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Corporations Amendment Regulations 2001 (No. 4)

Authoritative Version
  • - F2001B00407
  • No longer in force
SR 2001 No. 319 Regulations as made
These Regulations amend the Corporations Regulations 2001.
Administered by: Treasury
General Comments: This instrument was backcaptured in accordance with Section 36 of the Legislative Instruments Act 2003
Made 08 Oct 2001
Registered 01 Jan 2005
Tabled HR 12 Feb 2002
Tabled Senate 12 Feb 2002
Gazetted 15 Oct 2001
Date of repeal 09 Aug 2013
Repealed by Treasury (Spent and Redundant Instruments) Repeal Regulation 2013
This Legislative Instrument has been subject to a Motion to Disallow:
Motion Date:
18-Jun-2002
Expiry Date:
14-Jun-2005
House:
Senate
Details:
Partial
Resolution:
Disallowed
Resolution Date:
16-Sep-2002
Resolution Time:
Provisions:
rr 7.9.10, 7.9.11

Corporations Amendment Regulations 2001 (No. 4)1

Statutory Rules 2001 No. 3192

I, PETER JOHN HOLLINGWORTH, Governor-General of the Commonwealth of Australia, acting with the advice of the Federal Executive Council, make the following Regulations under the Corporations Act 2001.

Dated 8 October 2001

PETER HOLLINGWORTH

Governor-General

By His Excellency’s Command

JOE HOCKEY

Minister for Financial Services and Regulation


1              Name of Regulations

                These Regulations are the Corporations Amendment Regulations 2001 (No. 4).

2              Commencement

                These Regulations commence on the day on which item 1 of Schedule 1 to the Financial Services Reform Act 2001 commences.

3              Amendment of Corporations Regulations 2001

                Schedule 1 amends the Corporations Regulations 2001.


Schedule 1        Amendments

(regulation 3)

  

[1]         Regulation 1.0.02

substitute

1.0.02     Interpretation

         (1)   In these Regulations:

ABN (Australian Business Number) has the meaning given by section 41 of the A New Tax System (Australian Business Number) Act 1999.

Act means the Corporations Act 2001.

agent means a person appointed under subsection 601CG (1) of the Act.

approved deposit fund (or ADF) has the same meaning as in the SIS Act.

approved foreign bank:

                (a)    in relation to a participant of a licensed market, means a bank:

                          (i)    established by or under the law of a foreign country; and

                         (ii)    in relation to which there is in force an approval given by the market licensee in accordance with its operating rules; and

               (b)    in relation to a financial services licensee other than a participant of a licensed market, means a bank:

                          (i)    regulated by an overseas regulator; and

                         (ii)    in relation to which there is in force an approval given by ASIC for the purposes of this definition.

approved form, in relation to a provision of the Act or of these Regulations, means the form that is approved under paragraph 350 (1) (b) of the Act for use for that provision.

associated provisions, in relation to provisions (the core provisions) of the relevant old legislation as in force at a particular time, include (but are not limited to):

                (a)    any regulations or other instruments that are or were in force for the purposes of any of the core provisions at that time; and

               (b)    any interpretation provisions that apply or applied in relation to any of the core provisions at that time (whether or not they also apply or applied for other purposes); and

                (c)    any provisions relating to liability (civil or criminal) that apply or applied in relation to any of the core provisions at that time (whether or not they also apply or applied for other purposes); and

               (d)    any provisions that limit or limited, or that otherwise affect or affected, the operation of any of the core provisions at that time (whether or not they also limit or limited, or affect or affected, the operation of other provisions).

ASTC means ASX Settlement and Transfer Corporation Pty Limited.

ASTC certificate cancellation provisions means the provisions of the ASTC operating rules that deal with:

                (a)    the cancellation of certificates or other documents of title to Division 4 financial products; and

               (b)    matters incidental to the cancellation of those certificates or documents.

ASTC-regulated transfer means a transfer of a Division 4 financial product:

                (a)    within the meaning of:

                          (i)    Division 4 of Part 7.11 of the Act; and

                         (ii)    regulations relating to transfer made for sections 1074A and 1074E of the Act; and

               (b)    that is effected through ASTC; and

                (c)    that, according to the ASTC operating rules, is an ASTC-regulated transfer.

benefit fund has the meaning given by section 16B of the Life Insurance Act 1995.

building society has the same meaning as in section 16 of the RSA Act.

capital guaranteed, for a superannuation product or an RSA product, means that the contributions and accumulated earnings may not be reduced by a negative investment return or a reduction in the value of an asset in which the product is invested.

capital guaranteed fund means a public offer superannuation fund, or a sub-fund of a public offer superannuation fund, that has the following characteristics:

                (a)    its investments comprise 1 or more of the following only:

                          (i)    deposits with an ADI;

                         (ii)    investments in a capital guaranteed superannuation product or RSA product;

               (b)    the contributions and accumulated earnings of its members cannot be reduced by negative investment returns (within the meaning of subregulation 5.01 (1) of the SIS Regulations) or by any reduction in the value of its assets.

capital guaranteed member means a member whose interest in a public offer superannuation fund is fully invested in a capital guaranteed fund.

Division 3 asset means:

                (a)    shares mentioned in paragraph 1073A (1) (a) of the Act; or

               (b)    debentures mentioned in paragraph 1073A (1) (b) of the Act; or

                (c)    interests in a registered scheme mentioned in paragraph 1073A (1) (c) of the Act; or

               (d)    securities mentioned in paragraph 1073A (1) (e) of the Act.

Division 3 rights means:

                (a)    rights mentioned in paragraph 1073A (1) (d) of the Act; and

               (b)    rights related to securities mentioned in paragraph 1073A (1) (e) of the Act.

Division 3 securities means Division 3 assets and Division 3 rights.

Division 4 financial product has the meaning given by regulation 7.11.03.

eligible termination payment has the meaning given by Subdivision AA of Division 2 of Part III of the Income Tax Assessment Act 1936.

Exchange body means:

                (a)    Australian Stock Exchange Limited; or

               (b)    a subsidiary of Australian Stock Exchange Limited.

excluded ADF has the same meaning as in the SIS Act.

exempt public sector superannuation scheme (EPSSS) has the same meaning as in the SIS Act.

financial business means a business that:

                (a)    consists of, or includes, the provision of financial services; or

               (b)    relates wholly or partly to the provision of financial services.

form means an approved form or a prescribed form.

friendly society has the meaning given by section 16C of the Life Insurance Act 1995.

FSR commencement means the commencement of item 1 of Schedule 1 to the Financial Services Reform Act 2001.

income stream financial product means an annuity or other facility that is a financial product which provides an income stream, including:

                (a)    an income stream that is an investment life insurance product; or

               (b)    an income designated under section 9 of the Social Security Act 1991 or section 5H of the Veterans’ Entitlements Act 1986;

but does not include any of the following:

                (c)    a financial product under paragraph 764A (1) (ba) of the Act;

               (d)    anything that is not a financial product under section 765A of the Act;

                (e)    available money;

                (f)    deposit money;

               (g)    a managed investment product;

               (h)    a security;

                (i)    a loan that has not been repaid in full;

                (j)    gold, silver or platinum bullion.

Note   In accordance with subsections 761G (6) and (7) of the Act, superannuation products and RSA products are not income stream financial products.

investment-based financial product means:

                (a)    a financial product under section 763B of the Act; or

               (b)    a financial product under paragraph 764A (1) (ba) or (j) of the Act; or

                (c)    a financial product under paragraph 764A (1) (m) of the Act that is specified to be an investment-based financial product; or

               (d)    a security; or

                (e)    a managed investment product; or

                (f)    an investment life insurance product; or

               (g)    a deposit product;

but does not include any of the following:

               (h)    anything that is not a financial product under section 765A of the Act;

                (i)    an income stream financial product.

Note   In accordance with subsections 761G (6) and (7) of the Act, superannuation products and RSA products are not income stream financial products.

Lloyd’s has the same meaning as in the Insurance Act 1973.

non-cash payment financial product means a financial product under section 763D of the Act, other than:

                (a)    a derivative; or

               (b)    a financial product under paragraph 764A (1) (k) of the Act; or

                (c)    anything that is not a financial product under section 765A of the Act.

non-Division 3 securities means financial products to which Division 3 or 4 of Part 7.11 of the Act applies because of a declaration made by ASIC under paragraph 1075A (1) (b) of the Act.

old Corporations Act means the Corporations Act 2001 as in force immediately before the FSR commencement.

policy committee has the same meaning as in the SIS Act.

pooled superannuation trust (or PST) has the same meaning as in the SIS Act.

pre-FSR securities means securities defined in subsection 92 (3) of the old Corporations Act.

preserved benefits means preserved benefits under:

                (a)    Subdivision 6.1.2 of the SIS Regulations; or

               (b)    Subdivision 4.1.2 of the RSA Regulations.

proper ASTC transfer means:

                (a)    an ASTC-regulated transfer of a Division 4 financial product effected:

                          (i)    through the prescribed CS facility operated by the ASTC; and

                         (ii)    in accordance with the operating rules of the ASTC; and

               (b)    an ASTC-regulated transfer that the ASTC, in accordance with its operating rules, determines:

                          (i)    to comply substantially with the applicable provisions of those operating rules; and

                         (ii)    to be taken to be, and always to have been, a proper ASTC transfer.

public offer entity has the same meaning as in the SIS Act.

public offer superannuation fund has the same meaning as in the SIS Act.

registration number means:

                (a)    for a company — the number allotted to the company under paragraph 118 (1) (a) or 601BD (1) (a) of the Act; or

               (b)    for a registered body — the number allotted to it under section 601CB or 601CE of the Act; or

                (c)    for an auditor or a liquidator (including an official liquidator or a liquidator of a specified body corporate) — the number allotted to a person on registration of that person as an auditor or a liquidator.

regulated superannuation fund has the same meaning as in the SIS Act.

restricted non-preserved benefits means restricted non-preserved benefits under:

                (a)    Subdivision 6.1.3 of the SIS Regulations; or

               (b)    Subdivision 4.1.3 of the RSA Regulations.

retirement savings account has the same meaning as in the RSA Act.

risk-based financial product means:

                (a)    a financial product under section 763C of the Act; or

               (b)    a life risk insurance product;

but does not include any of the following:

                (c)    a derivative;

(d)    anything that is not a financial product under section 765A of the Act.

Note   In accordance with subsections 761G (5) and (7) of the Act, general insurance products are not risk-based financial products.

RSA Act means the Retirement Savings Accounts Act 1997.

RSA Regulations means the Retirement Savings Accounts Regulations 1997.

settlement authority means:

                (a)    a participating market licensee; or

               (b)    a prescribed CS facility.

settlement documents, in relation to a transaction (other than a guaranteed securities loan), means:

                (a)    if the agreement for the transaction has not been discharged — documents the supply of which in accordance with the agreement is sufficient to discharge the obligations of the seller under the agreement, in so far as the obligations relate to the supply of documents in connection with the transaction; or

               (b)    if the agreement for the transaction has been discharged, whether by performance or otherwise — documents the supply of which in accordance with the agreement would, if the agreement had not been discharged, be sufficient to discharge the obligations of the seller under the agreement, in so far as the obligations relate to the supply of documents in connection with the transaction.

SIS Act means the Superannuation Industry (Supervision) Act 1993.

SIS Regulations means the Superannuation Industry (Supervision) Regulations 1994.

sub-plan, in relation to a regulated superannuation fund, means a segment of the fund comprising a member or members of the fund, being a sub-plan that the trustee determines should be made.

successor fund has the same meaning as in the SIS Regulations.

superannuation entity has the same meaning as in the SIS Act.

superannuation interest has the same meaning as in the SIS Act.

superannuation scheme means a complying superannuation fund within the meaning of section 267 of the Income Tax Assessment Act 1936.

superannuation-sourced money means money in relation to which:

                (a)    the provider of a financial service knows that the money:

                          (i)    will be paid to a person as an eligible termination payment by the trustee of a regulated superannuation fund; or

                         (ii)    has been paid in that way at any time during the previous 6 months; or

               (b)    the provider of the financial service ought reasonably to know that fact.

TDS nominee, in relation to the transfer delivery service provisions of a settlement authority, means the clearing nominee mentioned in the definition of transfer delivery service provisions.

transfer delivery service provisions, in relation to a settlement authority, means provisions of the operating rules of the settlement authority under which a dealer (dealer 1) may elect to bring about a transfer of securities of a particular kind and number to another dealer (dealer 2) by:

                (a)    dealer 1 transferring securities of that kind and number to a clearing nominee of the settlement authority; and

               (b)    the clearing nominee transferring securities of that kind and number to dealer 2.

trustee in relation to a superannuation scheme, includes a person responsible for the administration and management of the scheme.

unrestricted non-preserved benefits means unrestricted non-preserved benefits under:

                (a)    Subdivision 6.1.4 of the SIS Regulations; or

               (b)    Subdivision 4.1.4 of the RSA Regulations.

         (2)   In these Regulations, a reference to a form by number is a reference to the form so numbered in Schedule 2.

[2]         Subregulation 1.0.05 (1)

omit

paragraph 350 (b)

insert

paragraph 350 (1) (b)

[3]         Paragraph 1.0.05 (2) (a)

omit

paragraph 350 (b)

insert

paragraph 350 (1) (b)

[4]         After regulation 1.0.05

insert

1.0.05A  Lodgment with ASIC

         (1)   For the definition of lodge with ASIC in section 761A of the Act, the definition relates to each provision of Chapter 7 of the Act that includes the expression lodge with ASIC.

         (2)   For paragraph 1364 (2) (c) of the Act:

                (a)    a statement that is to be given to ASIC in accordance with subsection 912C (1) of the Act may be lodged with ASIC in the prescribed form; and

               (b)    a report that is to be given to ASIC in accordance with subsection 912D (1) of the Act may be lodged with ASIC in the prescribed form; and

                (c)    written notice that is to be given to ASIC in accordance with subsection 912D (2) of the Act may be lodged with ASIC in the prescribed form; and

               (d)    information that is to be given to ASIC in accordance with subsection 912E (2) of the Act may be lodged with ASIC in the prescribed form; and

                (e)    information that is to be provided to ASIC in accordance with paragraph 913B (1) (ca) of the Act may be lodged with ASIC in the prescribed form.

[5]         Subparagraph 1.0.07 (f) (i)

substitute

                          (i)    subject to regulation 7.6.03:

                                   (A)     the ACN, ARBN or ARSN of the corporation or managed investment scheme; or

                                   (B)     if the last 9 digits of its ABN are the same, and in the same order, as the last 9 digits of its ACN, ARBN or ARSN (if the corporation or managed investment scheme has an ACN, ARBN or ARSN) — its ABN; and

[6]         Paragraph 1.0.18 (b)

substitute

               (b)    paragraphs 12 (2) (b) and (c) of the Act.

[7]         After regulation 1.0.21

insert

1.0.22     Territorial application of Act

                For subsection 5 (9) of the Act, each of the external Territories is included in this jurisdiction for the purposes of Chapter 7 of the Act (other than Parts 7.2 to 7.5 and Part 7.11) in relation to:

                (a)    a superannuation product within the meaning of section 761A of the Act; and

               (b)    an RSA product within the meaning of section 761A of the Act; and

                (c)    a financial service that relates to a superannuation product within the meaning of section 761A of the Act; and

               (d)    a financial service that relates to an RSA product within the meaning of section 761A of the Act.

[8]         Part 1.2

omit

[9]         Regulation 2C.1.01

substitute

2C.1.01  Prescribed financial market (Act s 170 (3))

                For subsection 170 (3) of the Act, prescribed financial market means any of the following:

                (a)   Australian Stock Exchange Limited;

               (b)   Bendigo Stock Exchange Ltd;

                (c)   Stock Exchange of Newcastle Limited.

[10]      Chapter 2D

omit

[11]      Subregulation 5B.3.04 (1)

omit

subsection 601DH (1) of the Corporations Law

insert

subsection 601DH (1) of the Act

[12]      After Part 6.2

insert

Part 6.5              The takeover procedure

6.5.01     Wholesale holders

                For paragraph 648J (4) (a) of the Act, $500 000 is specified in relation to an investment-based product.

Note   Under subsection 648J (7) of the Act, a holder of securities is a wholesale holder if the value of the securities equals or exceeds the amount specified in the regulations made for the purposes of paragraph 648J (7) (a).

Part 6.6              Variation of offers

6.6.01     Right to withdraw acceptance

         (1)   For paragraph 650E (3) (a) of the Act, a notice under paragraph 650E (2) (a) of the Act relating to securities entered on a register or subregister of a prescribed CS facility must be in a form approved by the operating rules of that prescribed CS facility for Part 6.6 of the Act (which may include an electronic form).

         (2)   For paragraph 650E (4) (a) of the Act, if securities are entered on a register or subregister of a prescribed CS facility, a person to whom section 650E of the Act applies must take the action that the operating rules of the prescribed CS facility require in relation to the return of the securities.

         (3)   For paragraph 650E (5) (a) of the Act, if a person withdraws an acceptance of an offer, the bidder must take any action that the operating rules of the prescribed CS facility require in relation to any of the securities:

                (a)    to which the acceptance relates; and

               (b)    that are entered on a register or subregister of the prescribed CS facility.

Part 6.8              Acceptances

6.8.01     Acceptance of offers made under off-market bid

                For paragraph 653A (b) of the Act, if the operating rules of a prescribed CS facility require an acceptance of an offer to which paragraph 653A (a) applies to be made in a particular way, to the extent that the acceptance relates to the securities in the offer, the acceptance must be made in that way.

6.8.02     Acceptances by transferees and nominees of offers made under off-market bid

                For paragraph 653B (4) (a) of the Act, a notice relating to securities entered on a register or subregister of a prescribed CS facility must be in a form approved by the operating rules of the prescribed CS facility for Part 6.8 of the Act (which may include an electronic form).

[13]      After Chapter 6

insert

Chapter 6A  Compulsory acquisitions and buy-outs

Part 6A.1            Compulsory acquisitions and buy-outs after takeover bid

6A.1.01  Terms on which securities to be acquired

                For paragraph 661C (4) (a) of the Act, an election relating to securities entered on an electronic register or subregister of a prescribed CS facility must be in an electronic form approved by the operating rules of the prescribed CS facility.

Chapter 6CA   Continuous disclosure

6CA.1.01   Continuous disclosure: other disclosing entities

                For paragraph 675 (2) (d) of the Act, the disclosure of information under section 675 of the Act is not required if:

                (a)    the information is confidential; or

               (b)    the disclosure of the information would contravene a law; or

                (c)    the information is about a matter of supposition; or

               (d)    the information is not definite enough to make disclosure appropriate; or

                (e)    the information relates to an incomplete proposal or a matter that is in the course of negotiation; or

                (f)    the information was prepared or created for the internal management purposes of the entity; or

               (g)    the information is a trade secret; or

               (h)    a reasonable person would not expect the information to be disclosed.

[14]      After regulation 6D.2.02

insert

6D.2.03  Sophisticated investors

         (1)   For subparagraph 708 (8) (c) (i) of the Act, $2.5 million is specified.

         (2)   For subparagraph 708 (8) (c) (ii) of the Act, $250 000 is specified.

Note   Under subsection 708 (8) of the Act, an offer of a body’s securities does not need disclosure to investors under Part 6D.2 of the Act if it appears from a certificate given by a qualified accountant no more than 6 months before the offer is made that the person to whom the offer is made:

(a)   has net assets of at least the amount specified in regulations made for the purposes of subparagraph 708 (8) (c) (i); or

(b)   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 subparagraph 708 (8) (c) (ii).

[15]      Chapters 7 and 8

substitute

Chapter 7    Financial services and markets

Part 7.1              Preliminary

Division 1              General

7.1.01     Prescribed financial market operators

                For the definition of prescribed financial market in section 9 of the Act, the following market operators are prescribed:

                (a)    Australian Stock Exchange Limited;

               (b)    Bendigo Stock Exchange Ltd;

                (c)    Stock Exchange of Newcastle Limited.

7.1.02     Participant

                For subparagraph (b) (vi) of the definition of participant in section 761A of the Act, section 792A of the Act is prescribed.

7.1.03       Prescribed CS facility

                For the definition of prescribed CS facility in section 761A of the Act, ASX Settlement and Transfer Corporation Pty Limited (also known as ‘ASTC’) is a prescribed CS facility.

7.1.04       Derivatives

         (1)   For paragraph 761D (1) (b) of the Act, the prescribed period is:

                (a)    for a spot foreign exchange contract — 2 business days; and

               (b)    in any other case — 1 business day.

         (2)   For subsection 761D (2) of the Act, an arrangement is declared to be a derivative if the following conditions are satisfied in relation to the arrangement:

                (a)    the arrangement is not a spot foreign exchange contract;

               (b)    under the arrangement, a party to the arrangement must, or may be required to, provide at some future time (which may be less than 1 day after the arrangement is entered into) consideration of a particular kind or kinds to someone;

                (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.

         (3)   In this regulation:

spot foreign exchange contract means a foreign exchange arrangement involving the provision, at some future time, of consideration that is determined by reference to an exchange rate on the day the arrangement is entered into.

7.1.05       Specific things that are not financial products: superannuation interests

                For paragraph 765A (1) (q) of the Act, an exempt public sector superannuation scheme within the meaning of the SIS Act is prescribed.

7.1.06       Specific things that are not financial products: credit facility

         (1)   For subparagraph 765A (1) (h) (i) of the Act, each of the following is a credit facility:

                (a)    the provision of credit:

                          (i)    for any period; and

                         (ii)    with or without prior agreement between the credit provider and the debtor; and

                        (iii)    whether or not both credit and debit facilities are available;

               (b)    a facility:

                          (i)    known as a bill facility; and

                         (ii)    under which a credit provider provides credit by accepting, drawing, discounting or indorsing a bill of exchange or promissory note;

                (c)    the provision of credit by a pawnbroker in the ordinary course of a pawnbroker’s business (being a business which is being lawfully conducted by the pawnbroker);

               (d)    the provision of credit by the trustee of the estate of a deceased person by way of an advance to a beneficiary or prospective beneficiary of the estate;

                (e)    the provision of credit by an employer, or a related body corporate of an employer, to an employee or former employee (whether or not it is provided to the employee or former employee with another person);

                (f)    the provision of a mortgage that secures obligations under a credit contract (other than a lien or charge arising by operation of any law or by custom);

               (g)    a guarantee related to a mortgage mentioned in paragraph (f);

               (h)    a guarantee of obligations under a credit contract.

         (2)   The provision of consumer credit insurance that includes a contract of general insurance for the Insurance Contracts Act 1984 is not a credit facility.

         (3)   In this regulation:

credit means a contract, arrangement or understanding:

                (a)    under which:

                          (i)    payment of a debt owed by one person (a debtor) to another person (a credit provider) is deferred; or

                         (ii)    one person (a debtor) incurs a deferred debt to another person (a credit provider); and

               (b)    including any of the following:

                          (i)    any form of financial accommodation;

                         (ii)    a hire purchase agreement;

                        (iii)    credit provided for the purchase of goods or services;

                        (iv)    a contract, arrangement or understanding for the hire, lease or rental of goods or services, other than a contract, arrangement or understanding under which:

                                   (A)     full payment is made before or when the goods or services are provided; and

                                   (B)     for the hire, lease or rental of goods — an amount at least equal to the value of the goods is paid as a deposit in relation to the return of the goods;

                         (v)    an article known as a credit card or charge card;

                        (vi)    an article, other than a credit card or a charge card, intended to be used to obtain cash, goods or services;

                       (vii)    an article, other than a credit card or a charge card, commonly issued to customers or prospective customers by persons who carry on business for the purpose of obtaining goods or services from those persons by way of a loan;

                      (viii)    a liability in respect of redeemable preference shares;

                        (ix)    a financial benefit arising from or as a result of a loan;

                         (x)    assistance in obtaining a financial benefit arising from or as a result of a loan;

                        (xi)    issuing, indorsing or otherwise dealing in a promissory note;

                       (xii)    drawing, accepting, indorsing or otherwise dealing in a negotiable instrument (including a bill of exchange);

                      (xiii)    granting or taking a lease over real or personal property;

                      (xiv)    a letter of credit.

7.1.07       Specific things that are not financial products: surety bonds

                For paragraph 765A (1) (y) of the Act, a surety bond is not a financial product.

7.1.08       Specific things that are not financial products: bank drafts

                For paragraph 765A (1) (y) of the Act, a bank draft, including (but not limited to):

                (a)    a cheque drawn by a financial institution on itself; or

               (b)    a cheque drawn by a financial institution on a financial institution other than itself;

is not a financial product.

7.1.09       Obligations related to clearing and settlement facility

                For paragraph 768A (1) (b) of the Act, the following obligations are prescribed:

                (a)    each obligation arising from a contract to transfer a financial product mentioned in paragraph 764A (1) (a) of the Act;

               (b)    each obligation arising from a contract to transfer a financial product mentioned in paragraph 764A (1) (b) of the Act;

                (c)    each obligation arising from acquiring or providing a financial product mentioned in paragraph 764A (1) (c) of the Act;

               (d)    each obligation arising from a contract to transfer a financial product mentioned in paragraph 764A (1) (j) of the Act;

                (e)    each obligation arising from a contract to transfer a financial product mentioned in paragraph 764A (1) (ba) of the Act.

7.1.10       Conduct that does not constitute operating a clearing and settlement facility

         (1)   For paragraph 768A (2) (i) of the Act, the conduct of TNS Clearing Pty Limited in becoming the legal counterparty to a broker-to-broker trade in quoted securities that is executed on the financial market known as the Australian Stock Exchange in the course of novation does not constitute operating a clearing and settlement facility.

         (2)   For paragraph 768A (2) (i) of the Act, the conduct of:

                (a)    the Stock Exchange of Newcastle Limited, or an agent of that body; or

               (b)    a participant of the Stock Exchange of Newcastle Limited, or an agent of the participant; or

                (c)    Bendigo Stock Exchange Limited, or an agent of that body; or

               (d)    a participant of the Bendigo Stock Exchange Limited, or an agent of the participant;

in operating a facility in accordance with the operating rules of a licensed market does not constitute operating a clearing and settlement facility if the requirements of subregulation (3) are met.

         (3)   For subregulation (2), the requirements are:

                (a)    the market licensee must have, and must be responsible for enforcing, operating rules that apply to a participant of the licensed market in relation to the participant’s obligations arising from transactions carried out on the licensed market; and

               (b)    a participant mentioned in paragraph (a), or an agent of the participant appointed in accordance with the operating rules of the licensed market, must be responsible for fulfilling the obligations owed to another participant or agent arising from transactions carried out on the licensed market; and

                (c)    the market licensee is not the operator of any other clearing and settlement facility; and

               (d)    each participant of the licensed market is not the operator of any other clearing and settlement facility; and

                (e)    each agent of a participant of the licensed market is not the operator of any other clearing and settlement facility.

         (4)   In this regulation:

novation means the replacement of a contract (the original contract) between the buyer and seller of financial products with:

                (a)    a contract between the buyer and TNS Clearing Pty Limited in the same terms as the original contract; and

               (b)    a second contract between the seller and TNS Clearing Pty Limited in the same terms as the original contract.

Division 2              Retail clients and wholesale clients

7.1.11       Meaning of retail client and wholesale client: motor vehicle insurance product

         (1)   For subparagraph 761G (5) (b) (i) of the Act, a motor vehicle insurance product is a contract that provides insurance cover (whether or not the cover is limited or restricted in any way) in respect of one or more of the following:

                (a)   loss of, or damage to, a motor vehicle;

               (b)   liability for loss of, or damage to, property caused by or resulting from impact of a motor vehicle with some other thing.

         (2)   A motor vehicle insurance product does not include:

                (a)    insurance to or in relation to which the Marine Insurance Act 1909 applies; or

               (b)    insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to:

                          (i)    workers’ compensation; or

                         (ii)    compulsory third party compensation.

         (3)   In this regulation:

motor vehicle means a vehicle that is designed:

                (a)    to travel by road; and

               (b)    to use volatile spirit, steam, gas, oil, electricity or any other power (not being human power or animal power) as its principal means of propulsion; and

                (c)    to carry passengers;

and includes a motor cycle.

         (4)   However, a motor vehicle does not include:

                (a)    an omnibus; or

               (b)    a tram; or

                (c)    a motor vehicle the carrying capacity of which exceeds 2 tonnes.

7.1.12       Meaning of retail client and wholesale client: home building insurance product

         (1)   For subparagraph 761G (5) (b) (ii) of the Act, a home building insurance product is a contract that provides insurance cover (whether or not the cover is limited or restricted in any way) in respect of destruction of or damage to a home building.

         (2)   A home building insurance product does not include insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to building or construction work in relation to a home building.

         (3)   In this regulation:

home building means:

                (a)    a building used, or intended to be used, principally and primarily as a place of residence; and

               (b)    out-buildings, fixtures and structural improvements used for domestic purposes, being purposes related to the use of the principal residence;

on the site and, without limiting the generality of the expression, includes:

                (c)    fixed wall coverings, fixed ceiling coverings and fixed floor coverings (other than carpets); and

               (d)    services (whether underground or not) that are the property of the insured or that the insured is liable to repair or replace or pay the cost of repairing and replacing; and

                (e)    fences and gates wholly or partly on the site.

site, in relation to a building, means the site specified in the relevant contract of insurance as the site on which the building is situated.

         (4)   A home building does not include:

                (a)    a hotel; or

               (b)    a motel; or

                (c)    a boarding house; or

               (d)    a building that:

                          (i)    is in the course of construction; and

                         (ii)    is being constructed by the insured, or an intending insured, in the course of a construction business; or

                (e)    a temporary building or structure or a demountable or moveable structure; or

                (f)    a caravan (whether fixed to the site or not).

7.1.13       Meaning of retail client and wholesale client: home contents insurance product

         (1)   For subparagraph 761G (5) (b) (iii) of the Act, a home contents insurance product is a contract that provides insurance cover (whether or not the cover is limited or restricted in any way) in respect of loss of or damage to the contents of a residential building.

         (2)   A home contents insurance product does not include:

                (a)    insurance to or in relation to which the Marine Insurance Act 1909 applies; or

               (b)    insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to:

                          (i)    workers’ compensation; or

                         (ii)    compulsory third party compensation.

         (3)   In this regulation:

contents, in relation to a residential building, means any of the following items:

                (a)    furniture, furnishings and carpets (whether fixed or unfixed);

               (b)    household goods;

                (c)    clothing and other personal effects;

               (d)    a picture;

                (e)    a work of art;

                (f)    a fur;

               (g)    a piece of jewellery;

               (h)    a gold or silver article;

                (i)    a document of any kind;

                (j)    a collection of any kind;

               (k)    swimming pools that:

                          (i)    are not fixtures; and

                         (ii)    are owned by the insured or by a member of the insured’s family ordinarily residing with the insured;

                        but does not include an article or thing to which the definition of residential building applies.

residential building means:

                (a)    a building used principally and primarily as a place of residence on the site; and

               (b)    out-buildings used for domestic purposes, being purposes related to the use of the principal residence on the site.

         (4)   A residential building does not include:

                (a)    a hotel; or

               (b)    a motel; or

                (c)    a boarding house; or

               (d)    a building that is in the course of construction; or

                (e)    a temporary building or structure or a demountable or moveable structure.

7.1.14       Meaning of retail client and wholesale client: sickness and accident insurance product

         (1)   For subparagraph 761G (5) (b) (iv) of the Act, a sickness and accident insurance product is a contract that has either of the following characteristics:

                (a)    the contract provides insurance cover (whether the cover is limited or restricted in any way) in respect of the insured person contracting a sickness or disease or a specified sickness or disease or sustaining an injury or a specified injury;

               (b)    if the insured person dies as a result of the sickness, disease or injury, the contract provides insurance cover (whether the cover is limited or restricted in any way) in respect of the death.

         (2)   A sickness and accident insurance product does not include:

                (a)    sickness and accident policies which are guaranteed ‘renewable’ at the option of the insured or where the insurer guarantees not to cancel the policy in response to a change in the risk where such a policy has been effected for a predetermined period of years in excess of 1 year; or

               (b)    insurance to or in relation to which the Marine Insurance Act 1909 applies; or

                (c)    insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to:

                          (i)    workers’ compensation; or

                         (ii)    compulsory third party compensation.

7.1.15       Meaning of retail client and wholesale client: consumer credit insurance product

         (1)   For subparagraph 761G (5) (b) (v) of the Act, a consumer credit insurance product is a contract that has the following characteristics:

                (a)    the contract provides insurance cover (whether the cover is limited or restricted in any way) in respect of:

                          (i)    the death of the insured person; or

                         (ii)    the insured person contracting a sickness or disease; or

                        (iii)    the insured person sustaining an injury; or

                        (iv)    the insured person becoming unemployed;

               (b)    the amount of the liability of the insurer under the contract is to be ascertained by reference to a liability of the insured person under a specified agreement to which the insured person is a party.

         (2)   A consumer credit insurance product does not include:

                (a)    insurance to or in relation to which the Marine Insurance Act 1909 applies; or

               (b)    insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to:

                          (i)    workers’ compensation; or

                         (ii)    compulsory third party compensation.

7.1.16       Meaning of retail client and wholesale client: travel insurance product

         (1)   For subparagraph 761G (5) (b) (vi) of the Act, a travel insurance product is a contract that provides insurance cover (whether or not the cover is limited or restricted in any way) in respect of one or more of the following:

                (a)    financial loss in respect of:

                          (i)    fares for any form of transport to be used; or

                         (ii)    accommodation to be used;

                        in the course of the specified journey in the event that the insured person does not commence or complete the specified journey;

               (b)    loss of or damage to personal belongings that occurs while the insured person is on the specified journey;

                (c)    a sickness or disease contracted or an injury sustained by the insured person while on the specified journey;

               (d)    loss, damage or compensation for an event occurring to the insured person during a specified journey that ordinarily forms a part of insurance commonly regarded as travel insurance, including

                          (i)    loss of cash or credit cards; and

                         (ii)    legal liability; and

                        (iii)    hijack; and

                        (iv)    kidnap; and

                         (v)    ransom.

         (2)   A travel insurance product does not include:

                (a)    insurance to or in relation to which the Marine Insurance Act 1909 applies; or

               (b)    insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to:

                          (i)    workers’ compensation; or

                         (ii)    compulsory third party compensation.

         (3)   In this regulation:

specified journey means a journey in relation to which insurance cover is provided by the contract.

7.1.17       Meaning of retail client and wholesale client: personal and domestic property insurance product

         (1)   For subparagraph 761G (5) (b) (vii) of the Act, a personal and domestic property insurance product is a contract that provides insurance cover (whether or not the cover is limited or restricted in any way) in respect of loss or damage to property that is:

                (a)    wholly or predominantly used for personal, domestic or household purposes by:

                          (i)    the insured; or

                         (ii)    a relative of the insured; or

                        (iii)    any person with whom the insured resides; and

               (b)    ordinarily used for that purpose.

        (2)   A personal and domestic property insurance product does not include:

                (a)    insurance to or in relation to which the Marine Insurance Act 1909 applies; or

               (b)    insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to:

                          (i)    workers’ compensation; or

                         (ii)    compulsory third party compensation.

         (3)   In this regulation:

property includes any of the following:

                (a)    moveables;

               (b)    valuables;

                (c)    a caravan or mobile home;

               (d)    an on-site mobile home;

                (e)    a trailer;

                (f)    a marine pleasure craft;

               (g)    a horse;

               (h)    a domestic pet;

                (i)    a mobile phone.

relative means any of the following relatives of an insured person:

                (a)    mother;

               (b)    step-mother;

                (c)    father;

               (d)    step-father;

                (e)    brother;

                (f)    half-brother;

               (g)    sister;

               (h)    half-sister;

                (i)    spouse (including defacto spouse);

                (j)    son;

               (k)    step-son;

                (l)    adopted son;

              (m)    daughter;

               (n)    step-daughter;

               (o)    adopted daughter;

               (p)    grandparent;

               (q)    grandchild;

                (r)    nephew;

                (s)    niece;

                (t)    uncle;

               (u)    aunt;

               (v)    mother-in-law;

              (w)    father-in-law.

         (4)   For paragraph (1) (b), property is taken to be intended to be used ordinarily for personal, domestic or household purposes if the insured signs a written statement that the property is intended to be used ordinarily for 1 or more of those purposes.

7.1.18       Retail clients and wholesale clients: price of investment-based financial products

         (1)   This regulation makes arrangements about the price for the provision of an investment-based financial product.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

Under paragraph 761G (10) (a) of the Act, the regulations may also 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.

In general, the ‘price’ of a product will be the amount that is paid to acquire or be issued with the financial product. The test for the price of the product in paragraph 761G (7) (a) of the Act will be determined at or before the time the client acquires, or is issued with, the financial product. If a client pays over $500 000 to acquire or be issued with the financial product, the client will be a wholesale client in respect of the product.

Price

         (2)   For paragraph 761G (7) (a) of the Act, the amount applicable in relation to an investment-based financial product is $500 000.

Working out price: general rule

         (3)   For paragraph 761G (10) (a) of the Act, the price of an investment-based financial product:

                (a)    is the amount that is paid or payable to acquire or purchase the investment-based financial product; and

               (b)    does not include any amount paid for or in respect of the investment-based financial product following its issue or acquisition unless the issue or acquisition would not have taken place without an arrangement to pay the amount.

Note   An amount deposited in a deposit account will not generally be regarded as part of the ‘price’ paid to acquire or purchase the financial product.

         (4)   For subregulation (3), in calculating any amount payable or paid to acquire or purchase the investment-based financial product:

                (a)    disregard any amount payable to the extent to which it is to be paid out of money lent by:

                          (i)    the person offering the investment-based financial product; or

                         (ii)    an associate of that person; and

               (b)    disregard any amount paid to the extent to which it was paid out of money lent by:

                          (i)    the person offering the investment-based financial product; or

                         (ii)    an associate of that person; and

                (c)    include any amount paid or payable to cover:

                          (i)    fees or charges that are paid to the issuer or any other person that relates to the issue of the investment-based financial product; and

                         (ii)    fees or charges that are paid to the issuer or any other person that relates to the issue of the investment-based financial product; and

               (d)    despite paragraph (c), disregard any amount of remuneration or other benefits paid or payable to a person for the provision of financial product advice or other related services provided directly to:

                          (i)    the client; or

                         (ii)    another person acting on behalf of the client.

Group products

         (5)   If the investment-based financial product is a group product covered by section 1012H of the Act:

                (a)    the amount in subregulation (2) is to be used to determine the status of each person who elects, or may elect, to be covered by the investment-based financial product; and

               (b)    subregulation (3) is to be used to determine the amount to be paid for the person to be covered by the investment-based financial product.

7.1.19       Retail clients and wholesale clients: value of investment-based financial products

         (1)   This regulation makes arrangements about the value of an investment-based financial product to which a financial service relates.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

Under paragraph 761G (10) (a) of the Act, the regulations may also 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.

In general, the ‘value’ of a product will be the amount that the product is worth once it is issued or acquired by the client. It is anticipated that the test for the value of the product in paragraph 761G (7) (a) of the Act will usually be used to assess a client’s status as a retail or wholesale client at or before the time that a financial service (eg financial product advice, disposal of the product) is provided to the client in respect of an existing product.

Value

         (2)   For paragraph 761G (7) (a) of the Act, the amount applicable in relation to an investment-based financial product is $500 000.

Working out value: general rule

         (3)   For paragraph 761G (10) (a) of the Act, the value of an investment-based financial product on a day is:

                (a)    if the financial product is a security, or a financial product under paragraph 764A (1) (j) of the Act — the market value of the investment-based financial product; or

               (b)    if paragraph (a) does not apply — the amount of money that stands to the client’s credit in relation to that investment-based financial product.

         (4)   For subregulation (3), in calculating the value of an investment-based financial product:

                (a)    disregard any amount standing to the client’s credit in relation to the investment-based financial product to the extent that it is to be paid, or was paid, out of money lent by:

                          (i)    the person offering the investment-based financial product; or

                         (ii)    an associate of that person; and

               (b)    disregard any amount of fees or charges:

                          (i)    that the product issuer has an actual or accrued right to deduct, or otherwise to have access to, from the value of the investment-based financial product (whether or not the amount has been deducted); or

                         (ii)    that has accrued as at the time that the client’s status as a retail or wholesale client is assessed.

Cumulative value of products

         (5)   If, at a single point in time:

                (a)    a financial service that is being provided to a client is:

                          (i)    financial product advice; or

                         (ii)    arranging for a person to engage in conduct in accordance with subsection 766C (2) of the Act; and

               (b)    the financial service is provided in respect of:

                          (i)    more than 1 investment-based financial product; or

                         (ii)    more than 1 income financial stream financial product; or

                        (iii)    a combination of investment-based financial products and income financial stream financial products; and

                (c)    either:

                          (i)    the total price for the provision of those financial products is at least $500 000; or

                         (ii)    the price or value of all of those financial products is at least $500 000;

the value of the financial products is taken, for subregulation (3), to be greater than the amount mentioned in subregulation (2).

         (6)   Subregulation (5) does not affect the operation of Part 7.9 of the Act, and Part 7.9 of these Regulations, to the extent that they require the provision of a Product Disclosure Statement in relation to the financial product advice.

Note   Although the effect of subregulation (5) is that the value of the investment-based financial products is taken to be at least $500 000 in the circumstances mentioned in that subregulation, a client must still be provided with appropriate product disclosure and other requirements in accordance with Part 7.9 of the Act as a retail client in relation to a particular investment-based financial product where the price of the product is less than $500 000.

In any situation in which a Product Disclosure Statement would be required for a retail client (the situations described in Subdivision B of Division 2 of Part 7.9 of the Act), the limit of $500 000 must be reached for any single investment-based financial product, or income stream financial product, before the client will be treated as a wholesale client.

Group products

         (7)   If the investment-based financial product is a group product covered by subsection 1012H (1) of the Act:

                (a)    the amount in subregulation (2) is to be used to determine the status of each person who elects, or may elect, to be covered by the investment-based financial product; and

               (b)    subregulation (3) is to be used to determine the value of the investment-based financial product to the extent that it stands, or will stand, to the credit of, each person who elects, or may elect, to be covered by the investment-based financial product.

Time of assessment

         (8)   If a financial services provider needs to assess the status of a client as either retail or wholesale at a particular time in order to ensure that the client complies with the Act, or for any related purpose, the value of a financial product may be assessed at any time, whether or not a financial service is being provided at that time in relation to that product.

Note   Subregulation (8) will ensure that a provider of financial services may assess a client’s status at any time (for example, the provider may need to ascertain whether a periodic statement must be sent to the client under section 1017D of the Act because the client is a retail client).

7.1.20       Retail clients and wholesale clients: price of income stream financial products

         (1)   This regulation makes arrangements about the price for the provision of an income stream financial product.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

Under paragraph 761G (10) (a) of the Act, the regulations may also 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.

In general, the ‘price’ of a product will be the amount that is paid to acquire or be issued with the financial product. The test for the price of the product in paragraph 761G (7) (a) of the Act will be determined at or before the time the client acquires, or is issued with, the financial product. If a client pays over $500 000 to acquire or be issued with the financial product, the client will be a wholesale client in respect of the product.

Price

         (2)   For paragraph 761G (7) (a) of the Act, the amount applicable in relation to an income stream financial product is $500 000.

Working out price: general rule

         (3)   The price of an income stream financial product:

                (a)    is the amount that is paid or payable to acquire or purchase the income stream financial product; and

               (b)    does not include any amount paid for or in respect of the income stream financial product following its issue or acquisition unless the issue or acquisition would not have taken place without an arrangement to pay the amount.

Note   Additional amounts contributed to an allocated annuity will not generally be regarded as part of the ‘price’ paid to acquire or purchase the financial product.

         (4)   For subregulation (3), in calculating any amount payable or paid to acquire or purchase the income stream financial product:

                (a)    disregard any amount payable to the extent to which it is to be paid out of money lent by:

                          (i)    the person offering the income stream financial product; or

                         (ii)    an associate of that person; and

               (b)    disregard any amount paid to the extent to which it was paid out of money lent by:

                          (i)    the person offering the income stream financial product; or

                         (ii)    an associate of that person; and

                (c)    include any amount paid or payable to cover:

                          (i)    fees or charges that are paid to the issuer or any other person that relates to the issue of the income stream financial product; and

                         (ii)    fees or charges that are paid to the issuer or any other person that relates to the issue of the income stream financial product; and

               (d)    despite paragraph (c), disregard any amount of remuneration or other benefits paid or payable to a person for the provision of financial product advice or other related services provided directly to:

                          (i)    the client; or

                         (ii)    another person acting on behalf of the client.

7.1.21       Retail clients and wholesale clients: value of income stream financial products

         (1)   This regulation makes arrangements about the value of an income stream financial product.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

Under paragraph 761G (10) (a) of the Act, the regulations may also 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.

In general, the ‘value’ of a product will be the amount that the product is worth once it is issued or acquired by the client. It is anticipated that the test for the value of the product in paragraph 761G (7) (a) of the Act will usually be used to assess a client’s status as a retail or wholesale client at or before the time that a financial service (eg financial product advice, disposal of the product) is provided to the client in respect of an existing product.

Value

         (2)   For paragraph 761G (7) (a) of the Act, the amount applicable in relation to an income stream financial product is $500 000.

Working out value: general rule

         (3)   For paragraph 761G (10) (a) of the Act, the value of an income stream product is the amount worked out in accordance with any of the following paragraphs:

                (a)    if the terms of the income stream financial product provide for the calculation of a commutation value — the commutation value;

               (b)    if the terms of the income stream financial product do not permit commutation — the minimum commutation amount calculated in accordance with ordinarily accepted actuarial standards;

                (c)    if the income stream financial product is of a kind in relation to which money stands to the client’s credit for the income stream financial product — the amount of money standing to the client’s credit.

         (4)   For subregulation (3), in calculating the value of an income stream financial product:

                (a)    disregard any amount standing to the client’s credit in relation to the income stream financial product to the extent that it is to be paid, or was to be paid, out of money lent by:

                          (i)    the person offering the income stream financial product; or

                         (ii)    an associate of that person; and

               (b)    disregard any amount of fees or charges:

                          (i)    that the product issuer has an actual or accrued right to deduct from the value of the income stream financial product (whether or not the amount has been deducted); or

                         (ii)    that has accrued as at the time that the client’s status as a retail or wholesale client is assessed.

         (5)   If it is not reasonably practicable to ascertain an amount in accordance with subregulation (3), the value of the income stream product is an amount calculated as follows:

                (a)    identify the price for the provision of the income stream;

               (b)    subtract the total of any amounts paid out of the income stream (including any regular payments and any capital amounts);

                (c)    subtract an amount representing the reasonable administrative fees or other expenses of the issuer (including any costs or fees relating to the product that were disclosed to the client at or before the time the product was issued);

               (d)    add interest on:

                          (i)    the amount paid for the income stream financial product; or

                         (ii)    an amount, or a reasonable notional amount, representing the value of the income stream financial product;

                        based on movements in the rate of the All Groups Consumer Price Index number (being the weighted average of the 8 Australian capital cities) published by the Australian Statistician.

Group products

         (6)   If the income stream financial product is a group product covered by subsection 1012H (1) of the Act:

                (a)    the amount in subregulation (2) is to be used to determine the status of each person who elects, or may elect, to be covered by the income stream financial product; and

               (b)    subregulation (3) is to be used to determine the value of the income stream financial product to the extent that it stands, or will stand, to the credit of, each person who elects, or may elect, to be covered by the income stream financial product.

Time of assessment

         (7)   If a financial services provider needs to assess the status of a client as either retail or wholesale at a particular time in order to ensure that the client complies with the Act, or for any related purpose, the value of a financial product may be assessed at any time, whether or not a financial service is being provided at that time in relation to that product.

Note   Subregulation (7) will ensure that a provider of financial services may assess a client’s status at any time (for example, the provider may need to ascertain whether a periodic statement must be sent to the client under section 1017D of the Act because the client is a retail client).

7.1.22       Retail clients and wholesale clients: value of derivatives

         (1)   This regulation makes arrangements about the value of a derivative:

                (a)    that is a financial product under section 761A of the Act; and

               (b)    to which section 765A of the Act does not apply.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

Under paragraph 761G (10) (a) of the Act, the regulations may also 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.

Value

         (2)   For paragraph 761G (7) (a) of the Act:

                (a)    the amount applicable in relation to a single derivative is $100 000; and

               (b)    if the derivative is included in 2 or more related financial products, the amount applicable in relation to the related financial products is $500 000.

Working out value: general rule

         (3)   For paragraph 761G (10) (a) of the Act, the value of a derivative is the face value, or the notional amount in respect of, the financial product (in dollar terms) as at the date on which the relevant arrangement is entered into by the parties.

Time of assessment

         (4)   If a financial services provider needs to assess the status of a client as either retail or wholesale at a particular time in order to ensure that the client complies with the Act, or for any related purpose, the value of a financial product may be assessed at any time, whether or not a financial service is being provided at that time in relation to that product.

Note   Subregulation (4) will ensure that a provider of financial services may assess a client’s status at any time (for example, the provider may need to ascertain whether ongoing disclosure of a significant event must be sent to the client under section 1017B of the Act because the client is a retail client).

7.1.23       Retail clients and wholesale clients: price of non-cash payment financial products

         (1)   This regulation makes arrangements about the price for the provision of a non-cash payment financial product.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

In general, the ‘price’ of a product will be the amount that is paid to acquire or be issued with the financial product. The test for the price of the product in paragraph 761G (7) (a) of the Act will be determined at or before the time the client acquires, or is issued with, the financial product. If a client pays over $500 000 to acquire or be issued with the financial product, the client will be a wholesale client in respect of the product.

Price

         (2)   For paragraph 761G (7) (a) of the Act, the amount applicable in relation to a non-cash payment financial product is $500 000.

Working out price: general rule

         (3)   The price of a non-cash payment financial product:

                (a)    is the amount that is paid or payable to acquire or purchase the non-cash payment financial product; and

               (b)    does not include any amount paid for or in respect of the non-cash payment financial product following its issue or acquisition unless the issue or acquisition would not have taken place without an arrangement to pay the amount.

Note   Additional amounts paid into a smart card or cheque account after its issue will not generally be regarded as part of the ‘price’ paid to acquire or purchase the financial product.

         (4)   For subregulation (3), in calculating any amount payable or paid to acquire or purchase the non-cash payment financial product:

                (a)    include any amount paid or payable to cover:

                          (i)    fees or charges that are paid to the issuer or any other person that relates to the issue of the non-cash payment financial product; and

                         (ii)    fees or charges that are paid to the issuer or any other person that relates to the issue of the non-cash payment financial product; and

               (b)    despite paragraph (a), disregard any amount of remuneration or other benefits paid or payable to a person for the provision of financial product advice or other related services provided directly to:

                          (i)    the client; or

                         (ii)    another person acting on behalf of the client.

7.1.24       Retail clients and wholesale clients: value of non-cash payment products

         (1)   This regulation makes arrangements about the value of a non-cash payment financial product to which a financial service relates.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

In general, the ‘value’ of a product will be the amount that the product is worth once it is issued or acquired by the client. It is anticipated that the test for the value of the product in paragraph 761G (7) (a) of the Act will usually be used to assess a client’s status as a retail or wholesale client at or before the time that a financial service (eg financial product advice, disposal of the product) is provided to the client in respect of an existing product.

Value

         (2)   For paragraph 761G (7) (a) of the Act, the amount applicable in relation to a non-cash payment financial product is $500 000.

Working out value: general rule

         (3)   For paragraph 761G (10) (a) of the Act, the value of a non-cash payment financial product on a day is the amount of money that stands to the client’s credit in respect of that product.

         (4)   For subregulation (3), in calculating an amount of money, disregard any amount of fees or charges:

                (a)    that the product issuer has an actual or accrued right to deduct, or otherwise to have access to, from the value of the non-cash payment financial product (whether or not the amount has been deducted); or

               (b)    that has accrued as at the time that the client’s status as a retail or wholesale client is assessed.

Time of assessment

         (5)   If a financial services provider needs to assess the status of a client as either retail or wholesale at a particular time in order to ensure that the client complies with the Act, or for any related purpose, the value of a financial product may be assessed at any time, whether or not a financial service is being provided at that time in relation to that product.

Note   Subregulation (5) will ensure that a provider of financial services may assess a client’s status at any time (for example, the provider may need to ascertain whether ongoing disclosure of a significant event must be sent to the client under section 1017B of the Act because the client is a retail client).

7.1.25       Retail clients and wholesale clients: life risk insurance and other risk-based financial products

         (1)   This regulation makes arrangements about the value of a risk-based financial product.

         (2)   Paragraph 761G (7) (a) of the Act does not apply to a risk-based financial product.

Note   Under paragraph 761G (7) (a) of the Act, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the financial product or financial service is provided to the person as a retail client unless 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 that paragraph as being applicable in the circumstances.

Under paragraph 761G (10) (a) of the Act, the regulations may also 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.

Under paragraph 761G (10) (b) of the Act, the regulations may also modify the way in which paragraph 761G (7) (a) applies in particular circumstances.

7.1.26       Superannuation-sourced money

                For the purpose of assessing the price of a financial product, or the value of a financial product to which a financial service relates, under paragraph 761G (7) (a) of the Act, superannuation-sourced money is not to be counted if:

                (a)    the financial service provided to a person is:

                          (i)    financial product advice; or

                         (ii)    if the person was a retail client — the provision of a financial product in circumstances in which a Product Disclosure Statement would need to be given to the client under Part 7.9 of the Act (including section 1012A, 1012B, 1012C or 1012IA); and

(b)    the financial product to which the financial service relates is a product other than a non-cash payment financial product; and

                (c)    the person who was the holder of the relevant superannuation interest in the regulated superannuation fund was or would have been a retail client under subsection 761G (6) of the Act if they had held or acquired the product after FSR commencement.

Example

If:

(a)   the price for an income stream financial product or an investment-based financial product is $700 000; and

(b)   the client uses $400 000 of superannuation-sourced money and $300 000 of other funds;

then, unless the client is a wholesale client for another reason, the client will be a retail client due to the operation of paragraph 761G (7) (a) of the Act.

Note   Under subsections 761G (5), (6) and (7) of the Act, general insurance products, superannuation products and RSA products are not financial products to which the restriction on counting superannuation-sourced money towards the price applies. This applies in addition to the exclusion for non-cash payment products under paragraph (b) of this regulation.

7.1.27       Retail clients and wholesale clients: effect of wholesale status

         (1)   For subsection 761G (10) of the Act if, at any time, the holder of a financial product is a wholesale client in relation to the product because of paragraph 761G (7) (a) of the Act:

                (a)    the holder is taken, on and after that time, to be a wholesale client in relation to the product as between the holder and the issuer of that product for the period during which the holder holds that product; and

               (b)    paragraph (a) applies whether or not the holder would, but for that paragraph, have otherwise been or become a retail client in relation to that product at some time.

         (2)   For subsection 761G (10) of the Act, if:

                (a)    a person is a wholesale client in relation to the product because of paragraph 761G (7) (a) or paragraph (1) (a); and

               (b)    another person becomes a holder of the financial product; and

                (c)    the issuer did not know, and could not reasonably be expected to have known:

                          (i)    whether another person had become the holder of the financial product; or

                         (ii)    whether any subsequent holder of the financial product was a retail client or a wholesale client;

the issuer is taken not to be guilty of any offence, or to be liable under civil penalty or civil liability provisions under the Act, merely because the issuer has not treated any subsequent holder of that financial product as a retail client.

7.1.28       Retail clients and wholesale clients: assets and income

         (1)   For subparagraph 761G (7) (c) (i) of the Act, $2.5 million is specified.

         (2)   For subparagraph 761G (7) (c) (ii) of the Act, $250 000 is specified.

Note   Under paragraph 761G (7) (c) of the Act, if a financial product is not, or a financial 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:

(a)   the client is a wholesale client under paragraph 761G (7) (a), (b) or (d) of the Act; or

(b)   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 that states that the person:

        (i)   has net assets of at least the amount specified in regulations made for the purposes of subparagraph 761G (7) (c) (i) of the Act; 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 subparagraph 761G (7) (c) (ii) of the Act a year.

Division 3              When does a person provide a financial service?

7.1.29       Activities conducted by accountants

         (1)   For paragraph 766A (2) (b) of the Act, the following circumstances are circumstances in which a qualified accountant is taken not to provide a financial service within the meaning of paragraph 766A (1) (a) of the Act:

                (a)    advising in relation to the preparation or auditing of financial statements;

               (b)    advising or acting in the capacity of a controller, administrator, receiver, manager, liquidator or trustee in bankruptcy in relation to the administration (including the disposal) of an entity or estate;

                (c)    advising on the financing of the acquisition of assets that are not financial products (for example, advising on the advantages and disadvantages of financing alternatives such as leasing and hire purchase);

               (d)    advising on the processes for the establishment, structuring and operation of a superannuation fund within the meaning of the SIS Act;

                (e)    advising on debt management, including factoring, defeasance and the sale of debts;

                (f)    advising on taxation issues, including in relation to the taxation implications of financial products;

               (g)    advising on the management of risk associated with conducting a business, including risk management through the use of financial products (for example, hedging);

               (h)    advising on business planning, including advice in relation to the establishment, structuring and administration of a business;

                (i)    conducting a due diligence on a business;

                (j)    valuing the assets of, or shares in, a business, or part of that business.

         (2)   Subregulation (1) applies only if the service does not involve the qualified accountant making a recommendation, providing a statement of opinion, or giving a report of either of those things, that:

                (a)    is intended to influence a person in making a decision in relation to:

                          (i)    a particular financial product; or

                         (ii)    a class of financial products; or

                        (iii)    an interest in a particular financial product; or

                        (iv)    an interest in a class of financial products; or

               (b)    could reasonably be regarded as being intended to influence a person in that way.

         (3)   In this regulation:

business includes an incorporated entity and an unincorporated entity.

qualified accountant has the meaning given by section 88B of the Act.

Part 7.2              Licensing of financial markets

Division 1              Market licensees’ obligations

7.2.01       Obligation to inform ASIC of certain matters: contraventions of licence or Act

                For paragraph 792B (3) (b) of the Act, a matter to which that paragraph relates is any matter that, in the opinion of a market licensee, constitutes or may constitute a contravention of:

                (a)    a condition of a licence held by a financial services licensee; or

               (b)    Subdivision A or B of Division 2 of Part 7.8 of the Act; or

                (c)    Division 3 of Part 7.8 of the Act; or

               (d)    Subdivision B of Division 6 of Part 7.8 of the Act.

7.2.02       Obligation to inform ASIC of certain matters: becoming director, secretary or executive officer of market licensee

         (1)   This regulation applies if a person becomes a director, secretary or executive officer of a market licensee or of a holding company of a market licensee (including when the person changes from one of those positions to another).

         (2)   For subsection 792B (5) of the Act, the information to be given to ASIC by the market licensee is:

                (a)    the person’s name and contact details; and

               (b)    the date of appointment to the position; and

                (c)    the person’s educational qualifications and financial market experience; and

               (d)    if the market licensee is aware of any details of a conviction of the kind mentioned in subsection 206B (1) of the Act — the details; and

                (e)    whether the market licensee knows whether the person:

                          (i)    is an undischarged bankrupt; or

                         (ii)    has entered into a deed of arrangement or composition of a kind mentioned in subsections 206B (3) and (4) of the Act;

                        and, if the market licensee knows the information, details of what the market licensee knows.

7.2.03       Obligation to inform ASIC of certain matters: ceasing to be director, secretary or executive officer of market licensee

         (1)   For subsection 792B (5) of the Act, this regulation applies if a person ceases to be a director, secretary or executive officer of a market licensee or of a holding company of a market licensee (including when the person changes from one of those positions to another).

         (2)   The information to be given to ASIC by the market licensee is:

                (a)    the person’s name and contact details; and

               (b)    the position that the person held; and

                (c)    the date on which the person ceased to hold the position; and

               (d)    if the person ceases to be a director, secretary or executive officer because the person is changing from the position to another in the company, the new position; and

                (e)    if the reason for ceasing to hold the position is:

                          (i)    because of a contravention of the Corporations Act or another law of a State or Territory; or

                         (ii)    because the person has become an undischarged bankrupt;

                        details of the reason.

7.2.04       Obligation to inform ASIC of certain matters: voting power in market licensee

         (1)   This regulation applies if 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 market licensee or in a holding company of the market licensee.

         (2)   For subsection 792B (5) of the Act, the information to be given to ASIC by the market licensee is:

                (a)    the person’s name and contact details; and

               (b)    if known by the market licensee, the date on which the person came to have, or ceased to have, more than 15% of the voting power; and

                (c)    if the market licensee knows the voting power that the person had immediately before the person came to have, or ceased to have, more than 15% of the voting power, that voting power; and

               (d)    whether the market licensee knows the manner in which the person came to have, or ceased to have, more than 15% of the voting power, and, if the market licensee knows the manner, details of what the market licensee knows.

7.2.05       Giving ASIC information about a listed disclosing entity

         (1)   For subsection 792C (2) of the Act, the following information is prescribed:

                (a)    a stock exchange automated trading system notification message;

               (b)    an Australian Stock Exchange voiceline announcement.

         (2)   In this regulation:

Australian Stock Exchange voiceline announcement means a message from the Australian Stock Exchange that is:

                (a)    spoken over an announcement system; and

               (b)    a summary of information lodged with the Australian Stock Exchange by a company or other entity that is included in the official list of a financial market.

Stock exchange automated trading system notification message means a brief message that is:

                (a)    transmitted to computer terminals of persons linked to the Stock Exchange Automated Trading System; and

               (b)    a summary of information lodged with the Australian Stock Exchange by a company or other entity that is included in the official list of a financial market.

7.2.06       Annual report of market licensee

                For subsection 792F (2) of the Act, if an annual report by a market licensee does not contain any of the following information, the information must accompany the annual report:

                (a)    a description of the activities the market licensee has undertaken in the financial year;

               (b)    the resources (including financial, technological and human resources) that the market licensee had available, and used, in order to ensure that it has complied with its obligations in Chapter 7 of the Act, and, in particular, the obligation contained in subparagraph 792A (c) (i) of the Act;

                (c)    an analysis of the extent to which the market licensee considers that the activities undertaken, and resources used, have resulted in full compliance with all its obligations under Chapter 7 of the Act.

Division 2                        The market’s operating rules and procedures

7.2.07       Content of licensed market’s operating rules

                For subsection 793A (1) of the Act, the following matters are matters with which the operating rules of a licensed market must deal:

                (a)    access to the licensed market, including the criteria for determining persons who are eligible to be participants;

               (b)    ongoing requirements for participants, including:

                          (i)    the conduct of participants in relation to the licensed market with the objective of promoting honesty and fair practice; and

                         (ii)    requirements that facilitate the monitoring of participants’ conduct in relation to the licensed market, including the monitoring of their compliance with the operating rules; and

                        (iii)    provision for the expulsion, suspension or disciplining of a participant for conduct in relation to the licensed market that is inconsistent with just and equitable principles in the transaction of business; and

                        (iv)    provision for the expulsion, suspension or disciplining of a participant for breaches of the operating rules; and

                         (v)    provision for the expulsion, suspension or disciplining of a participant for breaches of Chapter 7 of the Act, or regulations made under that Chapter; and

                        (vi)    provision for the expulsion, suspension or disciplining of a participant for breach of a condition on the participant’s Australian financial services licence; and

                       (vii)    provision for the expulsion, suspension or disciplining of a participant for a failure or expected failure to meet the participant’s obligations under commitments entered into on the licensed market;

                (c)    execution of orders;

               (d)    the way in which disorderly trading conditions are to be dealt with, including disruptions to trading;

                (e)    the class or classes of financial products that are to be dealt with on the licensed market by participants, including:

                          (i)    a description of the nature of each class of financial product; and

                         (ii)    for a class of derivatives, the standard terms of the arrangement that constitutes the derivative; and

                        (iii)    for a class of derivatives, a description of the asset, rate, index, commodity or other thing that is used for the matters mentioned in paragraph 761D (1) (c) of the Act;

                (f)    the terms of the contract formed between participants that enter into a transaction through the licensed market (to the extent to which paragraph (e) does not require that information);

               (g)    if appropriate, the listing of entities, including:

                          (i)    admitting an entity to the official list of the licensed market for the purpose of enabling financial products of the entity to be traded on the licensed market, and removing an entity from the official list; and

                         (ii)    the activities or conduct of an entity that is included on the official list of the licensed market, including a description of the arrangements for the disciplining of the entity for a breach of the operating rules;

               (h)    mechanisms through which market-related disputes between participants may be settled (for example, arbitration arrangements);

                (i)    the power to facilitate the assessment and, if appropriate, the investigation of market-related disputes between participants and between participants and clients;

                (j)    any obligations on participants and listed entities that are necessary to ensure that the market licensee is able to comply with subparagraph 792A (c) (i) of the Act and regulations made under section 798E of the Act.

7.2.08       Content of licensed market’s written procedures

                For subsection 793A (2) of the Act, the following matters are matters in respect of which a licensed market must have written procedures:

                (a)    exchange of appropriate information with:

                          (i)    clearing and settlement facilities; and

                         (ii)    other financial markets; and

                        (iii)    ASIC;

               (b)    arrangements to ensure the integrity and security of systems (including computer systems);

                (c)    arrangements for supervising the licensed market, including the monitoring of:

                          (i)    the conduct of participants in relation to the licensed market; and

                         (ii)    compliance by participants and listed entities with the operating rules of the licensed market;

               (d)    the assessment, investigation (if justified) and settlement of market-related disputes between participants;

                (e)    the assessment and investigation (if justified) of market-related disputes between participants and clients;

                (f)    the recording and effective disclosure of transactions;

               (g)    the provision of information about market processes.

Division 3                        Powers of the Minister and ASIC

7.2.09       Agencies for compliance assessment

                For paragraph 794C (5) (d) of the Act, the following agencies are prescribed:

                (a)    the Australian Competition and Consumer Commission;

               (b)    the Australian Prudential Regulation Authority;

                (c)   the Australian Taxation Office;

               (d)    the Australian Transaction Reports and Analysis Centre;

                (e)    an authority of a State or Territory having functions and powers similar to those of the Director of Public Prosecutions;

                (f)    the police force or service of each State and the Northern Territory;

               (g)    the Department of Consumer and Employment Protection of Western Australia;

               (h)    the Department of Fair Trading of New South Wales;

                (i)    the Office of Fair Trading and Business Affairs of Victoria;

                (j)   the Office of Consumer Affairs of Queensland;

               (k)    the Office of Consumer and Business Affairs of South Australia;

                (l)    the Office of Consumer Affairs and Fair Trading of Tasmania;

              (m)    the Consumer Affairs Bureau of the Australian Capital Territory;

               (n)    the Fair Trading Group of the Northern Territory.

Division 4                        The Australian market licence: applications (general)

7.2.10       Application of Division 4

                This Division applies in relation to a body corporate that applies for an Australian market licence that may be granted under subsection 795B (1) of the Act.

7.2.11       Information

                For paragraph 795A (1) (a) of the Act, the following information is required as part of an application by the body corporate for an Australian market licence:

                (a)    the body corporate’s name, address and contact details;

               (b)    the name, address and contact details of any person who will act on behalf of the body corporate in relation to the application;

                (c)    details of the body corporate’s major shareholders and organisation, including:

                          (i)    the name, address and contact details of each director; and

                         (ii)    the name, address and contact details of each secretary; and

                        (iii)    the name, address and contact details of each executive officer of the body corporate; and

                        (iv)    whether any director, secretary or executive officer is, or has been, disqualified from managing a corporation under a law of this jurisdiction or another jurisdiction;

               (d)    a description of the body corporate’s business or functions, other than the operation of the proposed market;

                (e)    details of the financial products to be traded on the proposed market;

                (f)    whether the proposed market will involve the provision of a financial product to a person as a retail client;

               (g)    details of the clearing and settlement arrangements that have been made, or are proposed, for the proposed market;

               (h)    details of the technological resources that will be used in the operation of the market, including details of:

                          (i)    the purpose of the resources; and

                         (ii)    how the resources are to be supplied, managed, maintained and upgraded; and

                        (iii)    how the security of information technology systems is to be protected;

                (i)    details of the arrangements for dealing with conflicts between the body corporate’s commercial interests and its obligations to supervise and monitor the market;

                (j)    details of the arrangements for the supervision of employees of the body corporate who have duties and responsibilities of a kind that supervision of the employees is necessary to protect the integrity of the operation of the proposed market;

               (k)    if the ACCC has made a decision in relation to the market that the body corporate will operate — details of the decision.

7.2.12       Documents

                For paragraph 795A (1) (b) of the Act, the following documents are required as part of an application by the body corporate for an Australian market licence:

                (a)    the body corporate’s current or proposed operating rules and written procedures;

               (b)    if applicable — the body corporate’s constitution;

                (c)    a copy of any agreement material to:

                          (i)    the way in which the proposed market is to be operated; and

                         (ii)    the way in which the financing of the proposed market, and the other resources used to operate it, will be organised; and

                        (iii)    the body corporate’s constitution or governance; and

                        (iv)    the appointment or employment of directors, secretaries and executive officers of the body corporate;

               (d)    a copy of any agreement, or proposed agreement, relating to the outsourcing or delegation of a function, facility or service in relation to the proposed market by the body corporate to another person;

                (e)    if the body corporate is a disclosing entity — a copy of each half-year financial report of the body corporate for:

                          (i)    the period of 3 years immediately before the application was made; or

                         (ii)    the shorter period in which the body corporate has carried on a business;

                (f)    if the body corporate is not a disclosing entity — a copy of each annual financial report of the body corporate for:

                          (i)    the period of 3 years immediately before the application was made; or

                         (ii)    the shorter period in which the body corporate has carried on a business;

               (g)    if the body corporate is a related body corporate — a copy of the relevant consolidated annual and half-year financial reports for:

                          (i)    the period of 3 years immediately before the application was made; or

                         (ii)    the shorter period in which the body corporate has carried on a business;

               (h)    a report, by a qualified person who is independent of the body corporate, about the anticipated financial resource requirements of the proposed market, including details of:

                          (i)    the total anticipated fixed expenditure and variable expenditure for the first 12 months of operation of the market; and

                         (ii)    the total anticipated revenue for the first 12 months of operation of the market and other sources of financial resources; and

                        (iii)    the body corporate’s contingency arrangements in the event of circumstances occurring that affect the body corporate’s ability to operate the market;

                (i)    details of the body corporate’s business plan, or other strategic planning, for the first 12 months of operation of the market, that are not included in the other documents mentioned in this regulation.

Division 5                        The Australian market licence: applications (financial market in foreign country)

7.2.13       Application of Division 5

                This Division applies in relation to a body corporate that applies for an Australian market licence that may be granted under subsection 795B (2) of the Act.

7.2.14       Information

                For paragraph 795A (1) (a) of the Act, the following information is required as part of an application by the body corporate for an Australian market licence:

                (a)    the body corporate’s name, address and contact details in this jurisdiction;

               (b)    the address and contact details of the body corporate’s principal place of business in the foreign country in which its financial market is located (the home country);

                (c)    whether the body corporate is registered under Division 2 of Part 5B.2 of the Act;

               (d)    details of the financial products that are traded on the financial market in the home country;

                (e)    details of the clearing and settlement arrangements for the financial market in the home country;

                (f)    details of the body corporate’s major shareholders and organisation, including any details that have not already been given to ASIC in accordance with Division 2 of Part 5B.2 of the Act of:

                          (i)    each person whose duties are comparable to those of a director; and

                         (ii)    each person whose duties are comparable to those of a secretary; and

                        (iii)    each person whose duties are comparable to those of an executive officer of the body corporate.

7.2.15       Documents

                For paragraph 795A (1) (b) of the Act, the documents required as part of an application by the body corporate for an Australian market licence are:

                (a)    the body corporate’s authorisation to operate the financial market in its home country, including a copy of any conditions imposed on the body corporate’s operation of its financial market in the home country; and

               (b)    sufficient documentation to allow the Minister to be satisfied that the regulation of the financial market in its home country is equivalent to regulation under the Act.

Example for paragraph (b)

Copies of the relevant legislation, rules and procedures in the home country.

Part 7.3              Licensing of clearing and settlement facilities

Division 1              Regulation of CS facility licensees: licensees’ obligations

7.3.01       Obligation to inform ASIC of certain matters: becoming director, secretary or executive officer of CS facility licensee

         (1)   This regulation applies if a person becomes a director, secretary or executive officer of a market licensee or of a holding company of a CS facility licensee (including when the person changes from one of those positions to another).

         (2)   For subsection 821B (4) of the Act, the information to be given to ASIC by the CS facility licensee is:

                (a)    the person’s name and contact details; and

               (b)    the date of appointment to the position; and

                (c)    the person’s educational qualifications and financial market experience; and

               (d)    if the CS facility licensee is aware of any details of a conviction of the kind mentioned in subsection 206B (1) of the Act — the details; and

                (e)    whether the CS facility licensee knows whether the person:

                          (i)    is an undischarged bankrupt; or

                         (ii)    has entered into a deed of arrangement or composition of a kind mentioned in subsections 206B (3) and (4) of the Act;

                        and, if the CS facility licensee knows the information, details of what the CS facility licensee knows.

7.3.02       Obligation to inform ASIC of certain matters: ceasing to be director, secretary or executive officer of CS facility licensee

         (1)   This regulation applies if a person ceases to be a director, secretary or executive officer of a CS facility licensee or of a holding company of a CS facility licensee (including when the person changes from one of those positions to another).

         (2)   For subsection 821B (4) of the Act, the information to be given to ASIC by the CS facility licensee is:

                (a)    the name and contact details of the person; and

               (b)    the position that the person held; and

                (c)    the date on which the person ceased to hold the position; and

               (d)    if the person ceases to be a director, secretary or executive officer because the person is changing from the position to another in the company, the new position; and

                (e)    if the reason for ceasing to hold the position is:

                          (i)    because of a contravention of the Corporations Act or another law of a State or Territory; or

                         (ii)    because the person has become an undischarged bankrupt;

                        details of the reason.

7.3.03       Obligation to inform ASIC of certain matters: voting power in CS facility licensee

         (1)   This regulation applies if 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 CS facility licensee or in a holding company of the CS facility licensee.

         (2)   For subsection 821B (4) of the Act, the information to be given to ASIC by the CS facility licensee is:

                (a)    the person’s name and contact details; and

               (b)    if known by the CS facility licensee, the date on which the person came to have, or ceased to have, more than 15% of the voting power; and

                (c)    if the CS facility licensee knows the voting power that the person had immediately before the person came to have, or ceased to have, more than 15% of the voting power, that voting power; and

               (d)    whether the CS facility licensee knows the manner in which the person came to have, or ceased to have, more than 15% of the voting power, and, if the CS facility licensee knows the manner, details of what the CS facility licensee knows.

7.3.04       Annual report of CS facility licensee

                For subsection 821E (2) of the Act, if an annual report by a CS facility licensee does not contain any of the following information, the information must accompany the annual report:

                (a)    a description of the activities the CS facility licensee has undertaken in the financial year;

               (b)    the resources (including financial, technological and human resources) that the CS facility licensee had available, and used, in order to ensure that it has complied with its obligations in Chapter 7 of the Act, and, in particular, the obligation contained in subparagraph 792A (c) (i) of the Act;

                (c)    an analysis of the extent to which the CS facility licensee considers that the activities undertaken, and resources used, have resulted in full compliance with all its obligations under Chapter 7 of the Act.

Division 2              Regulation of CS facility licensees: the facility’s operating rules and procedures

7.3.05       Content of licensed CS facility’s operating rules

                For subsection 822A (1) of the Act, the following matters are matters with which the operating rules of a licensed CS facility must deal:

                (a)    the regulated services provided by the licensed CS facility, including the means by which obligations of parties to transactions relating to financial products will be met through the licensed CS facility;

               (b)    matters relating to risk in the licensed CS facility;

                (c)    access to the licensed CS facility, including the criteria for determining persons who are eligible to be participants and the ongoing requirements for participants;

               (d)    suspension and expulsion of participants from the licensed CS facility;

                (e)    disciplinary action against participants;

                (f)    procedures, to be followed by participants, to address risks that are relevant to the licensed CS facility;

               (g)    requirements to facilitate the monitoring of compliance by participants with the operating rules of the licensed CS facility;

               (h)    the handling of defaults;

                (i)    any obligations on participants and issuers that are necessary to ensure that the CS facility licensee is able to comply with subparagraph 821A (c) (i) of the Act;

                (j)    if the licensed CS facility is a prescribed CS facility — arrangements for the transfer of financial products that are likely to be transferred using the licensed CS facility.

7.3.06       Content of licensed CS facility’s written procedures

                For subsection 822A (2) of the Act, the following matters are matters in respect of which a licensed CS facility must have written procedures:

                (a)    arrangements to ensure the integrity and security of systems (including computer systems);

               (b)    identifying and monitoring risks that are relevant to the licensed CS facility;

                (c)    the development of rules and procedures to address those risks;

               (d)    exchange of appropriate information with:

                          (i)    other clearing and settlement facilities; and

                         (ii)    financial markets; and

                        (iii)    ASIC and the Reserve Bank of Australia;

                        relating to participants and their activities that are relevant to the licensed CS facility;

                (e)    the provision of information about the procedures of the licensed CS facility, including rights, obligations and risks relating to the facility;

                (f)    arrangements for supervising the licensed CS facility, including the monitoring of compliance by participants and issuers with the operating rules of the licensed CS facility.

Division 3              Regulation of CS facility licensees: powers of the Minister and ASIC

7.3.07       Agencies for compliance assessment

                For paragraph 823C (5) (d) of the Act, the following agencies are prescribed:

                (a)    the Australian Competition and Consumer Commission;

               (b)    the Australian Prudential Regulation Authority;

                (c)   the Australian Taxation Office;

               (d)    the Australian Transaction Reports and Analysis Centre;

                (e)    an authority of a State or Territory having functions and powers similar to those of the Director of Public Prosecutions;

                (f)    the police force or service of each State and the Northern Territory;

               (g)    the Department of Consumer and Employment Protection of Western Australia;

               (h)    the Department of Fair Trading of New South Wales;

                (i)    the Office of Fair Trading and Business Affairs of Victoria;

                (j)   the Office of Consumer Affairs of Queensland;

               (k)    the Office of Consumer and Business Affairs of South Australia;

                (l)    the Office of Consumer Affairs and Fair Trading of Tasmania;

              (m)    the Consumer Affairs Bureau of the Australian Capital Territory;

               (n)    the Fair Trading Group of the Northern Territory.

7.3.08       Agencies for compliance assessment

                For paragraph 823CA (4) (d) of the Act, the following agencies are prescribed:

                (a)    the Australian Competition and Consumer Commission;

               (b)    the Australian Prudential Regulation Authority;

                (c)   the Australian Taxation Office;

               (d)    the Australian Transaction Reports and Analysis Centre;

                (e)    an authority of a State or Territory having functions and powers similar to those of the Director of Public Prosecutions;

                (f)    the police force or service of each State and the Northern Territory;

               (g)    the Department of Consumer and Employment Protection of Western Australia;

               (h)    the Department of Fair Trading of New South Wales;

                (i)    the Office of Fair Trading and Business Affairs of Victoria;

                (j)   the Office of Consumer Affairs of Queensland;

               (k)    the Office of Consumer and Business Affairs of South Australia;

                (l)    the Office of Consumer Affairs and Fair Trading of Tasmania;

              (m)    the Consumer Affairs Bureau of the Australian Capital Territory;

               (n)    the Fair Trading Group of the Northern Territory.

Division 4              The Australian CS facility licence: applications (general)

7.3.09       Application of Division 4

                This Division applies in relation to a body corporate that applies for an Australian CS facility licence that may be granted under subsection 824B (1) of the Act.

7.3.10       Information

                For paragraph 824A (1) (a) of the Act, the following information is required as part of an application by the body corporate for an Australian CS facility licence:

                (a)    the body corporate’s name, address and contact details;

               (b)    the name, address and contact details of any person who will act on behalf of the body corporate in relation to the application;

                (c)    details of the body corporate’s major shareholders and organisation, including:

                          (i)    the name, address and contact details of each director; and

                         (ii)    the name, address and contact details of each secretary; and

                        (iii)    the name, address and contact details of each executive officer of the body corporate; and

                        (iv)    whether any director, secretary or executive officer is, or has been, disqualified from managing a corporation under a law of this jurisdiction or another jurisdiction;

               (d)    a description of the body corporate’s business or functions, other than the operation of the clearing and settlement facility;

                (e)    the services in respect of which the Australian CS facility licence is sought, including details of:

                          (i)    the financial products for which clearing and settlement facilities are to be provided; and

                         (ii)    the nature of each interest in a financial product that is to be transferred using the clearing and settlement facility; and

                        (iii)    the mechanisms to be used by the body corporate to operate the clearing and settlement facility, including (if applicable) arrangements to limit the risk of default by a party to a transaction;

                (f)    whether the body corporate has applied, or intends to apply, to become a prescribed CS facility under section 761A of the Act;

               (g)    details of the technological resources that will be used in the operation of the clearing and settlement facility, including details of:

                          (i)    the purpose of the resources; and

                         (ii)    how the resources are to be supplied, managed, maintained and upgraded; and

                        (iii)    how the security of information technology systems is to be protected;

               (h)    details of the arrangements for dealing with conflicts between the body corporate’s commercial interests and its obligations to supervise and monitor the clearing and settlement facility;

                (i)    details of the arrangements for the supervision of employees of the body corporate who have duties and responsibilities of a kind that supervision of the employees is necessary to protect the integrity of the operation of the clearing and settlement facility;

                (j)    details of the arrangements for managing counterparty risk, including the risks arising from a counterparty being unable to meet its obligations arising out of clearing, settlement or clearing and settlement transactions using the facility;

               (k)    if the ACCC has made a decision in relation to the clearing and settlement facility that the body corporate will operate — details of the decision.

Example of interests in a financial product

Legal title or an equitable interest.

Example of mechanisms to operate the clearing and settlement facility

1   The way in which transfers are to be effected.

2   The way in which payment obligations are to be settled.

7.3.11       Documents

                For paragraph 824A (1) (b) of the Act, the following documents are required as part of an application by the body corporate for an Australian CS facility licence:

                (a)    the body corporate’s current or proposed operating rules and written procedures;

               (b)    if applicable — the body corporate’s constitution;

                (c)    a copy of any agreement material to:

                          (i)    the way in which the clearing and settlement facility is to be operated; and

                         (ii)    the way in which the financing of the clearing and settlement facility, and the other resources used to operate it, will be organised; and

                        (iii)    the body corporate’s constitution or governance; and

                        (iv)    the appointment or employment of directors, secretaries and executive officers of the body corporate;

               (d)    a copy of any agreement, or proposed agreement, between the body corporate and a market licensee relating to services to be offered to the market licensee;

                (e)    a copy of any agreement, or proposed agreement, relating to the outsourcing or delegation of a function, facility or service in relation to the facility by the body corporate to another person;

                (f)    if the body corporate:

                          (i)    uses, or is likely to use, a counterparty; or

                         (ii)    will be operating as a central counterparty;

                        an assessment by an independent auditor of the adequacy of the body corporate’s arrangements for managing counterparty risk;

               (g)    if the body corporate is a disclosing entity — a copy of each half-year financial report of the body corporate for:

                          (i)    the period of 3 years immediately before the application was made; or

                         (ii)    the shorter period in which the body corporate has carried on a business;

               (h)    if the body corporate is not a disclosing entity — a copy of each annual financial report of the body corporate for:

                          (i)    the period of 3 years immediately before the application was made; or

                         (ii)    the shorter period in which the body corporate has carried on a business;

                (i)    if the body corporate is a related body corporate — a copy of the relevant consolidated annual and half-year financial reports for:

                          (i)    the period of 3 years immediately before the application was made; or

                         (ii)    the shorter period in which the body corporate has carried on a business;

                (j)    a report, by a qualified person who is independent of the body corporate, about the anticipated financial resource requirements of the clearing and settlement facility, including details of:

                          (i)    the total anticipated fixed expenditure and variable expenditure for the first 12 months of operation of the clearing and settlement facility; and

                         (ii)    the total anticipated revenue for the first 12 months of operation of the clearing and settlement facility and other sources of financial resources; and

                        (iii)    the body corporate’s contingency arrangements in the event of circumstances occurring that affect the body corporate’s ability to operate the clearing and settlement facility;

               (k)    details of the body corporate’s business plan, or other strategic planning, for the first 12 months of operation of the clearing and settlement facility, that are not included in the other documents mentioned in this regulation.

Division 5              The Australian CS facility licence: applications (overseas clearing and settlement facility)

7.3.12       Application of Division 5

                This Division applies in relation to a body corporate that applies for an Australian CS facility licence that may be granted under subsection 824B (2) of the Act.

7.3.13       Information

                For paragraph 824A (1) (a) of the Act, the following information is required as part of an application by the body corporate for an Australian CS facility licence:

                (a)    the body corporate’s name, address and contact details in this jurisdiction;

               (b)    the address and contact details of the body corporate’s principal place of business in the foreign country in which its clearing and settlement facility is located;

                (c)    whether the body corporate is registered under Division 2 of Part 5B.2 of the Act;

               (d)    the services in respect of which the Australian CS facility licence is sought, including details of the financial products for which clearing and settlement facilities are to be provided;

                (e)    details of the body corporate’s major shareholders and organisation, including any details that have not already been given to ASIC in accordance with Division 2 of Part 5B.2 of the Act of:

                          (i)    each person whose duties are comparable to those of a director; and

                         (ii)    each person whose duties are comparable to those of a secretary; and

                        (iii)    each person whose duties are comparable to those of an executive officer of the body corporate.

7.3.14       Documents

                For paragraph 824A (1) (b) of the Act, the documents required as part of an application by the body corporate for an Australian CS facility licence are:

                (a)    the body corporate’s authorisation to operate the clearing and settlement facility in the foreign country in which its clearing and settlement facility is located (the home country), including any conditions imposed on the body corporate’s operation of its clearing and settlement facility in the home country; and

               (b)    a copy of any agreement, or draft agreement, between the body corporate and a market licensee relating to the clearing and settlement facility services to be provided; and

                (c)    sufficient documentation to allow the Minister to be satisfied that the regulation of the clearing and settlement facility in its home country is equivalent to regulation under the Act.

Example for paragraph (c)

Copies of the relevant legislation, rules and procedures in the home country.

Part 7.4              Limits on involvement with licensees

7.4.01       Widely held market body

                For section 850A of the Act, the following bodies corporate are prescribed:

                (a)    Australian Stock Exchange Limited (in its capacity as a body corporate that has an Australian market licence or an Australian CS facility licence);

               (b)    ASX Settlement and Transfer Corporation Pty Limited (also known as ‘ASTC’) (in its capacity as a body corporate that has an Australian CS facility licence);

                (c)    SFE Corporation Limited (in its capacity as a body corporate that has an Australian market licence or an Australian CS facility licence);

               (d)    SFE Clearing Corporation Pty Limited (in its capacity as a body corporate that has an Australian CS facility licence).

7.4.02       Record-keeping: market licensee

         (1)   For paragraph 854A (1) (b) of the Act, a market licensee must keep the following records:

                (a)    a list of names and contact details of the directors, secretaries and executive officers of the market licensee;

               (b)    a list of names and contact details of individuals who hold more than 15% of the voting power in the market licensee, prepared in accordance with the information given under regulation 7.4.04.

         (2)   The market licensee must keep the records for at least 5 years.

7.4.03       Record-keeping: CS facility licensee

         (1)   For paragraph 854A (1) (b) of the Act, a CS facility licensee must keep the following records:

                (a)    a list of names and contact details of the directors, secretaries and executive officers of the CS facility licensee;

               (b)    a list of names and contact details of individuals who hold more than 15% of the voting power in the CS facility licensee, prepared in accordance with the information given under regulation 7.4.04.

         (2)   The CS facility licensee must keep the records for at least 5 years.

7.4.04       Information for widely held market body

         (1)   This regulation applies to a person who has:

                (a)    a substantial holding in a widely held market body; and

               (b)    voting power in the widely held market body.

         (2)   For paragraph 854A (1) (d) of the Act, the person must give that information to the widely held market body.

         (3)   However, subregulation (2) does not require the person to give information that the person has already given to the widely held market body in accordance with Chapter 6C of the Act.

         (4)   The person must give the information by the time described in subsection 671B (6) of the Act.

Part 7.5              Compensation regimes for financial markets

Division 1              Preliminary

7.5.01       Definitions for Part 7.5

         (1)   In this Part:

becoming insolvent has the meaning given by regulation 7.5.02.

borrower, in relation to a guaranteed securities loan, has the meaning given by paragraph 7.5.05 (2) (b).

claim means a claim against the SEGC.

claimable obligation means:

                (a)    an obligation to transfer securities under an agreement for the purchase of securities, if the purchase is, for Subdivision 4.3, a reportable transaction; or

               (b)    an obligation to transfer securities under a replacement agreement in relation to an agreement of the kind mentioned in paragraph (a) that has been novated; or

                (c)    an obligation to transfer securities under a guaranteed securities loan; or

               (d)    an obligation to transfer securities under a replacement agreement in relation to a guaranteed securities loan that has been novated; or

                (e)    an obligation to transfer securities that arose as mentioned in paragraph 7.5.41 (1) (b).

clearing nominee, in relation to a settlement authority, means a subsidiary of the settlement authority operated for the purpose of facilitating the transfer of securities.

completion period, in relation to a sale or purchase of securities by a dealer, means:

                (a)    if the operating rules of a participating market licensee of which the dealer is a participant, being those operating rules as in force when the agreement for the sale or purchase is made, prescribe a period, for this paragraph, in relation to a class of sales or purchases that includes the sale or purchase — that period; or

               (b)    in any other case — a period that is reasonable, having regard to all the circumstances relating to the sale or purchase.

compliance period, in relation to an obligation under a guaranteed securities loan, means:

                (a)    if the operating rules of the lender as in force when the loan is made prescribe a period in relation to the obligation for this paragraph — that period; or

               (b)    in any other case — a period that is reasonable having regard to the obligation and all the circumstances relating to the loan.

dealer has the meaning given by regulation 7.5.03.

discharge, in relation to an obligation, means:

                (a)    in the case of a purchase obligation — discharge the whole of the obligation; or

               (b)    in any other case — discharge the whole or a part of the obligation.

excluded amount, in relation to a guaranteed securities loan, means an amount payable by the borrower by way of a fee or charge, or by way of interest or a penalty, in respect of the loan.

excluded person has the meaning given by regulation 7.5.04.

guaranteed securities loan has the meaning given by regulation 7.5.05.

lender, in relation to a guaranteed securities loan, has the meaning given by paragraph 7.5.05 (2) (a).

obligations, in relation to a participant of a participating market licensee, in relation to a person, includes obligations arising under:

                (a)    a law; or

               (b)    the participating market licensee’s operating rules; or

                (c)    the ASTC operating rules; or

               (d)    an agreement between:

                          (i)    in any case — the participant and the person; or

                         (ii)    if the participant is a partner in a participant of the participating market licensee — the last‑mentioned participant and the person.

orderly market means an orderly market on a financial market of:

                (a)    a participating market licensee; or

               (b)    an Exchange body.

participating market licensee means a market licensee that is a member of the SEGC.

prescribed period, in relation to a sale or purchase of securities by a dealer, means:

                (a)    if the operating rules of a participating market licensee in which the dealer is a participant, being those operating rules as in force when the agreement for the sale or purchase is made, prescribe a period, for this paragraph, in relation to a class of sales or purchases that includes the sale or purchase — that period; or

               (b)    in any other case — a period that is reasonable, having regard to all the circumstances relating to the sale or purchase.

property includes money, securities and scrip.

purchase obligation means an obligation of the kind mentioned in paragraph (a) of the definition of claimable obligation.

purchase price, in relation to a purchase of securities by a dealer on behalf of a person, means the total of:

                (a)    the amount of the consideration for the purchase; and

               (b)    any brokerage fees and other charges, and any stamp duty and other duties and taxes, payable by the person to the dealer in connection with the purchase.

relative, in relation to a person, means a parent or remoter lineal ancestor, son, daughter or remoter issue, or brother or sister, of the person.

replacement agreement has the meaning given by paragraph 7.5.11 (b).

reportable transaction means a transaction that:

                (a)    is entered into before or after the commencement of this Part in relation to securities; and

               (b)    is or has at any time been a sale or purchase, by a participant (the first dealer) of a participating market licensee, of securities, if the securities are quoted on a financial market of a participating market licensee when the agreement for the sale or purchase is made, and:

                          (i)    in any case — the participating market licensee’s operating rules, as in force when the agreement for the sale or purchase is made, require the first dealer to report the sale or purchase to the participating market licensee; or

                         (ii)    if the sale or purchase is to or from, as the case may be, a participant (the second dealer) of a participating market licensee — the last-mentioned participating market licensee’s operating rules, as in force when the agreement for the sale or purchase is made, require the second dealer to report to the last-mentioned participating market licensee the purchase or sale of the securities by the second dealer from or to, as the case may be, the first dealer.

sale and purchase of securities has the meaning given by regulation 7.5.06.

securities business has the meaning given by regulations 7.5.07 and 7.5.08.

security has the meaning given by regulation 7.5.09.

security benefit means:

                (a)    property (other than securities) or money transferred or paid to a person because the person is or was the holder of a security; or

               (b)    a right that a person has because the person is or was the holder of a security, including, for example:

                          (i)    a right to be paid an amount or to be issued with additional securities; or

                         (ii)    a right that arises out of a reduction in share capital, a scheme of arrangement or compromise or a takeover bid;

and includes a reference to a right, whether existing or future, and whether contingent or not.

transfer of securities has the meaning given by regulation 7.5.10.

transferor has the meaning given by paragraph 7.5.53 (4) (b).

transferred securities has the meaning given by paragraph 7.5.53 (4) (c).

unauthorised execution has the meaning given by paragraph 7.5.53 (4) (a).

Note   Definitions of other expressions that are used in this Part, including:

·      participant

·      prescribed CS facility

·      SEGC

are found in sections 9, 761A and 880B of the Act.

7.5.02       Meaning of becoming insolvent

         (1)   A body corporate becomes insolvent at a particular time if, and only if, at that time:

                (a)    an administrator of the body corporate is appointed under section 436A, 436B or 436C; or

               (b)    the body corporate commences to be wound up or ceases to carry on business; or

                (c)    a receiver, or a receiver and manager, of property of the body corporate is appointed, whether by a court or otherwise; or

               (d)    the body corporate enters into a compromise or arrangement with its creditors or a class of them.

         (2)   A natural person becomes insolvent at a particular time if, and only if, at that time:

                (a)    a creditor’s petition or a debtor’s petition is presented under Division 2 or 3 of Part IV of the Bankruptcy Act 1966 against:

                          (i)    the person; or

                         (ii)    a partnership in which the person is a partner; or

                        (iii)    2 or more joint debtors who include the person; or

               (b)    the person’s property becomes subject to control under Division 2 of Part X of the Bankruptcy Act 1966; or

                (c)    the person executes a deed of assignment or deed of arrangement under Part X of the Bankruptcy Act 1966; or

               (d)    the person’s creditors accept a composition under Part X of the Bankruptcy Act 1966.

         (3)   A reference in subregulation (2) to a Division or Part of the Bankruptcy Act 1966 includes a reference to provisions of a law of an external Territory, or a country other than Australia or an external Territory, that correspond to that Division or Part.

7.5.03       Meaning of dealer

         (1)   For this Part (other than Subdivision 4.5), a person is a dealer if the person is, or has been at any time, a participant of a participating market licensee.

         (2)   For Subdivision 4.5, a person is a dealer if the person is:

                (a)    a participating market licensee; or

               (b)    a participant of a participating market licensee.

7.5.04       Meaning of excluded person

         (1)   An, excluded person, in relation to a participant of a participating market licensee, means:

                (a)    in any case — the participant; or

               (b)    if the participant is not a body corporate:

                          (i)    a person who is the spouse, or who is a relative, of the participant; or

                         (ii)    a trustee of a trust in relation to which the participant or a person of a kind mentioned in subparagraph (i) is capable of benefiting; or

                        (iii)    a body corporate of which the participant is an officer; or

                        (iv)    a body corporate in which the participant or a person of a kind mentioned in subparagraph (i) has a controlling interest; or

                         (v)    a body corporate in which the participant, and a person of a kind mentioned in subparagraph (i) have a controlling interest; or

                        (vi)    a body corporate in which the participant and 2 or more persons of a kind mentioned in subparagraph (i) have a controlling interest; or

                       (vii)    a body corporate in which 2 or more persons of a kind mentioned in subparagraph (i) together have a controlling interest; or

                (c)    if the participant is:

                          (i)    a person who is an officer of the body corporate; or

                         (ii)    a body corporate that is related to the first‑mentioned body corporate; or

                        (iii)    a person who is the spouse, or who is a relative, of a person of a kind mentioned in subparagraph (i); or

                        (iv)    a trustee of a trust in relation to which a person of a kind mentioned in subparagraph (i) or (iii) is capable of benefiting; or

                         (v)    a body corporate in which a person of a kind mentioned in subparagraph (i) or (iii) has, or 2 or more such persons together have, a controlling interest; or

               (d)    if the participant is a partner in a participant of the participating market licensee and is not a body corporate:

                          (i)    a person who is a partner in the participant; or

                         (ii)    a person who is the spouse, or who is a relative, of a partner (not being a body corporate) in the participant; or

                        (iii)    a trustee of a trust in relation to which a person of a kind mentioned in subparagraph (i) or (ii) is capable of benefiting; or

                        (iv)    a person who is an officer of a body corporate that is a partner in the participant; or

                         (v)    a body corporate of which a person of a kind mentioned in subparagraph (i), (ii) or (iii) is an officer, or in which such a person has, or 2 or more such persons together have, a controlling interest; or

                (e)    if the participant is a partner in a participant of the participating market licensee and is a body corporate:

                          (i)    a person who is an officer of a body corporate that is a partner in the participant; or

                         (ii)    a body corporate that is related to the first‑mentioned body corporate; or

                        (iii)    a person who is a partner in the participant; or

                        (iv)    a person who is the spouse, or who is a relative, of a person (other than a body corporate) of a kind mentioned in subparagraph (i) or (iii); or

                         (v)    a trustee of a trust in relation to which a person of a kind mentioned in subparagraph (i), (iii) or (iv) is capable of benefiting; or

                        (vi)    a body corporate in which a person of a kind mentioned in subparagraph (i), (iii) or (iv) has, or 2 or more such persons together have, a controlling interest.

         (2)   A reference in subregulation (1) to a relative of a person includes a reference to a relative of the spouse (if any) of the person.

         (3)   A reference in subregulation (1) to an officer of a body corporate is a reference to:

                (a)    a director, secretary or executive officer of the body corporate; or

               (b)    a person who is an officer of the body corporate by virtue of paragraph (b), (c), (d) or (e) of the definition of officer in section 9 of the Act.

7.5.05       Meaning of guaranteed securities loan and related concepts

         (1)   An agreement is a guaranteed securities loan if:

                (a)    under the agreement:

                          (i)    a participating market licensee is to transfer securities of a specified kind and number to, or as directed by, a dealer; and

                         (ii)    in order to put the participating market licensee in the same position (as nearly as practicable) as if the agreement had not been made, the dealer is later to transfer to, or as directed by, the participating market licensee such securities and security benefits as the agreement requires; and

               (b)    the dealer is a participant of the participating market licensee on the day when the agreement is entered into; and

                (c)    the agreement is entered into after the commencement of this regulation; and

               (d)    the agreement is of a kind that, according to the operating rules of the participating market licensee, is to be guaranteed under Subdivision 4.4.

         (2)   For the purposes of the application of this Part in relation to a guaranteed securities loan:

                (a)    the participating market licensee mentioned in subparagraph (1) (a) (i) is the lender; and

               (b)    the dealer mentioned in subparagraph (1) (a) (i) is the borrower; and

                (c)    the securities transferred as mentioned in subparagraph (1) (a) (i) are borrowed securities.

         (3)   The fact that an agreement includes obligations in addition to those mentioned in subregulation (1) does not prevent the agreement from being a guaranteed securities loan.

7.5.06       Meaning of sale and purchase of securities

         (1)   A sale and purchase of securities are taken to consist of 2 distinct transactions:

                (a)    the sale of the securities by the seller to the buyer; and

               (b)    the purchase of the securities by the buyer from the seller.

         (2)   Except so far as the contrary intention appears, a reference in this Part to a sale, or to a purchase, includes a reference to a sale or purchase the agreement for which is made outside this jurisdiction.

7.5.07       Meaning of securities business: general

         (1)   For this Part (other than Subdivision 4.9), a securities business is a financial services business of dealing in securities.

         (2)   Subregulations (4), (5) and (6) apply for the purposes of determining:

                (a)    whether or not a person carries on, or holds himself, herself or itself out as carrying on, a securities business; and

               (b)    what constitutes such a business carried on by a person.

         (3)   Subregulation (6) also applies for the purposes of determining whether or not a person deals in securities.

         (4)   An act done on behalf of the person by the holder of a dealers licence or an exempt dealer must be disregarded.

         (5)   An act that the person does:

                (a)    while employed by, or acting for or by arrangement with, a dealer; and

               (b)    as an employee or agent of, or otherwise on behalf of, on account of, or for the benefit of, the dealer; and

                (c)    in connection with a securities business carried on by the dealer;

is to be disregarded.

         (6)   An act or acts done by the person that constitutes or together constitute a dealing by the person in a futures contract (within the meaning of the old Corporations Act) is or are to be disregarded.

7.5.08       Meaning of securities business: Subdivision 4.9

                For Subdivision 4.9, each of the following is a securities business:

                (a)    a financial services business of dealing in securities;

               (b)    a financial services business of dealing in financial products that were option contracts within the meaning of paragraph 92 (1) (e) of the old Corporations Act.

7.5.09       Meaning of security

         (1)   For this Part (other than Subdivision 4.7), each of the following is a security:

                (a)    a security mentioned in section 761A of the Act;

               (b)    Division 3 securities;

                (c)    non-Division 3 securities.

         (2)   For Subdivision 4.6, each of the following is a security:

                (a)    Division 3 securities;

               (b)    non-Division 3 securities.

7.5.10       Meaning of transfer of securities

         (1)   A transfer of securities takes place between a person (the transferor) and another person (the transferee) only if:

                (a)    in the case of an ASTC-regulated transfer — the transferor does, or causes to be done, all things that the ASTC operating rules require to be done by or on behalf of the transferor to effect the transfer; or

               (b)    in any other case — the transferor delivers, or causes to be delivered, to the transferee documents (transfer documents) that are sufficient to enable the transferee:

                          (i)    except in the case of Division 3 rights — to become registered as the holder of the securities; or

                         (ii)    in the case of Division 3 rights — to obtain the issue to the transferee of the securities to which the Division 3 rights relate;

                        without the transferor doing anything more, or causing anything more to be done, by way of executing or supplying documents.

         (2)   If a person:

                (a)    causes property (other than securities or money) to be transferred to another person; or

               (b)    causes documents that are sufficient to enable another person to become the legal owner of property (other than securities or money) to be delivered to another person;

the first-mentioned person is taken to have transferred the property to the other person.

         (3)   If a person causes money to be paid to another person, the first-mentioned person is taken to have paid the money to the other person.

7.5.11       Novation of agreements

                In this Part:

                (a)    an agreement is novated if, and only if, because of the operation of a settlement authority’s operating rules, the agreement is discharged and replaced with one or more other agreements; and

               (b)    each of the other agreements is a replacement agreement.

7.5.12       Attributing securities and payments to transactions

         (1)   This regulation applies if:

                (a)    either:

                          (i)    a number of securities are transferred to a participating market licensee or a participant of a participating market licensee in respect of a number of transactions; or

                         (ii)    a payment is made to a participating market licensee or a participant of a participating market licensee in respect of a number of transactions; and

               (b)    apart from this regulation, it is not possible to tell, for the purposes of this Part:

                          (i)    how many of the securities are transferred; or

                         (ii)    how much of the payment is made;

                        in respect of each of the transactions; and

                (c)    the operating rules of the participating market licensee include provisions determining:

                          (i)    how many of the securities are transferred; or

                         (ii)    how much of the payment is made;

                        in respect of each of the transactions.

         (2)   The provisions of the operating rules mentioned in paragraph (1) (c) have effect accordingly for the purposes of this Part.

7.5.13       Effect of contravention of Part 7.5

                A contravention of a provision of this Part does not constitute an offence.

Division 2              When there must be a compensation regime

7.5.14       Application for Australian market licence: information about compensation arrangements

                For paragraph 881B (2) (c) of the Act, the following information, relating to proposed compensation arrangements, is prescribed:

                (a)    the services and products provided by the financial market, and participants connected with the financial market;

               (b)    the sources of all funds to be used for compensation;

                (c)    the proposed minimum amount of cover, and how that amount has been calculated;

               (d)    the number of markets to which the compensation arrangements are intended to apply;

                (e)    details of any arrangement between the market operator and any other person associated with the operation of the compensation arrangement;

                (f)    details of the payments that will be able to be made, in accordance with the compensation arrangements, that will not be payments required by the Act or another law;

               (g)    the names of the persons responsible for the administration and monitoring functions mentioned in paragraphs 885I (1) (a), (b) and (c) of the Act, and details of the financial, technological and other resources to be used for those purposes;

               (h)    the name of the proposed auditor of the accounts relating to the compensation arrangements;

                (i)    the way in which the compensation arrangements will be monitored to ensure that they comply with the Act and these Regulations;

                (j)    the way in which the compensation arrangements will be monitored to ensure that they are adequate.

Division 3              Approved compensation arrangements

7.5.15       Application for approval of compensation arrangements after grant of Australian market licence: information about compensation arrangements

                For paragraph 882B (2) (a) of the Act, the following information, relating to proposed compensation arrangements, is prescribed:

                (a)    the services and products provided by the financial market, and participants connected with the financial market;

               (b)    the sources of all funds to be used for compensation;

                (c)    the proposed minimum amount of cover, and how that amount has been calculated;

               (d)    the number of markets to which the compensation arrangements are intended to apply;

                (e)    details of any arrangement between the market operator and any other person associated with the operation of the compensation arrangement;

                (f)    details of the payments that will be able to be made, in accordance with the compensation arrangements, that will not be payments required by the Act or another law;

               (g)    the names of the persons responsible for the administration and monitoring functions mentioned in paragraphs 885I (1) (a), (b) and (c) of the Act, and details of the financial, technological and other resources to be used for those purposes;

               (h)    the name of the proposed auditor of the accounts relating to the compensation arrangements;

                (i)    the way in which the compensation arrangements will be monitored to ensure that they comply with the Act and these Regulations;

                (j)    the way in which the compensation arrangements will be monitored to ensure that they are adequate.

7.5.16       Notification of payment of levies

                For subsection 883D (6) of the Act, a notification to the Commonwealth of payments of levy received by the operator of a market as agent for the Commonwealth must:

                (a)    be given for each period of 6 months ending on 31 December and 30 June; and

               (b)    be given in writing to:

                          (i)    the Secretary of the Department of Finance and Administration; or

                         (ii)    another officer of that Department notified in writing by the Secretary to the receiver of the levy; and

                (c)    set out the total of the levies (if any) that became payable in the period; and

               (d)    set out the total of the levies (if any) received in the period; and

                (e)    be given not later than 2 weeks after the end of the period.

7.5.17       Amount of compensation

                For subsection 885E (5) of the Act, the rate of interest is 5%.

Division 4              NGF Compensation regime

Subdivision 4.1           Preliminary

7.5.18       Application of Division 4

                For sections 888A, 888B, 888C, 888D and 888E of the Act, this Division sets out arrangements relating to compensation in respect of a loss that is connected with a financial market to which Division 4 of Part 7.5 of the Act applies.

Note   The financial markets to which Division 4 of Part 7.5 of the Act applies are set out in section 887A of the Act.

Subdivision 4.2               Third party clearing arrangements

7.5.19       Clearing arrangements

         (1)   For Subdivision 4.3, if:

                (a)    a participant of Australian Stock Exchange Limited (the transacting participant) enters into a reportable transaction; and

               (b)    under Australian Stock Exchange Limited’s operating rules, another participant (the clearing participant) has the obligation to complete the transaction and all obligations ancillary to that completion;

regulations 7.5.20 to 7.5.27 (inclusive) apply in relation to the function of completing the transaction, as if the clearing participant, and not the transacting participant, had entered into the transaction.

         (2)   For Subdivision 4.9, if:

                (a)    a participant of Australian Stock Exchange Limited (the transacting member) enters into a reportable transaction; and

               (b)    under Australian Stock Exchange Limited’s operating rules, another participant (the clearing participant) has the obligation to complete the transaction and all obligations ancillary to that completion;

regulation 7.5.56 applies in relation to the function of completing the transaction as if the clearing participant, and not the transacting participant, had entered into the transaction.

Subdivision 4.3           Contract guarantees

7.5.20       Claim by selling dealer in respect of default by buying dealer: ASTC-regulated transfer

         (1)   A dealer (dealer 1) may make a claim in respect of a reportable transaction that is a sale by dealer 1 to another dealer (dealer 2) if:

                (a)    a transfer of the securities concerned pursuant to the sale would be an ASTC-regulated transfer; and

               (b)    at the end of the completion period for the reportable transaction:

                          (i)    dealer 1 has done, or is ready, willing and able to do, all things that dealer 1 is required to do under the ASTC operating rules to effect a transfer of the securities pursuant to the sale; and

                         (ii)    dealer 2 has not paid to dealer 1, under that agreement, the consideration for the sale.

         (2)   Dealer 1 may make a single claim under this regulation in respect of the total amount of the unpaid consideration in respect of 2 or more sales.

         (3)   An Exchange body is entitled, on behalf of dealer 1, to make a claim that dealer 1 is entitled to make if:

                (a)    dealer 1 is a participant of the Exchange body; and

               (b)    the operating rules of the Exchange body purport to authorise the Exchange body to make the claim on behalf of dealer 1.

         (4)   If an Exchange body is entitled under subregulation (3) to make claims under this regulation on behalf of 2 or more dealers, that Exchange body is entitled to make a single claim under this regulation on behalf of both or all of those dealers in respect of the sum of the amounts in respect of which it is entitled to make separate claims on behalf of each of those dealers.

         (5)   ASTC is entitled, on behalf of dealer 1, to make a claim that dealer 1 is entitled to make if:

                (a)    dealer 1 is, or was, an ASTC participant; and

               (b)    the ASTC operating rules purport to authorise ASTC to make the claim on behalf of dealer 1.

         (6)   If ASTC is entitled, under subregulation (5), to make claims under this regulation on behalf of 2 or more dealers, ASTC is entitled to make a single claim under this regulation on behalf of both or all of those dealers in respect of the sum of the amounts in respect of which it is entitled to make separate claims on behalf of each of those dealers.

         (7)   The SEGC must allow the claim, and pay to the claimant an amount equal to the amount of the consideration, if the SEGC is satisfied that:

                (a)    subregulation (1), (3) or (5) entitles the claimant to make the claim; and

               (b)    dealer 1:

                          (i)    has done all things that dealer 1 is required to do under the ASTC operating rules to effect a transfer of the securities pursuant to the sale; or

                         (ii)    has, for the purposes of the claim, in accordance with the ASTC operating rules, transferred to the SEGC or to an Exchange body securities of the same kind and number as the first-mentioned securities; and

                (c)    the consideration for the sale has not been paid to dealer 1 under the agreement for the sale; and

               (d)    the agreement has not been discharged or otherwise terminated.

         (8)   A claim made under subregulation (2), (4) or (6) must be treated for subregulation (7) as if it consisted of a separate claim in respect of each of the sales to which it relates.

         (9)   If dealer 1 transfers securities to an Exchange body as mentioned in subparagraph (7) (b) (ii), the Exchange body must account to the SEGC for those securities in accordance with the ASTC operating rules.

7.5.21       Claim by selling dealer in respect of default by buying dealer: transaction other than ASTC-regulated transfer

         (1)   A dealer (dealer 1) may make a claim in respect of a reportable transaction that is a sale by dealer 1 to another dealer (dealer 2) if:

                (a)    a transfer of the securities concerned pursuant to the sale would not be an ASTC-regulated transfer; and

               (b)    at the end of the completion period for the reportable transaction:

                          (i)    dealer 1 has supplied, or is ready, willing and able to supply, to dealer 2, under the agreement for the sale, settlement documents in relation to the sale; and

                         (ii)    dealer 2 has not paid to dealer 1, under that agreement, the consideration for the sale.

         (2)   Dealer 1 may make a single claim under this regulation in respect of the total amount of the unpaid consideration in respect of 2 or more sales.

         (3)   An Exchange body is entitled, on behalf of dealer 1, to make a claim that dealer 1 is entitled to make if:

                (a)    dealer 1 is a participant of the Exchange body; and

               (b)    the operating rules of the Exchange body purport to authorise the Exchange body to make the claim on behalf of dealer 1.

         (4)   If an Exchange body is entitled under subregulation (3) to make claims on behalf of 2 or more dealers, that Exchange body is entitled to make a single claim under this regulation on behalf of both or all of those dealers in respect of the sum of the amounts in respect of which it is entitled to make separate claims on behalf of each of those dealers.

         (5)   ASTC is entitled, on behalf of dealer 1, to make a claim that dealer 1 is entitled to make if:

                (a)    dealer 1 is, or was, an ASTC participant; and

               (b)    the ASTC operating rules purport to authorise ASTC to make the claim on behalf of dealer 1.

         (6)   If ASTC is entitled, under subregulation (5), to make claims under this regulation on behalf of 2 or more dealers, ASTC is entitled to make a single claim under this regulation on behalf of both or all of those dealers in respect of the sum of the amounts in respect of which it is entitled to make separate claims on behalf of each of those dealers.

         (7)   The SEGC must allow the claim, and pay to the claimant an amount equal to the amount of the consideration, if the SEGC is satisfied that:

                (a)    subregulation (1), (3) or (5) entitles the claimant to make the claim; and

               (b)    dealer 1 has:

                          (i)    supplied to the SEGC settlement documents in relation to the sale for the purposes of the claim; or

                         (ii)    supplied to dealer 2 settlement documents in relation to the sale under the agreement for the sale; and

                (c)    the consideration for the sale has not been paid to the dealer under the agreement for the sale; and

               (d)    the agreement has not been discharged or otherwise terminated.

         (8)   A claim made under subregulation (2), (4) or (6) must be treated for subregulation (7) as if it consisted of a separate claim in respect of each of the sales to which it relates.

7.5.22       Claim by buying dealer in respect of default by selling dealer: ASTC-regulated transfer

         (1)   A dealer (dealer 1) may make a claim in respect of a reportable transaction that is a purchase by dealer 1 from another dealer (dealer 2) if:

                (a)    a transfer of the securities concerned pursuant to the purchase would be an ASTC-regulated transfer; and

               (b)    at the end of the completion period for the reportable transaction:

                          (i)    dealer 1 has supplied, or is ready, willing and able to supply, to dealer 2, the consideration for the purchase under the agreement for the purchase; and

                         (ii)    dealer 2 has not done all things that dealer 2 is required to do under the ASTC operating rules to effect a transfer of the securities pursuant to the purchase.

         (2)   Dealer 1 may make a single claim under this regulation in respect of 2 or more purchases.

         (3)   A claim made under subregulation (2) is to be treated for subregulation (4) as if it consisted of a separate claim in respect of each of the purchases to which it relates.

         (4)   The SEGC must allow the claim if the SEGC is satisfied that:

                (a)    subregulation (1) entitles dealer 1 to make the claim; and

               (b)    dealer 1 has:

                          (i)    paid to the SEGC the amount of the consideration for the purchase for the purposes of the claim; or

                         (ii)    paid to dealer 2 the amount of the consideration for the purchase under the agreement for the purchase; and

                (c)    dealer 2 has not done all things that that dealer is required to do under the ASTC operating rules to effect a transfer of the securities pursuant to the purchase; and

               (d)    the agreement has not been discharged or otherwise terminated.

         (5)   If the SEGC allows a claim in respect of a purchase of securities, the SEGC must, subject to regulation 7.5.28, transfer to dealer 1 securities of the same kind and number as the first-mentioned securities.

7.5.23     Claim by buying dealer in respect of default by selling dealer: transaction other than ASTC-regulated transfer

         (1)   A dealer (dealer 1) may make a claim in respect of a reportable transaction that is a purchase by dealer 1 from another dealer (dealer 2) if:

                (a)    a transfer of the securities concerned pursuant to the purchase would not be an ASTC-regulated transfer; and

               (b)    at the end of the completion period for the reportable transaction:

                          (i)    dealer 1 has supplied, or is ready, willing and able to supply, to dealer 2, under the agreement for the purchase, the consideration for the purchase; and

                         (ii)    dealer 2 has not supplied to dealer 1, under that agreement, settlement documents in relation to the purchase.

         (2)   Dealer 1 may make a single claim under this regulation in respect of 2 or more purchases.

         (3)   A claim made under subregulation (2) is to be treated for subregulation (4) as if it consisted of a separate claim in respect of each of the purchases to which it relates.

         (4)   The SEGC must allow the claim if the SEGC is satisfied that:

                (a)    subregulation (1) entitles dealer 1 to make the claim; and

               (b)    dealer 1 has:

                          (i)    paid to the SEGC the amount of the consideration for the purchase for the purposes of the claim; or

                         (ii)    paid to dealer 2 the amount of the consideration for the purchase under the agreement for the purchase; and

                (c)    settlement documents in relation to the purchase have not been supplied to dealer 1 under the agreement for the purchase; and

               (d)    the agreement has not been discharged or otherwise terminated.

         (5)   If the SEGC allows a claim in respect of a purchase of securities, the SEGC must, subject to regulation 7.5.29, supply to dealer 1 settlement documents in relation to the purchase.

7.5.24       Claim by selling client in respect of default by selling dealer: ASTC-regulated transfer

         (1)   This regulation applies to a person (the selling client) if:

                (a)    a dealer enters into a reportable transaction on behalf of the selling client; and

               (b)    the reportable transaction is a sale of securities; and

                (c)    a transfer of the securities concerned pursuant to the sale would be an ASTC-regulated transfer; and

               (d)    at the end of the prescribed period for the transaction:

                          (i)    if subparagraph (ii) does not apply — the selling client has done all things necessary to enable the dealer to do all things that the dealer is required to do under the ASTC operating rules to effect a transfer of the securities pursuant to the sale; and

                         (ii)    if:

                                   (A)     the dealer has been suspended by the participating market licensee concerned; or

                                   (B)     the dealer’s status as an ASTC participant has been suspended under the ASTC operating rules, and that suspension has not been removed;

                                 the selling client has done, or is ready, willing and able to do, all things necessary to enable the dealer to do all things that the dealer is required to do under the ASTC operating rules to effect a transfer of the securities pursuant to the sale; and

                        (iii)    the dealer’s obligations to the selling client in respect of the sale, in so far as they relate to the consideration for the sale, have not been discharged.

         (2)   The selling client may make a claim in respect of the sale.

         (3)   The selling client may make a single claim under this regulation in respect of 2 or more sales.

         (4)   A claim made under subregulation (3) is to be treated for subregulation (5) as if it consisted of a separate claim in respect of each of the sales to which it relates.

         (5)   The SEGC must allow the claim if the SEGC is satisfied that:

                (a)    subregulation (1) entitles the selling client to make the claim; and

               (b)    the selling client:

                          (i)    has done all things necessary to enable the dealer to do all things that the dealer is required to do under the ASTC operating rules to effect a transfer of the securities pursuant to the sale; or

                         (ii)    has, for the purposes of the claim, in accordance with the ASTC operating rules, transferred to the SEGC or to an Exchange body securities of the same kind and number as the first-mentioned securities; and

                (c)    the dealer’s obligations to the selling client in respect of the sale, in so far as they relate to the consideration for the sale, have not been discharged.

         (6)   If the SEGC allows a claim, the SEGC must pay to the selling client the amount of the consideration less so much (if any) of the total of any brokerage fees and other charges, and any stamp duty and other duties and taxes, payable by the selling client in connection with the sale as has not already been paid by the selling client.

         (7)   If a selling client transfers securities to an Exchange body as mentioned in subparagraph (5) (b) (ii), the Exchange body must account to the SEGC for those securities in accordance with the ASTC operating rules.

7.5.25       Claim by selling client in respect of default by selling dealer: transaction other than ASTC-regulated transfer

         (1)   This regulation applies to a person (the selling client) if:

                (a)    a dealer enters into a reportable transaction on behalf of the selling client; and

               (b)    the reportable transaction is a sale of securities; and

                (c)    a transfer of the securities concerned pursuant to the sale would not be an ASTC-regulated transfer; and

               (d)    at the end of the prescribed period for the transaction:

                          (i)    if subparagraph (ii) does not apply — the selling client has supplied to the dealer settlement documents for the purposes of the sale; and

                         (ii)    if:

                                   (A)     the dealer has been suspended by the participating market licensee concerned; or

                                   (B)     the dealer’s status as an ASTC participant has been suspended under the ASTC operating rules, and that suspension has not been removed;

                                 the selling client has supplied, or is ready, willing and able to supply, to the dealer settlement documents for the purposes of the sale; and

                        (iii)    the dealer’s obligations to the selling client in respect of the sale, in so far as they relate to the consideration for the sale, have not been discharged.

         (2)   The selling client may make a claim in respect of the sale.

         (3)   The selling client may make a single claim under this regulation in respect of 2 or more sales.

         (4)   A claim made under subregulation (3) is to be treated for subregulation (5) as if it consisted of a separate claim in respect of each of the sales to which it relates.

         (5)   The SEGC must allow the claim if the SEGC is satisfied that:

                (a)    subregulation (1) entitles the selling client to make the claim; and

               (b)    the selling client has:

                          (i)    supplied to the dealer settlement documents in relation to the sale under the agreement for the sale; or

                         (ii)    supplied to the SEGC settlement documents in relation to the sale for the purposes of the claim; and

                (c)    dealer 1’s obligations to the selling client in respect of the sale, in so far as they relate to the consideration for the sale, have not been discharged.

         (6)   If the SEGC allows a claim, the SEGC must pay to the selling client the amount of the consideration less so much (if any) of the total of any brokerage fees and other charges, and any stamp duty and other duties and taxes, payable by the selling client in connection with the sale as has not already been paid by the selling client.

7.5.26       Claim by buying client in respect of default by buying dealer: ASTC-regulated transfer

         (1)   This regulation applies to a person (the buying client) if:

                (a)    a dealer enters into a reportable transaction on behalf of the buying client; and

               (b)    the reportable transaction is a purchase of securities; and

                (c)    a transfer of the securities concerned pursuant to the purchase would be an ASTC-regulated transfer; and

               (d)    at the end of the prescribed period for the transaction:

                          (i)    if subparagraph (ii) does not apply, the buying client has paid to the dealer the purchase price in relation to the purchase; and

                         (ii)    if:

                                   (A)     the dealer has been suspended by the participating market licensee concerned; or

                                   (B)     the dealer’s status as an ASTC participant has been suspended under the ASTC operating rules, and that suspension has not been removed;

                                 the buying client has paid, or is ready, willing and able to pay, to the dealer the purchase price in relation to the purchase; and

                        (iii)    the dealer’s obligations to the buying client in respect of the purchase, in so far as they relate to the transfer of securities to the person, have not been discharged.

         (2)   The buying client may make a claim in respect of the purchase.

         (3)   The buying client may make a single claim under this regulation in respect of 2 or more purchases.

         (4)   A claim made under subregulation (3) is to be treated for subregulation (5) as if it consisted of a separate claim in respect of each of the purchases to which it relates.

         (5)   The SEGC must allow the claim if the SEGC is satisfied that:

                (a)    subregulation (1) entitles the buying client to make the claim; and

               (b)    either:

                          (i)    the buying client has paid to the dealer the amount of the consideration for the purchase under the agreement for the purchase; or

                         (ii)    the buying client has paid to the SEGC the amount of the consideration for the purchase for the purposes of the claim; and

                (c)    the dealer’s obligations to the buying client in respect of the purchase, in so far as they relate to the transfer of securities to the buying client, have not been discharged.

         (6)   If the SEGC allows a claim in respect of a purchase of securities, the SEGC must, subject to regulation 7.5.28, transfer to the buying client securities of the same kind and number as the first-mentioned securities.

7.5.27       Claim by buying client in respect of default by buying dealer: transaction other than ASTC-regulated transfer

         (1)   This regulation applies to a person (the buying client) if:

                (a)    a dealer enters into a reportable transaction on behalf of the buying client; and

               (b)    the reportable transaction is a purchase of securities; and

                (c)    a transfer of the securities concerned pursuant to the purchase would not be an ASTC-regulated transfer; and

               (d)    at the end of the prescribed period for the transaction:

                          (i)    if subparagraph (ii) does not apply, the buying client has paid to the dealer the purchase price in relation to the purchase; and

                         (ii)    if:

                                   (A)     the dealer has been suspended by the participating market licensee concerned; or

                                   (B)     the dealer’s status as an ASTC participant has been suspended under the ASTC operating rules, and that suspension has not been removed;

                                 the buying client has paid, or is ready, willing and able to pay, to the dealer the purchase price in relation to the purchase; and

                        (iii)    the dealer’s obligations to the buying client in respect of the purchase, in so far as they relate to settlement documents in relation to the purchase, have not been discharged.

         (2)   The buying client may make a claim in respect of the purchase.

         (3)   The buying client may make a single claim under this regulation in respect of 2 or more purchases.

         (4)   A claim made under subregulation (3) is to be treated for subregulation (5) as if it consisted of a separate claim in respect of each of the purchases to which it relates.

         (5)   The SEGC must allow the claim if the SEGC is satisfied that:

                (a)    subregulation (1) entitles the buying client to make the claim; and

               (b)    either:

                          (i)    the buying client has paid to the dealer the amount of the consideration for the purchase under the agreement for the purchase; or

                         (ii)    the buying client has paid to the SEGC the amount of the consideration for the purchase for the purposes of the claim; and

                (c)    the dealer’s obligations to the buying client in respect of the purchase, in so far as they relate to settlement documents in relation to the purchase, have not been discharged.

         (6)   If the SEGC allows a claim in respect of a purchase of securities, the SEGC must, subject to regulation 7.5.29, supply to the buying client settlement documents in relation to the purchase.

7.5.28       Cash settlement of claim: ASTC-regulated transfer

         (1)   This regulation applies if:

                (a)    the SEGC:

                          (i)    allows a claim under subregulation 7.5.22 (4) in respect of a purchase of securities by dealer 1 from dealer 2; or

                         (ii)    allows a claim under subregulation 7.5.26 (5) in respect of a purchase of securities by a dealer on behalf of a buying client; and

               (b)    it is not reasonably practicable for the SEGC to obtain securities of the same kind and number as the first-mentioned securities from the dealer before the end of:

                          (i)    if the ASTC operating rules, as in force when the SEGC allows the claim, prescribe a period, for this regulation, in relation to a class of claims that includes the claim — that period; or

                         (ii)    in any other case — such period as the SEGC, having regard to all the circumstances of the claim, considers reasonable; and

                (c)    it is not reasonably practicable for the SEGC to obtain, otherwise than from the dealer, securities of that kind and number before the end of that period because:

                          (i)    that dealing in those securities is suspended or for any other reason, there exists at no time during that period an orderly market in those securities; or

                         (ii)    the total number of those securities offered for sale on financial markets of participating market licensees or Exchange bodies at times during that period when there exists an orderly market in those securities is insufficient.

         (2)   The SEGC must satisfy the claim by paying to the claimant the amount that, when the claimant became entitled to make the claim, was the amount of the actual pecuniary loss suffered by the claimant in respect of the purchase.

7.5.29       Cash settlement of claim: transfer other than ASTC-regulated transfer

         (1)   This regulation applies if:

                (a)    the SEGC:

                          (i)    allows a claim under subregulation 7.5.22 (4) in respect of a purchase of securities by dealer 1 from dealer 2; or

                         (ii)    allows a claim under subregulation 7.5.27 (5) in respect of a purchase of securities by a dealer on behalf of a buying client; and

               (b)    it is not reasonably practicable for the SEGC to obtain from the dealer settlement documents in relation to the purchase before the end of:

                          (i)    if the operating rules of a participating market licensee of which the dealer is a participant, being those operating rules as in force when the SEGC allows the claim, prescribe a period, for this regulation, in relation to a class of claims that includes the claim — that period; or

                         (ii)    in any other case — such period as the SEGC, having regard to all the circumstances of the claim, considers reasonable; and

                (c)    it is not reasonably practicable for the SEGC to obtain otherwise than from the dealer settlement documents in relation to the purchase before the end of that period because:

                          (i)    there exists at no time during that period an orderly market in those securities, whether because that dealing in those securities is suspended or for any other reason; or

                         (ii)    the total number of those securities offered for sale on financial markets of participating market licensees or Exchange bodies at times during that period when there exists an orderly market in those securities is insufficient.

         (2)   The SEGC must satisfy the claim by paying to the claimant the amount that, when the claimant became entitled to make the claim, was the amount of the actual pecuniary loss suffered by the claimant in respect of the purchase.

7.5.30       Making of claims

         (1)   Subregulations 7.5.20 (1), 7.5.21 (1), 7.5.22 (1) and 7.5.23 (1) do not entitle a person (person 1) to make a claim in respect of:

                (a)    a sale of securities by person 1 to another person; or

               (b)   a purchase of securities by person 1 from another person;

as the case may be, unless, on the day on which the agreement for the sale or purchase was entered into:

                (c)    person 1 was a participant and carried on a securities business in Australia; and

               (d)    the other person was a participant.

         (2)   Subregulations 7.5.24 (1), 7.5.25 (1), 7.5.26 (1) and 7.5.27 (1) do not entitle a person (person 1) to make a claim in respect of:

                (a)    a sale of securities by another person on behalf of person 1; or

               (b)    a purchase of securities by another person on behalf of person 1;

as the case may be, unless, on the day on which the agreement for the sale or purchase was entered into, the other person was a participant and carried on a securities business in Australia.

         (3)   A claim must be in writing and must be served on the SEGC within 6 months after the day on which the claimant became entitled to make the claim.

         (4)   A claim that is not made within the period prescribed by subregulation (3) is barred unless the SEGC otherwise determines.

         (5)   The SEGC may publish, in each State and Territory in a daily newspaper circulating in that State or Territory, a notice that:

                (a)    is in a form approved by the SEGC; and

               (b)   names a particular dealer; and

                (c)    requires that all claims under this Subdivision, by the named dealer, during a period (the applicable period) specified in the notice in accordance with subregulation (6) must be served on the SEGC before the day (the last application day) specified in the notice in accordance with subregulation (8).

         (6)   The applicable period must be a period that starts and ends before:

                (a)    if each publication of the notice occurs on the same day — the day on which the notice is published; or

               (b)   in any other case — the first day on which the notice is published.

         (7)   The last application day must be at least 3 months after:

                (a)    if each publication of the notice occurs on the same day — the day on which the notice is published; or

               (b)    in any other case — the last day on which the notice is published.

         (8)   The SEGC, a member of the Board and any employee of, or person acting on behalf of, the SEGC each has qualified privilege in respect of the publication of a notice under subregulation (5).

7.5.31       Effect of novation, under operating rules, of agreement for purchase

         (1)   This regulation applies if:

                (a)    a dealer (dealer 1) agrees to buy securities from another dealer (dealer 2); and

               (b)    the purchase is a reportable transaction; and

                (c)    the agreement for the purchase is novated; and

               (d)    under a replacement agreement, dealer 2 becomes obliged to transfer securities to dealer 1.

         (2)   This regulation has effect for the purposes of:

                (a)    making a claim under regulations 7.5.22 and 7.5.23 in respect of the purchase; and

               (b)    the application of this Part in relation to such a claim.

         (3)   Subject to subregulations (4) and (5), the novation is to be disregarded.

         (4)   If:

                (a)    dealer 1’s obligation to supply to dealer 2, under the agreement for the purchase, the consideration for the purchase is replaced by an obligation under a replacement agreement to pay an amount; and

               (b)    that obligation under the replacement agreement has been, or is to be, taken into account for the purposes of provisions of the operating rules of a settlement authority that are of the kind mentioned in subregulation 7.5.40 (1);

dealer 1 is taken to have so supplied the consideration for the purchase.

         (5)   If the replacement agreement or agreements is or are discharged or otherwise terminated, the agreement for the purchase is taken to be discharged or otherwise terminated.

7.5.32       Effect of using a transfer delivery service

         (1)   This regulation applies if:

                (a)    under an agreement for the sale or purchase of securities, or under a replacement agreement in relation to such an agreement that has been novated, a person (the transferor) is obliged to transfer securities of a particular kind and number to another person (the transferee); and

               (b)    for the purpose of discharging the obligation, the transferor:

                          (i)    elects, in accordance with the transfer delivery service provisions of a settlement authority, to bring about a transfer of securities of that kind and number to the transferee by the means provided for in those provisions; and

                         (ii)    for the purpose of so bringing about that transfer, transfers securities of that kind and number to the TDS nominee.

         (2)   For this Subdivision, in relation to the sale or purchase, the obligation is taken to be discharged, to the extent of the number of securities of that kind, by the transfer of securities to the TDS nominee.

Subdivision 4.4           Securities loans guarantees

7.5.33       Claim by lender in respect of borrower’s failure to discharge obligation

         (1)   A lender may make a claim in respect of a borrower’s obligation under a guaranteed securities loan to transfer or pay securities or security benefits, or to pay another amount (except an excluded amount) if, at the end of the compliance period:

                (a)    the lender has transferred borrowed securities in accordance with the agreement; and

               (b)    the obligation remains undischarged to any extent.

         (2)   A participating market licensee may make a single claim under this regulation in respect of a number of obligations, whether arising under the same or different guaranteed securities loans.

         (3)   For regulations 7.5.36 and 7.5.37, a claim made under subregulation (2) is to be treated as if it were a separate claim in respect of each of the obligations to which it relates.

7.5.34       Effect of novation, under operating rules, of guaranteed securities loan

         (1)   This regulation applies if:

                (a)    an agreement is novated; and

               (b)    before the novation, the agreement was a guaranteed securities loan.

         (2)   This regulation has effect for the purposes of:

                (a)    making a claim under regulation 7.5.33 in respect of the loan; and

               (b)    the application of this Part in relation to such a claim.

         (3)   Subject to subregulations (4) and (5), the novation is to be disregarded.

         (4)   If:

                (a)    an obligation under the loan to pay an amount is replaced by an obligation under a replacement agreement to pay an amount; and

               (b)    that obligation under the replacement agreement has been, or is to be, taken into account for the purposes of provisions of the operating rules of a settlement authority that are of the kind mentioned in subregulation 7.5.40 (1);

the obligation to pay that amount under the loan is taken to be discharged.

         (5)   If the replacement agreement or agreements is or are discharged or otherwise terminated, the loan agreement is taken to be discharged or otherwise terminated.

7.5.35       How and when claim to be made

         (1)   A claim must be in writing and must be served on the SEGC within 6 months after the day on which the claimant became entitled to make the claim.

         (2)   A claim that is not made within the period required by subregulation (1) is barred unless the SEGC otherwise determines.

7.5.36       How claim in respect of securities or non‑money security benefits is to be satisfied

         (1)   The SEGC must allow a claim in respect of an obligation under a guaranteed securities loan to transfer securities or security benefits (except money) if the SEGC is satisfied that:

                (a)    the claimant is entitled to make the claim; and

               (b)    the obligation is still undischarged to the extent of a particular number of securities or security benefits of a particular kind (outstanding items).

         (2)   Subject to subregulations (3) and (4), the SEGC must transfer to, or as directed by, the lender, securities or security benefits of the same kind and number as the outstanding items if:

                (a)    the SEGC allows the claim; and

               (b)    the lender has:

                          (i)    under the guaranteed securities loan, paid each amount (if any) required to be paid under the loan by the lender upon the discharge of the obligation as directed by the borrower; or

                         (ii)    for the purposes of the claim, paid to the SEGC each amount (if any) required to be paid under the loan by the lender upon the discharge of the obligation.

         (3)   If:

                (a)    the SEGC allows the claim; and

               (b)    either:

                          (i)    paragraph (2) (b) is not satisfied; or

                         (ii)    paragraph (2) (b) is satisfied but the SEGC is satisfied that it is not reasonably practicable for the SEGC to obtain securities or security benefits of the same kind and number as the outstanding items within the pre-cash settlement period;

the SEGC must satisfy the claim by paying to the lender the amount that, as at the time when the SEGC decides it is so satisfied, is the actual pecuniary loss suffered by the lender in respect of the failure to discharge the obligation.

         (4)   In working out the amount of the actual pecuniary loss suffered in respect of the failure to discharge the obligation, regard may be had to the cost to the lender of any securities or security benefits of the same kind as the outstanding items that the claimant obtained because the obligation was not discharged.

         (5)   In this regulation:

pre-cash settlement period means:

                (a)    if the operating rules of the lender, as in force when the SEGC allows the claim, prescribe a period, for this regulation, in relation to a class of claims that includes the claim — that period; or

               (b)    in any other case — such period as the SEGC, having regard to all the circumstances of the claim, considers reasonable.

7.5.37       How claim in respect of amount of money is to be satisfied

         (1)   The SEGC must allow a claim in respect of an obligation under a guaranteed securities loan to pay a security benefit that is an amount of money, or to pay another amount, if the SEGC is satisfied that:

                (a)    the claimant is entitled to make the claim; and

               (b)    the obligation is still undischarged to the extent of a particular amount (the outstanding amount).

         (2)   If the SEGC allows the claim, it must pay to, or as directed by, the claimant an amount equal to the outstanding amount.

7.5.38       Nexus with Australia

                A participating market licensee may not make a claim in respect of a guaranteed securities loan unless:

                (a)    the borrower was carrying on a securities business in Australia on the day when the loan was entered into; or

               (b)    if the borrower was not so carrying on such a business, and was not carrying on a securities business outside Australia on that day — the last securities business that the borrower carried on before that day was carried on in Australia.

7.5.39       Effect of using a transfer delivery service

         (1)   This regulation applies if:

                (a)    under a guaranteed securities loan, or under a replacement agreement in relation to a guaranteed securities loan that has been novated, a person (the transferor) is obliged to transfer securities of a particular kind to, or as directed by, another person (the transferee); and

               (b)    for the purpose of wholly or partly discharging the transferor’s obligation to transfer securities under the loan, the transferor:

                          (i)    elects, in accordance with the transfer delivery service provisions of a settlement authority, to bring about a transfer of a particular number of securities of that kind to, or as directed by, the transferee by the means provided for in those provisions; and

                         (ii)    for the purpose of so bringing about that transfer, transfers that number of securities of that kind to the TDS nominee.

         (2)   For this Subdivision, in relation to the guaranteed securities loan, the obligation is taken to be discharged, to the extent of the number of securities of that kind, by the transfer of securities to the TDS nominee.

Subdivision 4.5           Claims in respect of net obligations

7.5.40       Claim in respect of failure to pay net amount in respect of transactions

         (1)   Subject to regulation 7.5.46, if:

                (a)    under provisions of the operating rules of a settlement authority, the total of the amounts that become due and payable to a dealer by a subsidiary of the settlement authority on a particular day in respect of transactions (as defined in the operating rules) of a kind or kinds specified in the operating rules is set off against the total of the amounts that become due and payable by the dealer to the subsidiary on that day in respect of transactions (as so defined) of that kind or those kinds; and

               (b)    depending on which of those totals is the greater, the provisions:

                          (i)    oblige the dealer to pay to the subsidiary, or to another person or persons nominated under the provisions, the difference between those totals within a specified period; or

                         (ii)    oblige the subsidiary, or another dealer or dealers nominated under the provisions, to pay to the dealer, or to another person or persons nominated under the provisions, the difference between those totals within a specified period; and

                (c)    as at the end of that period, that obligation remains undischarged to the extent of a particular amount;

the person to which the amount is payable may make a claim in respect of the obligation.

         (2)   Entitlement to make the claim is not affected by a dealer ceasing to be a participant of a participating market licensee after the obligation arose.

         (3)   For this regulation, a total may be a nil amount.

7.5.41       Claim in respect of failure to transfer net number of securities in respect of transactions

         (1)   This regulation applies if:

                (a)    under provisions of the operating rules of a settlement authority, the total number of securities of a particular kind to be transferred on a particular day to a dealer by a subsidiary of the settlement authority in respect of transactions (as defined in the operating rules) of a kind or kinds specified in the operating rules is set off against the total number of securities of that kind to be transferred on that day by the dealer to the subsidiary in respect of transactions (as so defined) of that kind or those kinds; and

               (b)    depending on which of those totals is the greater, the provisions:

                          (i)    oblige the dealer to transfer to another person or persons nominated under the provisions, securities of that kind equal in number to the difference between those totals within a specified period; or

                         (ii)    oblige another dealer or dealers nominated under the provisions to transfer to the dealer, or to another person or persons nominated under the provisions, securities of that kind equal in number to the difference between those totals within a specified period; and

                (c)    as at the end of that period, the obligation to transfer, or any of the obligations to transfer, as the case requires, remains undischarged to the extent of a particular number of securities of that kind (default securities).

         (2)   Subject to regulation 7.5.46, if the settlement authority has not taken action as mentioned in subregulation (3), the person to which the default securities should have been transferred may make a claim in respect of the failure to transfer the default securities.

         (3)   If, for the purpose of remedying the failure to transfer the default securities, the settlement authority has transferred securities of the same kind and number as the default securities to the person to which the default securities should have been transferred:

                (a)    the settlement authority is subrogated to all the rights and remedies of the person in relation to the failure to transfer the default securities; and

               (b)    subject to regulation 7.5.46, the settlement authority may make a claim in respect of its actions to remedy the failure; and

                (c)    any claim made under subregulation (2) in respect of the failure is taken not to have been entitled to be made.

         (4)   Entitlement to make a claim is not affected by a dealer ceasing to be a participant of a participating market licensee after the obligation to transfer arose.

         (5)   For this regulation, a total number of securities of a particular kind may be zero.

7.5.42       How and when claim to be made

         (1)   A claim must be in writing and must be served on the SEGC within 6 months after the day on which the claimant became entitled to make the claim.

         (2)   A claim that is not made within the period required by subregulation (1) is barred unless the SEGC otherwise determines.

7.5.43       How claim in respect of failure to pay net amount in respect of transactions is to be satisfied

         (1)   The SEGC must allow a claim under subregulation 7.5.40 (1) if the SEGC is satisfied that:

                (a)    subregulation 7.5.40 (1) entitles the claimant to make the claim; and

               (b)    the obligation mentioned in paragraph 7.5.40 (1) (c) still remains undischarged to the extent of a particular amount.

         (2)   If the SEGC allows the claim, the SEGC must pay to the claimant the amount mentioned in paragraph (1) (b).

7.5.44       How claim in respect of failure to transfer net number of securities in respect of transactions is to be satisfied: settlement authority has not taken action

         (1)   The SEGC must allow a claim under subregulation 7.5.41 (2) if the SEGC is satisfied that:

                (a)    the claimant is entitled to make the claim; and

               (b)    the obligation mentioned in paragraph 7.5.41 (1) (c) still remains undischarged to the extent of a particular number of securities of a particular kind (outstanding securities).

         (2)   Subject to subregulation (3), if the SEGC allows the claim, it must transfer to the claimant securities of the same kind and number as the outstanding securities.

         (3)   If the SEGC is satisfied that it is not reasonably practicable for the SEGC to obtain securities of the same kind and number as the outstanding securities within the pre-cash settlement period, the SEGC must satisfy the claim by paying to the claimant the amount that, as at the time when the SEGC decides it is so satisfied, is the actual pecuniary loss suffered by the claimant in respect of the failure to transfer the outstanding securities.

         (4)   In working out the amount of the actual pecuniary loss suffered in respect of the failure to transfer the outstanding securities, regard may be had to the cost to the claimant of any securities of the same kind as the outstanding securities that the claimant obtained because the outstanding securities were not transferred.

         (5)   In this regulation:

pre-cash settlement period means:

                (a)    if the operating rules of the settlement authority that is mentioned in paragraph 7.5.41 (1) (a), as in force when the SEGC allows the claim, prescribe a period, for this regulation, in relation to a class of claims that includes the claim — that period; or

               (b)    in any other case — such period as the SEGC, having regard to all the circumstances of the claim, considers reasonable.

7.5.45       How claim in respect of failure to pay net amount in respect of transactions is to be satisfied: settlement authority has taken action

         (1)   The SEGC must allow a claim by a settlement authority under subregulation 7.5.41 (3) if the SEGC is satisfied that:

                (a)    the settlement authority is entitled to make the claim; and

               (b)    the settlement authority has paid or transferred to the SEGC any money or property it has obtained because of the right of subrogation given by paragraph 7.5.41 (3) (a) in relation to the failure to transfer the default securities.

         (2)   If the SEGC allows the claim, it must pay to the settlement authority the amount that, as at the time when the claim is allowed, is the actual pecuniary loss suffered by the settlement authority because of the actions it has taken to remedy its subsidiary’s default.

         (3)   In working out the amount of the actual pecuniary loss suffered in respect of the actions taken by the settlement authority to remedy its subsidiary’s default, regard may be had to the cost to the settlement authority of obtaining the securities transferred as mentioned in subregulation 7.5.41 (3).

         (4)   Money or property paid or transferred to the SEGC under paragraph (1) (b) forms part of the Fund.

7.5.46       Nexus with Australia

                A person may not make a claim in respect of a failure by a person (the defaulter) to discharge an obligation to pay an amount or transfer securities unless:

                (a)    the defaulter was carrying on a securities business in Australia on the day on which the obligation arose; or

               (b)    if the defaulter was not so carrying on such a business on that day, and was not carrying on a securities business outside Australia on that day — the last securities business that the defaulter carried on before that day was carried on in Australia.

7.5.47       Effect of using a transfer delivery service

         (1)   This regulation applies if:

                (a)    a person (the transferor) is, under provisions of a kind mentioned in subregulation 7.5.41 (1), obliged to transfer securities of a particular kind to another person (the transferee); and

               (b)    for the purpose of wholly or partly discharging the obligation, the transferor:

                          (i)    elects, in accordance with the transfer delivery service provisions of a settlement authority, to bring about a transfer of a particular number of securities of that kind to the transferee by the means provided for in those provisions; and

                         (ii)    for the purpose of so bringing about the transfer, transfers that number of securities of that kind to the TDS nominee.

         (2)   For this Subdivision, the obligation is taken to have been discharged, to the extent of the number of securities of that kind, by the transfer of securities to the TDS nominee.

Subdivision 4.6           Transfer delivery service guarantees

7.5.48       Claims in respect of default by TDS nominee

         (1)   This regulation applies if:

                (a)    a dealer (the transferor) is obliged to transfer securities of a particular kind to, or as directed by, another dealer (the transferee); and

               (b)    the obligation is a claimable obligation; and

                (c)    for the purpose of discharging the obligation, the transferor:

                          (i)    elects, in accordance with the transfer delivery service provisions of a settlement authority, to bring about a transfer of a particular number of securities of that kind to, or as directed by, the transferee by the means provided for in those provisions; and

                         (ii)    for the purpose of so bringing about the transfer, transfers that number of securities of that kind to the TDS nominee; and

               (d)    for the purpose of bringing about the transfer of securities mentioned in subparagraph (c) (i) by the means provided for in those provisions, the TDS nominee later purports to transfer that number of securities of that kind to, or as directed by, the transferee; and

                (e)    the TDS nominee is in default under the transfer delivery service provisions because the transfer documents in relation to the purported transfer, so far as they relate to a particular number of securities of that kind (the default securities), are not sufficient for the purpose mentioned in subregulation 7.5.10 (1); and

                (f)    if the obligation is a purchase obligation — the transferee has paid, or is ready, willing and able to pay, to the transferor, under the agreement for the purchase, the consideration for the purchase.

         (2)   If the settlement authority has not taken action as mentioned in paragraph (3) (a) or (b), the transferee (even if it is the settlement authority) may make a claim in respect of the TDS nominee’s default.

         (3)   If the settlement authority has, for the purpose of remedying the TDS nominee’s default:

                (a)    if the settlement authority is also the transferee — obtained Division 3 assets of the same kind and number as the default securities; or

               (b)    in any other case — transferred securities of the same kind and number as the default securities to, or as directed by, the transferee;

the following provisions have effect:

                (c)    unless the settlement authority is also the transferee — the settlement authority is subrogated to all the rights and remedies of the transferee in relation to the purported transfer of securities by the TDS nominee;

               (d)    subject to regulation 7.5.52, the settlement authority may make a claim in respect of its actions to remedy the default;

                (e)    any claim made under subregulation (2) in respect of the TDS nominee’s default is taken not to have been entitled to be made.

         (4)   A person may make a single claim under subregulation (2) or (3) in respect of 2 or more defaults.

         (5)   A claim made under subregulation (4) is to be treated for regulations 7.5.50 and 7.5.51 as if it were a separate claim in respect of each of the defaults to which it relates.

         (6)   Entitlement to make a claim in respect of a claimable obligation is not affected by a person ceasing after the obligation arose to be a participant of a participating market licensee.

7.5.49       How and when claim to be made

         (1)   A claim must be in writing and must be served on the SEGC within 6 months after the day on which the claimant became entitled to make the claim.

         (2)   A claim that is not made within the period required by subregulation (1) is barred unless the SEGC otherwise determines.

7.5.50       How claim in respect of default by TDS nominee is to be satisfied: SEGC provides securities

         (1)   The SEGC must allow a claim under subregulation 7.5.48 (2) if the SEGC is satisfied that:

                (a)    subregulation 7.5.48 (2) entitles the claimant to make the claim; and

               (b)    if paragraph 7.5.48 (1) (f) applies — the claimant has:

                          (i)    paid to the transferor; or

                         (ii)    for the purposes of the claim, paid to the SEGC;

                        the consideration, under the agreement for the purchase, for the purchase.

         (2)   Subject to subregulation (3), if the SEGC allows the claim, it must transfer to, or as directed by, the claimant securities of the same kind and number as the default securities.

         (3)   If the SEGC is satisfied that it is not reasonably practicable for the SEGC to obtain securities of the same kind and number as the default securities within the pre-cash settlement period, the SEGC must satisfy the claim by paying to the claimant the amount that, as at the time when the SEGC decides that it is so satisfied, is the actual pecuniary loss suffered by the claimant in respect of the TDS nominee’s default.

         (4)   In working out the amount of the actual pecuniary loss suffered in respect of the TDS nominee’s default, regard may be had to the cost to the claimant of any securities of the same kind as the default securities that the claimant obtained because the TDS nominee failed to transfer the default securities.

         (5)   In this regulation:

pre-cash settlement period means:

                (a)    if the operating rules of the settlement authority concerned, as in force when the SEGC allows the claim, prescribe a period, for this regulation, in relation to a class of claims that includes the claim — that period; or

               (b)    in any other case — such period as the SEGC, having regard to all the circumstances of the claim, considers reasonable.

7.5.51       How claim in respect of default by TDS nominee is to be satisfied: SEGC cannot provide securities

         (1)   The SEGC must allow a claim under subregulation 7.5.48 (3) if the SEGC is satisfied that:

                (a)    subregulation 7.5.48 (3) entitles the claimant to make the claim; and

               (b)    if paragraph 7.5.48 (1) (f) applies — the transferee has paid to the transferor the consideration payable, under the agreement for the purchase, for the purchase; and

                (c)    the claimant has paid or transferred to the SEGC any money or property it has obtained because of the right of subrogation given by paragraph 7.5.48 (3) (c) in relation to the purported transfer of securities by the TDS nominee.

         (2)   If the SEGC allows the claim, it must pay to the claimant the amount that, as at the time when the claim is allowed, is the actual pecuniary loss suffered by the claimant because of the actions it has taken to remedy the TDS nominee’s default.

         (3)   In working out the amount of the actual pecuniary loss suffered in respect of actions taken by the claimant to remedy the TDS nominee’s default, regard may be had to the cost to the claimant of obtaining the securities obtained or transferred as mentioned in paragraph 7.5.48 (3) (a) or (b), as the case requires.

         (4)   Money or property paid or transferred to the SEGC under paragraph (1) (c) forms part of the Fund.

7.5.52       Nexus with Australia

                A person may not make a claim under subregulation 7.5.48 (2) or (3) unless:

                (a)    in the case of the settlement authority mentioned in that subregulation — the settlement authority was carrying on business in Australia on the day of the purported transfer mentioned in paragraph 7.5.48 (1) (d); or

               (b)    in any other case:

                          (i)    the person was carrying on a securities business in Australia on the day of the purported transfer mentioned in paragraph 7.5.48 (1) (d); or

                         (ii)    if the person was not so carrying on such a business on that day, and was not carrying on a securities business outside Australia on that day — the last securities business that the person carried on before that day was carried on in Australia.

Subdivision 4.7           Unauthorised transfer

7.5.53       Application of Subdivision 4.7

         (1)   This Subdivision applies if:

                (a)    a dealer executes a document of transfer of securities on behalf of a person as transferor of the securities; and

               (b)    the transfer is not an ASTC-regulated transfer; and

                (c)    apart from the effect of subregulation 7.11.17 (3), the person did not authorise the dealer to execute the document.

         (2)   For subregulation (1), a dealer is taken to have executed a document of transfer in relation to securities on behalf of a person as transferor of the securities if the document states that the person is the transferor of the securities and purports to have been stamped with the dealer’s stamp as the transferor’s broker.

         (3)   This Subdivision also applies if:

                (a)    a dealer effects, or purports to effect, a proper ASTC transfer of securities on behalf of a person; and

               (b)    apart from the effect of regulation 7.11.26, the person did not authorise the dealer to effect the transfer.

         (4)   In this Subdivision:

                (a)    the dealer’s action mentioned in whichever of paragraphs (1) (a) and (3) (a) is applicable is an unauthorised execution; and

               (b)    the person mentioned in whichever of those paragraphs is applicable is the transferor; and

                (c)    the securities mentioned in whichever of those paragraphs is applicable are the transferred securities.

7.5.54       Claim by transferor

                If, as a result of the unauthorised execution, the transferor suffers loss in respect of any of the transferred securities, the transferor may make a claim in respect of the loss.

7.5.55       Claim by transferee or sub-transferee

         (1)   If, as a result of the unauthorised execution, a person (the claimant), being:

                (a)    in any case:

                          (i)    if subregulation 7.5.53 (1) applies — the person stated in the document as the transferee of the transferred securities; or

                         (ii)    if subregulation 7.5.53 (3) applies — the person in whose favour the proper ASTC transfer was effected, or purported to be effected; or

               (b)    if that person has disposed of any of the transferred securities — a successor in title of that person to any of the transferred securities;

suffers loss in respect of any of the transferred securities, the claimant may make a claim in respect of that loss.

         (2)   A person is not entitled to make a claim under this regulation if the person:

                (a)    had actual knowledge that the transferor did not in fact authorise the unauthorised execution; or

               (b)    is an excluded person in relation to the dealer.

7.5.56       How and when claim may be made

         (1)   A claim must:

                (a)    be in writing; and

               (b)   be served on the SEGC:

                          (i)    if a notice under subregulation (4) applies to the claim — before the end of the last application day specified in the notice; or

                         (ii)   in any other case — within 6 months after the day on which the claimant first became aware that the claimant had suffered loss as a result of the unauthorised execution.

         (2)   For subregulation (1), a notice under subregulation (4) applies to a claim if the claim is in respect of an unauthorised execution, by the dealer named in the notice, during the applicable period specified in the notice.

         (3)   A claim that is not served on the SEGC by the time required by paragraph (1) (b) is barred unless the SEGC otherwise determines.

         (4)   The SEGC may publish, in each State and Territory in a daily newspaper circulating in that State or Territory, a notice, using Form 719A, that:

                (a)    names a particular dealer; and

               (b)    requires that all claims in respect of unauthorised executions, by the named dealer, during a period (the applicable period) specified in the notice in accordance with subregulation (5) must be served on the SEGC before the day (the last application day) specified in the notice in accordance with subregulation (6).

         (5)   The applicable period must be a period that starts and ends before:

                (a)    if each publication of the notice occurs on the same day — the day on which the notice is published; or

               (b)   in any other case — the first day on which the notice is published.

         (6)   The last application day must be at least 3 months after:

                (a)    if each publication of the notice occurs on the same day — the day on which the notice is published; or

               (b)    in any other case — the last day on which the notice is published.

         (7)   The SEGC, a member of the Board and any employee of, or person acting on behalf of, the SEGC each has qualified privilege in respect of the publication of a notice under subregulation (4).

7.5.57       How claim is to be satisfied

         (1)   The SEGC must allow a claim if the SEGC is satisfied that regulation 7.5.54 or 7.5.55 entitles the claimant to make the claim.

         (2)   If the SEGC allows the claim, and the claimant has, as a result of the unauthorised execution, ceased to hold some or all of the transferred securities, the SEGC must:

                (a)    subject to paragraph (b), supply to the claimant securities of the same kind and number as those of the transferred securities that the claimant has so ceased to hold; or

               (b)    if the SEGC is satisfied that it is not practicable for the SEGC to obtain such securities, or to obtain such securities within a reasonable time — pay to the claimant the amount that, as at the time when the SEGC decides that it is so satisfied, is the actual pecuniary loss suffered by the claimant, in respect of the transferred securities, as a result of the unauthorised execution (other than loss suffered as mentioned in subregulation (3)).

         (3)   If the SEGC allows the claim, it must pay to the claimant the amount that, as at the time when the claim is allowed, or when the SEGC decides as mentioned in paragraph (2) (b), as the case requires, is the actual pecuniary loss suffered by the claimant, as a result of the unauthorised execution, in respect of payments or other benefits:

                (a)    in any case — to which the claimant would have become entitled, as the holder of such of the transferred securities as the claimant has, as a result of the unauthorised execution, ceased to hold, if the claimant had continued to hold the securities concerned until that time; or

               (b)    if the claim was made under regulation 7.5.55 — that the claimant has received as holder of any of the transferred securities.

         (4)   For this regulation, if securities are purportedly transferred from a person to another person, the first‑mentioned person is taken to cease to hold, and the other person is taken to hold, the securities even if the other person did not by virtue of the transfer get a good title to the securities.

7.5.58       Discretionary further compensation to transferor

         (1)   If:

                (a)    the SEGC allows a claim made under regulation 7.5.54; and

               (b)    the SEGC is satisfied that the supply of securities, or the payment of money, or both, as the case requires, to the claimant under regulation 7.5.57 will not adequately compensate the claimant for a pecuniary or other gain that the claimant might, if the claimant had continued to hold the transferred securities, have made but did not in fact make;

the SEGC may determine in writing that there be paid to the claimant in respect of that gain a specified amount that the SEGC considers to be fair and reasonable in all the circumstances.

         (2)   If a determination is made under subregulation (1), the SEGC must pay to the claimant the amount specified in the determination.

7.5.59       Nexus with Australia

                Regulations 7.5.54 and 7.5.55 do not entitle a person to make a claim unless the dealer was on the day of the unauthorised execution a participant of a participating market licensee and:

                (a)    the dealer was carrying on a securities business in Australia on that day; or

               (b)    if the dealer was not so carrying on such a business and was not carrying on a securities business outside Australia on that day — the last securities business that the dealer carried on before that day was carried on in Australia.

Subdivision 4.8           Contraventions of ASTC certificate cancellation provisions

7.5.60       Claim in respect of contravention of ASTC certificate cancellation provisions

         (1)   A person who suffers pecuniary loss in respect of a contravention, by a dealer, of the ASTC certificate cancellation provisions may make a claim in respect of the loss.

         (2)   The loss must not be a loss in respect of an unauthorised execution (within the meaning of paragraph 7.5.53 (4) (a)) in respect of which the person has made, or is entitled to make, a claim under Subdivision 4.7.

         (3)   The person must not have been involved in the contravention.

         (4)   The following paragraphs must be satisfied in relation to the dealer:

                (a)    the dealer was a participant of a participating market licensee on the day of the contravention;

               (b)    either:

                          (i)    the dealer was carrying on a securities business in Australia on that day; or

                         (ii)    if the dealer was not so carrying on such a business on that day — the last securities business that the dealer carried on before that day was carried on in Australia.

7.5.61       How and when claim may be made

         (1)   A claim must:

                (a)    be in writing; and

               (b)    be served on the SEGC:

                          (i)    if a notice under subregulation (4) applies to the claim — before the end of the last application day specified in the notice; or

                         (ii)    in any other case — within 6 months after the day on which the claimant first became aware that the claimant had suffered loss as a result of the dealer’s contravention of the ASTC certificate cancellation provisions.

         (2)   For subregulation (1), a notice under subregulation (4) applies to a claim if the claim is in respect of a contravention of the ASTC certificate cancellation provisions, by the dealer named in the notice, during the applicable period specified in the notice.

         (3)   A claim that is not served on the SEGC by the time required by paragraph (1) (b) is barred unless the SEGC otherwise determines.

         (4)   The SEGC may publish, in each State and Territory in a daily newspaper circulating in that State or Territory, a notice, using Form 719B, that:

                (a)    names a particular dealer; and

               (b)    requires that all claims in respect of contraventions of the ASTC certificate cancellation provisions, by the named dealer, during a period (the applicable period) specified in the notice in accordance with subregulation (5) must be served on the SEGC before the day (the last application day) specified in the notice in accordance with subregulation (6).

         (5)   The applicable period must be a period that starts and ends before:

                (a)    if each publication of the notice occurs on the same day — the day on which the notice is published; or

               (b)    in any other case — the first day on which the notice is published.

         (6)   The last application day must be at least 3 months after:

                (a)    if each publication of the notice occurs on the same day — the day on which the notice is published; or

               (b)    in any other case — the last day on which the notice is published.

         (7)   The SEGC, a member of the Board and any employee of, or person acting on behalf of, the SEGC each has qualified privilege in respect of the publication of a notice under subregulation (4).

7.5.62       How claim is to be satisfied

         (1)   The SEGC must allow a claim if the SEGC is satisfied that regulation 7.5.60 entitles the claimant to make the claim.

         (2)   If the SEGC allows the claim, it must pay to the claimant the amount that, when the claim is allowed, is the actual pecuniary loss suffered by the claimant because of the contravention in respect of which the claim was made.

         (3)   For subregulation (2), the actual pecuniary loss suffered by the claimant does not include any loss in respect of an unauthorised execution (within the meaning of paragraph 7.5.53 (4) (a)) in respect of which the claimant has made, or is entitled to make, a claim under Subdivision 4.7.

7.5.63       Discretionary further compensation

         (1)   If:

                (a)    the SEGC allows a claim made under regulation 7.5.60; and

               (b)    the SEGC is satisfied that the payment of money to the claimant under regulation 7.5.62 will not adequately compensate the claimant for a pecuniary or other gain that the claimant did not make, but might have made, were it not for the contravention in respect of which the claim was made;

the SEGC may determine in writing that the claimant should be paid in respect of that gain a specified amount that the SEGC considers to be fair and reasonable in all the circumstances.

         (2)   If a determination is made under subregulation (1), the SEGC must pay the claimant the amount specified in the determination.

Subdivision 4.9           Claims in respect of insolvent participants

7.5.64       Claim in respect of property entrusted to, or received by, dealer before dealer became insolvent

         (1)   A person may make a claim in respect of property if:

                (a)    a dealer has become insolvent at a particular time (whether before or after the commencement of this regulation); and

               (b)    at an earlier time (whether before or after that commencement), the property was, in the course of, or in connection with, the dealer’s securities business entrusted to, or received by:

                          (i)    if the dealer was, at the earlier time, a partner in a participant — the participant, or a partner in, or an employee of, the participant; or

                         (ii)    in any other case — the dealer or an employee of the dealer;

                        and was so entrusted or received on behalf of, or because the dealer was a trustee of the property for, the person (other than an excluded person in relation to the dealer); and

                (c)    at the time the dealer became insolvent, the obligations of the dealer, or of a participant of which the dealer is a partner, as the case requires, to the person in respect of the property have not been discharged.

         (2)   The SEGC must allow the claim if the SEGC is satisfied that:

                (a)    subregulation (1) entitles the claimant to make the claim; and

               (b)    at the time the SEGC considers the claim, the obligations of the dealer, or of a participant of which the dealer is a partner, as the case requires, to the claimant in respect of the property have not been discharged.

         (3)   If the property is, or includes, money, the SEGC must pay to the claimant an amount equal to the amount of that money.

         (4)   If the property is, or includes, property other than money, the SEGC must, subject to subregulation (5) and regulation 7.5.65, supply the property other than money to the claimant.

         (5)   If:

                (a)    the SEGC allows a claim in respect of property that is, or includes:

                          (i)    a number of securities of a particular kind; or

                         (ii)    documents of title to a number of securities of a particular kind; and

               (b)    it is not reasonably practicable for the SEGC to obtain those securities, or those documents of title to securities, as the case may be, from the dealer or, if the dealer has disposed of them, from the dealer’s successor in title, before the end of:

                          (i)    if the operating rules of a participating market licensee of which the dealer is a participant, being those operating rules as in force when the SEGC allows the claim, prescribe a period, for this regulation, in relation to a class of claims that includes that claim — that period; or

                         (ii)    in any other case — such period as the SEGC, having regard to all the circumstances relating to the claim, considers reasonable;

the SEGC must, subject to regulation 7.5.65, supply to the person, instead of those securities, or those documents of title to securities, the number of securities of that kind, or documents of title to the number of securities of that kind, as the case may be.

7.5.65       Cash settlement of claims if property unobtainable

         (1)   If:

                (a)    the SEGC allows a claim in respect of property that is, or includes, a number of securities of a particular kind or documents of title to a number of securities of a particular kind; and

               (b)    it is not reasonably practicable for the SEGC to obtain those securities, or those documents of title to securities, as the case may be, from the dealer or, if the dealer has disposed of them, from the dealer’s successor in title, before the end of:

                          (i)    if the operating rules of a participating market licensee of which the dealer is a participant, being those operating rules as in force when the SEGC allows the claim, prescribe a period, for this regulation, in relation to a class of claims that includes the claim — that period; or

                         (ii)    in any other case — such period as the SEGC, having regard to all the circumstances relating to the claim, considers reasonable; and

                (c)    it is not reasonably practicable for the SEGC to obtain that number of securities of that kind, or documents of title to that number of securities of that kind, as the case may be, before the end of that period because:

                          (i)    whether by reason that dealing in securities of that kind is suspended or for any other reason, there exists at no time during that period an orderly market in such securities; or

                         (ii)    the total number of securities of that kind offered for sale on financial markets of market licensees or Exchange bodies at times during that period when there exists an orderly market in such securities is insufficient;

the SEGC may decide to pay to the claimant the amount that, when the decision is made, is the actual pecuniary loss suffered by the claimant in respect of the first-mentioned securities, or the first-mentioned documents of title, as the case may be, and if the SEGC does so, the SEGC must pay that amount to the claimant.

         (2)   If:

                (a)    the SEGC allows a claim that, because of a dealer having become insolvent, this Division entitles a person to make in respect of property that is, or includes, property (the relevant property) other than money, securities or documents of title to securities; and

               (b)    it is not reasonably practicable for the SEGC to obtain the relevant property from the dealer or, if the dealer has disposed of it, from the dealer’s successor in title, before the end of such period as the SEGC considers reasonable;

the SEGC may decide to pay to the claimant the amount that, when the decision is made, is the actual pecuniary loss suffered by the claimant in respect of the relevant property, and if the SEGC does so, the SEGC must pay that amount to the claimant.

7.5.66       Ordering of alternative claims and prevention of double recovery

         (1)   Subregulation (2) applies if:

                (a)    a participant has received under the agreement for a sale or purchase of securities by the participant on behalf of a person, the consideration for the sale or settlement documents in relation to the purchase, as the case may be; and

               (b)    subregulation 7.5.24 (1), 7.5.25 (1), 7.5.26 (1) or 7.5.27 (1) entitles the person to make a claim against the SEGC under Subdivision 4.3 in respect of the sale or purchase.

         (2)   This Subdivision does not, because of:

                (a)    a dealer, being the participant or a partner in the participant, having become insolvent at a particular time; and

               (b)    the participant having received, under the agreement, the consideration or the settlement documents;

entitle the person to make a claim in respect of the consideration or the settlement documents, as the case may be, unless the participant’s obligations to the person in respect of the sale or purchase, as the case may be, in so far as those obligations related to the consideration or the settlement documents, were discharged before that time.

         (3)   If:

                (a)    because of a dealer having become insolvent on a particular day, this Subdivision entitles a person to make a claim (the first claim) in respect of property; and

               (b)    because of a dealer having become insolvent on a later day, this Subdivision entitles a person to make another claim in respect of the property;

the SEGC must not allow the other claim unless:

                (c)    the person has made the first claim and the SEGC has allowed or disallowed it; or

               (d)    the SEGC is satisfied that if the first claim had been made the SEGC would have disallowed it; or

                (e)    the SEGC is satisfied that, when the person first became aware of the dealer mentioned in paragraph (b) having become insolvent on the later day:

                          (i)    the first claim was barred; or

                         (ii)    it was no longer reasonably practicable for the person to make the first claim before it became barred.

         (4)   If:

                (a)    at a particular time, the SEGC allows a claim in respect of property; and

               (b)    because of:

                          (i)    a dealer having become insolvent (whether before, at or after that time); and

                         (ii)    the property having, before that time, been entrusted or received as mentioned in paragraph 7.5.64 (1) (b);

                        this Subdivision entitles the claimant to make another claim in respect of the property;

the SEGC must not allow the other claim.

7.5.67       No claim in respect of money lent to dealer

                If, at the time when a dealer becomes insolvent:

                (a)    a person has lent money to the dealer; and

               (b)    the liability of the dealer to repay the money remains undischarged;

this Subdivision does not, because of the dealer having become insolvent at that time, entitle the person to make a claim in respect of the money.

7.5.68       Nexus with Australia

                This Subdivision does not, because of a person (the dealer) having become insolvent on a particular day, entitle a person to make a claim in respect of property unless:

                (a)    the dealer was on that day a participant of a participating market licensee; and

               (b)    the dealer was carrying on a securities business in Australia on that day, and was not carrying on a securities business outside Australia on that day.

7.5.69       No claim in certain other cases

                This Subdivision does not, because of a dealer having become insolvent on a particular day, entitle a person to make a claim in respect of property if:

                (a)    before that day the property had, in due course of the administration of a trust, ceased to be under the sole control of the dealer; or

               (b)    the SEGC, or the Court, is satisfied that circumstances that materially contributed to the dealer becoming insolvent on that day were due to, or caused directly or indirectly by, an act or omission of the person.

7.5.70       Making of claims

         (1)   The SEGC may publish, in each State and Territory, in a daily newspaper circulating generally in that State or Territory, a notice, using Form 720, specifying a day, not being earlier than 3 months after the publication of the notice, on or before which claims against the SEGC may be made, being claims that, because of a dealer specified in the notice having become insolvent, this Subdivision entitles persons to make.

         (2)   If this Subdivision entitles a person to make a claim, the claim must be in writing and must be served on the SEGC:

                (a)    if there has been published in accordance with subregulation (1) a notice specifying a day on or before which claims may be made, being claims that, because of the dealer having become insolvent on that day, this Subdivision entitles persons to make — on or before that day; or

               (b)    in any other case — within 6 months after the person becomes aware of the dealer having become insolvent on that day.

         (3)   A claim that is not made in accordance with subregulation (2) is barred unless the SEGC otherwise determines.

         (4)   The SEGC, a member of the Board and any employee of, or person acting on behalf of, the SEGC each has qualified privilege in respect of the publication of a notice under subregulation (1).

7.5.71       Limits of compensation

         (1)   The total amounts paid out of the Fund in connection with claims under this Subdivision must not exceed an amount equal to 14% of the minimum amount of the Fund as at the end of that day.

         (2)   In determining the total of the amounts paid out of the Fund in connection with claims in respect of property (the main property):

                (a)    an amount paid out of the Fund in connection with any of the claims must be disregarded, to the extent to which it is repaid to the Fund; and

               (b)    if, because of the exercise of a right or remedy in relation to property that is, or is included in, the main property, being a right or remedy of the claimant, or of any of the claimants, to which the SEGC is subrogated, money or other property has been recovered by, or on behalf, of the SEGC — so much of the amount, or of the total of the amounts, paid out of the Fund in connection with any of the claims as does not exceed:

                          (i)    the amount of that money; or

                         (ii)    the value of so much (if any) of that other property as has not been, and is not required to be, supplied under subregulation 7.5.64 (2) in respect of any of the claims;

                        must be disregarded.

         (3)   To ensure compliance with subregulation (1) in relation to particular claims:

                (a)    the SEGC may, in relation to each of those claims, determine in writing an amount to be the maximum amount in relation to the claim; and

               (b)   if paragraph (a) empowers the SEGC to make determinations in relation to the respective claims of 2 or more claimants — the SEGC must, in making those determinations:

                          (i)    take into account, in relation to each of those claimants, any money or other property that the claimant has received, or is likely to receive, from sources other than the Fund as compensation for property to which the claimant’s claim relates; and

                         (ii)    ensure, as far as practicable, that the proportion of the property to which a claim relates that is represented by the money and other property received from all sources (including the Fund) as compensation for property to which the claim relates is, as nearly as practicable, the same for each of those claimants.

         (4)   If a determination of an amount as the maximum amount in relation to a claim is in force under subregulation (3), the amount, or the total of the amounts, paid out of the Fund in connection with the claim must not exceed the amount that has been determined.

Subdivision 4.10         General

7.5.72       Power of SEGC to allow and settle claim

         (1)   The SEGC may, at any time after a person becomes entitled to make a claim, allow and settle the claim.

         (2)   Subregulation (1) authorises the SEGC to partially allow a claim (including, for example, in a case where the SEGC considers that the claimant’s conduct contributed to the loss).

7.5.73       Application of Fund in respect of certain claims

         (1)   This regulation applies if the SEGC acquires financial products in accordance with section 888K of the Act for the purpose of providing compensation.

         (2)   The financial products form part of the Fund until they are supplied in accordance with this Part to a claimant or sold in accordance with subregulation (3).

         (3)   If the SEGC:

                (a)    acquires the financial products; and

               (b)    satisfies the claim by paying an amount to the claimant;

the SEGC must, as soon as practicable after satisfying the claim, sell the financial products and pay the proceeds of the sale into the Fund.

7.5.74       Discretion to pay amounts not received etc because of failure to transfer securities

         (1)   This regulation applies if the SEGC is satisfied that:

                (a)    a person (the defaulter) has failed to discharge an obligation to transfer securities to another person (the entitled entity); and

               (b)    the entitled entity:

                          (i)    has made a claim in respect of the failure and has had securities transferred to it, or an amount paid to it, in satisfaction of the claim; or

                         (ii)    unless the entitled entity is a settlement authority — would have been entitled to make a claim in respect of the failure if a settlement authority had not transferred securities to it for the purpose of remedying the failure; or

                        (iii)    if the entitled entity is a settlement authority — would have been entitled to make a claim in respect of the failure if it had not obtained securities for the purpose of remedying the failure; and

                (c)    if the defaulter had duly transferred securities in accordance with the obligation, an amount would have been paid, or property would have been transferred, to the entitled entity as the holder of the securities; and

               (d)    the entitled entity has not received, and is not entitled to receive (otherwise than from the defaulter):

                          (i)    the amount or property; or

                         (ii)    an equivalent amount or equivalent property in respect of securities transferred or obtained as mentioned in paragraph (b); and

                (e)    if subparagraph (b) (i) applies, and an amount has been paid in satisfaction of the claim, the amount paid does not adequately compensate the entitled entity for the loss of the amount or property mentioned in paragraph (c).

         (2)   The SEGC may determine in writing that the entitled entity is to be paid, in respect of the loss of the amount or property mentioned in paragraph (1) (c), a specified amount that the SEGC considers to be fair and reasonable in the circumstances.

         (3)   If a determination is made under subregulation (1), the SEGC must pay to the entitled entity the amount specified in the determination.

7.5.75       Reduction in compensation

         (1)   The SEGC may reduce an amount of compensation by reference to 1 or more of the following:

                (a)    a right of set-off available to the claimant;

               (b)    the extent to which the claimant was responsible for causing the loss.

         (2)   If:

                (a)    the claimant has received a benefit from the third party to whom the claimant has assigned any of its rights and remedies in relation to the loss; and

               (b)    the claimant assigned rights and remedies as mentioned in paragraph (a) without the written consent of the SEGC; and

                (c)    the claimant continues to suffer a loss at the date of the determination of the claim;

the SEGC may reduce the amount of compensation to the amount that fairly represents the extent to which the claimant has, without the written consent of the SEGC, adversely affected the SEGC’s right to be subrogated to any of the claimant’s rights and remedies in relation to the loss to which the claim relates.

7.5.76       Claimant may be required to exercise right of set-off

         (1)   If:

                (a)    a person (the claimant) has made a claim in respect of a liability of another person (the defaulter); and

               (b)    the claimant has a right, whether under an agreement or otherwise, to set off a liability of the claimant to the defaulter against the liability mentioned in paragraph (a);

the SEGC may refuse to allow the claim until the claimant has exercised the right.

         (2)   The SEGC may, by notice in writing served on a person, require the person to give the SEGC specified information relating to the existence or exercise of rights of set-off.

7.5.77       Effect of set-off on claim

         (1)   If:

                (a)    the SEGC allows a claim by a person (the claimant) in respect of a liability of another person (the defaulter); and

               (b)    the liability of the defaulter to the claimant has been reduced, by an amount of money or a number of securities (the set-off reduction), because of:

                          (i)    the exercise by the claimant or the defaulter of a right of set-off, whether under an agreement or otherwise; or

                         (ii)    the operation of an agreement so far as it provides for the automatic set-off of liabilities; and

                (c)    but for this regulation, the reduction of the defaulter’s liability would not be taken into account when working out the obligations of the SEGC in respect of the claim;

this regulation applies for the purposes of working out those obligations.

         (2)   If:

                (a)    the SEGC is required to satisfy the claim by paying an amount; and

               (b)    the set-off reduction consists of an amount;

the amount the SEGC must pay in respect of the claim is reduced by the amount of the set-off reduction.

         (3)   If:

                (a)    the SEGC is required to satisfy the claim by paying an amount; and

               (b)    the set-off reduction consists of a number of securities;

then:

                (c)    the SEGC must work out the value of the securities; and

               (d)    the amount the SEGC must pay in respect of the claim is reduced by the value worked out under paragraph (c).

         (4)   If:

                (a)    the SEGC is required to satisfy the claim by transferring securities of a particular kind; and

               (b)    the set-off reduction consists of a number of securities of that kind;

the number of securities that the SEGC must transfer in respect of the claim is reduced by the number mentioned in paragraph (b).

         (5)   If:

                (a)    the SEGC is required to satisfy the claim by transferring securities of a particular kind; and

               (b)    the set-off reduction consists of a number of securities that are not of that kind;

then:

                (c)    the SEGC must work out:

                          (i)    the value of the securities that constitute the set-off reduction; and

                         (ii)    the number of securities of the kind mentioned in paragraph (a) that are equal in value to the value worked out under subparagraph (i); and

               (d)    the number of securities that the SEGC is required to transfer in respect of the claim is reduced by the number worked out under subparagraph (c) (ii).

         (6)   If:

                (a)    the SEGC is required to satisfy the claim by transferring securities of a particular kind; and

               (b)    the set-off reduction consists of an amount of money;

then:

                (c)    the SEGC must work out the number of securities of that kind that are equal in value to that amount; and

               (d)    the number of securities that the SEGC must transfer in respect of the claim is reduced by the number worked out under paragraph (c).

7.5.78       Claimant entitled to costs and disbursements

         (1)   This regulation applies if the SEGC:

                (a)    allows a claim in whole or in part; or

               (b)    disallows a claim in whole in the following circumstances:

                          (i)    the dealer compensated the claimant before the claim was determined;

                         (ii)    the claim would have been allowed if the dealer had not compensated the claimant.

         (2)   The claimant is entitled to be paid out of the Fund an amount equal to the total of the reasonable costs of, and the reasonable disbursements incidental to, the making and proof of the claim.

         (3)   The claimant is also entitled to be paid out of the Fund an amount in respect of the claimant’s reasonable costs of, and disbursements incidental to, attempting to recover the loss.

         (4)   Subregulations (2) and (3) apply in addition to the claimant’s other rights under this Division.

7.5.79       Interest

         (1)   In addition to an amount that is payable to a person out of the Fund in respect of a claim, interest at the rate of 5% per annum or, if another rate is determined in writing by the SEGC, at that other rate, is payable to the person out of the Fund, on so much of that amount as is not attributable to costs and disbursements, in respect of the period beginning on the day on which the person became entitled to make the claim and ending on:

                (a)    if the SEGC has made a determination under subregulation 7.5.82 (1) to pay that amount in instalments — the day on which that amount would, if no such determination had been made and the money in the Fund were unlimited, have been paid to the person; or

               (b)    if, because of insufficiency of the Fund, no part of that amount is paid to the person on the day on which that amount would, if the money in the Fund were unlimited, have been so paid — that day; or

                (c)    in any other case — the day on which that amount is paid to the person.

         (2)   A rate of interest determined by the SEGC for subregulation (1):

                (a)    must not exceed the rate that, when the determination is made, is fixed by Rules of Court for the purposes of paragraph 52 (2) (a) of the Federal Court of Australia Act 1976; and

               (b)   must not be less than 5% per year.

         (3)   As soon as practicable after determining a rate of interest, the SEGC must publish a copy of the determination in the Gazette.

         (4)   If:

                (a)    under subregulation (1), interest is payable to a person on an amount in respect of a period; and

               (b)    that amount, or a part of that amount, remains unpaid throughout a period beginning immediately after the period mentioned in paragraph (a);

interest, in addition to that amount and that interest, is payable to the person, at the rate of 5% per annum, out of the Fund on that amount, or on that part of that amount, as the case may be, in respect of that period first mentioned in paragraph (b).

7.5.80       SEGC to notify claimant if claim disallowed

                The SEGC must, after wholly or partly disallowing a claim, serve on the claimant, or on the claimant’s solicitor, notice of the disallowance using Form 721.

7.5.81       Arbitration of amount of cash settlement of certain claims

         (1)   If:

                (a)    a cash settlement provision requires the SEGC to pay an amount in respect of a claim; and

               (b)    the amount cannot be determined by agreement between the SEGC and the claimant;

the amount must be determined by arbitration in accordance with this regulation.

         (2)   If:

                (a)    in relation to a claim, paragraph 7.5.77 (3) (c), (5) (c) or (6) (c) requires the SEGC to work out the value of securities, or the number of securities that are equal in value to another value or amount; and

               (b)    the value or number cannot be determined by agreement between the SEGC and the claimant;

the value or number is to be determined by arbitration in accordance with this regulation.

         (3)   The reference to arbitration is a reference to persons appointed, in accordance with subregulation (4), for the purposes of the reference.

         (4)   For the purposes of the reference to arbitration:

                (a)    the participating market licensee must make the appointment, or the participating market licensees must jointly make the appointment; and

               (b)    3 persons must be appointed; and

                (c)    the Minister must have approved the appointment of each person in writing; and

               (d)    at least 2 of the persons must not be any of the following:

                          (i)    a participant of a participating market licensee;

                         (ii)    an officer or employee of the SEGC;

                        (iii)    an officer or employee of a participating market licensee;

                        (iv)    an officer or employee of a participant.

         (5)   If, before the commencement of this regulation, an arbitration:

                (a)    was to take place but had not begun; or

               (b)    had begun but had not been concluded;

the arbitration must take place, or continue, as if it were an arbitration under this regulation.

         (6)   In this regulation:

cash settlement provision means any of the following provisions:

                (a)    regulation 7.5.28;

               (b)    regulation 7.5.29;

                (c)    subregulation 7.5.36 (3);

               (d)    subregulation 7.5.37 (2);

                (e)    subregulation 7.5.43 (2);

                (f)    subregulation 7.5.44 (3);

               (g)    subregulation 7.5.45 (2);

               (h)    subregulation 7.5.50 (3);

                (i)    subregulation 7.5.51 (2);

                (j)    regulation 7.5.57;

               (k)    regulation 7.5.62;

                (l)    subregulation 7.5.65 (1);

              (m)    subregulation 7.5.65 (2).

7.5.82     Instalment payments

         (1)   This regulation applies if, at a particular time, the SEGC is of the opinion that, if all the amounts that, as at that time, are payable out of the Fund in connection with claims were so paid, the Fund would be exhausted or substantially depleted.

         (2)   The SEGC may determine in writing that amounts so payable as at that time must be so paid in instalments of specified amounts payable on specified days.

7.5.83       Notification of payment of levies

                For subsection 889J (7) of the Act, a notification to the Commonwealth of payments of levy received by the operator of a financial market as agent for the Commonwealth must:

                (a)    be given for each period of 6 months ending on 31 December and 30 June; and

               (b)    be given in writing to:

                          (i)    the Secretary of the Department of Finance and Administration; or

                         (ii)    another officer of that Department notified in writing by the Secretary to the receiver of the levy; and

                (c)    set out the total of the levies (if any) that became payable in the period; and

               (d)    set out the total of the levies (if any) received in the period; and

                (e)    be given not later than 2 weeks after the end of the period.

7.5.84       Notification of payment of levies

                For subsection 889K (6) of the Act, a notification to the Commonwealth of payments of levy received by an operator of a financial market as agent for the Commonwealth must:

                (a)    be given for each period of 6 months ending on 31 December and 30 June; and

               (b)    be given in writing to:

                          (i)    the Secretary of the Department of Finance and Administration; or

                         (ii)    another officer of that Department notified in writing by the Secretary to the receiver of the levy; and

                (c)    set out the total of the levies (if any) that became payable in the period; and

               (d)    set out the total of the levies (if any) received in the period; and

                (e)    be given not later than 2 weeks after the end of the period.

Subdivision 4.11            Other provisions relating to compensation

7.5.85       Prescribed body corporate with arrangements covering clearing and settlement facility support

                For subsection 891A (1) of the Act, ASX Settlement and Transfer Corporation Pty Limited (also known as ‘ASTC’) is a prescribed body corporate.

Division 5              Provisions common to both kinds of compensation arrangements

7.5.86       Excess money in National Guarantee Fund

         (1)   The Minister may notify the SEGC that the Minister is satisfied that:

                (a)    a market licensee specified in the notification is operating a financial market to which Division 4 of Part 7.5 of the Act applies; or

               (b)    each market licensee specified in the notification is operating a financial market to which Division 4 of Part 7.5 of the Act applies.

         (2)   For section 892G of the Act, if, on a day, the amount in the NGF is greater than the minimum amount identified in accordance with section 889I of the Act, the amount by which it is greater is excess money.

7.5.87       Excess money in fidelity fund

         (1)   For section 892G of the Act, if, on a day:

                (a)    a fidelity fund (other than the NGF) is the sole source of funds available to cover claims for the purposes of Division 3 arrangements; and

               (b)    the amount in the fidelity fund is greater than the minimum amount of cover identified in accordance with paragraph 882A (4) (a) of the Act;

the amount by which it is greater is excess money.

         (2)   For section 892G of the Act, if, on a day:

                (a)    a fidelity fund (other than the NGF) is not the sole source of funds available to cover claims for the purposes of Division 3 arrangements; and

               (b)    the amount in the fidelity fund is greater than the minimum amount of cover specified in accordance with paragraph 882A (4) (a) of the Act, reduced by the sum of the amounts of cover from each other source of funds available for the purposes of the same Division 3 arrangements;

the amount by which it is greater is excess money.

7.5.88       Minister’s arrangements for payment of excess money in compensation funds

         (1)   The Minister may approve, in writing, a matter as an approved purpose for which excess money may be paid.

         (2)   The matter must relate to:

                (a)    the creation of, or participation in, a program for the development of the financial industry that:

                          (i)    is conducted primarily for a public benefit; and

                         (ii)    is not conducted primarily to promote the profitability of the commercial operations of any market; or

               (b)    the payment of premiums for fidelity insurance or other compensation arrangements for the financial market as part of an approved compensation arrangement for Division 3 of Part 7.5 of the Act.

Examples for paragraph (2) (a)

1   Public education activities.

2   Research into future product or service needs.

3   Research and consulting services intended to improve the international performance of Australian financial markets.

4   Improvement of Australia’s role as a financial centre.

         (3)   The Minister may, in relation to an approved purpose, determine conditions to which the payment of excess money for the approved purpose must be subject.

7.5.89       Payment of excess money from NGF

         (1)   If the Minister notifies the SEGC in accordance with subregulation 7.5.86 (1), the SEGC may determine, in writing, that an amount of excess money specified in the determination be paid to 1 or more of the market licensees specified in the Minister’s notification.

         (2)   The amount must be paid in accordance with the SEGC’s determination.

         (3)   A market licensee that receives a payment of excess money from the NGF must pay the excess money into an account that:

                (a)    is kept separately from other accounts used by the market licensee; and

               (b)    is designated as a ‘financial industry development account’.

7.5.90       Use of excess money from NGF

         (1)   A market licensee that receives a payment of excess money from the NGF must use the money only:

                (a)    for the approved purpose (if any) for which it was paid, and in accordance with any conditions to which the payment of the money is subject under subregulation 7.5.88 (3); or

               (b)    in accordance with subregulation (3); or

                (c)    to make a repayment to the NGF.

         (2)   If the market licensee contravenes subregulation (1), the market licensee must:

                (a)    notify the SEGC of the contravention as soon as practicable; and

               (b)    repay the amount involved into its financial industry development account.

         (3)   If there is no immediate requirement for the market licensee to use an amount of excess money in its financial industry development account:

                (a)    the market licensee may invest the amount in a way authorised by section 892C of the Act; and

               (b)    if the market licensee invests excess money during a financial year, the market licensee must pay any interest or profit from the investment into its financial industry development account.

         (4)   The market licensee must, in respect of each financial year during which, at any time, there is money in its financial industry development account, lodge a completed Form 719 with ASIC not later than 3 months after the end of the financial year.

7.5.91       Payment of excess money from fidelity fund

                If there is excess money in a fidelity fund (other than the NGF), the market licensee to which the excess money relates may pay an amount of the excess money into an account that:

                (a)    is kept separately from other accounts used by the market licensee; and

               (b)    is designated as a ‘financial industry development account’.

7.5.92       Use of excess money from fidelity fund

         (1)   A market licensee that receives a payment of excess money from a fidelity fund must use the money only:

                (a)    for a purpose approved under subregulation 7.5.88 (1), and in accordance with any conditions to which the payment is subject under subregulation 7.5.88 (3); or

               (b)    in accordance with subregulation (3); or

                (c)    to make a repayment to the fidelity fund.

         (2)   If the market licensee contravenes subregulation (1), the market licensee must repay the amount involved into its financial industry development account.

         (3)   If there is no immediate requirement for the market licensee to use an amount of excess money in its financial industry development account, the market licensee:

                (a)    the market licensee may invest the amount in a way authorised by section 892C of the Act; and

               (b)    if the market licensee invests excess money during a financial year, the market licensee must pay any interest or profit from the investment into its financial industry development account.

         (4)   The market licensee must, in respect of each financial year during which, at any time, there is money in its financial industry development account, lodge a completed Form 719 with ASIC not later than 3 months after the end of the financial year.

7.5.93       Qualified privilege

         (1)   For section 892J of the Act, the following persons each have qualified privilege in respect of the publication of a statement, in accordance with Division 3 of Part 7.5 of the Act, that a contract of insurance does, or does not cover a particular participant:

                (a)    a market licensee;

               (b)    the board of the market licensee;

                (c)    an agent of the board of the market licensee;

               (d)    an employee of a market licensee.

         (2)   For section 892J of the Act, the following persons each have qualified privilege in respect of a notice, in accordance with Division 3 of Part 7.5 of the Act, seeking claims in relation to a particular participant of a financial market:

                (a)    a market licensee;

               (b)    the board of the market licensee;

                (c)    an agent of the board of the market licensee;

               (d)    an employee of a market licensee.

Part 7.6              Licensing of providers of financial services

7.6.01       Need for Australian financial services licence: general

         (1)   For paragraph 911A (2) (k) of the Act, the provision of the following services is covered by an exemption from the requirement to hold an Australian financial services licence:

                (a)    dealing in a financial product by a person in the capacity of the trustee of a superannuation entity (other than the trustee of a public offer entity);

               (b)    dealing in a financial product by a person in the capacity of the trustee of a pooled superannuation trust in the following circumstances:

                          (i)    the pooled superannuation trust is used for investment of the assets of a regulated superannuation fund;

                         (ii)    the regulated superannuation fund has net assets of at least $10 million on the date that it first invests in the pooled superannuation trust;

                (c)    dealing in a financial product by a person in the capacity of the trustee of a pooled superannuation trust in the following circumstances:

                          (i)    the pooled superannuation trust is used for investment of the assets of a regulated superannuation fund;

                         (ii)    the regulated superannuation fund has net assets of at least $5 million, but less than $10 million, on the date that it first invests in the pooled superannuation trust;

                        (iii)    the trustee has a reasonable expectation that the net assets of the regulated superannuation fund will equal or exceed $10 million within 3 months of the date on which it first invests in the PST;

               (d)    dealing in a financial product by a person in the capacity of the trustee of a pooled superannuation trust in circumstances in which the pooled superannuation trust is not used for the investment of the assets of a regulated superannuation fund;

                (e)    a financial service provided by a person (person 1) in the following circumstances:

                          (i)    the service consists only of referring a person (person 2) to a financial services licensee;

                         (ii)    the referral is provided by person 1 as an incidental part of person 1’s ordinary activities;

                        (iii)    person 1 discloses to person 2, in writing, when the referral is made, any benefits (including commission) that person 1, or an associate of person 1, is to receive in respect of the referral and any benefits (including commission) that person 1, or an associate of person 1, is to receive that are attributable to the referral;

                (f)    a financial service provided in the following circumstances:

                          (i)    a person (person 1) is a person that is not in the jurisdiction;

                         (ii)    person 1 arranges, on behalf of another person (person 2), for a holder of an Australian financial services licence to deal in a financial product;

                        (iii)    person 1 believes on reasonable grounds that person 2 is not in the jurisdiction;

               (g)    a financial service provided in the following circumstances:

                          (i)    a person (person 1) is a person that is not in the jurisdiction;

                         (ii)    person 1 believes on reasonable grounds that another person (person 2) is not in the jurisdiction;

                        (iii)    person 1 deals on behalf of person 2 in a financial product that cannot be traded on a licensed market;

                        (iv)    person 1 believes on reasonable grounds that each person who is a party to the dealing or any transaction to which the dealing relates is a person that is not in the jurisdiction;

               (h)    a financial service that consists only of arranging for contributions to be paid into:

                          (i)    a superannuation fund within the meaning of the SIS Act; or

                         (ii)    a successor fund; or

                        (iii)    a retirement savings account;

                (i)    a financial service that consists only of the provision of factual information to:

                          (i)    a member or prospective member of a superannuation fund within the meaning of the SIS Act; or

                         (ii)    a holder or prospective holder of a retirement savings account;

                (j)    a financial service:

                          (i)    provided to an insurer; and

                         (ii)    that consists only of either or both of the handling of claims and the settlement of claims in relation to an insurance product.

         (2)   If paragraph (1) (c) applies, and the net assets of the regulated superannuation fund do not equal or exceed $10 million at the end of the 3 month period mentioned in subparagraph (1) (c) (ii):

                (a)    the trustee of the pooled superannuation trust must offer to redeem the investment of the regulated superannuation fund as soon as practicable after the end of the period; and

               (b)    the regulated superannuation fund has not accepted the redemption offer within 3 months after the offer was made; and

                (c)    the net assets of the regulated superannuation fund do not equal or exceed $10 million by the end of the 3 month period mentioned in paragraph (b);

the trustee of the pooled superannuation trust must apply for an Australian financial services licence.

         (3)   Paragraph (1) (e) is not intended to affect the determination of whether the provision of a service that is not described by that paragraph is, or is not, the provision of a financial service.

7.6.02       Alternative dispute resolution systems

         (1)   For subparagraph 912A (2) (a) (i) of the Act, ASIC must take the following matters into account when considering whether to make or approve standards or requirements relating to internal dispute resolution:

                (a)    Australian Standard AS 4269 1995:

                          (i)    known as Complaints Handling; and

                         (ii)    published by Standards Australia; and

                        (iii)    as in force when this regulation commences;

               (b)    any other matter ASIC considers relevant.

         (2)   ASIC may:

                (a)    vary or revoke a standard or requirement that it has made in relation to an internal dispute resolution procedure; and

               (b)    vary or revoke the operation of a standard or requirement that it has approved in its application to an internal dispute resolution procedure.

         (3)   For subparagraph 912A (2) (b) (i) of the Act, ASIC must take the following matters into account when considering whether to approve an external dispute resolution scheme:

                (a)    the accessibility of the dispute resolution scheme;

               (b)    the independence of the dispute resolution scheme;

                (c)    the fairness of the dispute resolution scheme;

               (d)    the accountability of the dispute resolution scheme;

                (e)    the efficiency of the dispute resolution scheme;

                (f)    the effectiveness of the dispute resolution scheme;

               (g)    any other matter ASIC considers relevant.

         (4)   ASIC may:

                (a)    specify a period for which an approval of an external dispute resolution scheme is in force; and

               (b)    make an approval of an external dispute resolution scheme subject to conditions specified in the approval, including conditions relating to the conduct of an independent review of the operation of the scheme; and

                (c)    vary or revoke:

                          (i)    an approval of an external dispute resolution scheme; or

                         (ii)    the specification of a period for which an approval is in force; or

                        (iii)    a condition to which an approval of an external dispute resolution scheme is subject.

7.6.03       Applying for Australian financial services licence

                For paragraph 913A (a) of the Act, the following information is required as part of an application by person for an Australian financial services licence:

                (a)    if the person is a body corporate:

                          (i)    the person’s name (including the person’s principal business name, if any); and

                         (ii)    the name and address of each director; and

                        (iii)    the name and address of each secretary;

               (b)    if the person is applying on behalf of a partnership — the partnership’s name and address, and the name of each partner;

                (c)    if paragraphs (a) and (b) do not apply — the person’s name (including the person’s principal business name, if any);

               (d)    the person’s principal business address;

                (e)    if the person has an ABN — the ABN;

                (f)    a description of the financial services that the person proposes to provide;

               (g)    the arrangements (including a description of systems) by which the person will comply with its general obligations set out in section 912A of the Act;

               (h)    any other information that ASIC requires for the purpose of considering the application.

7.6.04       Conditions on Australian financial services licence

                For subsection 914A (8) of the Act, an Australian financial services licence is subject to the following conditions:

                (a)    if the financial services licensee is not a body regulated by APRA — a condition that, if any event occurs that may make a material adverse change to the financial position of the financial services licensee by comparison with its financial position:

                          (i)    at the time of the application for the Australian financial services licence; or

                         (ii)    as described in documents lodged with ASIC after the application for the Australian financial services licence;

                        the financial services licensee must lodge with ASIC in the prescribed form a notice setting out particulars of the event not later than the end of the first business day after the day on which the financial services licensee becomes aware of the event;

               (b)    a condition that, if:

                          (i)    there is a change in a matter particulars of which are entered in a register of financial services licensees; and

                         (ii)    the change is not a direct consequence of an act by ASIC;

                        the financial services licensee must lodge with ASIC in the prescribed form particulars of the change within 10 business days after the change;

                (c)    a condition that, if:

                          (i)    there is a change in a matter particulars of which are entered in a register of authorised representatives of financial services licensees; and

                         (ii)    the change is not required to be reported in accordance with section 916F of the Act; and

                        (iii)    the change is not a direct consequence of an act by ASIC;

                        the financial services licensee must lodge with ASIC in the prescribed form particulars of the change within 10 business days after the change;

               (d)    a condition that the financial services licensee must maintain a record of the training (relevant to the provision of financial services) that each of its representatives has undertaken, including:

                          (i)    training undertaken after the representative became a representative of the licensee; and

                         (ii)    any training undertaken before the representative became a representative of the licensee to the extent that the financial services licensee is able to obtain the information by reasonable inquiry;

                (e)    a condition that, before the financial services licensee appoints an authorised representative, the financial services licensee must make reasonable inquiries so as to satisfy itself as to:

                          (i)    the representative’s identity; and

                         (ii)    whether the person has already been allocated a number by ASIC as an authorised representative;

                (f)    a condition that, if:

                          (i)    ASIC has allocated a number to an authorised representative; and

                         (ii)    the financial services licensee lodges a document with ASIC that refers to the authorised representative;

                        the financial services licensee must refer to the number in the document;

               (g)    a condition that the financial services licensees must provide a copy of an authorisation of any of its authorised representatives:

                          (i)    on request by any person; and

                         (ii)    free of charge; and

                        (iii)    as soon as practicable after receiving the request and, in any event, within 10 business days after the day on which it received the request;

               (h)    a condition that the financial services licensees must take reasonable steps to ensure that each of its authorised representatives supplies a copy of its authorisation by the financial services licensee:

                          (i)    on request by any person; and

                         (ii)    free of charge; and

                        (iii)    as soon as practicable after receiving the request and, in any event, within 10 business days after the day on which it received the request.

7.6.05       Register of financial services licensees and register of authorised representatives of financial services licensees

         (1)   For subsection 922A (2) of the Act, ASIC must include the following details for each financial services licensee in the register of financial service licensees:

                (a)    the financial services licensee’s name (including the financial services licensee’s principal business name, if any);

               (b)    the principal business address of the financial services licensee;

                (c)    the date on which the financial services licensee’s licence was granted;

               (d)    the number of the financial services licence of the financial services licensee;

                (e)    if the financial services licensee has an ABN — the ABN;

                (f)    details of any conditions on the financial services licensee’s licence, including details of the financial service, or class of financial services, that the financial services licensee is authorised to provide;

               (g)    any other information that ASIC believes should be included in the register.

         (2)   For subsection 922A (2) of the Act, ASIC must include the following details for each authorised representative of a financial services licensee in the register of authorised representatives of financial services licensees:

                (a)    the authorised representative’s name (including the authorised representative’s principal business name, if any);

               (b)    the authorised representative’s principal business address;

                (c)    if the authorised representative is a body corporate — the name of each director and secretary;

               (d)    the number allocated to the authorised representative by ASIC;

                (e)    the name of each financial services licensee for which the authorised representative is an authorised representative;

                (f)    the number of the financial services licence of each financial services licensee for which the authorised representative is an authorised representative;

               (g)    if the authorised representative has an ABN — the ABN;

               (h)    the date of the authorised person’s authorisation, and any other information about the authorisation that ASIC believes should be included in the register;

                (i)    any other information that ASIC believes should be included in the register.

7.6.06       ASIC register relating to persons against whom banning order or disqualification order is made

         (1)   For subsection 922A (2) of the Act, ASIC must include the following details for each person against whom a banning order is made in the register of persons against whom a banning order under Division 8 of Part 7.6 of the Act is made:

                (a)    the person’s name;

               (b)    the day on which the banning order took effect;

                (c)    whether the banning order is permanent or for a fixed period;

               (d)    if the banning order is for a fixed period — the period;

                (e)    the terms of the banning order;

                (f)    whether the banning order has been varied or cancelled;

               (g)    if the banning order has been varied:

                          (i)    the date of the variation; and

                         (ii)    the terms of the variation;

               (h)    if the banning order has been cancelled — the date of the cancellation;

                (i)    any other information that ASIC believes should be included in the register.

         (2)   For subsection 922A (2) of the Act, ASIC must include the following details for each person against whom a disqualification order is made in the register of persons against whom a disqualification order under Division 8 of Part 7.6 of the Act is made:

                (a)    the person’s name;

               (b)    the day on which the disqualification order took effect;

                (c)    whether the disqualification order is permanent or for a fixed period;

               (d)    if the disqualification order is for a fixed period — the period;

                (e)    the terms of the disqualification order;

                (f)    whether the disqualification order has been varied or revoked;

               (g)    if the disqualification order has been varied:

                          (i)    the date of the variation; and

                         (ii)    the terms of the variation;

               (h)    if the disqualification order has been revoked — the date of the revocation;

                (i)    any other information that ASIC believes should be included in the register.

7.6.07       Restriction on use of certain words or expressions

                For subparagraph 923A (2) (b) (iii) of the Act, any other person in respect of whom section 942B or 942C of the Act makes provision for information to be provided in a financial services guide in relation to the receipt of remuneration or other benefits is prescribed.

Part 7.7              Financial service disclosure

Division 1                        Preliminary

7.7.01       How documents, information and statements are to be given

         (1)   For subsection 940C (3) of the Act:

                (a)    if general financial advice is given orally in a public forum, information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given orally; and

               (b)    if general financial advice is given in electronic form in a public forum, information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given in electronic form; and

                (c)    if general financial advice is given in writing (otherwise than in electronic form) in a public forum, information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given in writing; and

               (d)    if general financial advice is given in any other manner in a public forum, information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given in the same manner.

         (2)   For subsection 940C (3) of the Act:

                (a)    if execution-related telephone advice is given orally, information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given orally; and

               (b)    if execution-related telephone advice is given in electronic form, information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given in electronic form; and

                (c)    if execution-related telephone advice is given in writing (otherwise than in electronic form), information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given in writing; and

               (d)    if execution-related telephone advice is given in any other manner, information that subsection 941C (5) or 946B (3) of the Act requires to be given must be given in the same manner.

Division 2                        Financial Services Guide

7.7.02       Situations in which Financial Services Guide is not required

                For paragraph 941C (6) (c) of the Act, travellers’ cheques are prescribed.

7.7.03       Financial Services Guide given by financial services licensee: description of documents

         (1)   For paragraph 942B (2) (k) of the Act, the Financial Services Guide given by a financial services licensee must include a statement that:

                (a)    describes the purpose and content of the Financial Services Guide; and

               (b)    if appropriate:

                          (i)    informs the client that the client may also receive either or both of a Statement of Advice and a Product Disclosure Statement; and

                         (ii)    describes the purpose and content of those documents.

         (2)   In describing the purpose and content of the Financial Services Guide as mentioned in subregulation (1), the client’s attention must be drawn to the following matters:

                (a)    the Guide is designed to assist the client in deciding whether to use any of the services offered in the Guide;

               (b)    the Guide contains information about remuneration that may be paid to the financial services licensee and other relevant persons in relation to the services offered;

                (c)    the Guide contains information on how complaints against the financial services licensee are dealt with.

         (3)   In describing the purpose and content of a Statement of Advice or Product Disclosure Statement, the client’s attention must be drawn to a description of the circumstances in which the Statement of Advice or Product Disclosure Statement will be given.

         (4)   Subregulations (2) and (3) do not prevent the statement required under subregulation (1) from drawing attention to other matters relating to the purpose and content of the Financial Services Guide, the Statement of Advice or the Product Disclosure Statement.

         (5)   The statement required under subregulation (1) must be:

                (a)    presented in a manner that is easy for the client to understand; and

               (b)    displayed prominently in the Financial Services Guide.

         (6)   A statement is displayed prominently if it:

                (a)    appears at, or close to, the front of the Financial Services Guide; and

               (b)    stands out from the other information contained in the Guide.

Note   Ideally, the statement should be placed:

(a)   on the inside cover or inside facing page of a paper-based Financial Services Guide form; or

(b)   in an equivalent position of a Financial Services Guide that is not provided in a paper-based form.

7.7.04       Financial Services Guide given by financial services licensee: remuneration, commission and benefits

         (1)   For paragraph 942B (2) (k) of the Act, the Financial Services Guide given by a financial services licensee must include information, to the extent that the information is able to be ascertained at the time the Financial Services Guide is given to the client, about all remuneration (including commission) and other benefits that a person (person 1) has received, or is to receive, for referring another person to the financial services licensee.

         (2)   For paragraph 942B (4) (c) of the Act, and without limiting the generality of subsection 942B (3) of the Act, the Financial Services Guide given by a financial services licensee must include the following more detailed statements in relation to the remuneration (including commission) and other benefits that person 1, or another person mentioned in paragraph 942B (2) (e) of the Act, has received, or is to receive:

                (a)    if the amount of remuneration, commission or other benefits is able to be ascertained at the time the Financial Services Guide is given to the client, the amount;

               (b)    if the amount of remuneration, commission or other benefits is not able to be ascertained at the time the Financial Services Guide is given to the client, a description of the means by which the remuneration, commission or other benefits are to be calculated or provided;

                (c)    if the person has received, or is to receive, commission, and personal advice is given, a statement that:

                          (i)    the quantum of commission the person receives on specific financial products will be disclosed in the record of the personal advice; or

                         (ii)    if the quantum is not calculable at the time the personal advice is given — the manner in which the commission is to be calculated will be disclosed in the record of the personal advice;

               (d)    written details of when and how the remuneration, commission or other benefits are payable.

         (3)   For paragraph (2) (b), a description of the means by which remuneration, commission or other benefits are to be provided must, to the extent relevant, include a statement of a range of amounts or rates of remuneration, commission or other benefits.

Examples

1   ‘Remuneration is paid within the range of $X to $Y’.

2   ‘Commission is paid at rates between X% and Y%’.

         (4)   The statements must be presented in a manner that is easy for the client to understand.

7.7.05       Record of advice given by financial services licensee

                For subparagraph 942B (2) (g) (iii) of the Act, the minimum period within which a client may request a record of the advice to which that subparagraph relates is:

                (a)    if the providing entity is required by regulation 7.8.09 or 7.8.10 to report to the client — 10 business days after the day on which the next report is provided to the client after the execution-related telephone advice is provided; or

               (b)    in any other case — 90 days after the day on which the execution-related telephone advice is provided.

7.7.06       Financial Services Guide given by authorised representative of financial services licensee: description of documents

         (1)   For paragraph 942C (2) (m) of the Act, the Financial Services Guide given by an authorised representative must include a statement that:

                (a)    describes the purpose and content of the Financial Services Guide; and

               (b)    if appropriate:

                          (i)    informs the client that the client may also receive either or both of a Statement of Advice and a Product Disclosure Statement; and

                         (ii)    describes the purpose and content of those documents.

         (2)   In describing the purpose and content of the Financial Services Guide as mentioned in subregulation (1), the client’s attention must be drawn to the following matters:

                (a)    the Guide is designed to assist the client in deciding whether to use any of the services offered in the Guide;

               (b)    the Guide contains information about remuneration that may be paid to the authorised representative and other relevant persons in relation to the services offered;

                (c)    the Guide contains information on how complaints against the authorised representative are dealt with.

         (3)   In describing the purpose and content of a Statement of Advice or Product Disclosure Statement, the client’s attention must be drawn to a description of the circumstances in which the Statement of Advice or Product Disclosure Statement will be given.

         (4)   Subregulations (2) and (3) do not prevent the statement required under subregulation (1) from drawing attention to other matters relating to the purpose and content of the Financial Services Guide, the Statement of Advice or the Product Disclosure Statement.

         (5)   The statement required under subregulation (1) must be:

                (a)    presented in a manner that is easy for the client to understand; and

               (b)    displayed prominently in the Financial Services Guide.

         (6)   A statement is displayed prominently if it:

                (a)    appears at, or close to, the front of the Financial Services Guide; and

               (b)    stands out from the other information contained in the Guide.

Note   Ideally, the statement should be placed:

(a)   on the inside cover or inside facing page of a paper-based Financial Services Guide form; or

(b)   in an equivalent position of a Financial Services Guide that is not provided in a paper-based form.

7.7.07       Financial Services Guide given by authorised representative of financial services licensee: remuneration, commission and benefits

         (1)   For paragraph 942C (2) (m) of the Act, the Financial Services Guide given by an authorised representative of a financial services licensee must include information, to the extent that the information is able to be ascertained at the time the Financial Services Guide is given to the client, about all remuneration (including commission) and other benefits that a person (person 1) has received, or is to receive, for referring another person to:

                (a)    the authorised representative; or

               (b)    the financial services licensee.

         (2)   For paragraph 942C (4) (d) of the Act, and without limiting the generality of subsection 942C (3) of the Act, the Financial Services Guide given by an authorised representative of a financial services licensee must include the following more detailed statements in relation to the remuneration (including commission) and other benefits that person 1, or another person mentioned in paragraph 942C (2) (f) of the Act, has received, or is to receive:

                (a)    if the amount of remuneration, commission or other benefits is able to be ascertained at the time the Financial Services Guide is given to the client, the amount;

               (b)    if the amount of remuneration, commission or other benefits is not able to be ascertained at the time the Financial Services Guide is given to the client, a description of the means by which the remuneration, commission or other benefits are to be calculated or provided;

                (c)    if the person has received, or is to receive, commission, and personal advice is given, a statement that:

                          (i)    the quantum of commission the person receives on specific financial products will be disclosed in the record of the personal advice; or

                         (ii)    if the quantum is not calculable at the time the personal advice is given — the manner in which the commission is to be calculated will be disclosed in the record of the personal advice;

               (d)    written details of when and how the remuneration, commission or other benefits are payable.

         (3)   For paragraph (2) (b), a description of the means by which remuneration, commission or other benefits are to be provided must, to the extent relevant, include a statement of a range of amounts or rates of remuneration, commission or other benefits.

Examples

1   ‘Remuneration is paid within the range of $X to $Y’.

2   ‘Commission is paid at rates between X% and Y%’.

        (4)   The statements must be presented in a manner that is easy for the client to understand.

7.7.08       Record of advice given by authorised representative of financial services licensee

                For subparagraph 942C (2) (h) (iii) of the Act, the minimum period within which a client may request a record of the advice to which that subparagraph relates is:

                (a)    if the providing entity is required by regulation 7.8.09 or 7.8.10 to report to the client — 10 business days after the day on which the next report is provided to the client after the execution-related telephone advice is provided; or

               (b)    in any other case — 90 days after the day on which the execution-related telephone advice is provided.

Division 3              Statement of Advice

7.7.09      Situations in which Statement of Advice is not required: record of execution-related telephone advice

         (1)   For subsection 946B (3A) of the Act, a record of execution-related telephone advice must set out:

                (a)    the advice given to the client by the providing entity; or

               (b)    brief particulars of the recommendations made to the client by the providing entity, including the basis on which the recommendations were made.

         (2)   The providing entity may keep the record in any form.

Example

A tape recording.

         (3)   The providing entity must keep the record:

                (a)    if the providing entity is required by regulation 7.8.09 or 7.8.10 to report to the client — for at least 10 business days after the day on which the next report is provided to the client after the execution-related telephone advice is provided; or

               (b)    in any other case — for at least 90 days after the day on which the execution-related telephone advice is provided.

7.7.10       Situations in which Statement of Advice is not required: travellers’ cheques

                For paragraph 946B (5) (c) of the Act, travellers’ cheques are prescribed.

7.7.11       Statement of Advice given by financial services licensee

         (1)   For paragraph 947B (2) (g) of the Act, a Statement of Advice given by a financial services licensee must include information about all remuneration (including commission) and other benefits that a person (person 1) has received, or is to receive, for referring another person to the financial services licensee.

         (2)   For paragraph 947B (4) (c) of the Act, and without limiting the generality of subsection 947B (3) of the Act, the Statement of Advice given by the financial services licensee must include the following more detailed statements in relation to the remuneration (including commission) and other benefits that person 1, or another person mentioned in paragraph 947B (2) (d) of the Act, has received, or is to receive:

                (a)    the total amount of remuneration, commission and benefits payable:

                          (i)    stated as an amount; or

                         (ii)    if the total amount cannot be identified when the Statement of Advice is provided — set out as a description of the method of calculating the remuneration, commission and benefits (including, if appropriate, percentages or worked dollar examples);

               (b)    written details of when and how the remuneration, commission and other benefits are payable.

        (3)   The statements must be presented in a manner that is easy for the client to understand.

7.7.12       Statement of Advice given by authorised representative of financial services licensee

         (1)   For paragraph 947C (2) (h) of the Act, a Statement of Advice given by an authorised representative of a financial services licensee must include information about all remuneration (including commission) and other benefits that a person (person 1) has received, or is to receive, for referring another person to the authorised representative or the financial services licensee.

         (2)   For paragraph 947C (4) (c) of the Act, and without limiting the generality of subsection 947C (3) of the Act, the Statement of Advice given by the authorised representative must include the following more detailed statements in relation to the remuneration (including commission) and other benefits that person 1, or another person mentioned in paragraph 947C (2) (e) of the Act, has received, or is to receive:

                (a)    the total amount of remuneration, commission and benefits payable:

                          (i)    stated as an amount; or

                         (ii)    if the total amount cannot be identified when the Statement of Advice is provided — set out as a description of the method of calculating the remuneration, commission and benefits (including, if appropriate, percentages or worked dollar examples);

               (b)    written details of when and how the remuneration, commission and other benefits are payable.

        (3)   The statements must be presented in a manner that is easy for the client to understand.

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

7.8.01       Obligation to pay money into an account

         (1)   For subparagraph 981B (1) (a) (i) of the Act, the reference in that subparagraph to an account with an Australian ADI does not require a financial services licensee that is an ADI to pay money into an account held by itself.

         (2)   For subparagraph 981B (1) (a) (ii) of the Act, the following accounts are prescribed:

                (a)    an account with an approved foreign bank;

               (b)    a cash management trust.

         (3)   For subparagraph 981B (1) (b) (iv) of the Act, if, in accordance with an agreement mentioned in paragraph 7.8.02 (3) (a), a financial services licensee is required to pay an amount mentioned in subparagraph 7.8.02 (3) (a) (iv), that amount is money which must be paid into an account to which that subparagraph applies.

         (4)   For subparagraph 981B (1) (b) (iv) of the Act:

                (a)    money paid to a financial services licensee:

                          (i)    from or on behalf or an insured or intending insured for or on account of an insurer; and

                         (ii)    in connection with a contract of insurance or proposed contract of insurance;

                        is money which may be paid into an account to which that subparagraph applies; and

               (b)    money paid to a financial services licensee from or on behalf of an insurer for or on account of an insured or intending insured is money which may be paid into an account to which that subparagraph applies.

         (5)   For paragraph 981B (1) (c) of the Act, a financial services licensee must:

                (a)    operate an account to which that paragraph applies as a trust account; and

               (b)    designate the account to be a trust account; and

                (c)    hold all moneys paid into the account on trust for the benefit of the person who is entitled to the moneys.

7.8.02       Accounts maintained for section 981B of the Act

Withdrawals from account

         (1)   For paragraph 981C (a) of the Act, payments may be made out of an account maintained for section 981B of the Act in any of the following circumstances:

                (a)    making a payment to, or in accordance with the written direction of, a person entitled to the money;

               (b)    defraying brokerage and other proper charges;

                (c)    paying to the financial services licensee money to which the financial services licensee is entitled;

               (d)    making a payment of moneys due to an insurer in connection with a contract of insurance;

                (e)    making a payment that is otherwise authorised by law.

Permissible investments

         (2)   For paragraph 981C (a) of the Act, and subject to subregulations (3), (4) and (5), the following kinds of investment may be made in relation to an account maintained for section 981B of the Act:

                (a)    investment in any manner in which trustees are for the time being authorised by law to invest trust funds;

               (b)    investment on deposit with an eligible money market dealer;

                (c)    investment on deposit at interest with an Australian ADI;

               (d)    the acquisition of cash management trust interests;

                (e)    investment in a security issued or guaranteed by the Commonwealth or a State or Territory;

                (f)    investment on deposit with a licensed CS facility.

         (3)   A financial services licensee must not invest an amount in a way permitted by subregulation (2) unless:

                (a)    the financial services licensee has obtained the client’s written agreement to the following matters:

                          (i)    the making of the investment;

                         (ii)    how earnings on the investment are to be dealt with (including whether or not the earnings are to be shared, and whether or not the earnings are to be paid into the account);

                        (iii)    how the realisation of the investment is to be dealt with (including whether or not the capital invested, and the proceeds of the investment, are to be deposited into the account);

                        (iv)    how any losses made on the investment are to be dealt with (including the circumstances in which the financial services licensee is required to pay an amount equal to the difference between the amount invested and the amount received, into the account or otherwise);

                         (v)    the fee (if any) that the financial services licensee proposes to charge for the investment; and

               (b)   the money is money to which the client is entitled.

Note   The investment arrangement may be a managed investment scheme.

         (4)   If:

                (a)    a financial services licensee invests an amount in a way permitted by subregulation (2); and

               (b)    the money invested relates to moneys deposited by a client for the purpose of dealing in a derivative or a financial product that is a derivative;

the investment must be realisable within 24 hours and must not exceed 50% of the client’s moneys deposited for that purpose.

         (5)   In subregulation (2):

investment does not include the making of an investment in accordance with the specific direction of a client.

Note   Paragraph (1) (a) deals with the withdrawal of money from an account in accordance with the written direction of a person entitled to the money.

Minimum balance requirements

         (6)   For paragraph 981C (b) of the Act, in relation to moneys received in relation to insurance products:

                (a)    the minimum balance to be maintained, on a day, in an account maintained for section 981B of the Act is the sum of any amounts that any other person is entitled to receive from the account on that day; and

               (b)    if, at a particular time, money received by a financial services licensee for or on account of any other person is paid into an account, the other person is taken to be entitled to receive payment of:

                          (i)    the amount; or

                         (ii)    if any deductions from the amount are authorised by a written agreement between the person and the financial services licensee — the amount less the deductions;

                        throughout the period beginning at that time and ending when the payment is made to the person.

Interest on accounts

         (7)   For paragraph 981C (c) of the Act, if money is held in an account maintained for section 981B of the Act:

                (a)    the client is entitled to an amount of interest on the account in proportion to the amount of the client’s funds in the account; and

               (b)    the interest on the account may be shared by the client and the financial services licensee in accordance with a written agreement between them (including by allowing the financial services licensee to retain all of the interest and any fee the financial services licensee may take from the interest); and

                (c)    the interest on the account is not required to be paid into an account.

Interest and other earnings on investments

         (8)   For paragraph 981C (d) of the Act, interest or other earnings on:

                (a)    an investment of money withdrawn from an account maintained for section 981B of the Act; or

               (b)    the proceeds of the realisation of such an investment;

must be dealt with in accordance with the written agreement between the financial services licensee and the client under subregulation (3).

7.8.03       How money to be dealt with if licensee ceases to be licensed etc

         (1)   For paragraph 981F (a) of the Act, this regulation applies if a financial services licensee ceases to be licensed (including a cessation because the financial services licensee’s licence has been suspended or cancelled).

         (2)   For paragraph 981F (b) of the Act, this regulation applies if a financial services licensee:

                (a)    becomes insolvent under an administration; or

               (b)    is the subject of any of the following arrangements:

                          (i)    the appointment of an administrator under section 436A, 436B or 436C of the Act;

                         (ii)    the commencement of winding up;

                        (iii)    the appointment of a receiver of property of the financial services licensee, whether by a court or otherwise;

                        (iv)    the appointment of a receiver and manager of property of the financial services licensee, whether by a court or otherwise;

                         (v)    entry into a compromise or arrangement with creditors of the financial services licensee, or a class of creditors;

                        (vi)    if the financial services licensee is deceased — administration of the estate of the financial services licensee under Part XI of the Bankruptcy Act 1966;

                       (vii)    if the financial services licensee is deceased — administration of the estate of the financial services licensee under the law of an external Territory that provides for the administration of the insolvent estate of a deceased person;

                      (viii)    an arrangement under the law of a foreign country that provides for a matter mentioned in subparagraphs (i) to (vii).

         (3)   For paragraph 981F (d) of the Act, this regulation applies if:

                (a)    a financial services licensee ceases to carry on a particular activity authorised by the financial services licence; and

               (b)    money is paid in connection with that activity.

         (4)   For each person who is entitled to be paid money from an account of the financial services licensee maintained for section 981B of the Act, the account is taken to be subject to a trust in favour of the person.

         (5)   If money in an account of the financial services licensee maintained for section 981B of the Act has been invested, for each person who is entitled to be paid money from the account, the investment is taken to be subject to a trust in favour of the person.

         (6)   Money in the account of the financial services licensee maintained for section 981B of the Act is to be paid as follows:

                (a)    the first payment is of money that has been paid into the account in error;

               (b)    if money has been received on behalf of insureds in accordance with a contract of insurance, the second payment is payment to each insured person who is entitled to be paid money from the account, in the following order:

                          (i)    the amounts that the insured persons are entitled to receive from the moneys in the account in respect of claims that have been made;

                         (ii)    the amounts that the insured persons are entitled to receive from the moneys in the account in respect of other matters;

                (c)    if:

                          (i)    paragraph (b) has been complied with; or

                         (ii)    paragraph (b) does not apply;

                        the next payment is payment to each person who is entitled to be paid money from the account;

               (d)    if the money in the account is not sufficient to be paid in accordance with paragraph (a), (b) or (c), the money in the account must be paid in proportion to the amount of each person’s entitlement;

                (e)    if there is money remaining in the account after payments made in accordance with paragraphs (a), (b) and (c), the remaining money is taken to be money payable to the financial services licensee.

         (7)   This regulation applies despite anything to the contrary in the Bankruptcy Act 1966 or a law relating to companies.

7.8.04       Money to which Subdivision A of Division 2 of Part 7.8 of the Act applies taken to be held in trust: breach of financial services law

                For paragraph 981H (3) (b) of the Act, if client money is held by an investment mentioned in subregulation 7.8.02 (5) following a breach of a financial services law:

                (a)    the money is subject to a trust in favour of the client to the extent that the client is entitled to the money; and

               (b)    any investment of the money is subject to a trust in favour of the client to the extent that the client is entitled to the investment; and

                (c)    the proceeds of a realisation of an investment of the money are subject to a trust in favour of the client to the extent that the client is entitled to the proceeds.

7.8.05       Money to which Subdivision A of Division 2 of Part 7.8 of the Act applies taken to be held in trust: risk accepted by insurer

         (1)   For paragraph 981H (3) (b) of the Act, this regulation applies if, in relation to an insurance product:

                (a)    a financial services licensee is holding money to which Subdivision A of Division 2 of Part 7.8 of the Act applies; and

               (b)    the risk in relation to the insurance product has been accepted by an insurer.

         (2)   The financial services licensee holds the money on trust for the insurer in accordance with Division 2 of Part 7.8 of the Act, subject to the agreement of the insurer.

         (3)   This regulation does not affect the operation of regulations 7.8.03 and 7.8.08.

7.8.06       Statement setting out terms of loan etc

                For subsection 982C (1) of the Act, the financial services licensee must give a client a disclosure document that contains, as far as practicable, the matters required for Division 2 of Part 7.9 of the Act.

7.8.07       How property to which Division 3 of Part 7.8 of the Act to be dealt with

         (1)   For paragraph 984B (1) (a) of the Act, this regulation sets out requirements in relation to property to which Division 3 of Part 7.8 of the Act applies.

         (2)   The financial services licensee must hold the property on trust for the benefit of the person who is entitled to it.

         (3)   If the client requests the financial services licensee, in writing, to deposit the property in safe custody with an ADI:

                (a)    the licensee must deposit the property; or

               (b)    if the licensee does not comply with the request for any reason, the licensee must notify the client, as soon as practicable, of the failure to comply with the request.

        (4)   If the client requests the financial services licensee, in writing, to deposit the property in safe custody with a financial services licensee that provides a custodial or depositary service for section 766E of the Act:

                (a)    the licensee must deposit the property; or

               (b)    if the licensee does not comply with the request for any reason, the licensee must notify the client, as soon as practicable, of the failure to comply with the request.

         (5)   If the client requests the financial services licensee, in writing, to deposit the property in safe custody in the place where the property was deposited with, or received by, the licensee:

                (a)    the licensee must deposit the property in accordance with the request; and

               (b)    if the licensee does not comply with the request for any reason, the licensee must notify the client, as soon as practicable, of the failure to comply with the request.

         (6)   If the client requests that the body corporate that issued or made available the securities or managed investment products underlying the property register the property in the name of a nominee controlled by the financial services licensee, the financial services licensee must arrange for the body corporate to register the securities or managed investment products in that way.

         (7)   If:

                (a)    none of subsections (3) to (6) applies; and

               (b)    the property is not registered in the client’s name by the body corporate that issued or made available the securities or managed investment products underlying the property;

the financial services licensee must arrange to have the property registered in the client’s name.

         (8)   A financial services licensee must not deposit property as security for a loan or advance to the financial services licensee unless:

                (a)    the client owes the financial services licensee an amount in connection with a transaction entered into by the financial services licensee on the client’s behalf; and

               (b)    the financial services licensee gives the client a written notice that identifies the property and states that the dealer proposes to deposit it as security for a loan or advance to the financial services licensee; and

                (c)    the amount, or total of the amounts, that the client owes on the day of the deposit is at least the amount of the loan or advance.

         (9)   If a financial services licensee deposits property as security for a loan or advance to the financial services licensee, in accordance with subregulation (8):

                (a)    the financial services licensee must, not later than 1 business day after the amount, or total of the amounts, that the client owes on the day of the deposit are repaid, withdraw the property from that deposit; and

               (b)    if, at the end of 3 months after the day of that deposit, or at the end of any subsequent interval of 3 months, the property has not been withdrawn from that deposit — the financial services licensee must give the client written notice of that fact.

       (10)   In this regulation:

property includes scrip, but does not include money.

7.8.08       Debts of financial services licensee in relation to premiums etc

         (1)   Subregulations (2) to (4) apply if:

                (a)    money is received by a financial services licensee:

                          (i)    from, or on behalf of, an insured or intending insured, or from another financial services licensee on behalf of an insured or intending insured; and

                         (ii)    as a premium or an instalment of a premium in connection with a contract of insurance or a proposed contract of insurance; and

               (b)    the risk, or a part of the risk, to which the contract or proposed contract relates is accepted by or on behalf of an insurer; and

                (c)    the financial services licensee who so received the money is informed of, or otherwise ascertains, the amount of the premium or instalment to be paid.

         (2)   The financial services licensee who received the money must pay to the insurer an amount equal to the amount of the premium or instalment to be paid:

                (a)    in the period of 90 days (the relevant period) after:

                          (i)    the day on which the cover provided by the insurer under the contract starts to have effect; or

                         (ii)    the first day of the period to which the instalment relates; or

               (b)    if it is not practicable for the financial services licensee to pay the amount in the relevant period — as soon as practicable after the end of that period.

         (3)   If the financial services licensee has not received the amount of the premium, or of an instalment of the premium, payable in respect of a contract of insurance at the end of the relevant period, the financial services licensee must notify the insurer in writing, not later than 7 days after the end of the relevant period, that the financial services licensee has not received the amount.

         (4)   Subregulation (3) does not apply if the financial services licensee receives the amount:

                (a)    in the period of 7 days mentioned in subregulation (3); and

               (b)    before notifying the insurer in accordance with subregulation (3).

         (5)   Subregulations (6) and (7) apply if:

                (a)    a financial services licensee receives money from, or on behalf of:

                          (i)    an insured or intending insured; or

                         (ii)    another financial services licensee on behalf of an insured or intending insured;

                        as a premium or an instalment of a premium in connection with a contract of insurance or a proposed contract of insurance; and

               (b)    the risk, or a part of the risk, to which the contract or proposed contract relates is accepted by or on behalf of an insurer; and

                (c)    the financial services licensee who received the money has not been informed of, and has not otherwise ascertained, the amount of the premium or instalment to be paid.

         (6)   The financial services licensee who received the money must pay the amount mentioned in subregulation (7) to the insurer:

                (a)    in the period of 90 days (the relevant period) after:

                          (i)    the day on which the cover provided by the insurer under the contract starts to have effect; or

                         (ii)    the first day of the period to which the instalment relates; or

               (b)    if it is not practicable for the financial services licensee to pay the amount in the relevant period — as soon as practicable after the end of that period.

         (7)   For subregulation (6), the amount is:

                (a)    for a new contract of insurance, an amount not less than the lesser of:

                          (i)    the amount of the money received; or

                         (ii)    75% of the amount fairly estimated by the financial services licensee to be the premium or instalment that is to be paid; and

               (b)    for a renewal of a contract of insurance, an amount not less than the lesser of:

                          (i)    the amount of the money so received; or

                         (ii)    75% of the previous year’s premium for the risk, or of the last instalment of that years premium.

         (8)   Subregulation (9) applies if:

                (a)    the risk, or a part of the risk, to which a contract of insurance or a proposed contract of insurance relates is accepted by or on behalf of an insurer; and

               (b)    the contract of insurance or proposed contract of insurance has been, or is being, arranged or effected by a financial services licensee (licensee 1), either directly or through another financial services licensee; and

                (c)    licensee 1 has not been informed of, and has not otherwise ascertained, the amount of a premium or of an instalment of a premium to be paid in connection with the contract or proposed contract.

         (9)   Licensee 1 must, notify the insurer in writing, within 10 days after the day on which the risk, or that part of the risk, was accepted, that:

                (a)    the risk, or that part of the risk, has been accepted; and

               (b)    licensee 1 does not know the amount of the premium or instalment to be paid;

unless licensee 1 is informed of, or otherwise ascertains, the amount of the premium or instalment to be paid before notifying the insurer.

       (10)   Nothing in this regulation prevents:

                (a)    an insurer from making a contract or arrangement with a financial services licensee providing for the financial services licensee to pay an amount to the insurer before the time by which the financial services licensee is required by the provision concerned to pay that amount to the insurer; or

               (b)    an insurer from authorising a financial services licensee in writing to pay on behalf of the insurer, out of the money received by the financial services licensee as a premium or instalment of a premium in respect of a contract of insurance arranged with the insurer, any charges required by law to be paid by the insurer in respect of the contract; or

                (c)    a financial services licensee from exercising any legal right available to the financial services licensee to deduct from any moneys payable by the financial services licensee to the insurer any remuneration payable by the insurer to the financial services licensee in relation to a contract of insurance.

       (11)   For subregulation (1) or (5), if the risk, or a part of the risk, to which a contract or proposed contract mentioned in that subregulation is accepted on behalf of an insurer by an insurance intermediary other than the insurance financial services licensee who received the moneys from or on behalf of the insured or intending insured, the payment of the premium, or part of the premium, by the financial services licensee to the intermediary is taken to be a payment of the premium or part of the premium by the financial services licensee to the insurer.

       (12)   For subregulation (3) or (8), if:

                (a)    a financial services licensee is required to notify an insurer in accordance with that subregulation; and

               (b)    an insurance intermediary other than the financial services licensee has accepted the risk, or a part of the risk, to which the contract or proposed contract relates on behalf of the insurer;

a notification by the financial services licensee to the intermediary is taken to be a notification by the financial services licensee to the insurer.

       (13)   Subregulations (14) and (15) apply if:

                (a)    a financial services licensee receives money from, or on behalf of, an insured or intending insured in connection with a contract of insurance or proposed contract of insurance; and

               (b)    at the end of 30 days after the day on which the money was received, the risk, or a part of the risk, to which the contract or proposed contract relates has not been accepted.

       (14)   If the risk has not been accepted, the financial services licensee must, within 7 days after the end of the 30 day period:

                (a)    give ASIC notice in the prescribed form to the insured or intending insured that the risk has not been accepted; and

               (b)    return the money to the insured or intending insured.

       (15)   If a part of the risk to which the contract or proposed contract relates has not been accepted, the financial services licensee must, within 7 days after the end of the 30 day period:

                (a)    give notice in the approved form (if any) to the insured or intending insured of the extent to which the risk has not been accepted; and

               (b)    return that part of the money that relates to the part of the risk that has not been accepted to the insured or intending insured.

       (16)   If a financial services licensee receives money from, or on behalf of, an insurer for payment to, or on behalf of, an insured, the financial services licensee must pay an amount equal to the money to, or on behalf of, the insured:

                (a)    within 7 days after the day on which the financial services licensee received the money; or

               (b)    if it is not practicable for the financial services licensee to pay the amount in that period — as soon as practicable after the end of the period.

       (17)   Nothing in subregulation (16) prevents:

                (a)    an insured from making a contract or arrangement with a insurance financial services licensee providing for the financial services licensee to pay an amount mentioned in that subregulation to or on behalf of the insured before the time by which the financial services licensee is required by that subregulation to pay that amount to or on behalf of the insured; or

               (b)    a financial services licensee from exercising any legal right available to the financial services licensee to deduct from an amount payable by the financial services licensee to the insured any money payable by the insured to the financial services licensee in connection with a contract of insurance.

       (18)   A person is guilty of an offence if the person contravenes subregulation (2), (3), (6), (9), (14) or (16), whether or not it was done with the consent of the insurer or of the insured or intending insured.

Penalty:   Imprisonment for 2 years.

       (19)   Subregulation (18) does not apply if the person has a reasonable excuse.

Note   A defendant bears an evidential burden in relation to the matter in subregulation (18) (see subsection 13.3 (3) of the Criminal Code).

       (20)   Strict liability applies to subregulation (18).

Note   For strict liability, see section 6.1 of the Criminal Code.

       (21)   If:

                (a)    under subregulation (2), (3), (6) or (9), a financial services licensee is required to pay an amount to, or to notify, an insurer; and

               (b)    under the contract or proposed contract of insurance concerned the insurer is an underwriting member of Lloyd’s;

it is sufficient compliance with the subregulation if the financial services licensee pays the amount to, or notifies, as the case may be, the Lloyd’s broker concerned.

7.8.09       Reporting in relation to money to which Subdivision A or B of Division 2 of Part 7.8 of the Act applies or property to which Division 3 of Part 7.8 of the Act applies

         (1)   For section 986A of the Act, this regulation applies if a financial services licensee has, at any time during a particular quarter, held:

                (a)    money to which Subdivision A or B of Division 2 of Part 7.8 of the Act applies on account of a client; or

               (b)    property to which Division 3 of Part 7.8 of the Act applies on account of a client.

         (2)   If the financial services licensee has held money on account of a client, the financial services licensee must, within 7 days after the end of the relevant quarter day, give the client a written statement setting out the following information:

                (a)    the name of the financial services licensee;

               (b)    the licence number in relation to the financial services licensee;

                (c)    the address of the principal place at which the financial services licensee carries on business;

               (d)    the opening cash balance for the quarter in the client’s account;

                (e)    details of transactions affecting the account during the quarter and relating to the client (including deposits, credits, withdrawals, debits and the imposition or payment of fees and charges);

                (f)    particulars of any investments held on behalf of the client at the end of the quarter;

               (g)    the cash balance in the account at the end of the quarter;

               (h)    particulars of any loans made, repaid or outstanding from the client to the financial services licensee.

         (3)   If the financial services licensee has held property on account of the client, the financial services licensee must, within 7 days after the end of the quarter day in relation to the quarter during which the transitional period in relation to the financial services licensee ended, give the client a written statement setting out the following information:

                (a)    the name of the financial services licensee;

               (b)    the licence number in relation to the financial services licensee;

                (c)    the address of the principal place at which the financial services licensee carries on business;

               (d)    details of the property held;

                (e)    whether the property was held in safe custody;

                (f)    details of any changes in the holdings of property during the quarter (including a change to or from holding in safe custody).

         (4)   The financial services licensee may give a statement in the form of an electronic communication only with the client’s agreement.

7.8.10       Reporting in relation to dealings in derivatives

         (1)   For section 986B of the Act:

                (a)    this regulation sets out reporting requirements that apply if a financial services licensee receives money from or on behalf of a retail client; and

               (b)    a wholesale client may request a financial services licensee in writing to apply the reporting requirements to money received by the financial services licensee from the wholesale client.

         (2)   A financial services licensee is not required to make a report of the acquisition of a financial product before or during a particular month, being a transaction entered into by the financial services licensee on behalf of a participant in a licensed market, if:

                (a)    the financial product has not been disposed of at the end of that month; and

               (b)    after the end of that month, the financial services licensee gives to the participant the information that the financial services licensee is required, under the operating rules of the licensed market, to give to the participant about the transaction.

         (3)   If:

                (a)    a financial services licensee has, before or during a particular month, acquired a financial product on behalf of a client; and

               (b)    the client instructed the financial services licensee to allocate a dealing in the transaction to another financial services licensee; and

                (c)    as at the end of that month, the financial product has not been disposed of; and

               (d)    more than one financial services licensee entered into the transaction on behalf of the client who acquired the financial product;

the financial services licensee who last deals in the transaction is the only financial services licensee required to make a report of the acquisition.

         (4)   If:

                (a)    a financial services licensee has, before or during a particular month, acquired a financial product on behalf of a client; and

               (b)    the client did not instruct the financial services licensee to allocate a dealing in the transaction to another financial services licensee; and

                (c)    as at the end of that month, the financial product has not been disposed of; and

               (d)    more than one financial services licensee entered into the transaction on behalf of the client who acquired the financial product;

the financial services licensee whom the client instructed to enter the transaction is the only financial services licensee required to make a report of the acquisition.

         (5)   A financial services licensee is not required to make a report of the acquisition or disposal of a financial product if:

                (a)    the transaction is entered into by the financial services licensee on behalf of a participant in a licensed market; and

               (b)    the financial services licensee has held money or property on account of the participant; and

                (c)    the financial services licensee gives to the participant the information that the financial services licensee is required, under the operating rules of the licensed market, to give to the participant about the transaction.

         (6)   If a financial services licensee is required to give a report to a client under the operating rules of a licensed market, relating to the matters set out in the report under this regulation, compliance by the financial services licensee with the operating rules is taken to be sufficient compliance with this regulation.

         (7)   Subregulation (8) applies:

                (a)    if a financial services licensee has, at any time during a particular month, held money or property on account of a client; or

               (b)    if:

                          (i)    a financial services licensee has, before or during a particular month, acquired a derivative on behalf of a client; and

                         (ii)    as at the end of that month, the derivative has not been disposed of.

         (8)   The financial services licensee must, within 7 days after the end of that month, send to the client a written statement setting out:

                (a)    the name of the financial services licensee; and

               (b)    the licence number in relation to the financial services licensee; and

                (c)    the address of the principal place at which the financial services licensee carries on business; and

               (d)    the opening cash balance for the month in the account relating to the client; and

                (e)    all deposits, credits, withdrawals and debits affecting the account relating to the client during the month; and

                (f)    the cash balance in the account relating to the client at the end of the month; and

               (g)    in relation to each derivative that:

                          (i)    the financial services licensee has, before or during that month, acquired on behalf of the client; and

                         (ii)    as at the end of that month, has not been disposed of;

                        particulars of the derivative; and

               (h)    details of each outstanding call for a deposit or margin in respect of a derivative that the financial services licensee has acquired on behalf of the client.

         (9)   If a financial services licensee has, during a particular month, authority to operate on a discretionary account, the financial services licensee must, within 7 days after the end of that month, send to the person, or to each person, who gave instructions to the financial services licensee authorising the financial services licensee to operate on the discretionary account a written statement setting out:

                (a)    the name of the financial services licensee; and

               (b)    the licence number in relation to the financial services licensee; and

                (c)    the address of the principal place at which the financial services licensee carries on business; and

               (d)    the opening cash balance for that month in the account (the account) maintained by the financial services licensee in respect of the discretionary account; and

                (e)    all deposits, credits, withdrawals and debits affecting the account during that month; and

                (f)    the cash balance in the account at the end of that month; and

               (g)    in relation to each derivative:

                          (i)    that the financial services licensee has acquired before or during that month; and

                         (ii)    the acquisition of which was an operation by the financial services licensee on the discretionary account; and

                        (iii)    that, as at the end of that month, has not been disposed of;

                        particulars of the derivative; and

               (h)    details of each outstanding call for a deposit or margin in respect of a derivative:

                          (i)    that the financial services licensee has acquired on behalf of the client; and

                         (ii)    the acquisition of which was an operation by the financial services licensee on the discretionary account.

       (10)   A reference in this regulation to operation by a financial services licensee on a discretionary account is a reference to dealings by the financial services licensee in derivatives on instructions of another person that authorise the financial services licensee to deal in derivatives without the prior approval of that other person, whether:

                (a)    the instructions are given by, and the money used for operating on the account is provided by, one person only; or

               (b)    the instructions are given by, and the money used for operating on the account is contributed as a common fund by, each of a number of persons;

not being dealings on instructions that authorise dealings in derivatives without the prior approval of that other person only as to the time when or the price at which the dealings are to be effected, or both.

7.8.11       Particular categories of information to be shown in records

                For paragraph 988E (g) of the Act, the following matters are specified:

                (a)    all underwriting transactions entered into by the financial services licensee;

               (b)    all financial products dealt with by the licensee under instructions from another person;

                (c)    each person who gave instructions to deal with financial products;

               (d)    all property:

                          (i)    that is not the property of the financial services licensee; and

                         (ii)    for which the financial services licensee, or a nominee controlled by the financial services licensee, is accountable;

                (e)    each person by whom, or for whom, property mentioned in paragraph (d) is held;

                (f)    the extent to which property mentioned in paragraph (d) is:

                          (i)    held in safe custody; or

                         (ii)    deposited with a third party as security for a loan or advance made to the financial services licensee;

               (g)    all transactions in relation to insurance products entered into with, or on behalf of, foreign insurers.

7.8.12       Requirements in relation to financial records of financial services licensees

         (1)   For section 988F of the Act, the financial records of a financial services licensee must be kept in sufficient detail as to show or include, for basic deposit products:

                (a)    separate particulars of every transaction by the financial services licensee; and

               (b)    the day on which, or the period during which, each transaction by the financial services licensee took place.

         (2)   For section 988F of the Act, the financial records of a financial services licensee must be kept in sufficient detail as to show or include, for all financial products other than basic deposit products:

                (a)    the information mentioned in subregulation (1); and

               (b)    if the financial services licensee is not a partner in a firm — separate particulars of each transaction by the financial services licensee with, or for the account of:

                          (i)    clients of the financial services licensee; or

                         (ii)    the financial services licensee’s own account; or

                        (iii)    other financial services licensees; or

                        (iv)    representatives of the financial services licensee; or

                         (v)    employees of the financial services licensee; and

                (c)    if the financial services licensee is a partner in a firm — separate particulars of each transaction by the financial services licensee with, or for the account of:

                          (i)    clients of the financial services licensee other than the partners in the firm; or

                         (ii)    the partners in the firm; and

               (d)    copies of acknowledgments of the receipt of financial products or documents of title to financial products.

7.8.13       Auditor’s report with annual profit and loss statement and balance sheet

         (1)   For subsection 989B (3) of the Act, an auditor’s report lodged with a true and fair profit and loss statement and balance sheet in respect of a financial year must be lodged with ASIC in the prescribed form.

         (2)   For subsection 989B (3) of the Act, an auditor’s report lodged with a true and fair profit and loss statement and balance sheet in respect of a financial year must contain a statement that the auditor has checked or examined each of the following matters:

                (a)    the internal procedures used by a financial services licensee to comply with Part 7.8 of the Act;

               (b)    the way in which each account maintained for section 981B or 982B of the Act has been operated and controlled;

                (c)    each ledger or record that the auditor considers necessary for the purposes of the audit.

7.8.14       Contents of annual profit and loss statement and balance sheet and applicable accounting procedures

                For paragraph 989C (a) of the Act, a true and fair profit and loss statement and balance sheet in respect of a financial year must contain a declaration by the financial services licensee that:

                (a)    the profit and loss statement and balance sheet give a true and fair view of the matters stated in it; and

               (b)    the auditor’s report lodged with the profit and loss statement and balance sheet is a true copy of the report on the profit and loss statement and balance sheet of the financial services licensee.

7.8.15       Appointment of auditor by financial services licensee

         (1)   For subsections 990B (7) and (8) of the Act, this regulation:

                (a)    sets out matters related to the appointment of a firm as auditor of the financial statements of a financial service licensee; and

               (b)    modifies the effect of section 990E of the Act.

         (2)   The appointment is taken to be an appointment of each person who is:

                (a)    a member of the firm; and

               (b)    a registered company auditor;

whether the person is resident in Australia or not at the date of the appointment.

         (3)   Unless subregulation (4) applies, the appointment of the members of a firm as auditors that is taken by subregulation (2) to have been made because of the appointment of the firm as auditor of the holder is not affected by the dissolution of the firm.

         (4)   If a firm that has been appointed as auditor is reconstituted because of the death, retirement or withdrawal of a member or members, or because of the admission of a new member or new members, or both:

                (a)    a person who:

                          (i)    was taken under subregulation (2) to be an auditor of the financial services licensee; and

                         (ii)    has retired or withdrawn from the firm as previously constituted;

                        is taken to have resigned as auditor as from the day of the retirement or withdrawal; and

               (b)    a person who:

                          (i)    is a registered company auditor; and

                         (ii)    is admitted to the firm;

                        is taken to have been appointed as an auditor of the holder as from the date of the admission; and

                (c)    the reconstitution of the firm does not affect the appointment of the continuing members of the firm who are registered company auditors as auditors; and

               (d)    nothing in paragraphs (a) to (c) affects the operation of section 990C of the Act.

         (5)   Sections 990F to 990H of the Act do not apply to a resignation mentioned in paragraph (4) (a) unless:

                (a)    the person who is taken to have resigned was the only member of the firm who was a registered company auditor; and

               (b)    there is no member of the firm who is a registered company auditor after the retirement or withdrawal of that person.

         (6)   A report or notice that purports to be made or given by a firm appointed as auditor is taken not to have been duly made or given unless it is signed by a member of the firm who is a registered company auditor:

                (a)    in the firm’s name; and

               (b)    in his or her own name.

         (7)   If a vacancy in the office of an auditor continues, the surviving or continuing auditor or auditors (if any) may act as auditor while the vacancy continues.

         (8)   If a vacancy occurs in the office of an auditor, and there is no surviving or continuing auditor of the financial services licensee, the financial services licensee must, within 14 days after the vacancy occurs appoint as auditor:

                (a)    a person who is eligible to act as auditor; or

               (b)    2 or more persons each of whom is eligible to act as auditor; or

                (c)    a firm that is eligible to act as auditor; or

               (d)    2 or more firms each of which is eligible to act as auditor; or

                (e)    a combination of persons and firms each of which is eligible to act as auditor.

         (9)   If an auditor ceases to hold office in accordance with paragraph 990E (a) or (d) of the Act, the financial services licensee for which the auditor acted must lodge with ASIC a notice in the prescribed form stating that the auditor has ceased to hold the office.

7.8.16       When person is ineligible to act as auditor of financial services licensee

         (1)   For section 990C of the Act, a person is ineligible to act as auditor of a financial services licensee in any of the following circumstances:

                (a)    the person is not a registered company auditor;

               (b)    the person is indebted in an amount exceeding $5 000 to:

                          (i)    the financial services licensee; or

                         (ii)    if the financial services licensee is a body corporate — to a body corporate related to the financial services licensee;

                (c)    a body corporate in which the person has a substantial holding is indebted in an amount exceeding $5 000 to:

                          (i)    the financial services licensee; or

                         (ii)    if the financial services licensee is a body corporate — to a body corporate related to the financial services licensee;

               (d)    the person is a partner or employee of the financial services licensee;

                (e)    if the financial services licensee is a body corporate — the person is:

                          (i)    an officer of the body; or

                         (ii)    a partner, employer or employee of an officer of the body; or

                        (iii)    a partner or employee of an employee of an officer of the body.

         (2)   For section 990C of the Act, a firm is ineligible to act as auditor of a financial services licensee at a particular time unless:

                (a)    at least 1 member of the firm is a registered company auditor who is ordinarily resident in Australia; and

               (b)    if the business name under which the firm is carrying on business is not registered under a law of a State or Territory — a return has been lodged in the prescribed form showing, in relation to each member of the firm:

                          (i)    the member’s full name; and

                         (ii)    the member’s address at that time; and

                (c)    no member of the firm is indebted in an amount exceeding $5 000 to:

                          (i)    the financial services licensee; or

                         (ii)    if the financial services licensee is a body corporate — to a body corporate related to the financial services licensee; and

               (d)    no body corporate in which any member of the firm has a substantial holding is indebted in an amount exceeding $5 000 to:

                          (i)    the financial services licensee; or

                         (ii)    if the financial services licensee is a body corporate — to a body corporate related to the financial services licensee; and

                (e)    no member of the firm is a partner or employee of the financial services licensee; and

                (f)    if the financial services licensee is a body corporate — no member of the firm is:

                          (i)    an officer of the body; or

                         (ii)    a partner, employer or employee of an officer of the body; or

                        (iii)    a partner or employee of an employee of an officer of the body; and

               (g)    if the financial services licensee is a body corporate — no officer of the financial services licensee receives any remuneration from the firm for acting as a consultant to it on accounting or auditing matters.

         (3)   For paragraphs (1) (b), (1) (c), (2) (c) and (2) (d), a debt owed by a natural person to a body corporate is to be disregarded if:

                (a)    the body corporate is:

                          (i)    an Australian ADI; or

                         (ii)    a body corporate registered under the Life Insurance Act 1995; and

               (b)    the debt arose because of a loan that the body corporate or entity made to the person in the ordinary course of its ordinary business; and

                (c)    the person used the amount of the loan to pay the whole or part of the purchase price of premises that the person uses as their principal place of residence.

         (4)   For subregulations (1) and (2), a person is taken to be an officer of a body corporate if:

                (a)    the person is an officer of a related body corporate; or

               (b)    unless ASIC directs that this paragraph not apply in relation to the person — the person has, at any time within the immediately preceding period of 12 months, been an officer or promoter of the body corporate or of a related body corporate.

         (5)   For this regulation, a person is not taken to be an officer of a body corporate by reason only of being or having been the liquidator of the body corporate or of a related body corporate.

         (6)   For this regulation, a person is not taken to be an officer of a body corporate:

                (a)    by reason only of having been appointed as an auditor of that body corporate or of a related body corporate; or

               (b)    for any purpose relating to taxation, a public officer of a body corporate; or

                (c)    by reason only of being or having been authorised to accept on behalf of the body corporate or a related body corporate:

                          (i)    service of process; or

                         (ii)    any notices required to be served on the body corporate or related body corporate.

7.8.17       Priority to clients’ orders

                For paragraph 991B (3) (b) of the Act, subsection 991B (2) of the Act does not apply in relation to transactions entered into by a participant in a licensed market in accordance with the operating rules of that licensed market.

7.8.18       Instructions to deal through licensed markets

         (1)   For section 991C of the Act, this regulation applies in relation to all instructions received by a financial services licensee to deal in financial products through licensed markets, except to the extent that the operating rules of a licensed market of which the financial services licensee is a participant otherwise provide.

         (2)   Subject to subregulation (3), the financial services licensee must transmit, in the sequence in which they are received, all instructions to deal in a class of financial products at or near the market price for financial products of that class prevailing immediately before execution of the instructions.

         (3)   If:

                (a)    a financial services licensee proposes to deal in a class of financial products on the financial services licensee’s own account; and

               (b)    the person by whom or on whose instructions the instructions for the dealing are to be transmitted is aware of instructions of a client of the financial services licensee to deal in that class of financial products at or near the market price for a financial product of that class prevailing at that time (being instructions that have not been transmitted);

that person must not transmit, and must not give instructions to any other person to transmit, the instructions to give effect to the proposal of the financial services licensee to deal in that class of financial products before the instructions of the client are transmitted.

         (4)   If:

                (a)    during a particular period, a financial services licensee transmits instructions (whether or not those instructions consist of, or include, instructions giving effect to a proposal of the financial services licensee to deal in the class of financial products concerned on the financial services licensee’s own account) to deal in a class of financial products at or near the market price for a financial product of that class prevailing immediately before execution of the instructions; and

               (b)    dealings in that class of financial products are effected pursuant to those instructions;

the financial services licensee must allocate the dealings to those instructions:

                (c)    in the sequence in which the dealings were effected; and

               (d)   in the sequence in which the financial services licensee transmitted the instructions.

         (5)   A financial services licensee (licensee 1), or a director, partner, officer or employee of a financial services licensee, must not disclose to any other financial services licensee, or to a person engaged or employed in the business of licensee 1 or any other financial services licensee, instructions of a client to deal in a class of financial products, except:

                (a)    to the extent necessary to execute the instructions; or

               (b)    as required by this Act or any other law.

         (6)   In this regulation, a reference to the transmission by a financial services licensee of instructions to deal in a class of financial products is a reference:

                (a)    if the financial services licensee has direct access to the licensed market on which the instructions are to be executed — to the transmission of the instructions to that licensed market; or

               (b)    if the financial services licensee has access to the licensed market on which the instructions are to be executed only through another financial services licensee — to the transmission of the instructions to that other financial services licensee.

7.8.19       Records of instructions to deal on licensed markets and foreign markets

         (1)   For section 991D of the Act, this regulation applies in relation to:

                (a)    instructions received by a financial services licensee to deal in financial products, on behalf of a client, through licensed markets or through other financial markets (whether inside or outside Australia); and

               (b)    instructions received by a financial services licensee to deal in financial products, on the financial service licensee’s own account, through licensed markets or through other financial markets (whether inside or outside Australia).

         (2)   The financial services licensee must keep records setting out brief particulars of the following matters:

                (a)    the instructions;

               (b)    if the instructions were received on behalf of a client — the client;

                (c)    the person who gave the instructions to the financial services licensee;

               (d)    the date and time of receipt of the instructions, and the person who received the instructions;

                (e)    the date and time of transmission of the instructions, and the person who transmitted the instructions;

                (f)    the date and time of execution of the instructions.

         (3)   For subregulation (2), if:

                (a)    a financial services licensee transmits for execution on a financial market outside Australia and the external Territories instructions to deal in financial products; and

               (b)    it is not reasonably practicable for the financial services licensee to set out the date and time of execution of those instructions in its records;

the financial services licensee must set out the date and time as precisely as is reasonably practicable.

         (4)   The financial services licensee must keep records relating to instructions given by a client to deal in financial products in a manner that makes the records identifiable separately from records relating to instructions to deal in financial products on the financial services licensee’s own account.

         (5)   The financial services licensee must keep the records mentioned in subregulation (2) for at least 5 years after the particulars are created.

7.8.20       Dealings with non-licensees

         (1)   For subsection 991E (1) of the Act:

                (a)    section 991E does not apply in relation to the sale or purchase of financial products mentioned in paragraph 764A (1) (a) of the Act by the body corporate by which the financial products were made available if the financial products are made available in accordance with Chapters 5C and 6D of the Act; and

               (b)    section 991E does not apply to the sale or purchase of financial products mentioned in paragraph 764A (1) (b) of the Act by the body corporate by which the financial products were made available if the financial products are made available in accordance with Chapters 5C and 7 of the Act.

         (2)   For subsection 991E (2) of the Act:

                (a)    a disclosure referred to in paragraph 991E (1) (c) of the Act must be given by the financial services licensee to the non-licensee:

                          (i)    in writing; and

                         (ii)    if the transaction is an on-market transaction — in relation to the particular transaction, a class of on-market transactions which includes the transaction, or all on-market transactions; and

               (b)    a consent referred to in paragraph 991E (1) (d) of the Act:

                          (i)    may be given orally, or in writing, by the non-licensee; and

                         (ii)    is effective until it is revoked, either orally or in writing, by the non-licensee; and

                (c)    if the non-licensee gives an oral consent to the financial services licensee, or revokes a consent orally, the financial services licensee must:

                          (i)    make a written record of the consent or revocation; and

                         (ii)    provide a copy of the written record to the non-licensee within 10 business days after the day on which the consent is given or revoked.

         (3)   For subsection 991E (3) of the Act, a brokerage, commission or other fee is permitted in respect of a transaction between a financial services licensee and a non-licensee only if:

                (a)    the financial services licensee is a participant in a licensed market; and

               (b)    the transaction is effected in accordance with the operating rules of the relevant licensed market; and

                (c)    the operating rules permit a brokerage, commission or fee to be charged to non-licensees of the same kind as the non-licensee; and

               (d)    the non-licensee has authorised the financial services licensee to charge the non-licensee in respect of the transaction; and

                (e)    the financial services licensee discloses to the non-licensee the amount of the brokerage, commission or fee, or the basis on which it will be calculated, before the non-licensee gives the authorisation mentioned in paragraph (d); and

                (f)    the amount of the brokerage, commission or fee is reasonable having regard to the amount that would have been charged by the financial services licensee to the non-licensee if the financial services licensee had entered the transaction with the non-licensee as agent and not on its own behalf.

         (4)   For subregulation (3):

                (a)    an authorisation given to the financial services licensee by the non-licensee:

                          (i)    may be given orally, or in writing, by the non-licensee; and

                         (ii)    is effective until it is revoked, either orally or in writing, by the non-licensee; and

               (b)    if the non-licensee gives an oral authorisation to the financial services licensee, or revokes an authorisation orally, the financial services licensee must:

                          (i)    make a written record of the authorisation or revocation; and

                         (ii)    provide a copy of the written record to the non-licensee within 10 business days after the day on which the authorisation is given or revoked; and

                (c)    a disclosure of the amount of the brokerage, commission or fee, or the basis on which it will be calculated must be given by the financial services licensee to the non-licensee:

                          (i)    in writing: and

                         (ii)    if the transaction is an on-market transaction — in relation to the particular transaction, a class of on-market transactions that includes the transaction, or all on-market transactions.

        (5)   For subsection 991E (7) of the Act, a financial services licensee must:

                (a)    keep records of the following matters relating to each financial products transaction entered into by the financial services licensee on the financial service licensee’s own behalf:

                          (i)    a description of the financial products transaction;

                         (ii)    the date and time of receipt of the instructions for the financial products transaction;

                        (iii)    the date and time of transmission of the instructions to the licensed market concerned;

                        (iv)    the date and time of execution of the instructions;

                         (v)    the source of the funds to effect the financial products transaction; and

               (b)    keep the records in a manner that makes the records identifiable separately from records of the financial services licensee.

Note   Other requirements for record-keeping are in Division 6 of Part 7.8 of the Act.

7.8.21       Dealings involving employees of financial services licensees

         (1)   For subsection 991F (2) of the Act, that subsection does not have effect in relation to:

                (a)    a bank; or

               (b)    a body corporate that gives credit in good faith to a person (not being a director of the body corporate) employed by the body corporate, or by another body corporate that is related to the first body corporate, to enable the person to acquire financial products that are:

                          (i)    fully paid shares in the body corporate; and

                         (ii)    to be held in beneficial ownership by the person.

         (2)   For subsection 991F (3) of the Act, a body corporate that is related to a financial services licensee may act as the agent of an employee of the financial services licensee, in respect of the acquisition mentioned in that subsection, only if:

                (a)    before the acquisition, the employee has informed the related body corporate that the employee is acquiring, or agreeing to acquire, the financial product on the employee’s own behalf; and

               (b)    the financial services licensee has in place arrangements with the related body corporate to allow the licensee to be informed of, and to gain access to records relating to, the acquisition.

Part 7.9              Financial product disclosure and other provisions relating to issue and sale of financial products

Division 1              Preliminary

7.9.01       Interpretation

         (1)   In this Part:

amount includes a nil amount.

charge:

                (a)    includes a charge made by a trustee, service provider or other person; and

               (b)    does not include a government charge, tax or duty.

contact details, in relation to a superannuation entity, means:

                (a)    the name of the superannuation entity and, if relevant, of the sub-plan; and

               (b)    a contact address for the superannuation entity; and

                (c)    a contact person and telephone number for the contact person.

contact person, in relation to a superannuation entity, means a named individual, or a person holding a designated office or position, who is available to receive and deal with inquiries or complaints by product holders (as the case may be).

contribution includes a benefit that is rolled over or transferred to a fund.

contribution charge means a charge that:

                (a)    is not a death and disability insurance charge; and

               (b)    is made:

                          (i)    against contributions made in respect of a member; or

                         (ii)    when the member joins a fund, against:

                                   (A)     the member’s benefits in the fund; or

                                   (B)     the member, or another person on the member’s behalf.

death and disability insurance charge means a charge that:

                (a)    is made against:

                          (i)    contributions made in respect of a member; or

                         (ii)    a member’s benefits in a fund; or

                        (iii)    the investment earnings of a fund; or

                        (iv)    the assets of a fund; or

                         (v)    a member or another person on the member’s behalf; and

               (b)    is used by the trustee solely to pay:

                          (i)    an insurance premium, including stamp duty on the premium, to an insurer; or

                         (ii)    a charge by the trustee;

                        for insurance against:

                        (iii)    the trustee’s liability to provide a benefit payable by the trustee:

                                   (A)     for the member on or after the death of the member; or

                                   (B)     to the member when the member stops work because of illness; or

                        (iv)    either:

                                   (A)     the death of the member; or

                                   (B)     the member’s inability to work because of illness.

direct account charge means a charge that:

                (a)    is made against a member’s benefits in a fund; and

               (b)    is not a contribution charge, death and disability insurance charge or exit charge.

exit charge means a charge that:

                (a)    is made against:

                          (i)    a member’s benefits in a fund; or

                         (ii)    a member or another person on the member’s behalf; and

               (b)    is only made when a payment:

                          (i)    is made to the member; or

                         (ii)    is transferred to an RSA, a deferred annuity, an annuity or another fund.

fund information:

                (a)    in relation to a superannuation product, means information:

                          (i)    relating to the management, financial condition and investment performance of either or both of a superannuation entity and any relevant sub-plan (within the meaning of section 1017DA of the Act); and

                         (ii)    required to be given under this Division; and

               (b)    in relation to an RSA product, means information:

                          (i)    relating to the management, financial condition and investment performance of an RSA; and

                         (ii)    required to be given under this Division.

fund reporting period means a reporting period for fund information.

investment management charge means a charge that:

                (a)    is made against the assets or investment earnings of a fund because the fund’s expenses exceed direct account charges; and

               (b)    is not a transaction cost, direct account charge, contribution charge, death and disability insurance charge or exit charge.

net earnings rate means the investment return on the assets of a fund after payment of transaction costs, government charges, taxes and duties and charges relating to the management of investment of fund assets.

ongoing management charge means a charge that:

                (a)    is made against:

                          (i)    a member’s benefits in a fund; or

                         (ii)    the assets or investment earnings of the fund; or

                        (iii)    a member or another person on the member’s behalf; and

               (b)    is not:

                          (i)    a contribution charge, death and disability insurance charge, exit charge or switching charge; or

                         (ii)    a charge that:

                                   (A)     is made for a service requested by the member that the member could not reasonably expect to receive unless the member asked for it and paid a reasonable charge; and

                                   (B)     is reasonable; and

                (c)    is worked out in accordance with Schedule 10.

Note   Also see subregulation (4).

prescribed net earnings rate, in relation to a fixed-rate option offered by a capital guaranteed fund for a period, means the net earnings rate declared, in advance, by the fund.

publication date, for a Product Disclosure Statement, means the date required under section 1013G of the Act.

remuneration, for an Australian financial services licensee or an authorised representative, means a payment that:

                (a)    is made to the Australian financial services licensee or authorised representative because a superannuation interest is issued to a member; and

               (b)    is not made under an agreement by which the member, or another person on the member’s behalf, has retained the Australian financial services licensee or authorised representative on a fee-for-service basis.

Note   Also see subregulation (5).

service provider means:

                (a)    a person who provides the trustee of a superannuation entity, for a fund to which the SIS Act applies or an underlying investment, with services relating to management, administration or investment management, including any of the following areas:

                          (i)    management;

                         (ii)    administration;

                        (iii)    audit;

                        (iv)    actuarial matters;

                         (v)    accountancy;

                        (vi)    custodianship;

                       (vii)    investment management;

                      (viii)    investment advice;

                        (ix)    law;

                         (x)    insurance;

                        (xi)    insurance broking; or

               (b)    the responsible entity of a managed investment scheme.

sub-fund, in relation to a capital guaranteed fund, means a segment of a public offer superannuation fund that has the following characteristics:

                (a)    the sub-fund has separately identifiable assets and separately identifiable beneficiaries;

               (b)    the interest of each beneficiary of the sub-fund is determined by reference only to the conditions governing that sub-fund;

                (c)    there is no transfer of assets, benefits or money between the sub-fund and another sub-fund without a transfer of a corresponding beneficial interest;

               (d)    the insurance and administration costs of the sub‑fund are attributable only to that sub-fund.

switching charge means a charge that:

                (a)    is made against:

                          (i)    a member’s benefits in a fund; or

                         (ii)    the member or another person on the member’s behalf; and

               (b)    is made for the transfer of all or part of the member’s benefits in the fund from one investment strategy to another.

transaction cost means:

                (a)    brokerage paid because of an investment transaction; or

               (b)    a cost arising from maintenance of a property investment; or

                (c)    stamp duty on an investment transaction.

underlying investment means an investment, including an investment in a managed investment scheme, that:

                (a)    is made directly by a fund; and

               (b)    is not made through an interposed trust or company.

unfunded defined benefits fund means a defined benefits fund under which all or some of the amounts that will be required for the payment of a benefit are not paid into the fund until the member concerned becomes entitled to receive the benefit.

         (2)   In this Part, unless the contrary intention appears, a reference to a member is taken to mean:

                (a)    in relation to a superannuation entity — a person who:

                          (i)    is a member of the entity; or

                         (ii)    receives a pension from the entity; or

                        (iii)    has deferred his or her entitlement to receive a benefit from the entity; and

               (b)    in relation to an approved deposit fund — a depositor in the fund; and

                (c)    in relation to a pooled superannuation trust — a unit-holder.

         (3)   In a Division of this Part, a reference to a fund is a reference to a fund of the kind to which the Division applies.

         (4)   For the definition of ongoing management charge, if:

                (a)    a premium (including government charges, taxes or duties for the premium) for an insurance product is charged against a product holder; and

               (b)    the insurer:

                          (i)    repays part of the premium to the responsible person; or

                         (ii)    pays to the responsible person an amount worked out by reference to the premium;

the part paid to the responsible person and not paid or credited to the product holder is taken to be an ongoing management charge made against the product holder.

         (5)   For the definition of remuneration, payment is taken to have been given to an Australian financial services licensee or an authorised representative for issuing an interest to a member if:

                (a)    issuing the interest is taken into account to increase the payment given to the Australian financial services licensee or authorised representative for other matters (for example, bonus commission); or

               (b)    the payment is given after the interest is issued and only if the member remains a member of the fund (for example, trailing commission).

7.9.02       Sub-plans

         (1)   This regulation applies if the trustee of a regulated superannuation fund proposes to make a determination as to whether a sub-plan should be made.

         (2)   In making a determination, the trustee must have regard to all relevant matters, including each of the following:

                (a)    whether there is a common factor in a segment of the fund (for example, whether a group of members of the fund have the same employer);

               (b)    whether the governing rules of the fund provide for a particular segment to be a sub-plan.

         (3)   For subsection 1017C (9) of the Act, the sub-plan is a relevant sub-plan.

         (4)   For paragraph 761E (7) (a) of the Act, if:

                (a)    a person is a member of a superannuation fund in relation to a sub-plan; and

               (b)    the person’s membership changes to membership in relation to another sub-plan;

the change to membership in relation to the other sub‑plan is taken to be the issue of a new interest in the superannuation fund.

         (5)   For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to the fund (including a sub-plan) as set out in Part 1 of Schedule 10A.

Division 2              Arrangements for Product Disclosure Statements in relation to superannuation products and RSA products

Subdivision 2.1           Preliminary

7.9.03       Application of Division 2

                This Division applies in relation to superannuation products and RSA products.

Note   See paragraphs 764A (1) (g) and (h) of the Act.

Subdivision 2.2               Late provision of Product Disclosure Statement for certain members of regulated superannuation fund, public offer superannuation fund or successor fund

7.9.04       Product Disclosure Statement to be provided later

                For section 1012F of the Act, a superannuation product provided by any of the following is a specified superannuation product:

                (a)    a regulated superannuation fund that is not a public offer superannuation fund;

               (b)    a public offer superannuation fund that is not a successor fund, but only in respect of:

                          (i)    standard employer-sponsored members of the fund; or

                         (ii)    in the case of an eligible rollover fund — persons who become members of the fund by being issued with a superannuation interest under section 243 of the SIS Act; or

                        (iii)    in the case of an eligible rollover fund — persons who became members of the fund in the following way:

                                   (A)     the employer was a standard employer-sponsor of a fund (fund 1);

                                   (B)     the benefits of members in fund 1 were transferred to a successor fund;

                                   (C)     the employer was a standard employer-sponsor of fund 1 immediately before those benefits were so transferred;

                                   (D)     the employer was a standard employer-sponsor of the successor fund immediately after those benefits were so transferred; or

                        (iv)    in the case of an eligible rollover fund — persons who became members of the fund in the circumstances mentioned in section 89 of the RSA Act;

                (c)    a successor fund.

Subdivision 2.3               Product Disclosure Statement for retirement savings account

7.9.05       Situation in which Product Disclosure Statement is not required

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to an RSA product as set out in Part 2 of Schedule 10A.

Subdivision 2.4               Product Disclosure Statement for eligible rollover fund

7.9.06       Additional persons to which Product Disclosure Statement must be given

                For paragraph 1020G (2) (b) of the Act, Part 7.9 of the Act is modified in its application in relation to a superannuation product or an RSA product as set out in Part 3 of Schedule 10A.

Subdivision 2.5               Product Disclosure Statement for insurance options

7.9.07       Modification of Act: Product Disclosure Statement in relation to insurance options

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to a superannuation entity or an RSA as set out in Part 4 of Schedule 10A.

Division 3                        Dealing with money received for financial product before the product is issued

7.9.08       Accounts

         (1)   For subparagraph 1017E (2) (a) (ii) of the Act, the following accounts are prescribed:

                (a)    an account with a foreign deposit taking institution that is regulated by a foreign regulatory body that ASIC has approved in writing for this paragraph;

               (b)    an account with a cash management trust.

         (2)   For paragraph 1017E (2) (c) of the Act, a product provider to which subsection 1017E (2) of the Act applies must:

                (a)    operate an account to which paragraph 1017E (2) (a) of the Act applies as a trust account; and

               (b)    designate the account to be a trust account; and

                (c)    hold all moneys paid into the account on trust for the benefit of the person who is entitled to the moneys.

Division 4                        Content of Product Disclosure Statements

Subdivision 4.1           Preliminary

7.9.09       Application of Division 4

         (1)   This Division applies in relation to superannuation products and RSA products.

Note   See paragraphs 764A (1) (g) and (h) of the Act.

         (2)   Each of the Subdivisions of this Division has an application provision:

                (a)    stating the types of entity in relation to which the Subdivision applies; and

               (b)    referring to any provisions that limit or restrict the application of the Subdivision or a particular provision.

Note   Information content requirements are set out in the main provisions of section 1013D of the Act. These Regulations set out a more detailed statement of the information required under subsection 1013D (1) that the retail clients of superannuation products and RSA products would reasonably require for the purpose of making a decision whether to acquire the financial product.

Subdivision 4.2           Product Disclosure Statement for superannuation entities and RSAs

7.9.10       Application of Subdivision 4.2

                This Subdivision applies in relation to:

                (a)    a regulated superannuation entity; and

               (b)    an RSA.

7.9.11       More detailed information in Product Disclosure Statement: superannuation entity or RSA

         (1)   For paragraph 1013D (4) (c) of the Act, the more detailed information to be included in a Product Disclosure Statement that relates to the superannuation entity or RSA is:

                (a)    for a regulated superannuation fund that is not a self managed superannuation fund or a capital guaranteed fund — the information mentioned in Schedule 10B, where relevant, in the way specified in that Schedule; and

               (b)    for a capital guaranteed fund or an RSA — the information mentioned in Schedule 10C, where relevant, in the way specified in that Schedule.

Note   Sections 1013D, 1013E and 1013F of the Act set out content requirements for other superannuation funds, such as self managed superannuation funds. Those sections continue to apply in addition to the requirements in these Regulations.

         (2)   For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to the entity or RSA as set out in Part 5 of Schedule 10A.

Subdivision 4.3           Other arrangements for Product Disclosure Statements and application forms

7.9.12       Modification of Act: Product Disclosure Statements and application forms for standard employer-sponsors and successor funds

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to superannuation products and RSA products as set out in Part 6 of Schedule 10A.

7.9.13       Offer of superannuation interest without application or eligible application

         (1)   For paragraph 1016A (4) (a) of the Act, if a trustee of a public offer entity issues a superannuation interest in the entity to a person without first receiving an application, or an eligible application, the trustee is taken not to have contravened section 1016A of the Act if:

                (a)    the entity is a standard employer-sponsored fund; and

               (b)    the person holds the interest as a standard employer-sponsored member of the entity; and

                (c)    after issuing the interest, the trustee makes reasonable efforts:

                          (i)    to obtain an application or eligible application from the person’s standard employer-sponsor; or

                         (ii)    to obtain an eligible application from the person; and

               (d)    if the trustee has not obtained the application or eligible application within 90 days after issuing the interest, the trustee does not accept any more contributions from the standard employer-sponsor in respect of the person until the trustee receives the application or eligible application.

         (2)   For paragraph 1016A (4) (b) of the Act, if a trustee has not obtained the application or eligible application under subregulation (1) within 90 days after issuing the interest, the trustee must not intentionally or recklessly accept any more contributions from the standard employer-sponsor in respect of the person until the trustee receives the application or eligible application.

Penalty:   50 penalty units.

         (3)   Subregulation (2) does not apply if the person has a reasonable excuse.

Note   A defendant bears an evidential burden in relation to the matter in subregulation (2) (see subsection 13.3 (3) of the Criminal Code).

         (4)   Strict liability applies to subregulation (2).

Note   For strict liability, see section 6.1 of the Criminal Code.

7.9.14       Remedies for person acquiring financial product under defective Product Disclosure Statement

         (1)   This regulation applies to a financial product:

                (a)    that is:

                          (i)    a superannuation product to which requirements of the SIS Act relating to preservation rules and cashing restrictions apply; or

                         (ii)    an RSA product to which requirements of the RSA Regulations relating to preservation rules and cashing restrictions apply; and

               (b)    that has been issued or sold in contravention of section 1016E of the Act.

         (2)   For subsection 1016F (3) of the Act, to exercise a right of return for the financial product in circumstances in which the moneys paid to acquire the financial product are subject to the preservation rules and cashing restrictions, the client must:

                (a)    nominate a superannuation fund, approved deposit fund or RSA into which the moneys subject to the preservation rules and cashing restrictions, and to which preservation conditions apply, are to be repaid; and

               (b)    make the nomination not later than 1 month after notifying the responsible person of the right to exercise the right of return.

         (3)   The client must notify the responsible person in writing or by electronic means.

         (4)   For subsection 1016F (6) of the Act, the responsible person must repay the monies as directed.

         (5)   For subsection 1019B (7) of the Act, if:

                (a)    a financial product mentioned in this regulation is subject to the nomination of a further superannuation entity or RSA; and

               (b)    the application in relation to the financial product is not accepted by the nominated superannuation entity or RSA;

the responsible person may rollover or transfer the client’s benefits to an eligible rollover fund.

Subdivision 4.4           General

7.9.15       More detailed information in Product Disclosure Statement: unauthorised foreign insurer

         (1)   For paragraph 1013D (4) (c) of the Act, the more detailed information that must be included in a Product Disclosure Statement that relates to a financial product issued by an unauthorised foreign insurer is:

                (a)    a statement that the product issuer is:

                          (i)    an unauthorised foreign insurer; and

                         (ii)    not authorised under the Insurance Act 1973 to conduct insurance business in Australia; and

               (b)    a statement that an insurer of that kind is not subject to the provisions of the Insurance Act 1973, which establishes a system of financial supervision of general insurers in Australia; and

                (c)    a statement that the person should consider whether to obtain further information, including:

                          (i)    the country in which the product issuer is incorporated, and whether the country has a system of financial supervision of insurers; and

                         (ii)    the paid up capital of the financial product; and

                        (iii)    which country’s laws will determine disputes in relation to the financial product.

         (2)   In this regulation:

unauthorised foreign insurer means:

                (a)    an insurer that:

                          (i)    does not have an authority under the Insurance Act 1973 to carry on insurance business; and

                         (ii)    is not a person who, because of section 5 of that Act, is not required to have such an authority; and

                        (iii)    carries on insurance business outside Australia and the external Territories to which the Insurance Act 1973 extends; or

               (b)    if a direction is in force under section 74 of the Insurance Act 1973 — a Lloyd’s underwriter.

7.9.16       More detailed information in Product Disclosure Statement: consumer credit insurance product

         (1)   For paragraph 1013D (4) (c) of the Act, the more detailed information that must be included in a Product Disclosure Statement that relates to a consumer credit insurance product is:

                (a)    a brief explanation of the purposes of consumer credit insurance; and

               (b)    an outline statement of general areas covered by the consumer credit insurance product, or the kind of consumer credit insurance product; and

                (c)    a statement that it is important that the insured read the Product Disclosure Statement carefully to understand the extent of cover provided by the consumer credit insurance product, and its limitations; and

               (d)    if all of the following matters apply under the consumer credit insurance product:

                          (i)    a person who applies for, or obtains, consumer credit insurance is not obliged to buy the consumer credit insurance;

                         (ii)    cover is provided under the consumer credit insurance product in respect of losses caused by certain contingencies;

                        (iii)    the extent of loss to the consumer credit insurance product applies is measured by reference to the liability of the insured under the credit agreement to which the consumer credit insurance applies;

                        a statement to that effect, accompanied by examples of the contingencies; and

                (e)    a table of the benefit limits applicable under the consumer credit insurance product; and

                (f)    a statement that the insured:

                          (i)    is required to be truthful; and

                         (ii)    is able to arrange consumer credit insurance through a different insurer; and

               (g)    a statement of the commission paid or payable in relation to the provision of the consumer credit insurance product.

         (2)   In this regulation:

consumer credit insurance product means a general insurance product provided by a class of contracts of insurance that is:

                (a)    declared, in accordance with the Insurance Contracts Act 1984 to be a class of contracts to which Division 1 of Part V of that Act applies; and

               (b)    identified as consumer credit insurance as part of that declaration.

Division 5              Ongoing requirements for product disclosure after person becomes a member

Subdivision 5.1           Preliminary

7.9.17       Application of Division 5

                This Division applies in relation to the following entities:

                (a)    a regulated superannuation fund;

               (b)    an approved deposit fund;

                (c)    a pooled superannuation trust;

               (d)    an RSA.

Subdivision 5.2               Periodic statements for retail clients for financial products that have an investment component: regulated superannuation funds, ADFs and RSAs

7.9.18       Application of Subdivision 5.2

                This Subdivision applies in relation to:

                (a)    a regulated superannuation fund; and

               (b)    an approved deposit fund; and

                (c)    an RSA.

7.9.19       Specific requirements for periodic statements: superannuation funds (other than self managed superannuation funds) and RSAs

                For paragraph 1017D (5) (g) of the Act, a periodic statement for a member of a fund (other than a self managed superannuation fund) or an RSA holder must include the following details:

                (a)    the contact details of the fund or the RSA provider;

               (b)    the amount of defined withdrawal benefit for the member or RSA holder under the SIS Regulations at the start of the reporting period;

                (c)    the amount of the withdrawal benefit for the member or RSA holder at the end of the reporting period, and the method by which that amount was worked out;

               (d)    the amount (if any) of the withdrawal benefit for the member or RSA holder, at the end of the reporting period, that consists of preserved benefits;

                (e)    the amount (if any) of the withdrawal benefit for the member or RSA holder, at the end of the reporting period, that consists of restricted non‑preserved benefits;

                (f)    the amount (if any) of the withdrawal benefit for the member or RSA holder, at the end of the reporting period, that consists of unrestricted non‑preserved benefits.

7.9.20       Specific requirements for certain periodic statements: superannuation funds (other than self managed superannuation funds)

         (1)   For paragraph 1017D (5) (g) of the Act, a periodic statement for a member of a fund (other than a self managed superannuation fund) must include the following details:

                (a)    the amount of the member’s contributions during the reporting period;

               (b)    the amount of benefits rolled-over or otherwise transferred into the fund during the reporting period;

                (c)    the amount of withdrawals during the reporting period;

               (d)    the information about costs of transactions mentioned in Division 8;

                (e)    the amount of any allotment of employer contributions during the reporting period;

                (f)    the amount of any allotment of net earnings during the reporting period (including, for a unitised product, the presentation of changes in price as amounts in dollars);

               (g)    the rate of any allotment of net earnings during the reporting period;

               (h)    the amount of bonuses that have accrued at the end of the reporting period;

                (i)    the amount of the sum assured;

                (j)    the amount payable in the event of the member’s death:

                          (i)    at the end of the reporting period; or

                         (ii)    on the first day of the next reporting period;

                        or the method by which that amount is worked out;

               (k)    details, including the amount or method of working out, of other significant benefits, including, in particular, disability benefits;

                (l)    if the trustee is aware, or ought reasonably to be aware, of contributions that are due and payable during the reporting period but have not been paid to the fund at, or shortly before, the date of issue of the report, details of the amount of those contributions and of action that the trustee has taken, or proposes to take, to have the contributions paid.

         (2)   For paragraph (1) (g), if the earnings rate for members of the fund is reflected in the price of units of the fund, rather than being credited or debited against the accounts of members, an earnings rate allotted to members in respect of a period is taken to be a change in the value of the member’s units being determined by the trustee in respect of that period.

         (3)   A nil amount need not be disclosed.

7.9.21       Specific requirements in particular cases: member (other than capital guaranteed member) of fund other than a self managed superannuation fund

         (1)   For paragraph 1017D (5) (g) of the Act, and in addition to regulations 7.9.19 and 7.9.20, a periodic statement for a member (other than a capital guaranteed member) of a fund (other than a self managed superannuation fund) must include the following details:

                (a)    if the fund is an unfunded defined benefits fund — details of the surcharge debt account kept by the trustee, under subsection 16 (2) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997, for the member, including:

                          (i)    the balance of the account at the start of the reporting period; and

                         (ii)    the amount debited to the account for superannuation contributions surcharge assessed, by the Commissioner of Taxation, to be payable on the member’s surchargeable contributions; and

                        (iii)    the amount of interest debited, under subsection 16 (4) of that Act, to the account during the reporting period; and

                        (iv)    the balance of the account at the end of the reporting period;

               (b)    if the trustee reduced the member’s benefits in connection with payment of a superannuation contributions surcharge or an advance instalment of surcharge:

                          (i)    the amount deducted; and

                         (ii)    if there is a difference between the amount deducted and the amount assessed under subsection 15 (1) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 or between the amount deducted and the amount determined under subsection 15 (2) of that Act — a statement explaining the difference;

                (c)    a description of the nature, effect and significant features of surcharge debt accounts.

         (2)   A nil amount need not be disclosed.

7.9.22       Specific requirements: capital guaranteed funds and RSAs

         (1)   For paragraph 1017D (5) (g) of the Act, and in addition to regulations 7.9.19 and 7.9.20, a periodic statement for a member of a capital guaranteed fund must include the following details:

                (a)    a statement that outlines the means by which the fund is to be maintained as a capital guaranteed fund and sets out the name of the institution providing the investments that back the fund;

               (b)    a statement that outlines the effect of the lower‑risk/lower-return nature of the product on possible benefits in the long term;

                (c)    a statement that the member may wish to consider:

                          (i)    other superannuation arrangements that may provide a greater return over the long term; and

                         (ii)    seeking advice on alternative investment arrangements that may be more suitable.

         (2)   For paragraph 1017D (5) (g) of the Act, and in addition to regulation 7.9.19, a periodic statement for an RSA holder must include the following details:

                (a)    a statement that outlines the effect of the lower-risk/lower-return nature of the product on possible benefits in the long term;

               (b)    a suggestion that the RSA holder may wish to consider:

                          (i)    other superannuation arrangements that may provide a greater return over the long term; and

                         (ii)    seeking advice on alternative investment strategies that may be more suitable.

7.9.23       Information for capital guaranteed fund: benefits reach $10 000

                For paragraph 1017D (5) (g) of the Act, and in addition to regulations 7.9.19 and 7.9.22, if the amount of the benefits of a member in a capital guaranteed fund at the end of a reporting period is at least $10 000, the periodic statement for that reporting period must include the following details:

                (a)    a statement of that fact;

               (b)    a statement that the information contained in the periodic statement is important and that the notice must be read carefully;

                (c)    a statement that outlines the effect of the lower‑risk/lower‑return nature of the product on possible benefits in the long term;

               (d)    a statement that the member may wish to consider:

                          (i)    other superannuation arrangements that may provide a greater return over the long term; and

                         (ii)    seeking advice on alternative investment arrangements that may be more suitable.

7.9.24       Modification of Act: pensioners, members subject to compulsory protection of small amounts and members with small amounts that are expected to grow quickly

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to a superannuation entity or an RSA to which this Subdivision applies as set out in Part 7 of Schedule 10A.

Subdivision 5.3           Periodic statements for retail clients for financial products that have an investment component: information for RSAs

7.9.25       Application of Subdivision 5.3

                This Subdivision applies in relation to an RSA provider.

7.9.26       Specific requirements where applicable: RSAs

         (1)   For paragraph 1017D (5) (g) of the Act, and in addition to regulation 7.9.19, a periodic statement for an RSA holder must include details of the following matters in respect of the RSA holder so far as they are applicable:

                (a)    the amount of the RSA holder’s contributions during the reporting period;

               (b)    the amount of employer contributions during the reporting period;

                (c)    the amount of benefits rolled-over or transferred into the RSA during the reporting period;

               (d)    the amount of withdrawals during the reporting period;

                (e)    information about the cost of transactions mentioned in Division 8;

                (f)    the amount of interest credited to the RSA during the reporting period;

               (g)    the actual or notional rate of net interest applied to the RSA during the reporting period;

               (h)    a statement of:

                          (i)    the annual effective rate of net earnings in each of the most recent reporting periods that, in total, constitute a period of at least 5 years; and

                         (ii)    the compound average effective rate of net earnings for the period of 5 years ending at the end of the reporting period;

                (i)    the effect of the RSA holder-protection standards under Division 3.3 of the RSA Regulations;

                (j)    the amount of bonuses that have accrued at the end of the reporting period;

               (k)    if a risk insurance product is held by the RSA provider — the amount of the sum assured;

                (l)    the circumstances when benefits may be paid to an eligible rollover fund, the effect of that payment and the contact details of the eligible rollover fund;

              (m)    the amount payable in the event of the RSA holder’s death:

                          (i)    at the end of the reporting period; or

                         (ii)    on the first day of the next reporting period;

                        or the method by which that amount is worked out;

               (n)    the amount, or method of working out, of other benefits including, in particular, disability benefits;

               (o)    if the RSA provider reduced the RSA holder’s benefits in connection with payment of a superannuation contributions surcharge or an advance instalment of surcharge:

                          (i)    the amount deducted; and

                         (ii)    if there is a difference between the amount deducted and the amount assessed under subsection 15 (1) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997 or between the amount deducted and the amount determined under subsection 15 (2) of that Act — a statement explaining the difference.

         (2)   A nil amount need not be disclosed.

         (3)   If, at the end of a reporting period, an RSA has not been in existence for 5 years, the references in paragraph (1) (h) to 5 years are taken to be references to the whole period of existence of the RSA.

7.9.27       Modification of Act: periodic statements for RSA holders

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to an RSA to which this Subdivision applies as set out in Part 8 of Schedule 10A.

7.9.28       Information for RSA: amount reaches $10 000

                For subsection 1017DA (1) of the Act, if the amount of an RSA at the end of a reporting period is at least $10 000, the periodic statement for that reporting period must include the following:

                (a)    a statement of that fact;

               (b)    a statement that the information contained in the periodic statement is important and that the notice must be read carefully;

                (c)    a statement that outlines the effect of the lower-risk/lower‑return nature of the RSA on possible benefits in the long term;

               (d)    a suggestion that the RSA holder may wish to consider:

                          (i)    other superannuation arrangements that may provide a greater return over the long term; and

                         (ii)    seeking advice on alternative investment strategies that may be more suitable.

Subdivision 5.4           Fund information for retail clients for financial products that have an investment component: additional information for superannuation entities and RSA providers

7.9.29       Application of Subdivision 5.4

                This Subdivision applies in relation to a superannuation entity and an RSA provider.

7.9.30       Additional information for change to choices

         (1)   For paragraph 1017D (5) (g) of the Act, a periodic statement for a holder of a financial product must include, if relevant, either of the following:

                (a)    details of:

                          (i)    other investment strategies available to the holder; and

                         (ii)    other contribution levels available to the holder; and

                        (iii)    other insurance coverage available to the holder in relation to the financial product;

               (b)    a statement:

                          (i)    that the details in paragraph (a) are available on request from the responsible person; and

                         (ii)    about how to ask for the details.

         (2)   The details or statement must relate to:

                (a)    an interest in the same sub-plan; or

               (b)    if there is no sub-plan — an interest in the same superannuation entity (other than a pooled superannuation trust) or an RSA.

         (3)   For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to a superannuation entity and an RSA provider as set out in Part 9 of Schedule 10A.

Subdivision 5.5               Fund information for retail clients for financial products that have an investment component: superannuation

7.9.31       Application of Subdivision 5.5

                This Subdivision applies in relation to:

                (a)    a regulated superannuation fund; and

               (b)    an approved deposit fund; and

                (c)    a pooled superannuation trust.

7.9.32       Reporting periods: general

         (1)   For subsection 1017DA (2) of the Act, fund information as mentioned in Subdivisions 5.6 and 5.7 must be provided, in accordance with this regulation, to the product holder in a periodic statement for each fund reporting period during which the holder holds the product.

         (2)   The following provisions apply in relation to fund reporting periods:

                (a)    each reporting period lasts for:

                          (i)    a period not exceeding 1 year, fixed by the issuer; or

                         (ii)    a longer period fixed by ASIC on the application of the issuer to which the period relates;

               (b)    the first reporting period starts when the holder acquired the product;

                (c)    each subsequent reporting period starts at the end of the preceding reporting period.

         (3)   The periodic fund statement must be given as soon as practicable after, and in any event within 6 months after the end of the reporting period to which it relates.

         (4)   In relation to a fund reporting period:

                (a)    Subdivisions 5.5 to 5.7 apply only in respect of persons who are product holders on the last day of the fund reporting period for fund information; and

               (b)    information required to be given under Subdivisions 5.5 to 5.7 need only be given to persons who are product holders on the day on which the fund report containing the information is completed.

         (5)   For subsection 1017DA (2) of the Act, fund information in relation to a particular product holder that is provided in accordance with an obligation under section 1017DA of the Act to provide fund information in accordance with Subdivisions 5.5 to 5.7 need not be given in respect of the same fund reporting period.

Example

A superannuation fund may choose to report:

(a)   some fund information in respect of a 6-month period; and

(b)   further fund information, and a periodic report, in respect of a 9-month period; and

(c)   the remaining fund information in respect of a 12-month period.

7.9.33     Use of more than 1 document

                For subsection 1017DA (2) of the Act, a reference in Subdivisions 5.5 to 5.7 to a periodic fund report, or fund information:

                (a)    includes 2 or more documents that include all of the information required by those Subdivisions; and

               (b)    is to be read as if subsections 1013L (1), (2), (3), (5) and (7) of the Act were included in those Subdivisions, and referred to a periodic statement instead of a Product Disclosure Statement.

Subdivision 5.6           Fund information for retail clients for financial products that have an investment component: fund information for regulated superannuation funds and ADFs

7.9.34     Application of Subdivision 5.6

                This Subdivision applies in relation to:

                (a)    a regulated superannuation fund; and

               (b)    an approved deposit fund.

7.9.35     General requirement

                For paragraph 1017DA (1) (a) of the Act, fund information must include all information that the responsible person reasonably believes a product holder would reasonably need for the purpose of:

                (a)    understanding the management and financial condition of the fund and of the relevant sub-plan (if any); and

               (b)    understanding the investment performance of the relevant sub-plan or, if none, of the fund.

7.9.36     Specific requirements in all cases

                For paragraph 1017DA (1) (a) of the Act, fund information must include all of the following items of information:

                (a)    the contact details of the fund;

               (b)    in respect of the relevant sub-plan or, if none, of the fund — a description of:

                          (i)    the investment strategy of the fund trustee, having regard to the requirements of paragraph 52 (2) (f) of the SIS Act; and

                         (ii)    the investment objectives.

7.9.37     Specific requirements in particular cases

         (1)   For paragraph 1017DA (1) (a) of the Act, fund information must include all of the following, so far as they are applicable:

                (a)    in respect of the relevant sub-plan or, if none, of the fund — the names of investment managers appointed by the trustee;

               (b)    in the case of a standard employer-sponsored fund that is not a public offer superannuation fund and does not have a trustee approved under subsection 92 (10) of the SIS Act:

                          (i)    if the trustee of the fund is a body corporate, the name of that body corporate and the names of all its directors during the whole or any part of the reporting period and, in respect of each of those directors, details of how and by whom they were appointed;

                         (ii)    if the trustees of the fund are individuals, the names of the trustees of the fund during the whole or any part of the relevant reporting period and, in respect of each of those trustees, details of how and by whom they were appointed;

                (c)    in the case of a fund other than a fund mentioned in paragraph (b):

                          (i)    the name of each corporate trustee of the fund during the relevant reporting period; and

                         (ii)    in respect of the relevant policy committee (if any), details of the committee (including the names of the committee members as at the end of that reporting period and, in respect of each of the members, details of how and by whom they were appointed);

               (d)    a statement as to whether or not any indemnity insurance has been taken out by the trustee;

                (e)    either:

                          (i)    the audited fund accounts, the auditor’s report and, if there is a relevant sub-plan, abridged financial information relating to that sub-plan; or

                         (ii)    each of the following:

                                   (A)     abridged financial information relating to the relevant sub-plan or, if none, to the fund;

                                   (B)     information as to when the audited fund accounts and the auditor’s report will be sent to members or will be available to members on request, as the case may be;

                (f)    in respect of the relevant sub-plan or, if none, of the fund — a statement of assets as at the end of:

                          (i)    the relevant reporting period; and

                         (ii)    the immediately preceding reporting period;

                        that includes all information that the responsible person reasonably believes a member would reasonably need to understand the asset allocation at those times;

               (g)    details of:

                          (i)    each investment that has a value in excess of 5% of the total assets of the relevant sub‑plan or, if none, of the fund; and

                         (ii)    each combination of investments that the trustee knows or ought reasonably to know are invested in, directly or indirectly, a single enterprise or single group of associated enterprises and that have a combined value in excess of 5% of the total assets of the relevant sub-plan or, if none, of the fund;

               (h)    a statement regarding the funds policy toward the use of derivative securities;

                (i)    if the derivatives charge ratio of the fund (as defined in the SIS Regulations) exceeded 5% at any time during the reporting period:

                          (i)    the derivatives charge ratio as at the end of the reporting period; and

                         (ii)    the highest derivatives charge ratio attained during the reporting period; and

                        (iii)    an explanation of why the derivatives charge ratio exceeded 5%; and

                        (iv)    an explanation of the meaning of derivatives charge ratio in, or to the effect of the following:

                                 ‘The derivatives charge ratio is the percentage of the total market value of the assets of the fund (other than cash) that the trustee has charged as security for derivatives investments made by the trustee.’;

                (j)    in respect of the relevant sub-plan or, if none, of the fund:

                          (i)    the annual effective rate of net earnings in each of the most recent reporting periods that, in total, constitute a period of at least 5 years; and

                         (ii)    the compound average effective rate of net earnings for the period of 5 years ending at the end of the reporting period;

Note   As to funds and sub-plans in existence for less than 5 years, see subregulation (4).

               (k)    if the fund maintains reserves — in respect of the relevant sub-plan or, if none, of the fund, details of movements of reserves during the most recent reporting periods that, in total, constitute at least 3 years;

                (l)    if the net earnings of the fund are allotted to members’ accounts — in respect of the relevant sub-plan or, if none, of the fund, the manner in which the allotment is made;

              (m)    if the fund maintains reserves — in respect of the relevant sub-plan or, if none, of the fund, a description of the management strategy of the fund trustee in relation to the reserves, having regard to the requirements of paragraph 52 (2) (g) of the SIS Act;

               (n)    details of any penalties imposed on the responsible person under:

                          (i)    section 38A of the SIS Act; or

                         (ii)    section 182 of the RSA Act;

               (o)    if the fund is:

                          (i)    a defined benefit fund; and

                         (ii)    the contributions paid by the employer-sponsor in the reporting period are less than the amount that an actuary has approved as sufficient contributions in that period; and

                        (iii)    the difference is material;

                        in respect of the relevant sub-plan or, if none, of the fund — a statement to the effect that the matters stated in subparagraphs (ii) and (iii) apply, and statements of:

                        (iv)    the consequences for the fund of the shortfall; and

                         (v)    any action that the trustee has taken, or proposes to take, in relation to the matter;

               (p)    the ultimate source (including, for example, the fund’s reserves, the members’ accounts or the employer) from which payments in connection with superannuation contributions surcharges or advance instalments of surcharge will be drawn;

               (q)    if there are circumstances in which the trustee would pay the member’s benefit to an eligible rollover fund:

                          (i)    details of those circumstances; and

                         (ii)    the contact details of the eligible rollover fund; and

                        (iii)    a statement of the effect of the payment of benefits to the eligible rollover fund.

         (2)   A nil amount need not be disclosed.

         (3)   For subparagraph (1) (g) (ii), investments in a trust are taken not to be invested in the trustee of the trust.

         (4)   If, at the end of a reporting period, a fund or sub-plan has not been in existence for 5 years, the references in paragraph (1) (j) to 5 years are taken to be references to the whole period of existence of the fund or sub‑plan, as the case requires.

         (5)   In this regulation:

abridged financial information, in relation to a reporting period of a fund or a sub-plan, means information derived from the fund’s accounts or records that gives a reasonable summary of either:

                (a)    both:

                          (i)    changes in the financial position of the fund or sub-plan during the reporting period; and

                         (ii)    the financial position of the fund or sub-plan at the end of the reporting period; or

               (b)    both:

                          (i)    changes in the net assets of the fund or sub‑plan during the reporting period; and

                         (ii)    the net assets of the fund or the sub-plan at the end of the reporting period.

7.9.38     Specific information in particular case: self managed superannuation fund

                For subsection 1017DA (1) of the Act, fund information for a self managed superannuation fund must include only the information mentioned in paragraph 7.9.37 (1) (p).

7.9.39     Benefits determined by life insurance products

         (1)   Paragraphs 7.9.37 (1) (e), (f) and (g) do not apply to funds from which the benefits paid to each member are wholly determined by reference to life insurance products.

         (2)   If:

                (a)    subregulation (1) does not apply only because shares in the life insurance company issuing the life insurance products were acquired because the company was demutualised; and

               (b)    the shares have been held for not more than 18 months after the date of acquisition;

paragraphs 7.9.37 (1) (e), (f) and (g) do not apply to funds from which the benefits paid to each individual member would otherwise be wholly determined by reference to life insurance products.

         (3)   If subregulation (1) or (2) applies, the fund information must include the reason why the information for paragraphs 7.9.37 (1) (e), (f) and (g) has not been given.

Subdivision 5.7           Fund information for retail clients for financial products that have an investment component: fund information for pooled superannuation trusts

7.9.40     Application of Subdivision 5.7

                This Subdivision applies in relation to a pooled superannuation trust.

7.9.41     Specific requirements in all cases

                For subsection 1017DA (1) of the Act, fund information must include the following:

                (a)    in respect of the pooled superannuation trust — a description of the investment strategy of the pooled superannuation trust trustee, having regard to:

                          (i)    the requirements of paragraph 52 (2) (f) of the SIS Act; and

                         (ii)    the investment objectives of the pooled superannuation trust;

               (b)    a statement to the effect that other information is available on request.

7.9.42     Specific requirements in particular cases

         (1)   For subsection 1017DA (1) of the Act, and subject to subregulations (2) and (3), fund information must include the following, so far as they are applicable:

                (a)    in respect of the pooled superannuation trust — the names of investment managers appointed by the trustee;

               (b)    the name of each approved trustee of the pooled superannuation trust during the relevant reporting period;

                (c)    either:

                          (i)    the audited accounts of the pooled superannuation trust and the auditor’s report; or

                         (ii)    each of the following:

                                   (A)     abridged financial information relating to the pooled superannuation trust;

                                   (B)     information as to when the audited accounts of the pooled superannuation trust and the auditor’s report will be sent to unit‑holders or will be available to unit-holders on request, as the case may be;

               (d)    in respect of the pooled superannuation trust — a statement of assets as at the end of:

                          (i)    the relevant reporting period; and

                         (ii)    the immediately preceding reporting period;

                        that includes sufficient information to enable unit‑holders to understand the asset allocation at those times;

                (e)    details of:

                          (i)    each investment that has a value in excess of 5% of the total assets of the pooled superannuation trust; and

                         (ii)    details of each combination of investments that the trustee knows or ought reasonably to know are invested, directly or indirectly, in a single enterprise or single group of associated enterprises and that have a combined value in excess of 5% of the total assets of the pooled superannuation trust;

                (f)    in respect of the pooled superannuation trust — the effective rate of net earnings of the pooled superannuation trust in the most recent reporting periods that, in total, constitute a period of at least 3 years;

               (g)    the information about costs of transactions mentioned in Division 8;

               (h)    details of any penalties imposed on the trustee under:

                          (i)    section 38A of the SIS Act; or

                         (ii)    section 182 of the RSA Act.

         (2)   A nil amount need not be disclosed.

         (3)   For subparagraph (1) (e) (ii), investments in a trust are taken not to be invested in the trustee of the trust.

         (4)   In this regulation:

abridged financial information, in relation to a reporting period of a pooled superannuation trust, means information derived from the pooled superannuation trust’s accounts that gives a reasonable summary of:

                (a)    changes in the pooled superannuation trust’s financial position during the reporting period; and

               (b)    the pooled superannuation trust’s financial position at the end of the reporting period.

Subdivision 5.8           Ongoing disclosure of material changes and significant events

7.9.43     Modification of Act: disclosure of material changes and significant events in relation to superannuation products and RSA products

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to:

                (a)    a regulated superannuation fund (other than a self managed superannuation fund); and

               (b)    an approved deposit fund (other than an excluded approved deposit fund); and

                (c)    a pooled superannuation trust; and

               (d)    an RSA;

as set out in Part 10 of Schedule 10A.

7.9.44     Benefits to be paid to eligible rollover fund

         (1)   For subsection 1017DA (1) of the Act, if the benefits of a superannuation product holder or RSA product holder will be paid to an eligible rollover fund unless the holder chooses, within a specified period, another superannuation entity, an EPSSS or an RSA to which those benefits will be paid, the responsible person must give a notice to the product holder within a reasonable period to allow a decision to be made.

         (2)   The notice must include:

                (a)    information about the payment to the eligible rollover fund that will assist the product holder to decide between having the benefits paid to that other superannuation entity, the EPSSS, the RSA or the eligible rollover fund; and

               (b)    so much of the following information as is relevant:

                          (i)    an explanation why the product issuer (the transferor) intends to pay the product holder’s benefits to the eligible rollover fund if the product holder does not make the choice within the period;

                         (ii)    a statement of the effect of the payment of benefits to the eligible rollover fund;

                        (iii)    the contact details of the eligible rollover fund;

                        (iv)    subject to subregulation (3), the amount, of the product holder’s benefits that will be paid from the transferor;

                         (v)    a statement to the effect that, if the product holder chooses a superannuation entity, EPSSS or RSA that refuses to accept the payment of the product holder’s benefit, or the product holder makes no choice within the specified period, the responsible person will pay the product holder’s benefits to the eligible rollover fund.

         (3)   For subparagraph (2) (b) (iv), the product issuer may inform a product holder of the approximate amount of the product holder’s benefits if, at the time the information is to be given, the responsible person cannot determine the exact amount of the product holder’s benefits that will be paid from the superannuation entity or RSA.

         (4)   This regulation does not require the responsible person of the transferor to provide information about RSAs, EPSSSs or superannuation entities other than the eligible rollover fund.

         (5)   The notice may be given in writing or electronic form.

         (6)   In this regulation:

responsible person means:

                (a)    a trustee of a superannuation entity; or

               (b)    an RSA provider.

Subdivision 5.9           Information on request: members

7.9.45     Regulated superannuation funds, ADFs and pooled superannuation trusts

         (1)   This regulation applies in relation to:

                (a)    a regulated superannuation fund (other than a self managed superannuation fund); and

               (b)    an approved deposit fund (other than an excluded approved deposit fund); and

                (c)    a pooled superannuation trust.

         (2)   For paragraph 1017C (5) (a) of the Act, the following are prescribed documents:

                (a)    the governing rules of the fund or pooled superannuation trust;

               (b)    audited accounts of the fund or pooled superannuation trust, together with (whether or not specifically requested) the auditor’s report in relation to the accounts;

                (c)    for a fund — the most recent actuarial report (as referred to in regulation 9.30 of the SIS Regulations) on the fund, and any subsequent written advice by an actuary to the trustee, to the extent that those documents are relevant to:

                          (i)    the overall financial condition of the fund; or

                         (ii)    the entitlements of a person;

               (d)    a copy of the fund information given under section 1017DA of the Act, or Subdivision 2.4.3 of the SIS Regulations, that was most recently given to the members;

                (e)    if a fund report prepared for Subdivision 2.4.3 of the SIS Regulations is relevant to the fund or pooled superannuation trust, the fund report;

                (f)    if, for a pooled superannuation trust:

                          (i)    fund information prepared for Subdivision 4.7 of Division 4; or

                         (ii)    information similar to fund information prepared for the SIS Regulations;

is relevant to the pooled superannuation trust, the fund information.

         (3)   If the person requesting the information is not a concerned person or an employer-sponsor, the documents mentioned in paragraphs (1) (a) and (c) are not prescribed documents.

7.9.46     RSAs

         (1)   This regulation applies in relation to an RSA.

         (2)   For paragraph 1017C (5) (a) of the Act, the terms and conditions of the RSA are a prescribed document.

Subdivision 5.10         Information on request: payments

7.9.47     Modification of Act: charges for information requested

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to a superannuation entity or an RSA provider as set out in Part 11 of Schedule 10A.

Subdivision 5.11         Information about complaints

7.9.48     Complaints: regulated superannuation fund or approved deposit fund

         (1)   This regulation applies if:

                (a)    a trustee of a regulated superannuation fund or an approved deposit fund receives a complaint from a person referred to in subsection 101 (1A) of the SIS Act; or

               (b)    a decision is made in relation to a complaint made in accordance with arrangements established under section 47 of the RSA Act.

         (2)   For subparagraph 1017DA (1) (a) (iii) of the Act, the trustee or RSA provider must give to the person, within 30 days:

                (a)    information about:

                          (i)    the external dispute resolution system that covers complaints by holders of the financial product; and

                         (ii)    how that system may be accessed;

                        (for example, details of the existence of the Superannuation Complaints Tribunal and information about its functions); and

               (b)    the date of the trustee’s decision in relation to the complaint.

Subdivision 5.12         Periodic report when product holder ceases to hold product: superannuation products and RSA products

7.9.49     Application of Subdivision 5.12

                For paragraph 1017D (5) (g) of the Act, this Subdivision applies in relation to:

                (a)    superannuation products; and

               (b)    RSA products.

7.9.50     Exit reporting period

                In this Subdivision, exit reporting period, in relation to a person who ceases to hold a product to which this Subdivision applies, means the reporting period mentioned in paragraph 1017D (2) (d) of the Act.

7.9.51     Time for compliance

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to a fund as set out in Part 12 of Schedule 10A.

7.9.52     General requirement

                For paragraph 1020 (2) (b) of the Act, subsections 1017D (2) and (4) of the Act are modified, in its application in relation to a person who ceases to hold a superannuation product or an RSA product (other than a product issued by a capital guaranteed fund) by requiring the issuer of the product to give all information to:

                (a)    if the person is alive — the person; or

               (b)    if the person is deceased — each person receiving a benefit as a result of the person’s death;

that the trustee reasonably believes such a person would reasonably need for the purpose of understanding his or her investment in the financial product.

7.9.53     Information on death of product holder

                For paragraph 1017D (5) (g) of the Act, if a person ceases by death to hold a superannuation product (other than an interest in a pooled superannuation trust) or an RSA product, the periodic report given to each person receiving a benefit from the issuer of the product as a result of the person’s death must include:

                (a)    a statement setting out details (in summary form) of arrangements that the issuer has made to deal with inquiries and information about the dispute resolution system that covers complaints; or

               (b)    a statement that the details are available on request.

7.9.54     Specific requirements in all cases 

                For paragraph 1017D (5) (g) of the Act, if a reporting period is the exit reporting period, the issuer of a superannuation product (other than the trustee of a self managed superannuation fund or pooled superannuation trust) must include in the periodic report given to a person who ceases, otherwise than by death to hold the product:

                (a)    the information mentioned in regulation 7.9.19; and

               (b)    in relation to a death or disability benefit that ceases or reduces, because the person has ceased to hold the product:

                          (i)    either:

                                   (A)     the amount of the death or disability benefit immediately before the person ceased to hold the product or at the end of the last reporting period; or

                                   (B)     the method of working out the death or disability benefit; and

                         (ii)    whether a continuation option is available to the person and, if it is, details of the option, a contact person who is available to discuss the option and a telephone number for the contact person.

7.9.55     Specific requirements in particular cases 

         (1)   For paragraph 1017D (5) (g) of the Act, if a reporting period is the exit reporting period, the issuer of a superannuation product (other than the trustee of a self managed superannuation fund or pooled superannuation trust) must include in the periodic report given to a person who ceases, otherwise than by death to hold the product, the information mentioned in regulation 7.9.20.

         (2)   A nil amount need not be disclosed.

7.9.56     Exceptions to exit reporting period provisions: superannuation products and RSA products

                This Subdivision does not apply in relation to a superannuation product holder who has been provided with the relevant information in the circumstances described in Part 13 of Schedule 10A.

7.9.57     Exception — members subject to compulsory protection of small amounts

                For paragraph 1017D (5) (g) of the Act, if a protected holder of a superannuation product or RSA product ceases to hold the product, a periodic statement must include the following information for the exit reporting period:

                (a)    the contact details of the product provider;

               (b)    the amount of the product holder’s withdrawal benefit;

                (c)    the amount of any deduction, from the product holder’s benefits, in connection with payment of a superannuation contributions surcharge, or an advance instalment of surcharge, during the exit reporting period;

               (d)    if there is a difference between the amount deducted and the amount assessed under subsection 15 (1) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997, or between the amount deducted and the amount determined under subsection 15 (2) of that Act — a statement explaining the difference;

                (e)    for a superannuation product provided by an unfunded defined benefits fund — details of the surcharge debt account kept by the issuer, under subsection 16 (2) of the Superannuation Contributions Tax (Assessment and Collection) Act 1997, for the holder including:

                          (i)    the balance of the account at the start of the exit reporting period; and

                         (ii)    the amount debited to the account during the exit reporting period for superannuation contributions surcharge that is assessed, by the Commissioner of Taxation, to be payable on the member’s surchargeable contributions; and

                        (iii)    the amount of interest debited to the account, under subsection 16 (4) of that Act, during the exit reporting period; and

                        (iv)    the balance of the account at the end of the exit reporting period.

7.9.58     Information to be given in cases other than death of RSA holder

         (1)   For paragraph 1017D (5) (g) of the Act, if a reporting period for an RSA is the exit reporting period to which paragraph 1017D (2) (d) of the Act applies for an RSA holder who ceases to be an RSA holder, otherwise than by death:

                (a)    the RSA provider must give the RSA holder the information mentioned in regulation 7.9.19; and

               (b)    regulation 7.9.22 does not apply.

         (2)   A nil amount need not be disclosed.

7.9.59     Information to be given where applicable

         (1)   For paragraph 1017D (5) (g) of the Act, if a reporting period for an RSA is the exit reporting period to which paragraph 1017D (2) (d) of the Act applies for an RSA holder who ceases to be an RSA holder, otherwise than by death, the RSA provider must give the RSA holder:

                (a)    the information mentioned in regulation 7.9.26 (other than paragraphs 7.9.26 (1) (h), (i), (l) and (m); and

               (b)    in the case of a death benefit that ceases or reduces, or will cease or reduce, because the person has closed the RSA:

                          (i)    either:

                                   (A)     the amount of the death benefit immediately before the person closed the RSA or at the end of the last RSA holder reporting period; or

                                   (B)     the method of working out the death benefit; and

                         (ii)    whether a continuation option for insurance cover is available to the person and, if it is, details of the option, a contact person who is available to discuss the option and a telephone number for the contact person.

         (2)   A nil amount need not be disclosed.

7.9.60     Modification of Act: exceptions to exit reporting period provisions

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to an RSA as set out in Part 13 of Schedule 10A.

Subdivision 5.13         General requirements for ongoing disclosure

7.9.61     Modification of Act: disclosure

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to the obligation to give information about financial products as set out in Part 14 of Schedule 10A.

Division 6              Confirmation of transactions

7.9.62     Confirmation of transaction: superannuation products and RSAs

         (1)   For paragraph 1017F (4) (e) of the Act, a transaction is not required to be confirmed by the trustee of a superannuation fund, an ADF or pooled superannuation trust in the following circumstances:

                (a)    the transaction relates to a superannuation product;

               (b)    the trustee has provided information in accordance with section 1017D of the Act and Subdivision 5.12 of these Regulations about having left the superannuation fund, ADF or pooled superannuation trust.

         (2)   For paragraph 1017F (4) (e) of the Act, a transaction is not required to be confirmed by an RSA provider in the following circumstances:

                (a)    the transaction relates to an RSA;

               (b)    the trustee has provided information in accordance with section 1017D of the Act and Subdivision 5.12 of these Regulations about closing the RSA.

7.9.63     Confirmation of transactions: precise costs of transaction not known

         (1)   For subparagraph 1017F (8) (c) (iii) of the Act, the confirmation of a transaction of a financial product is not required to include details of the amount payable by the holder of the financial product if the amount is not known at the time of the confirmation.

         (2)   For subparagraph 1017F (8) (c) (iv) of the Act, the confirmation of a transaction of a financial product is not required to give details of the taxes and stamp duties payable in relation to the transaction if the amount of the taxes and stamp duties is not known at the time of the confirmation.

         (3)   For paragraph 1017F (9) (c) of the Act, section 1017F of the Act is modified in relation to its application to a transaction of a financial product as set out in Part 15 of Schedule 10A.

Division 7              Cooling-off periods

7.9.64     Cooling-off periods not to apply

         (1)   For paragraph 1019A (2) (a) of the Act, the following subclasses of financial products are excluded from paragraph 1019A (1) (a) of the Act:

                (a)    a financial product offered or issued under a distribution reinvestment plan or switching facility;

               (b)    a financial product the acquisition of which is an additional contribution required by an existing agreement or contract;

                (c)    a financial product issued as consideration for an offer made under a takeover bid under Chapter 6 of the Act;

               (d)    an interim contract of insurance within the meaning of subsection 11 (2) of the Insurance Contracts Act 1984;

                (e)    a managed investment product that is not liquid in accordance with section 601KA of the Act at the time the managed investment product is issued;

                (f)    a superannuation product that is issued in relation to:

                          (i)    a non-public offer superannuation entity; or

                         (ii)    a public offer superannuation entity mentioned in paragraph 7.6.01 (1) (b), (c) or (d);

               (g)    a risk insurance product that is:

                          (i)    of less than 12 months duration; or

                         (ii)    a renewal of an existing product on the terms and conditions to which the product is currently subject.

         (2)   For paragraph 1020G (1) (a) of the Act, a reference in paragraph 1019A (3) (a) of the Act to a client does not include a person who holds a superannuation product or an RSA product as a standard employer-sponsor member.

7.9.65     Return of financial product

         (1)   For subsection 1019B (5) of the Act, the right to return the risk insurance product for an event that will start and end within the 14 day period mentioned in subsection 1019B (3) of the Act (and to have money paid to acquire the risk insurance product repaid) cannot be exercised at any time after the end of the period starting when the risk insurance product was provided and ending on the earlier of:

                (a)    14 days; and

               (b)    the start of the event.

Example

Short-term travel insurance.

         (2)   In this regulation:

event means the commencement of the process in relation to which the risk insurance product was entered into.

Examples

1   For insurance on household goods during removal, the commencement of loading a transportation vehicle is the event.

2   For travel insurance, the commencement of the journey is the event.

7.9.66     Return of financial product: transfer between superannuation entities or RSAs

         (1)   For subsection 1019B (2) of the Act, this regulation applies in relation to a superannuation product or an RSA product that has been issued to the holder of the product as a result of a transfer between superannuation entities or RSAs.

         (2)   It is a requirement of the exercise of the right to return the superannuation product or RSA product that, if the money to be repaid includes:

                (a)    restricted non-preserved benefits; or

               (b)    preserved benefits;

the holder of the superannuation product, or the RSA holder, must nominate a superannuation fund, approved deposit fund or RSA into which the money representing restricted non-preserved benefits or preserved benefits is to be repaid.

         (3)   For subsection 1019B (7) of the Act, if the right of return is exercised, the product issuer must return the money as directed.

7.9.67     Variation of amount to be repaid

         (1)   For subsection 1019B (8) of the Act, the amount to be repaid on an exercise of the right to return a financial product is to be varied in accordance with this regulation.

Investment-linked product

         (2)   If:

                (a)    the financial product is:

                          (i)    an investment-linked product within the meaning of the Insurance Contracts Act 1984; or

                         (ii)    a managed investment product; or

                        (iii)    a superannuation product (subject to the governing rules of the issuer of the superannuation product relevant to the redemption of superannuation interests); and

               (b)    on the day on which the product issuer receives notification from the product holder exercising the holder’s right to return, the amount that would have been the price at which the product was acquired (the allocation price) if the product had been acquired on that day is less than the allocation price on the day on which the product was acquired;

the amount that would otherwise be repaid may be reduced by the adjustment amount.

         (3)   If:

                (a)    the financial product is:

                          (i)    an investment-linked product within the meaning given by the Insurance Contracts Act 1984; or

                         (ii)    a managed investment product; or

                        (iii)    a superannuation product; and

               (b)    on the day on which the product issuer receives notification from the product holder exercising the holder’s right to return, the amount that would have been the price at which the product was acquired (the allocation price) if the product had been acquired on that day is greater than the allocation price on the day on which the product was acquired;

the amount that would otherwise be repaid is increased by the adjustment amount.

         (4)   For subregulations (2) and (3), the adjustment amount is the difference between:

                (a)    the price at which the product was acquired; and

               (b)    the price at which the product could be acquired on the day on which the product issuer receives notification from the product holder exercising the holder’s right to return.

         (5)   If the price referred to in paragraph (4) (b) is not determined under the relevant contract or legal relationship on the day on which the product issuer receives notification from the product holder exercising the holder’s right to return, the amount to be repaid and the adjustment amount is to be determined:

                (a)    on the basis of the most recent day on which a price was calculated under the contract or legal relationship; or

               (b)    if there is no day of that kind, as soon as practicable after the product issuer receives the notification.

Tax

         (6)   If:

                (a)    tax or duty of any kind has been paid, or is payable, by the product issuer because of the issue of the financial product; and

               (b)    either:

                          (i)    if the tax or duty has been paid, the issuer is unable to obtain a refund of the tax or duty; or

                         (ii)    if the tax or duty has not been paid, the tax or duty does not cease to be payable as a result of the exercise of the right to return the financial product;

the amount that would otherwise be repaid is reduced by the amount of the tax or duty.

Certain financial products

         (7)   The amount that would otherwise be repaid may be reduced to account for reasonable administrative and transaction costs (other than the payment of commissions or similar benefits) incurred by the issuer of a financial product (other than an RSA product) that:

                (a)    are reasonably related to the acquisition of the financial product and the subsequent termination of the contract or legal relationship; and

               (b)    do not exceed the true cost of an arms’ length transaction.

Financial product issued for specific period

         (8)   If:

                (a)    the financial product is:

                          (i)    a risk insurance product; or

                         (ii)    that part of a financial product that is a risk insurance product; and

               (b)    the financial product has been issued for a specific period; and

                (c)    a proportion of that period has already passed when the right to return the risk insurance product is exercised;

the amount that would otherwise be repaid may be reduced by a proportion equal to the proportion of the period that has passed.

Superannuation product

         (9)   For subsection 1019B (7) of the Act, if:

                (a)    the return of a financial product mentioned in this regulation is subject to the nomination of a further superannuation entity or RSA; and

               (b)    the application in relation to the financial product is not accepted by the nominated superannuation entity or RSA;

the product issuer may rollover or transfer the product holder’s benefits to an eligible rollover fund.

7.9.68     Modification of section 1019B of the Act: client includes standard employer-sponsor

         (1)   For paragraph 1020G (2) (a) of the Act, subsections 1019B (1) and (2) of the Act are modified so that a reference in those subsections to a client includes a standard employer-sponsor of a public offer superannuation entity or an RSA, to the extent only of the employee’s interest in the superannuation entity or RSA.

         (2)   For subsection 1019B (7) of the Act, if the right of return is exercised by a standard employer-sponsor, in accordance with subsections 1019B (1) and (2) as modified, in relation to money that is:

                (a)    mandated contributions under the SIS Act; and

               (b)    subject to any relevant provisions in Division 6;

the product issuer must return the money as directed.

         (3)   For subsection 1019B (7) of the Act, if the right of return is exercised by a standard employer-sponsor, in accordance with subsections 1019B (1) and (2) as modified, in relation to money that is:

                (a)    paid to acquire the product to which the right of return relates; and

               (b)    subject to any relevant provisions in Division 6;

the product issuer must return the money as directed.

7.9.69     Modification of provisions of Division 5 of Part 7.9 of the Act: terms of contract

         (1)   For paragraph 1020G (2) (a) of the Act, this regulation applies in relation to the following financial products:

                (a)    an investment-linked product within the meaning of the Insurance Contracts Act 1984;

               (b)    a managed investment product;

                (c)    a superannuation product.

         (2)   Division 5 of Part 7.9 of the Act is modified to the extent necessary to require that a contract or legal relationship governing the issue and redemption of the financial product includes a provision that:

                (a)    a product holder may have the right to return a financial product under the Act; and

               (b)    the product issuer does not contravene any terms of the contract or legal relationship by complying with a request to return a financial product made in accordance with the Act; and

                (c)    the amount to be repaid following the exercise of the right to return a financial product is the amount calculated in accordance with the Act.

         (3)   Division 5 of Part 7.9 of the Act, and the regulations made for, or relating to, provisions of that Division, are also modified to the extent necessary to give effect to the modification set out in subregulation (2).

7.9.70     Modification of provisions of Division 5 of Part 7.9 of the Act: distributions

         (1)   For paragraph 1020G (2) (a) of the Act, this regulation applies in relation to the holder of:

                (a)    an investment-linked product within the meaning of the Insurance Contracts Act 1984; or

               (b)    a managed investment product; or

                (c)    a superannuation product.

         (2)   A reference in paragraph 1019B (5) (a) of the Act to a right or power does not include the making of a distribution to the holder.

Division 8              Other requirements

7.9.71     Modification of section 1017D of the Act: use of more than 1 document

                For paragraph 1020G (1) (c) of the Act, sections 1017D of the Act is modified:

                (a)    so that a reference in those sections to a periodic statement includes 2 or more documents that include all of the information required by those sections; and

               (b)    as if subsections 1013L (1), (2), (3), (5) and (7) of the Act were included in that section, and referred to a periodic statement instead of a Product Disclosure Statement.

7.9.72     Modification of section 1017D of the Act: information already given

                For paragraph 1020G (1) (c) of the Act section 1017D of the Act is modified so that if:

                (a)    a financial product is a superannuation product or an RSA product; and

               (b)    the issuer has provided information in accordance with Subdivisions 5.2 and 5.3;

paragraphs 1017D (5) (a) to (e) are omitted.

7.9.73     Reporting periods: general

                For paragraph 1020G (1) (c) of the Act, Part 7.9 of the Act is modified in its application in relation to financial products as set out in Part 16 of Schedule 10A.

7.9.74     Form of application

         (1)   An application form for a financial product, for use by a client, that is attached to, accompanying or derived from a Product Disclosure Statement must include the following information:

                (a)    the applicant’s name;

               (b)    the applicant’s date of birth;

                (c)    the applicant’s address.

         (2)   An application form for a financial product, for use by an employer that is applying as a prospective standard employer-sponsor, that is attached to, accompanying or derived from a Product Disclosure Statement must include the employer’s name and address.

7.9.75     Content of periodic statements: costs of transactions

         (1)   For paragraph 1017D (5) (g) of the Act, the prescribed details in relation to a financial product for which:

                (a)    a transaction has occurred during the reporting period; and

               (b)    advice of the cost of the transaction has not been included in the confirmation of the transaction;

include the cost of the transaction, including the amount payable and the amount of taxes and charges in relation to the transaction.

         (2)   For paragraph 1017D (5) (g) of the Act, the prescribed details in relation to a financial product include:

                (a)    the amounts paid by the holder of the financial product in respect of the financial product during the period, and the times at which those amounts were paid; and

               (b)    if the amounts paid in respect of the financial product, and amounts paid in respect of other financial products, are paid into a common fund — any amounts deducted from the common fund by way of fees, expenses or charges; and

                (c)    information about the dispute resolution mechanism that covers complaints by holders of the product, and about how the system may be accessed; and

               (d)    a statement that further information in relation to the financial product is available on request.

7.9.76     Consents to certain statements

         (1)   For subsection 1013K (2) of the Act, the period for which a person must keep a consent or a copy of a consent is 7 years from the date of the consent.

         (2)   The copy of the consent may be kept:

                (a)    in its physical form; or

               (b)    in an electronic form that is capable of being reproduced in physical form.

7.9.77     Alternative dispute resolution requirements — product issuer that is not a financial services licensee

         (1)   For subparagraph 1017G (2) (a) (i) of the Act, ASIC must take the following matters into account when considering whether to make or approve standards or requirements relating to internal dispute resolution:

                (a)    Australian Standard AS 4269 1995:

                          (i)    known as Complaints Handling; and

                         (ii)    published by Standards Australia; and

                        (iii)    as in force when this regulation commences;

               (b)    any other matter ASIC considers relevant.

         (2)   ASIC may:

                (a)    vary or revoke a standard or requirement that it has made in relation to an internal dispute resolution procedure; and

               (b)    vary or revoke the operation of a standard or requirement that it has approved in its application to an internal dispute resolution procedure.

         (3)   For subparagraph 1017G (2) (b) (i) of the Act, ASIC must take the following matters into account when considering whether to approve an external dispute resolution scheme:

                (a)    the accessibility of the dispute resolution scheme;

               (b)    the independence of the dispute resolution scheme;

                (c)    the fairness of the dispute resolution scheme;

               (d)    the accountability of the dispute resolution scheme;

                (e)    the efficiency of the dispute resolution scheme;

                (f)    the effectiveness of the dispute resolution scheme;

               (g)    any other matter ASIC considers relevant.

         (4)   ASIC may:

                (a)    specify a period for which an approval of an external dispute resolution scheme is in force; and

               (b)    make an approval of an external dispute resolution scheme subject to conditions specified in the approval, including conditions relating to the conduct of an independent review of the operation of the scheme; and

                (c)    vary or revoke:

                          (i)    an approval of an external dispute resolution scheme; or

                         (ii)    the specification of a period for which an approval is in force; or

                        (iii)    a condition to which an approval of an external dispute resolution scheme is subject.

7.9.78     Additional statement: trustee required to provide benefits

         (1)   For subsection 1017DA (1) of the Act, if, at the time a periodic statement is required to be given under regulation 7.9.22, there is in force a notice given to the trustee by a member under subregulation 6.17A (4) of the SIS Regulations, the periodic statement must include a statement calling the member’s attention to:

                (a)    the person, persons or class, or classes, of persons mentioned in the notice; and

               (b)    the fact that, in accordance with the notice, the trustee will pay a benefit in respect of the member, on or after the death of the member, to the person, persons or class, or classes, of persons mentioned in the notice if:

                          (i)    the person, or each person, mentioned in the notice is the legal personal representative or a dependant of the member; and

                         (ii)    the proportion of the benefit that will be paid to that person, or to each of those persons, is certain or readily ascertainable from the notice or a statement under regulation 6.17B of the SIS Regulations; and

                        (iii)    the notice is in effect; and

                (c)    the statement of the member about:

                          (i)    the proportion of the benefit that will be paid to the person, or to each person, mentioned in the notice; or

                         (ii)    how that proportion is to be determined; and

               (d)    the fact that the member may confirm, amend or revoke the notice in accordance with subregulation 6.17A (5) of the SIS Regulations; and

                (e)    the date when the notice ceases to have effect under paragraph 6.17A (7) (a) or (b) of the SIS Regulations.

         (2)   The periodic statement must also include information that the member may use to confirm, amend or revoke the notice.

         (3)   In this regulation, a reference to a notice includes a reference to the notice as confirmed, or amended, under subregulation 6.17A (5) of the SIS Regulations.

7.9.79     Short selling of securities, managed investment products and certain other financial products

         (1)   For subsection 1020B (2) of the Act, section 1020B of the Act does not have effect in relation to a sale of financial products that is done by the giving or writing of an option registered with:

                (a)    Options Clearing House Proprietary Limited; or

               (b)    SFE Clearing Corporation Pty Limited.

         (2)   For subsection 1020B (2) of the Act, section 1020B of the Act does not have effect in relation to a sale of unobtained shares if the seller is, at the time of the sale, able to obtain at least the number of shares of the same class as the unobtained shares by exercising exchange traded options.

         (3)   For subregulation (2), the number of shares of a class that a seller is able to obtain at the time of a sale is:

SIO – SSO – PS

where:

SIO (Shares Immediately Obtainable) means the number of shares of the class that, at the time of the sale, the seller is able to obtain by exercising exchange traded options at a price:

                (a)    that does not exceed the sale price payable to the seller under the sale; or

               (b)    that exceeds the sale price by an amount that is no more than an amount deposited by the seller with:

                          (i)    Options Clearing House Proprietary Limited; or

                         (ii)    SFE Clearing Corporation Pty Limited;

                        before and in relation to the sale.

SSO (Shares Subject to Options) means the number of shares of the class sold over which he or she has given or written exchange traded options that, at the time of sale, have not expired or been exercised.

PS (unobtained shares Previously Sold) means the number of unobtained shares previously sold in sales that have not been completed at the time of the sale.

         (4)   For subregulation (2), the price payable by the seller for obtaining shares by exercising exchange traded options is to be calculated by reference first to the option with the lowest exercise price, then to the option with the second lowest exercise price, and so on in ascending order of price until the necessary number of options would have been exercised.

         (5)   In this regulation:

exchange traded options means options registered with:

                (a)    Options Clearing House Proprietary Limited; or

               (b)    SFE Clearing Corporation Pty Limited;

according to their operating rules.

seller, in the case of a sale by an agent, means the principal.

unobtained shares means shares of a class:

                (a)    that a seller has agreed to sell; and

               (b)    over which the seller does not, at the time of the sale, have a presently exercisable and unconditional right to vest in the buyer.

7.9.80     Late provision of Product Disclosure Statement for travellers’ cheques

                For subparagraph 1012G (1) (b) (iii) of the Act, travellers’ cheques are prescribed.

Part 7.11            Title and transfer

Division 1              Preliminary

7.11.01   Definitions

                In this Part:

associate, in relation to a broker or participant, means:

                (a)    if the broker or participant:

                          (i)    is a member of a firm of brokers or participants; and

                         (ii)    is not a broker’s agent or a participant’s agent;

                        any other member of the firm; or

               (b)    if:

                          (i)    the broker or participant is the agent or employee of another broker or participant; and

                         (ii)    the other broker or participant is not a member of a firm of brokers or participants;

                        the other broker or participant; or

                (c)    if:

                          (i)    the broker or participant is the agent or employee of another broker or participant; and

                         (ii)    the other broker or participant is a member of a firm of brokers or participants;

                        any member of that firm.

ASTC subregister means a subregister of Division 4 financial products maintained in accordance with the ASTC operating rules.

beneficial owner, in relation to Division 3 securities, means a person for whom an authorised trustee corporation holds (whether alone or together with any other person or persons) the Division 3 securities in trust in the ordinary course of its business.

broker means an Australian financial services licensee who is a participant of a financial market.

broker’s agent means:

                (a)    the agent of a broker; or

               (b)    the employee of a broker.

company includes a body mentioned in regulation 7.11.07.

duly completed, in relation to a transfer document, includes the requirements set out in regulation 7.11.05.

duly completed Part 1 means a transfer document that has been duly completed in accordance with Part 1 of Form 1, 2, 3, 5, 6 or 7.

execution time, in relation to a transfer document, means:

                (a)    for a sufficient transfer under regulation 7.11.11 — the time when the transfer document was stamped with a stamp purporting to be that of the transferee’s broker; and

               (b)    for a sufficient transfer under regulation 7.11.12 or 7.11.13 — the time when the transfer document was executed by the transferor.

identification code, in relation to a participant, means a code that, for the purposes of the ASTC operating rules, is:

                (a)    the participant’s identification code; or

               (b)    one of its identification codes.

in accordance with includes to the effect of.

issuer of a Division 4 financial product means:

                (a)    an issuer under section 761E of the Act; and

               (b)    any other person identified as an issuer, or treated as an issuer, under the ASTC operating rules.

market licensee, in relation to securities specified in a transfer document, means the market licensee that operates the market for the securities.

7.11.02   Authorised trustee corporation

                For the definition of authorised trustee corporation in section 9 of the Act, each body corporate listed in Schedule 9 is declared to be an authorised trustee corporation for the purposes of a provision in which the expression appears.

7.11.03   Arrangements about Division 4 financial products

         (1)   A financial product is a Division 4 financial product if the financial product is:

                (a)    a Division 3 security other than a security mentioned in paragraph 1073A (1) (e) of the Act; or

               (b)    declared by ASIC, under section 1075A of the Act, to be a financial product the transfer of which will be effected through ASTC under these Regulations.

         (2)   Subregulations (3) to (8) apply in relation to a class of Division 4 financial products that is admitted to quotation.

         (3)   A Division 4 financial product in the class of Division 4 financial products is not taken to have stopped being quoted merely because of a temporary suspension of quotation of the class.

         (4)   If:

                (a)    there is a suspension of the quotation of a Division 4 financial product in the class; and

               (b)    during the suspension, the issuer in relation to the Division 4 financial product ceases to be included in the official list of the market licensee on which the Division 4 financial product is traded;

the Division 4 financial product is taken to stop being quoted when the issuer ceases to be included in the official list.

         (5)   Subregulation (4) does not limit the circumstances in which a Division 4 financial product in the class may be taken to have stopped being quoted on a financial market of a market licensee.

         (6)   For the provisions mentioned in subregulation (8), if:

                (a)    a Division 4 financial product stops being quoted on a financial market of a market licensee; and

               (b)    the ASTC operating rules provide that the Division 4 financial product is to be taken to continue to be quoted for a specified period;

the Division 4 financial product is taken to be quoted during the period.

         (7)   For the provisions mentioned in subregulation (8), if:

                (a)    a Division 4 financial product has been issued; and

               (b)    the Division 4 financial product:

                          (i)    is approved, by a market licensee, to be admitted to quotation on a financial market of the market licensee; and

                         (ii)    has not yet been quoted; and

                (c)    the ASTC operating rules provide that the Division 4 financial product is taken to be quoted for a specified period;

the Division 4 financial product is taken to be quoted during the period.

         (8)   The provisions are:

                (a)    the definitions of:

                          (i)    ASTC certificate cancellation provisions; and

                         (ii)    ASTC-regulated transfer; and

                        (iii)    ASTC subregister; and

                        (iv)    proper ASTC transfer; and

               (b)    section 653A of the Act; and

                (c)    Part 7.11 of the Act; and

               (d)    regulations made for the purposes of Part 7.11 of the Act.

7.11.04   Arrangements for forms

         (1)   A reference in this Part to a form by number is a reference to:

                (a)    the form numbered in that way in Schedule 2A; or

               (b)    a form that has the same effect.

         (2)   If a form in Schedule 2A refers to the full name of the transferor of Division 3 securities, the reference includes a reference to the name of the person shown in the records of the issuer in relation to those securities as the holder of those securities.

7.11.05   Document duly completed in accordance with a particular form

         (1)   Subject to subregulation (2), a document is not duly completed in accordance with one of Forms 1, 2, 3, 4, 5, 6, 7 and 8, or a part of one of those forms, unless the following requirements are met:

                (a)    the document must purport to state the transferee’s name and address where the form or part requires that information;

               (b)    the document must bear a stamp that purports to be the transferor’s broker’s stamp where the form or part requires that information;

                (c)    the document must bear a stamp that purports to be the transferee’s broker’s stamp where the form or part requires that information;

               (d)    the document must bear a stamp that purports to be a market licensee’s stamp where the form or part requires that information.

         (2)   If a document (the first document) relates to particular Division 3 securities, the following paragraphs apply for the purposes of determining whether the first document and another document (the second document) are, together or with 1 or more other documents, a sufficient transfer of the Division 3 securities:

                (a)    the first document is not duly completed in accordance with Part 3 of Form 1, 2, 3, 5, 6 or 7 unless it:

                          (i)    bears a stamp that purports to be the transferee’s broker’s stamp where that part refers to the transferee’s broker’s stamp; and

                         (ii)    sets out a string of characters that purports to be the transfer consolidation number of the first document where that part refers to the transferee’s broker’s stamp;

               (b)    the second document is not duly completed in accordance with Part 1 of Form 4 or 8 unless it sets out a string of characters that purports to be the transfer consolidation number of the first document where that part refers to a transfer consolidation number or transfer consolidation numbers (whether or not it sets out 1 or more strings of characters that do not purport to be the transfer consolidation number);

                (c)    the second document can be duly completed in accordance with Part 1 of Form 4 or 8 even if it does not set out correctly the number of Division 3 securities to which it relates.

Note   If the document mentioned in subregulation (1), or the documents mentioned in subregulation (2), are a sufficient transfer of the Division 3 securities, the document or documents become transfer documents for this Part.

7.11.06   Stamping of documents

         (1)   In this Part (other than regulation 7.11.40):

                (a)    a reference to the stamping of a document is a reference to stamping in ink; and

               (b)    a reference to a stamp on a document, or to a stamp borne by a document, is a reference to a stamp stamped on the document in ink.

         (2)   A reference in regulation 7.11.40 to the stamping of a document is a reference to stamping the document in any manner.

Examples

1   Stamping in ink.

2   Affixing a stamp.

3   Impressing a stamp.

7.11.07   Application of Division 3 of Part 7.11 of the Act to certain bodies

        (1)   For subparagraph 1073C (a) (ii) of the Act, the Westpac Banking Corporation is prescribed.

         (2)   For subparagraph 1073C (b) (iii) of the Act, the Australian Gas Light Company is prescribed.

Note   The effect of section 1073C of the Act is that Division 3 of Part 7.11 of the Act applies to bodies prescribed for that section as if they were companies.

7.11.08   Interests in registered schemes

                For paragraph 1073A (1) (c) of the Act, an interest in a registered scheme is an interest in a registered scheme if the interest:

                (a)    is an interest in a managed investment scheme that is registered under section 601EB of the Act; and

               (b)    is quoted on the financial market of the Australian Stock Exchange Limited.

Division 2              Application of Part 7.11

7.11.09   Application

                This Part applies to conduct engaged in in this jurisdiction or otherwise.

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

7.11.10   Application of Division 3

                This Division is made under section 1073D of the Act, and applies to transfers of Division 3 securities effected otherwise than through a prescribed CS facility.

7.11.11   Sufficient transfer: general

         (1)   A document is a sufficient transfer of Division 3 assets if it:

                (a)    relates to those assets; and

               (b)    is duly completed in accordance with the documentation in any of the following subparagraphs:

                          (i)    Parts 1 and 2 of Form 1;

                         (ii)    Part 1 of Form 1 and Parts 1 and 2 of Form 2 or Form 3;

                        (iii)   Parts 1 and 3 of Form 1 and both parts of Form 4;

                        (iv)    Part 1 of Form 1, Parts 1 and 3 of Form 2 or Form 3 and both parts of Form 4.

         (2)   A document is a sufficient transfer of Division 3 rights if it:

                (a)    relates to those rights; and

               (b)    is duly completed in accordance with the documentation in any of the following subparagraphs:

                          (i)    Parts 1 and 2 of Form 5;

                         (ii)    Part 1 of Form 5 and Parts 1 and 2 of Form 6 or Form 7;

                        (iii)    Parts 1 and 3 of Form 5 and both parts of Form 8;

                        (iv)    Part 1 of Form 5, Parts 1 and 3 of Form 6 or Form 7 and both parts of Form 8.

7.11.12   Sufficient transfer of Division 3 assets: authorised trustee corporation

         (1)   This regulation applies to the transfer of Division 3 assets, otherwise than by way of sale, gift or exchange, by an authorised trustee corporation (whether alone or together with any other person or persons) to the beneficial owner of the Division 3 assets.

         (2)   A document is a sufficient transfer of the Division 3 assets if it:

                (a)    relates to those assets; and

               (b)    is duly completed in accordance with Form 9.

7.11.13   Sufficient transfer of Division 3 rights: authorised trustee corporation

         (1)   This regulation applies to the transfer of Division 3 rights, otherwise than by way of sale, gift or exchange, by an authorised trustee corporation (whether alone or together with any other person or persons) in favour of the beneficial owner of those rights.

         (2)   A document is a sufficient transfer of the Division 3 rights if it:

                (a)    relates to those rights; and

               (b)    is duly completed in accordance with Form 10.

7.11.14   Sufficient transfer

         (1)   A document that is a sufficient transfer of Division 3 assets may be used:

                (a)   as a proper instrument of transfer for section 1071B of the Act; and

               (b)    as an instrument of transfer for the purposes of any other law or instrument governing or relating to those assets.

         (2)   A document that is a sufficient transfer of Division 3 rights may be used as an instrument of transfer of those rights for the purposes of any law or instrument governing or relating to those rights.

7.11.15   Transferee’s execution of transfer of Division 3 assets

         (1)   If Division 3 assets are transferred by means of a sufficient transfer:

                (a)    the transferee is taken to have agreed at the execution time to accept the Division 3 assets subject to the terms and conditions on which the transferor held them at that time; and

               (b)    the terms and conditions are the terms and conditions applicable as between:

                          (i)    the issuer in relation to the Division 3 assets; and

                         (ii)    the holder for the time being of the Division 3 assets.

         (2)   If the Division 3 assets are shares, the transferee is also taken to have agreed, at the execution time:

                (a)    to become a member of the issuer; and

               (b)    to be bound, on being registered as the holder of the shares, by the issuer’s constitution.

7.11.16   Transferee’s execution of transfer of Division 3 rights

         (1)   If Division 3 rights relating to Division 3 assets are transferred by means of a sufficient transfer, the transferee is taken:

                (a)    to have applied at the execution time to the issuer in relation to the Division 3 assets for the issue to the transferee of the Division 3 assets; and

               (b)    to have agreed at the execution time to accept the Division 3 assets subject to the terms and conditions on which the issuer offers them for subscription.

         (2)   If the Division 3 assets are shares, the transferee is also taken to have agreed, at the execution time:

                (a)    to become a member of the issuer; and

               (b)    to be bound, on being registered as the holder of the shares, by the issuer’s constitution.

7.11.17   Transfer document that purports to bear stamp of transferor's broker

         (1)   This regulation applies if a transfer document relating to Division 3 assets or Division 3 rights:

                (a)    is a duly completed Part 1; and

               (b)    bears a stamp that purports to be a stamp of the transferor’s broker (the designated broker).

         (2)   Each associate (if any) of the designated broker is taken to have warranted:

                (a)    that the statements in the transfer document that purport to be certified by the designated broker are accurate; and

               (b)   that the transferor is:

                          (i)    the registered holder of, or entitled to be registered as the holder of, the Division 3 assets; or

                         (ii)    is entitled to the Division 3 rights;

                        and is legally entitled or authorised to sell or dispose of the Division 3 assets or Division 3 rights.

         (3)   If the designated broker is not a broker’s agent, the designated broker is taken to have warranted:

                (a)    that the statements in the transfer document that purport to be certified by the designated broker are accurate; and

               (b)   that the transferor is:

                          (i)    the registered holder of, or entitled to be registered as the holder of, the Division 3 assets; or

                         (ii)    is entitled to the Division 3 rights;

                        and is legally entitled or authorised to sell or dispose of the Division 3 assets or Division 3 rights.

         (4)   The following additional arrangements apply if the transfer document has been duly completed in accordance with Part 1 of Form 1 or Form 5:

                (a)    if, when the transfer document was stamped with the stamp mentioned in paragraph (1) (b), the designated broker had authority to sell the Division 3 assets or Division 3 rights, on the transferor’s behalf, to:

                          (i)    the transferee; or

                         (ii)    particular persons who include, or particular classes of persons at least one of which includes, the transferee; or

                        (iii)    any person at all;

                        the designated broker is taken to have been authorised to execute, and to have executed, the transfer document on the transferor’s behalf;

               (b)    each associate (if any) of the designated broker is liable to indemnify:

                          (i)    the issuer in relation to the Division 3 assets or Division 3 rights; and

                         (ii)    the transferor; and

                        (iii)    the transferee; and

                        (iv)    the transferee’s broker;

                        against any loss or damage arising if:

                         (v)    the stamp mentioned in paragraph (1) (b) is not the designated broker’s stamp; or

                        (vi)    apart from paragraph (a), the designated broker was not authorised to execute the transfer document on the transferor’s behalf;

                (c)    if the designated broker is not a broker’s agent, the designated broker is liable to indemnify:

                          (i)    the issuer in relation to the Division 3 assets or Division 3 rights; and

                         (ii)    the transferor; and

                        (iii)    the transferee; and

                        (iv)    the transferee’s broker;

                        against any loss or damage arising if:

                         (v)    the stamp mentioned in paragraph (1) (b) is not the designated broker’s stamp; or

                        (vi)    apart from paragraph (a), the designated broker was not authorised to execute the transfer document on the transferor’s behalf.

7.11.18   Warranties by market licensee if transfer document purports to bear its stamp

         (1)   This regulation applies if a transfer document:

                (a)    has been duly completed in accordance with Part 1 of Form 3 or Form 7; and

               (b)    bears a stamp that purports to be a stamp of a market licensee.

         (2)   The market licensee is taken to have warranted that:

                (a)    the statements in the transfer document that purport to be certified by a market licensee are accurate; and

               (b)    the transferor is:

                          (i)    the registered holder of, or entitled to be registered as the holder of, the Division 3 assets; or

                         (ii)    entitled to the Division 3 rights;

                        and is legally entitled or authorised to sell or dispose of the Division 3 assets or Division 3 rights.

7.11.19   Indemnities by market licensee and broker if transfer document purports to bear their stamps

         (1)   This regulation applies if:

                (a)    a transfer document (the first document) relating to Division 3 assets or Division 3 rights:

                          (i)    has been duly completed in accordance with Part 1 of Form 1 or Form 5; and

                         (ii)    bears a stamp that purports to be the stamp of the transferor’s broker; and

               (b)    another transfer document:

                          (i)    relates to any or all of the Division 3 assets or Division 3 rights; and

                         (ii)    has been duly completed in accordance with Part 1 of Form 3 or Form 7; and

                        (iii)    bears a stamp that purports to be the stamp of a market licensee.

         (2)   The market licensee is liable to indemnify:

                (a)    the issuer in relation to the Division 3 assets or Division 3 rights; and

               (b)    the transferor in relation to the other document; and

                (c)    the transferee in relation to the other document; and

               (d)    the broker of the transferee in relation to the other document;

against any loss or damage arising if:

                (e)    the stamp mentioned in subparagraph (1) (a) (ii) is not the stamp of the transferor’s broker; or

                (f)    apart from paragraph 7.11.17 (4) (a), the designated broker was not authorised to execute the first document on behalf of the transferor in relation to the first document.

         (3)   Each associate (if any) of the transferor’s broker is liable to indemnify the market licensee against any loss or damage arising as mentioned in subregulation (2).

         (4)   If the transferor’s broker is not a broker’s agent, the transferor’s broker is liable to indemnify the market licensee against any loss or damage arising as mentioned in subregulation (2).

         (5)   Nothing in this regulation limits the operation of anything in regulation 7.11.17 or 7.11.18 or of anything else in this regulation.

7.11.20   Joint and several warranties and liabilities

         (1)   If 2 or more persons are taken to have warranted in the terms mentioned in paragraphs 7.11.17 (2) (a) and (b) or 7.11.17 (3) (a) and (b), the persons are taken to have warranted jointly and severally.

         (2)   If 2 or more persons are liable as mentioned in paragraph 7.11.17 (4) (b) or (c), or subregulation 7.11.19 (3) or (4), the persons are liable jointly and severally.

7.11.21   Registration of certain instruments

         (1)   This regulation applies if a sufficient transfer under this Part is lodged with a company for the purpose of:

                (a)    registering a transfer of Division 3 assets; or

               (b)    obtaining the issue of Division 3 assets.

         (2)   If the sufficient transfer is a transfer under regulation 7.11.11, the company and its officers are, in the absence of knowledge to the contrary, entitled to assume without inquiry that:

                (a)    a stamp on the transfer document that purports to be the transferor’s broker’s stamp is the stamp of that broker; and

               (b)    a stamp on the transfer document that purports to be the transferee’s broker’s stamp is the stamp of that broker; and

                (c)    a stamp on the transfer document that purports to be the stamp of a market licensee is the stamp of that market licensee.

         (3)   If the sufficient transfer is a transfer under regulation 7.11.12 or 7.11.13, the company and its officers are, in the absence of knowledge to the contrary, entitled to assume without inquiry that:

                (a)    at the execution time, the authorised trustee corporation named in the instrument held (whether alone or together with any other person or persons) in the ordinary course of its business, in trust for or on behalf of the transferee, the Division 3 assets or Division 3 rights to which the sufficient transfer relates; and

               (b)    the transfer was not made by way of a sale, gift or exchange of the Division 3 assets or Division 3 rights.

7.11.22   Details to be included in instrument of transfer

                For subsection 1071B (3) of the Act, the State or Territory in this jurisdiction in which the company is taken to be registered is a prescribed detail.

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

7.11.23   Application of Division 4

                This Division is made under sections 1074A and 1074E of the Act, and applies to transfers of Division 4 financial products effected through ASTC.

Note   ASTC — the ASX Settlement and Transfer Corporation Pty Limited — is a prescribed CS facility for the Act.

7.11.24   Application of ASTC operating rules

                If the ASTC operating rules include provisions determining:

                (a)    which participant effected a proper ASTC transfer; or

               (b)    when a proper ASTC transfer takes effect;

those provisions have effect for this Division.

7.11.25   Participant’s authority to enter into transaction continues despite client’s death

         (1)   This regulation applies if:

                (a)    a person authorises a participant to enter into a transaction involving the disposal of a Division 4 financial product (for example, a sale); and

               (b)    the person dies before the participant enters into the transaction; and

                (c)    the authority is still in force immediately before the person dies.

         (2)   The authority continues, despite the person’s death, as if the person were still alive.

         (3)   If the participant enters into the transaction while the authority so continues, the transaction is binding on the person’s legal representative.

         (4)   The authority can be revoked by the person’s legal representative in any way that the person could have revoked it while the person was alive.

7.11.26   Authority to enter into transaction gives authority to transfer

         (1)   This regulation applies if a person authorises a participant to enter into a transaction involving the disposal of a Division 4 financial product (for example, a sale).

         (2)   The person is taken to have authorised the participant to effect any proper ASTC transfer of the Division 4 financial product that the participant effects, whether or not the transfer has any connection with the transaction.

Note   The transfer may have no connection with the transaction because of the operation of the provisions of the ASTC operating rules mentioned in subregulation 7.5.41 (1).

         (3)   The authority that the person is taken by subregulation (2) to have given:

                (a)    is revoked if, before the transaction is entered into, the authority to enter into the transaction is revoked or otherwise ceases to have effect; and

               (b)    cannot otherwise be revoked.

         (4)   If the person dies after the transaction is entered into, the authority:

                (a)    continues in force, despite the person’s death, as if the person were still alive; and

               (b)    cannot be revoked.

         (5)   If:

                (a)    the authority mentioned in subregulations (1) and (2) is given to a participant mentioned in paragraph (b) of the definition of participant in section 761A of the Act (the transacting participant); and

               (b)    under the market licensee’s operating rules, a participant mentioned in paragraph (a) of the definition of participant in section 761A of the Act (the clearing participant) has the function of completing the relevant transaction;

the clearing participant has the same authority as the transacting participant has under subregulations (1) and (2).

7.11.27   Effect of proper ASTC transfer on transferee: Division 4 financial products other than rights

         (1)   If a proper ASTC transfer of a Division 4 financial product (other than rights) takes effect at a particular time:

                (a)    the transferee is taken to have agreed at that time to accept the Division 4 financial product subject to the terms and conditions on which the transferor held them immediately before that time; and

               (b)    the terms and conditions are the terms and conditions applicable as between the issuer in relation to, and the holder for the time being of, the Division 4 financial product.

         (2)   If the Division 4 financial product is shares, the transferee is also taken to have agreed at that time:

                (a)    to become a member of the issuer; and

               (b)    to be bound by the issuer’s constitution.

         (3)   If the Division 4 financial product is an interest in a managed investment scheme, the transferee is also taken to have agreed at that time:

                (a)    to become a member of the managed investment scheme; and

               (b)    to be bound by the constitution of the managed investment scheme to the extent that:

                          (i)    the transferee will comply with any requirement imposed on the transferee by the constitution; and

                         (ii)    the transferee will not impede compliance by another person with any requirement imposed on the other person by the constitution.

         (4)   In this regulation:

right means a right, whether existing or future, and whether contingent or not, of a person to have any of the following issued to the person, whether or not on payment of any money or for any other consideration:

                (a)    a share in a company (including a body to which section 1073C of the Act applies);

               (b)    a debenture of a company (including a body to which section 1073C of the Act applies);

                (c)    an interest in a registered scheme mentioned in regulations made under paragraph 1073A (1) (c) of the Act.

7.11.28   Effect of proper ASTC transfer on transferee: rights

         (1)   If a proper ASTC transfer of a Division 4 financial product that is rights (other than rights that relate to an interest in a managed investment scheme) takes effect at a particular time, the transferee is taken:

                (a)    to have applied at that time to the issuer in relation to the rights for the issue to the transferee of the Division 4 financial product to which the rights relate; and

               (b)    to have agreed at that time to accept the Division 4 financial product to which the rights relate subject to the terms and conditions on which the issuer offers them for subscription.

         (2)   If the Division 4 financial product to which the rights (other than rights that relate to an interest in a managed investment scheme) relate is shares, the transferee is also taken to have agreed, at that time:

                (a)    to become a member of the issuer; and

               (b)    to be bound, on being registered as the holder of the shares, by the issuer’s constitution.

         (3)   If the Division 4 financial product is a right to an interest in a managed investment scheme, the transferee is also taken to have agreed at that time:

                (a)    to have applied at that time to the responsible entity in relation to the rights for the issue to the transferee of the interest in a managed investment scheme to which the rights relate; and

               (b)    to have agreed at that time to accept the interest in a managed investment scheme to which the rights relate subject to the terms and conditions on which they are offered by the responsible entity; and

                (c)    to become a member of the managed investment scheme; and

               (d)    to be bound by the constitution of the managed investment scheme to the extent that:

                          (i)    the transferee will comply with any requirement imposed on the transferee by the constitution; and

                         (ii)    the transferee will not impede compliance by another person with any requirement imposed on the other person by the constitution.

         (4)   In this regulation:

right means a right, whether existing or future, and whether contingent or not, of a person to have any of the following issued to the person, whether or not on payment of any money or for any other consideration:

                (a)    a share in a company (including a body to which section 1073C of the Act applies);

               (b)    a debenture of a company (including a body to which section 1073C of the Act applies);

                (c)    an interest in a registered scheme mentioned in regulations made under paragraph 1073A (1) (c) of the Act.

7.11.29   Warranties by participant if identification code is included in transfer document

         (1)   This regulation applies if the transfer document for a proper ASTC transfer of a Division 4 financial product includes a participant’s identification code as the identification code of the participant effecting the transfer.

         (2)   If the participant is the transferor, the participant is taken to have warranted that:

                (a)    the transfer was effected by the participant; and

               (b)    the transferor was legally entitled or authorised to transfer the Division 4 financial product.

         (3)   Subregulation (4) applies if:

                (a)    the participant is not the transferor; and

               (b)    the transfer is pursuant to a transaction in relation to which, or to transactions in relation to each of which, one of the following conditions is satisfied:

                          (i)    the transaction was entered into in the ordinary course of trading on a financial market;

                         (ii)    the transaction is, under the operating rules of a market licensee, described, or to be described, as ‘special’ when it is reported to the market licensee.

         (4)   The participant is taken to have warranted that:

                (a)    the transferor was legally entitled or authorised to transfer the Division 4 financial product; and

               (b)    the transfer was effected by the participant; and

                (c)    the participant was authorised by the transferor to effect the transfer.

         (5)   Subregulation (6) applies if:

                (a)    the participant is not the transferor; and

               (b)    the transfer is not pursuant to a transaction in relation to which, or to transactions in relation to each of which, one of the following conditions is satisfied:

                          (i)    the transaction was entered into in the ordinary course of trading on a financial market;

                         (ii)    the transaction is, under the operating rules of a market licensee, described, or to be described, as ‘special’ when it is reported to the market licensee.

         (6)   The participant is taken to have warranted that:

                (a)    the transfer was effected by the participant; and

               (b)    the participant was authorised by the transferor to effect the transfer.

7.11.30   Indemnities in respect of warranted matters: transfer not effected by the participant

         (1)   This regulation applies if:

                (a)    a participant is taken by regulation 7.11.29 to have warranted, in relation to a proper ASTC transfer of a Division 4 financial product, that the transfer was effected by the participant; and

               (b)    the transfer was not effected by the participant.

         (2)   The participant is liable to indemnify each of the following against any loss or damage arising from the transfer not having been effected by the participant:

                (a)    the issuer in relation to the Division 4 financial product;

               (b)    the transferor;

                (c)    the transferee;

               (d)    if a participant acted as the transferee’s agent in the transfer — that participant;

                (e)    the prescribed CS facility operated by ASTC;

                (f)    TNS Clearing Pty Limited.

         (3)   For this regulation, the effect of regulation 7.11.26 is to be disregarded in determining whether a person:

                (a)    was legally entitled or authorised to transfer Division 4 financial products; or

               (b)    was authorised by another person to effect a transfer of Division 4 financial products.

7.11.31   Indemnities in respect of warranted matters: transferor not legally entitled or authorised to transfer Division 4 financial products

         (1)   This regulation applies if:

                (a)    a participant is taken by regulation 7.11.29 to have warranted, in relation to a proper ASTC transfer of a Division 4 financial product, that the transferor was legally entitled or authorised to transfer the Division 4 financial product; and

               (b)    the transferor was not legally entitled or authorised to transfer the Division 4 financial product.

         (2)   The participant is liable to indemnify each of the following against any loss or damage arising from the transferor not having been legally entitled or authorised to transfer the Division 4 financial product:

                (a)    the issuer in relation to the Division 4 financial product;

               (b)    the transferee;

                (c)    if a participant acted as the transferee’s agent in the transfer — that participant;

               (d)    the prescribed CS facility operated by ASTC;

                (e)    TNS Clearing Pty Limited.

         (3)   For this regulation, the effect of regulation 7.11.26 is to be disregarded in determining whether a person:

                (a)    was legally entitled or authorised to transfer Division 4 financial products; or

               (b)    was authorised by another person to effect a transfer of Division 4 financial products.

7.11.32   Indemnities in respect of warranted matters: participant not authorised to effect transfer

         (1)   This regulation applies if:

                (a)    a participant is taken by regulation 7.11.29 to have warranted, in relation to a proper ASTC transfer of a Division 4 financial product, that the participant was authorised by the transferor to effect the transfer; and

               (b)    the participant was not authorised by the transferor to effect the transfer.

         (2)   The participant is liable to indemnify each of the following against any loss or damage arising from the participant not having been authorised by the transferor to effect the transfer:

                (a)    the issuer in relation to the Division 4 financial product;

               (b)    the transferor;

                (c)    the transferee;

               (d)    if a participant acted as the transferee’s agent in the transfer — that participant;

                (e)    the prescribed CS facility operated by ASTC;

                (f)    TNS Clearing Pty Limited.

         (3)   For this regulation, the effect of regulation 7.11.26 is to be disregarded in determining whether a person:

                (a)    was legally entitled or authorised to transfer Division 4 financial products; or

               (b)    was authorised by another person to effect a transfer of Division 4 financial products.

7.11.33   Joint and several warranties and liabilities

         (1)   If 2 or more persons are taken to have warranted in the terms mentioned in subregulation 7.11.29 (2), (4) or (6), the persons are taken to have warranted jointly and severally.

         (2)   If 2 or more persons are liable as mentioned in regulation 7.11.30, 7.11.31 or 7.11.32, the persons are liable jointly and severally.

7.11.34   ASTC entitled to assume its operating rules complied with

         (1)   This regulation applies if the prescribed CS facility operated by ASTC assumes without inquiry, in the absence of knowledge to the contrary, that anything purporting to be done under the ASTC operating rules in connection with a transfer of a Division 4 financial product has been done in accordance with those rules.

         (2)   If the prescribed CS facility operated by ASTC assumes, in reliance on subregulation (1), that a thing was done in accordance with the ASTC operating rules, the thing is taken to have been done in accordance with those rules.

         (3)   If the prescribed CS facility operated by ASTC:

                (a)    acts on behalf of the issuer in relation to a Division 4 financial product; and

               (b)    as part of that function assumes, in reliance on subregulation (1), that a thing was done in accordance with the ASTC operating rules;

the issuer is also taken to assume, and to be entitled to assume, that the thing was done in accordance with the ASTC operating rules.

7.11.35   ASTC-regulated transfer not to be registered unless proper ASTC transfer

         (1)   The issuer in relation to a Division 4 financial product must not register, or otherwise give effect to, an ASTC-regulated transfer of the Division 4 financial product unless the transfer is a proper ASTC transfer.

         (2)   Subregulation (1) has effect despite anything in:

                (a)    the issuer’s constitution; or

               (b)    a deed relating to debentures; or

                (c)    the constitution of a registered scheme; or

               (d)    a deed relating to interests.

7.11.36   Issuer not to refuse to register proper ASTC transfer

                The issuer in relation to a Division 4 financial product must not:

                (a)    refuse or fail to register a proper ASTC transfer of the Division 4 financial product; or

               (b)    refuse or fail to give effect to a proper ASTC transfer of the Division 4 financial product.

7.11.37   Determination of who holds Division 4 financial products for the purposes of meeting

         (1)   This regulation applies to a meeting of the holders of securities of a body corporate if some or all of the securities are Division 4 financial products.

         (2)   The convener of the meeting may determine that all the securities of the body corporate that are Division 4 financial products at a specified time before the meeting are taken, for the purposes of the meeting, to be held by the persons who held them at the specified time.

         (3)   The specified time:

                (a)    must satisfy any applicable requirements of the ASTC operating rules; but

               (b)    in any case, must not be more than 48 hours before the meeting.

         (4)   The convenor must make a determination:

                (a)    in accordance with any applicable requirements of the ASTC operating rules as to the way in which it must be made; but

               (b)    in any case, before notice of the meeting is given.

         (5)   The convenor must include particulars of the determination in the notice of the meeting.

         (6)   However, a failure to include particulars of the determination in the notice of the meeting does not invalidate the determination.

         (7)   The convenor’s determination has effect accordingly despite anything in:

                (a)    the Act; and

               (b)    these Regulations; and

                (c)    any other law (written or unwritten) that applies to the meeting; and

               (d)    any document that applies to the meeting (for example, the body corporate’s constitution or any relevant trust deed).

7.11.38   Determination of who holds Division 4 financial products in class of Division 4 financial products for the purposes of meeting

         (1)   This regulation applies to a meeting of the holders of a class of securities of a body corporate if some or all of the securities in that class are Division 4 financial products.

         (2)   The convener of the meeting may determine that all the securities of the body corporate in the relevant class that are Division 4 financial products at a specified time before the meeting are taken, for the purposes of the meeting, to be held by the persons who held them at the specified time.

         (3)   The specified time:

                (a)    must satisfy any applicable requirements of the ASTC operating rules; but

               (b)    in any case, must not be more than 48 hours before the meeting.

         (4)   The convenor must make a determination:

                (a)    in accordance with any applicable requirements of the ASTC operating rules as to the way in which it must be made; but

               (b)    in any case, before notice of the meeting is given.

         (5)   The convenor must include particulars of the determination in the notice of the meeting.

         (6)   However, a failure to include particulars of the determination in the notice of the meeting does not invalidate the determination.

         (7)   The convenor’s determination has effect accordingly despite anything in:

                (a)    the Act; and

               (b)    these Regulations; and

                (c)    any other law (written or unwritten) that applies to the meeting; and

               (d)    any document that applies to the meeting (for example, the body corporate’s constitution or a relevant trust deed).

7.11.39   Determination of who holds Division 4 financial products for the purposes of conferring security benefits

         (1)   If the ASTC operating rules include provisions relating to the determination, for the purposes of conferring security benefits, of who holds or is taken to hold Division 4 financial products at a particular time, those provisions have effect accordingly despite anything in:

                (a)    the Act; and

               (b)    these Regulations; and

                (c)    any other law (written or unwritten) that applies to the conferral; and

               (d)    any document that applies to the conferral (for example, the body corporate’s constitution or a relevant trust deed).

         (2)   In subregulation (1), conferring a security benefit means:

                (a)    paying or transferring money or property to a person because the person holds or held a Division 4 financial product; or

               (b)    issuing securities to a person because the person holds or held a Division 4 financial product; or

                (c)    conferring a right on a person because the person holds or held a Division 4 financial product.

Division 5              Offences

7.11.40   Stamping of broker’s stamp on sufficient transfer

         (1)   A broker must not stamp with a broker’s stamp a document (a transfer document) that:

                (a)    relates to Division 3 securities; and

               (b)    may be used as a sufficient transfer under this Part;

unless the transfer document relates to a sale or purchase of the Division 3 securities, in the ordinary course of the broker’s business, for a consideration of not less than their unencumbered market value at the time of the sale or purchase.

         (2)   A person must not stamp a transfer document with a stamp that purports to be that of the transferor’s broker unless:

                (a)    the stamp is the stamp of the transferor’s broker; and

               (b)    apart from paragraph 7.11.17 (4) (a), the transferor’s broker is authorised to execute the document on the transferor’s behalf; and

                (c)    the person is:

                          (i)    the transferor’s broker; or

                         (ii)    authorised to stamp the document on the transferor’s broker’s behalf.

         (3)   A market licensee must not stamp with a stamp of the market licensee a document that may be used as a sufficient transfer under this Part of Division 3 securities unless:

                (a)    a duly completed Part 1, relating to the Division 3 securities, has been lodged with the issuer in relation to the Division 3 securities; or

               (b)    the market licensee holds a duly completed Part 1 that:

                          (i)    bears a certificate that purports to be that of the transferor’s broker; and

                         (ii)    states that a duly completed Part 1, relating to the Division 3 securities, has been lodged or will be lodged with the issuer in relation to the Division 3 securities.

         (4)   A person must not execute a document that:

                (a)    may be used as a sufficient transfer under regulation 7.11.12 or 7.11.13; and

               (b)    relates to a transfer of Division 3 securities:

                          (i)    made by way of a sale, gift or exchange of the Division 3 securities; or

                         (ii)    to or in favour of a person who is not the beneficial owner of the Division 3 securities.

         (5)   A person who is not an authorised trustee corporation must not knowingly cause, authorise or permit to be executed a document that:

                (a)    relates to Division 3 securities; and

               (b)    may be used as a sufficient transfer under regulation 7.11.12 or 7.11.13;

but is not a sufficient transfer under that regulation.

         (6)   A person must not knowingly lodge or cause to be lodged with a company a document that has been:

                (a)    stamped in contravention of subregulation (1), (2) or (3); or

               (b)    executed in contravention of subregulation (4);

for the purpose of securing the registration of the transfer of, or the issue of, Division 3 securities to the transferee named in the document.

7.11.41   Inclusion of identification codes in proper ASTC transfers

                A person must not include a participant’s identification code in a document that may be used to effect a proper ASTC transfer unless:

                (a)    the person:

                          (i)    is the participant; or

                         (ii)    is authorised so to include the identification code by the participant; and

               (b)    if:

                          (i)    the identification code is so included as the identification code of the participant effecting the transfer; and

                         (ii)    the participant is not the transferor;

                        the participant is, apart from the effect of regulation 7.11.26, authorised by the transferor to effect the transfer.

7.11.42   Contravention by participant of the ASTC certificate cancellation provisions relating to use of cancellation stamps

                A participant must not, intentionally or recklessly, contravene the ASTC certificate cancellation provisions by affixing, or failing to affix, a cancellation stamp to a certificate or other document of title to a Division 4 financial product.

Division 6              Civil liability

7.11.43   Contravention by participant of the ASTC certificate cancellation provisions

         (1)   This regulation applies to a person who suffers loss or damage because of conduct of a participant that was engaged in a contravention of the ASTC certificate cancellation provisions.

         (2)   The person may, unless the person was involved in the contravention, recover the amount of the loss or damage by action against the participant, whether or not the participant has been convicted of an offence in respect of the contravention.

         (3)   An action under subregulation (2) must be begun within 6 years after the day on which the cause of action arose.

         (4)   This regulation does not affect a liability that a person has under any other law.

         (5)   For section 1310B of the Act, an action under subregulation (2) is taken to be a proceeding in respect of loss or damage arising out of a contravention of the Act.

Part 7.12            Miscellaneous

7.12.01   Destruction of records by ASIC

                For paragraph 1101D (b) of the Act, the period of possession is 7 years.

[16]      Paragraph 9.1.01 (l)

omit

of the Act.

insert

of the Act;

[17]      After paragraph 9.1.01 (l)

insert

              (m)    the register in respect of financial services licensees mentioned in subsection 922A (2) of the Act;

               (n)    the register in respect of authorised representatives of financial services licensees mentioned in subsection 922A (2) of the Act;

               (o)    the register in respect of persons against whom a banning order or disqualification order is made mentioned in subsection 922A (2) of the Act.

[18]      Paragraph 9.1.02 (l)

omit

official liquidator.

insert

official liquidator;

[19]      After paragraph 9.1.02 (l)

insert

              (m)    in relation to the register in respect of financial services licensees mentioned in subsection 922A (2) of the Act:

                          (i)    all of the information in the register which ASIC considers appropriate for a person to search in accordance with subsection 1274A (3) of the Act; or

                         (ii)    all of the information in the register which ASIC considers appropriate to make available in accordance with subsection 1274A (4) of the Act;

               (n)    in relation to the register in respect of authorised representatives of financial services licensees mentioned in subsection 922A (2) of the Act:

                          (i)    all of the information in the register which ASIC considers appropriate for a person to search in accordance with subsection 1274A (3) of the Act; or

                         (ii)    all of the information in the register which ASIC considers appropriate to make available in accordance with subsection 1274A (4) of the Act;

               (o)    in relation to the register in respect of persons against whom a banning order or disqualification order is made mentioned in subsection 922A (2) of the Act:

                          (i)    all of the information in the register which ASIC considers appropriate for a person to search in accordance with subsection 1274A (3) of the Act; or

                         (ii)    all of the information in the register which ASIC considers appropriate to make available in accordance with subsection 1274A (4) of the Act.

[20]      Regulation 9.4A.01, definition of issuing body

substitute

issuer has the same meaning as in section 761E of the Act.

[21]      Subregulation 9.4A.02 (1)

omit

an issuing body

insert

an issuer that is required to keep 1 or more registers

[22]      Subregulation 9.4A.02 (2)

omit

an issuing body

insert

an issuer that is required to keep 1 or more registers

[23]      After Part 10.1

insert

Part 10.2            Transitional arrangements for the commencement of the Financial Services Reform Act 2001

Division 1              Preliminary

10.2.01   Application of Part 10.2

                For Part 10.2 of the Act, this Part deals with matters of a transitional, saving or application nature relating to amendments made by the Financial Services Reform Act 2001 and the transition from the application of the old legislation to the application of the new legislation.

Note   Part 10.2 contains a number of regulation-making powers that relate to matters of a transitional, saving and application nature.

10.2.02   Definitions

                In this Part:

futures body means any of the following bodies:

                (a)    a futures exchange;

               (b)    a clearing house for a futures exchange; </