the market licensee is prescribed by the regulations for the purpose of this subsection, ASIC must, in respect of the obligation in paragraph 792A(c), do such an assessment at least once a year.

             (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 a Chapter 5 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); or

                     (e)  in the case of a licensee that is a leviable entity (within the meaning of the ASIC Supervisory Cost Recovery Levy Act 2017)—the following have not been paid in full at least 12 months after the due date for payment:

                              (i)  an amount of levy (if any) payable in respect of the licensee;

                             (ii)  an amount of late payment penalty payable (if any) in relation to the levy;

                            (iii)  an amount of shortfall penalty payable (if any) in relation to the levy.

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.

798M  Exemptions by Minister

             (1)  The Minister may exempt a particular financial market, or class of financial markets, from all or specified provisions of this Part. An exemption may be unconditional, or subject to conditions specified in the exemption.

Note:          The provisions of this Part include regulations made for the purposes of this Part (see section 761H).

             (2)  The Minister may, at any time:

                     (a)  vary an exemption to:

                              (i)  impose conditions, or additional conditions, on the exemption; or

                             (ii)  vary or revoke any of the conditions on the exemption; or

                     (b)  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 class of financial markets—a notice has been published on ASIC’s website allowing a reasonable period within which the operator of each financial market covered by the exemption may make submissions on the proposed action, and that period has ended.

             (4)  If an exemption is expressed to apply in relation to a class of financial markets (whether or not it is also expressed to apply in relation to one or more financial markets otherwise than by reference to membership of a class), then the exemption, and any variation or revocation of the exemption, is a legislative instrument.

             (5)  If subsection (4) does not apply to an exemption, then the exemption, and any variation or revocation of the exemption, must be in writing and the Minister must publish notice of it in the Gazette.

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 by Minister

             (1)  The Minister may exempt a particular clearing and settlement facility, or class of clearing and settlement facilities, from all or specified provisions of this Part. An exemption may be unconditional, or subject to conditions specified in the exemption.

Note:          The provisions of this Part include regulations made for the purposes of this Part (see section 761H).

             (2)  The Minister may, at any time:

                     (a)  vary an exemption to:

                              (i)  impose conditions, or additional conditions, on the exemption; or

                             (ii)  vary or revoke any of the conditions on the exemption; or

                     (b)  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 class of clearing and settlement facilities—a notice has been published on ASIC’s website allowing a reasonable period within which the operator of each clearing and settlement facility covered by the exemption may make submissions on the proposed action, and that period has ended.

             (4)  If an exemption is expressed to apply in relation to a class of clearing and settlement facilities (whether or not it is also expressed to apply in relation to one or more clearing and settlement facilities otherwise than by reference to membership of a class), then the exemption, and any variation or revocation of the exemption, is a legislative instrument.

             (5)  If subsection (4) does not apply to an exemption, then the exemption, and any variation or revocation of the exemption, must be in writing and the Minister must publish notice of it in the Gazette.

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;

                     (c)  the client money reporting rules;

those other rules prevail over the operating rules to the extent of the inconsistency.

Note 1:       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).

Note 2:       If there is an inconsistency between the derivative transaction rules or the derivative trade repository rules and the client money reporting rules, the derivative transaction rules or the derivative trade repository rules prevail: see subsection 981M(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 assessment of 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)  If the CS facility licensee is prescribed by the regulations for the purpose of this subsection, ASIC must, in respect of the obligation in paragraph 821A(c), do such an assessment at least once a year.

             (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 assessment of licensee’s compliance

             (1)  The Reserve Bank of Australia (the Reserve Bank) may do an assessment of how well a 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.

          (1A)  If the CS facility licensee is prescribed by the regulations for the purpose of this subsection, the Reserve Bank must do such an assessment at least once a year.

             (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 a Chapter 5 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); or

                     (e)  in the case of a licensee that is a leviable entity (within the meaning of the ASIC Supervisory Cost Recovery Levy Act 2017)—the following have not been paid in full at least 12 months after the due date for payment:

                              (i)  an amount of levy (if any) payable in respect of the licensee;

                             (ii)  the amount of late payment penalty payable (if any) in relation to the levy;

                            (iii)  the amount of shortfall penalty payable (if any) in relation to the levy.

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.