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ASIC Class Order [CO 02/294]

Authoritative Version
CO 02/294 Orders/ASIC Class Orders as amended, taking into account amendments up to ASIC Class Order [CO 07/480]
Administered by: Treasury
Registered 25 May 2012
Start Date 02 Jul 2007
End Date 01 Jul 2013
Date of repeal 01 Jul 2013
Repealed by ASIC Class Order [CO 13/763]

ASIC Class Order [CO 02/294]

Investor directed portfolio services

This instrument has effect under s601QA(1)(a),  741(1)(a),  992B(1)(a) and  1020F(1)(a) of the Corporations Act 2001.

This compilation was prepared on 14 January 2008 taking into account amendments up to [CO 07/480]. See the table at the end of this class order.

Prepared by the Australian Securities and Investments Commission.

Australian Securities and Investments Commission
Corporations Act — Paragraphs  601QA(1)(a),  741(1)(a),  992B(1)(a) and  1020F(1)(a) — Revocation and Exemption

Under paragraphs 601QA(1)(a) and 741(1)(a) of the Corporations Act 2001 (“the Act”), the Australian Securities and Investments Commission (“ASIC”) hereby revokes Class Order [00/210].

Under paragraphs 601QA(1)(a), 741(1)(a), 992B(1)(a) and 1020F(1)(a) of the Act ASIC hereby gives the following exemptions to the extent and on the conditions specified in relation to each of them.

1      Interpretation

In this instrument:

“accessible financial products” means financial products that may be held through an IDPS.

“accessible investments” means assets that may be held through an IDPS, including accessible securities and accessible financial products.

“accessible securities” means securities that may be held through an IDPS.

“annual investor statement” means the report referred to in paragraph 2(e)(xiii)(A).

“associated provisions” has the same meaning as in section  1410 of the Act.

“custodian” means a person (other than a client) that holds property to which an IDPS relates (the custodian may also be an operator of the IDPS).

“disclosure document” means a prospectus, a profile statement or an offer information statement a copy of which is lodged with ASIC, or a document required by an instrument under section 601QA or section 741 of the Act setting out information about offers of accessible securities.

“distribution reinvestment plan” means a written arrangement between the client and the operator to the effect that the client instructs the operator to:

(a)   reinvest distributions from specified accessible investments held through the IDPS by the client in some or all of the accessible investments held through the IDPS by the client; and

(b)   carry out the reinvestment of distributions referred to in paragraph (a) according to an agreed method,

where before entering into the arrangement the client has been given an IDPS Guide containing a statement to the effect that the client may not have the current Product Disclosure Statement for an accessible financial product at the time an additional holding of the accessible financial product is acquired under the distribution reinvestment plan.

“IDPS” means an investor directed portfolio service, consisting of a number of functions including a custody, settlement and reporting system and service with the following features:

(a)   the clients of the service have the sole discretion to decide what (but not necessarily when) assets will be acquired or disposed of, except where:

(i)    there are any prior written directions to acquire or dispose of a particular asset in particular circumstances that the client has agreed not to vary (other than on the exercise of any discretion on the part of an operator); or

(ii)   the client has authorised the operator or another  person to give directions on their behalf, for the purpose of the  other person receiving or securing payment of moneys owing by the client to the person; and

(b)   subject to any prior contrary directions in order to ensure payment of moneys for which the client is liable, a client may direct the operator to:

(i)    take reasonable steps to transfer assets to or to the order of the client;

(ii)   realise assets held on account for the client and  either:

(A)  pay the proceeds to or to the order of the client; or

(B)  if the operator and the client agree, hold the proceeds under the IDPS in an account with an Australian ADI designated as a trust account,

       unless the assets cannot be transferred or realised under law or the terms of their issue; and

(c)   except where otherwise mentioned in paragraph (a) or (b), any discretion of the holder of assets held through the service may be exercised only in accordance with the directions from time to time of the relevant client; and

(d)  the service is provided in such a way that clients are led to expect, and are likely to receive, benefits in the form of:

(i)    access to investments that the client could not otherwise access directly; or

(ii)   cost reductions by using assets contributed by the client or derived directly or indirectly from assets contributed by the client with assets contributed by other clients or derived directly or indirectly from assets contributed by other clients.

Note: Cost reductions may arise from the pooling of client funds to make large investments that can be acquired on more favourable terms than if the investments were made by each client on their own behalf. They may also arise from the “netting” of transactions whereby directions of clients to buy and sell assets are offset against each other and a transaction for the net amount is entered into.

“IDPS contract” means a contract between an operator and a client under which the operator provides the client with an IDPS or the performance of some functions which together with others constitute an IDPS.

“IDPS financial year” means each period not exceeding one year ending 30 June and commencing on 1 July.

“IDPS Guide” means:

(a)   a document relating to an IDPS that contains the information described in paragraph 2(f); or

(b)   more than one document (other than a Supplementary IDPS Guide) relating to an IDPS that taken together contain the information described in paragraph 2(f) where:

(i)    each document is given to the client at the same time; and

(ii)   each document refers to each other document.

If there are or may be different versions of a document of the kind referred to in paragraph (b), the reference required by subparagraph (b)(ii) does not have to identify any particular one of those versions and may instead identify the document generically.

Note: Even where a Supplementary IDPS Guide is given at the same time as an IDPS Guide that consists of more than one document, it is not treated as one of those documents. A Supplementary IDPS Guide is required to meet the specific identification requirements in paragraph (b) of the definition of Supplementary IDPS Guide.

 

“IDPS-like scheme” has the same meaning as in ASIC Class Order [CO 02/296] or any class order that replaces that class order.

“issuer” means a person who is capable of issuing, transferring or making available accessible securities.

“NCS” has the same meaning as in ASIC Class Order [CO 02/295] or any class order that replaces that class order.

“operator” means a holder of a financial services licence that includes a condition requiring the holder to comply with the requirements of this instrument, who contracts with a client for the provision of the IDPS or a function that forms part of the IDPS.

“quarter’s end” means, in relation to electronic access to information under subparagraph 2(e)(xii)(B):

 (a) the end of the day that is a quarter day; or

 (b) where such access is not given at the time mentioned in paragraph (a)—the time at which access is first given after that time.

 “regular savings plan” means a written arrangement between the client and the operator to the effect that:

(a)   the client instructs the operator to acquire specified accessible financial products by way of periodic payments of a specified amount and at specified intervals (each such acquisition is referred to below as a “regular savings acquisition”);

(b)   the client acknowledges that under the regular savings plan a regular savings acquisition of an accessible financial product may occur without the client having been given a current Product Disclosure Statement or Supplementary Product Disclosure Statement (each a “missing document”) in relation to the accessible financial product;

(c)   the operator agrees to give to the client any missing document relating to an accessible financial product (unless this  would not be required under this instrument if the acquisition were not under a regular savings plan) that may be acquired under the regular savings plan as soon as reasonably practicable and in any event by the fifth business day after the issue of the document; and

(d)  the client acknowledges that regular savings acquisitions will continue to be made under the regular savings plan until the client instructs the operator otherwise or the arrangement constituting the regular savings plan is terminated; and

where the client:

(e)   before entering into the arrangement has been given an IDPS Guide containing a statement; and

(f)   has been given advice quarterly in writing,

to the effect that the client may not have the current Product Disclosure Statement for an accessible financial product at the time a regular savings acquisition of the accessible financial product is made.

“regulated acquisition” has the same meaning as in section 1012IA of the Act.

“representative” has the meaning given by section 910A of the Act.

“rights issue” means an issue of securities to a holder of securities pursuant to a right given to the holder as a holder.

“Supplementary IDPS Guide” means a document:

(a)        by which a person who has prepared an IDPS Guide can:

(i)    correct a misleading or deceptive statement in the IDPS Guide; or

(ii)   correct an omission from the IDPS Guide of information described in paragraph (2)(f); or

(iii)  update the information contained in the IDPS Guide; and

(b)   which has at the beginning:

(i)    a statement that it is a Supplementary IDPS Guide; and

(ii)   an identification of the IDPS Guide that it supplements; and

(iii)  a statement that it is to be read together with that IDPS Guide and any other specified Supplementary IDPS Guides; and

(c)   which is dated with the date on which the Supplementary IDPS Guide was prepared or the preparation was completed.

 “transactional functions” means:

(a)   acquisition and disposal of accessible investments in accordance with the instructions of the client or otherwise in accordance with the terms of the IDPS contract; or

(b)   maintenance of records of investments of clients for the purposes of consolidated reporting functions under the IDPS.

Note:  In this instrument a reference to doing an act, such as for example giving a document, includes a reference to causing or authoring it to be done: section 52 of the Act; paragraph 46(1)(a) of the Acts Interpretation Act 1901.

2      Operators

An operator of an IDPS is exempt from:

(a)   Chapter 5C of the Act for the operation of the IDPS;

(b)   Parts 6D.2 and 6D.3 of the Act for:

(i)    the offer of an interest in a managed investment scheme arising out of participation or proposed participation in the IDPS; and

(ii)   offers of accessible securities through the IDPS;

(c)   Division 8 of Part 7.8 and from Part 7.9 of the Act (other than, subject to this instrument, section  1012IA and associated provisions) in relation to a financial product that is:

(i)    an interest in a managed investment scheme arising out of participation or proposed participation in the IDPS; or

(ii)   held or that may be held by a client because the legal ownership of a financial product is held by a custodian for the client as part of the IDPS; and

       including in relation to an offer to issue, an offer to arrange for the issue, the issue, the acceptance of an offer to acquire, and a recommendation to acquire, the financial product; and

(d)  section 1012IA of the Act for a regulated acquisition that satisfies subparagraphs 2(e)(vi), (vii) or (viii) of this instrument,

on the following conditions and until the operator fails to comply with a condition other than paragraph (e) or the operator fails to take all reasonable steps to comply with paragraph (e) or has reasonable grounds to believe that it has not complied with paragraph (e):

(e)   The operator complies with, and as soon as reasonably practicable ensures that each IDPS contract with the operator includes provisions to the effect of, the following:

(i)    The operator will perform its obligations under the contract honestly and with reasonable care and diligence.

(ii)   The operator will compensate clients in relation to the functions that the operator has contracted to perform, for acts and omissions of any of its agents engaged to perform those functions or functions connected with the performance of those functions (including transactional functions), as if they were the acts or omissions of the operator.

(iii)  The operator will ensure that all accessible investments held by it or by a custodian it engages (not including assets held by the client) are held on trust for the relevant client or clients of the IDPS.

(iv)  The operator will ensure that all money received by it or its agent from clients or in which clients have an interest is paid into an account with an Australian ADI (or an account of the  kind referred to in subregulation 7.9.08(1) of the Corporations Regulations 2001) designated as a trust account.

(v)   The operator will give to the client on request a copy of all communications that are required by law to be given to the  holder of an accessible investment (including communications that are required to be given on request) where that accessible investment is required to be held on trust for the client by the operator or a custodian. The client may make a request in relation to a particular future communication or a standing request in relation to a class of future communications. The operator must give a copy of the communication as soon as practicable after the information is received or otherwise becomes available to be provided to the client.

(vi)  The operator must not and must ensure that any custodian acting on the operator's behalf does not acquire accessible investments for a client unless a person performing the transactional functions is reasonably satisfied that:

(A)  the client has been given an IDPS Guide that would comply with these conditions if given at the time of the acquisition of the accessible investments (but not necessarily immediately prior to the acquisition);

(B)  in the case of an acquisition of accessible securities — either:

(I)   the client has been given a copy of the disclosure document for the accessible securities that would have been required had the securities been offered to the client directly at the time of the acquisition of the accessible securities; or

(II)  the accessible securities could lawfully have been offered and issued or sold, as the case may be, to the client directly without the client being required to have received a disclosure document; and the operator has no reason to suspect that a disclosure document would have been required if all other holdings by a custodian or by a custodian under an IDPS-like scheme or NCS in the investments had been acquired by the relevant clients directly; and

(C)  before a regulated acquisition of a new disclosure financial product is made for a client as part of the IDPS where section 1012IA of the Act requires that the client has been given a Product Disclosure Statement, the client has been given a Product Disclosure Statement for the financial product that the person performing the transactional functions has no reason to believe is defective as defined in section 1021B of the Act is up to date at the time of the acquisition.

(vii) Notwithstanding subparagraph 2(e)(vi), the operator or a custodian may acquire an additional holding of an accessible investment in relation to a client under a distribution reinvestment plan if the client already has an existing holding of that accessible investment through the IDPS and a person performing the transactional functions is reasonably satisfied that the client has been given an IDPS Guide that would comply with these conditions if given at the time of the reinvestment acquisition.

(viii) Notwithstanding subparagraph 2(e)(vi), the operator or a custodian acting on its behalf may make a regular savings acquisition if a person performing the transactional functions is reasonably satisfied that the client has been given an IDPS Guide that would comply with these conditions if given at the time of the regular savings acquisition where:

(A)  the client already has an existing holding of that accessible investment through the IDPS; and

(B)  the operator has complied with its agreement with the client in relation to the regular savings plan to give any missing documents.

(ix)  The operator must not and must ensure that any custodian acting on its behalf does not acquire accessible securities if the operator, the custodian or any person performing the transactional functions is aware that the disclosure document for those accessible securities:

(A)  does not comply with the relevant requirements of the Act regarding the contents of the disclosure document; or

(B)  contains a material statement which is untrue or misleading.

(x)   The operator must not and must ensure that any custodian acting on its behalf does not acquire accessible investments through the IDPS for a client that are:

(A)  interests in a managed investment scheme that a person performing the transactional functions is not reasonably satisfied is a registered scheme; or

(B)  interests in a scheme that would be a managed investment scheme but for paragraph (e) of the definition of “managed investment scheme” in section  9 of the Act;

       unless:

(C)  in relation to the client, a person performing the transactional functions is reasonably satisfied that if the client had invested directly in the scheme, the scheme would not have been required to have been registered; and

(D)  so far as any person performing the transactional functions is aware or has reason to suspect, if all interests in the scheme held by a custodian, or by a custodian under an IDPS-like scheme or NCS had been held in the scheme directly the scheme would not have been required to be registered.

Note: Under section 601ED a managed investment scheme does not generally need to be registered if it has no more  than 20 members. If interests held through IDPS, IDPS-like schemes and NCS had been acquired directly, the scheme may have required registration as it may have had more than 20 members.

(xi)  Except for a rights issue, the operator will not and will ensure that a custodian acting on its behalf does not acquire accessible securities as part of an IDPS unless a person performing the transactional functions is reasonably satisfied that either:

(A)  the issuer of the disclosure document for the accessible securities has given its prior written agreement to the use of the disclosure document as disclosure to clients or prospective clients of the IDPS; or

(B)  the disclosure document indicates that the issuer of the securities authorises the use of the disclosure document as disclosure to clients or prospective clients of the IDPS or a class of IDPSs which includes the IDPS.

(xii) The operator will:

(A)  give to each client of the IDPS a quarterly report within one month after each quarter day; or

(B)  give electronic access to the information referred to in subparagraphs 2(e)(xii)(F) to (I) on a substantially continuous basis to clients who:

(I)   have agreed to obtain information concerning transactions and holdings through the IDPS electronically in lieu of receiving a quarterly report; and

(II)  the operator has no reason to doubt can electronically access this information on a substantially continuous basis.

If the operator provides electronic access to information to clients during a quarter instead of a quarterly report:

(BA)        the information that was displayed at the quarter’s end for the quarter that purports to be the information required under subparagraphs 2(e)(xii)(F) to (I) must remain readily accessible to the clients through the same facility by which electronic access was given to the clients during the quarter until the end of the IDPS financial year after the IDPS financial year in which the quarter day falls; and

(BB)        the facility on which the information remains accessible must display to clients a statement to the effect that only information displayed at the quarter's end will be considered by the auditor in preparing its annual report relating to the information provided electronically.    

The quarterly report must contain information about:

(C)  all transactions by or on behalf of the client through the IDPS during the quarter;

(D)  the quantity and value of assets held through the IDPS by the client and corresponding liabilities on the quarter day, the value of assets being determined as follows:

(I)   for financial assets (“financial assets” has the same meaning as that term has in paragraph 7.1 of Accounting Standard AASB 1033 “Presentation and Disclosure of Financial Instruments”) — net market value (being the amount which could be expected to be received from the disposal of the asset in an orderly market after deducting costs expected to be incurred in realising the proceeds of such a disposal); and

(II)  for all other assets — the value which would be shown in the books of the IDPS; and

(E)  the revenue and expenses of the client in relation to the IDPS and assets held through the IDPS by the client during the quarter.

       The following information must be accessible electronically if electronic access is provided instead of quarterly reports:

(F)  all transactions which the client has conducted through the IDPS for a period of at least one year (or such shorter period as the client's account has been in existence) up to a date no more than 48 hours (excluding hours on a day that is not a business day) before the time of access;

(G)  the quantity and value of assets held through the IDPS by the client and corresponding liabilities at a time no more than 48 hours (excluding hours on a day that is not a business day) before the time of access, the values of the assets being determined in accordance with subparagraph 2(e)(xii)(D) and being as current as is reasonably practicable;

(H)  the revenue and expenses of the client in relation to the IDPS and assets held through the IDPS by the client during a period of at least one year (or such shorter period as the client's account has been in existence) up to a date no more than 48 hours (excluding hours on a day that is not a business day) before the time of access; and

(I)   the time at which the information is current.

 (xiii)The operator will give to each client within three months of the end of each IDPS financial year:

(A)  an annual investor statement containing a summary of the transactions by or on behalf of the client through the IDPS during the IDPS financial year containing the particulars that a client may reasonably require in relation to the transactions and for each client who has been provided with quarterly reports under subparagraph 2(e)(xii)(A), a statement that the client may request a copy of any quarterly report relating to the IDPS financial year for the client; and

(B)  a copy of the annual report or reports for the relevant IDPS financial year required by paragraph 2(j).

(f)   The operator will before entering into any IDPS contract give to each prospective client an IDPS Guide that contains:

(i)    the information that a client of the IDPS would reasonably require to:

(A)  understand the nature of the IDPS being offered and any risks associated with participation in the service;

(B) identify the operators and custodians and the nature of their responsibilities and relationships;

(C)  understand any differences between the rights of a  holder of accessible investments and the rights of a client of the  service with respect to accessible investments;

(D)  understand the method and extent of all charges associated with the IDPS including any right of the operator or other person to recoup expenses from a client's assets;

(E)  understand the basic rights of a client of the IDPS in relation to that operator including if applicable:

(I)   the circumstances and manner in which a client can communicate instructions to the operator or a person engaged by the operator;

(II)  the client's right to disclosure about accessible  investments;

(III)  the client's right to elect to receive copies of communications sent to holders of accessible investments including those communications which the holder may elect to receive;

(F)  identify the internal and external complaints resolution mechanisms for the clients of the IDPS; and

(G)  understand what other relevant information can be obtained from the operator;

(ii)   if the IDPS Guide does not specify the accessible investments for the IDPS — a statement to the effect that a separate document specifying those investments will be provided on request without charge;

(iii)  a prominent statement to the effect that:

“The total fees and charges you will pay will include the costs of this service as well as the cost of any investment you choose. It is important that you understand the fees of any investment you choose, and that those fees are in addition to the fees charged by us for the service, together with transaction and account costs incurred on your behalf. The costs of the investments you choose will generally be set out in a disclosure document or Product Disclosure Statement for the investments.”; and

(iv)  examples based on estimates of the total of fees,  charges and expenses of the service and the accessible securities and financial products accessed through the IDPS. The estimate of the total must be expressed as a proportion of the total price paid in acquiring the securities and financial products through the IDPS. The operator must have reasonable grounds for believing that the estimates of the fees, charges and expenses are within the range typically charged for accessible securities and financial products of the relevant kind. The examples must cover a range of accessible securities and financial products that may be acquired through the IDPS. They need not refer to actual or identified accessible securities or financial products.

(g)   The operator must not give to a client an IDPS Guide once the operator becomes aware that:

(i)    a material change has occurred to the information in it; or

(ii)   it becomes misleading or deceptive or likely to mislead or deceive.

(ga) For the purposes of this instrument, if:

(i)    a person is given an IDPS Guide; and

(ii)   at the same time, or later, they are given a Supplementary IDPS Guide that supplements the IDPS Guide;

the IDPS Guide is taken, from when the Supplementary IDPS Guide is given to the person, to include the information and statements contained in the Supplementary IDPS Guide.

(h)   The operator must keep a copy of each version of the IDPS Guide and any Supplementary IDPS Guide for at least seven years after it ceases to be used.

(i)    The operator must keep for at least seven years after it ceases to apply a copy of each of the following documents required by subparagraph 2(e)(xi):

(i)    the written agreement; or

(ii)   the disclosure document that contains the authority.

(j)    An operator who performs the functions set out in column 2 of an item in the following table in relation to annual investors statements, quarterly reports or information made electronically accessible under subparagraph (2)(e)(xii), must after the end of each IDPS financial year cause a registered company auditor to provide one or more reports that set out each of opinions or statements set out in column 3 of the item in the table. The opinions or statements of the auditor must cover the statements, reports or information in relation to which the operator performed the relevant functions. None of the reports of the auditor may contain any statement that has or purports to have the effect of excluding or disclaiming liability to clients of the IDPS as users of the report.

 

 

Column 2

Column 3

ITEM

AN OPERATOR WHO

MUST CAUSE AN AUDITOR TO PREPARE A REPORT OR REPORTS SETTING OUT THE FOLLOWING OPINIONS AND STATEMENTS

 

 1.  

 

 1.   prepares the statements, reports or information; and

 2.   gives or makes it accessible to clients


(an operator who performs both these functions is referred to in this table as a “full service operator”)

 

 1.   The auditor's opinion as to whether internal controls and other procedures of the full service operator, each custodian and any other relevant person acting on behalf of that operator were suitably designed and operated effectively in all material respects to ensure that:

 (a)  the annual investor statements for the relevant IDPS financial year are or have been given to clients without material misstatements; and

 (b)  where the annual investor statements do not purport to include particulars of each transaction that would be required in quarterly reports for each quarter during the IDPS financial year:

 (i)   any quarterly reports are or have been given to clients without material misstatements; and

 (ii)  any information that is made accessible electronically under subparagraph 2(e)(xii) in respect of the IDPS financial year is not materially misstated at each quarter’s end in the IDPS financial year.

 

 

 

 2.   The auditor's opinion as to whether the aggregates of assets (other than assets held by a client), liabilities, revenue and expenses shown in the clients' annual investor statements for the relevant IDPS financial year have been properly reconciled in all material respects to the corresponding amounts shown in the reports prepared by the custodian and which have been independently audited.

 

 

 

 3.   The auditor's statement as to whether or not the auditor has any reason to believe that:

 (a)  any annual investor statement for the relevant IDPS financial year given to any client is materially misstated; and

 (b)  if the annual investor statements for the IDPS financial year do not generally purport to include particulars of each transaction that would be required in quarterly reports for each quarter during the IDPS financial year:

 (i)   any quarterly reports given for the IDPS financial year are materially misstated; and

 

 

 

 (ii)  any information accessible electronically by clients under subparagraph 2(e)(xii) that relates to any of the following was materially misstated at each quarter’s end in the IDPS financial year:

(A)    transactions during the IDPS financial year;

(B)    assets held during the IDPS financial year and any corresponding liabilities;

 (C)   revenue and expenses for the IDPS financial year.

 

 2.  

 

 1.   prepares the content of the statements, reports or information; and

 

 1.   The auditor's opinion as to whether internal controls and other procedures of the back office operator, each custodian and any other relevant person acting on behalf of that operator were suitably designed and operated effectively in all material respects to ensure that:

 

 

 2.   gives it to an operator (the “client contact operator”) covered by item 3 for giving or making available to clients


(an operator who performs both these functions is referred to in this table as a “back office operator”)

 

 (a)  the annual investor statements for the relevant IDPS financial year are not materially misstated; and

 (b)  where the annual investor statements do not purport to include particulars of each transaction that would be required in quarterly reports for each quarter during the IDPS financial year:

 (i)   any quarterly reports are or have been given to the client contact operator without material misstatements; and

 (ii)  any information given to the client contact operator to be made accessible electronically under subparagraph 2(e)(xii) during the IDPS financial year is not materially misstated at each quarter’s end in the IDPS financial year.

 

 

 

 2.   The auditor's opinion as to whether the aggregates of assets (other than assets held by a client), liabilities, revenue and expenses shown in the clients' annual investor statements for the relevant IDPS financial year given to the client contact operator have been properly reconciled in all material respects to the corresponding amounts shown in the reports prepared by the custodian and which have been independently audited.

 

 

 

 3.   The auditor's statement as to whether or not the auditor has any reason to believe that:

 (a)  any annual investor statement for the relevant IDPS financial year given to the client contact operator is materially misstated; and

 (b)  if the annual investor statements for the IDPS financial year do not generally purport to include particulars of each transaction that would be required in quarterly reports for each quarter during the IDPS financial year:

 (i)   any quarterly reports required to be given for the IDPS financial year are materially misstated; and   

 

 

 

   (ii) any information provided for the purpose of being made accessible electronically under subparagraph 2(e)(xii) that has been given to the client contact operator and relates to any of the following was materially misstated at each quarter’s end in the IDPS financial year:

(A)    transactions during the IDPS financial year;

(B)    assets held during the IDPS financial year and any corresponding liabilities;

 (C)   revenue and expenses for the IDPS financial year.

 

 3.  

 

 1.   receives the content of the statements, reports or information from a back office operator;
and

The auditor's opinion as to whether internal controls and other procedures of the client contact operator and any other relevant person acting on behalf of the client contact operator were suitably designed and operated effectively in all material respects to ensure that:

 (a)  the annual investor statements for the relevant IDPS financial year are or have been given to clients without material misstatements;
and

 

 

 2.   gives or makes it available to clients


(an operator who performs both these functions is referred to in this table as a “client contact operator”)

 

 (b)  where the annual investor statements do not purport to include particulars of each transaction that would be required in quarterly reports for each quarter during the IDPS financial year:

 (i)   any quarterly reports, that have been given to the client contact operator by the back office operator are given to each relevant client without material alteration; and

 (ii)  any information given to the client contact operator by the back office operator to be made accessible electronically under subparagraph 2(e)(xii) that relates to any of the following:

 (A) transactions during the IDPS financial year;

 (B) assets held during the IDPS financial year and any corresponding liabilities;

 (C) revenue and expenses for the IDPS financial year,

       is so made accessible without material alteration at each quarter’s end in the IDPS financial year.

 

Note 1:   Internal controls and other procedures include any alternative controls and procedures employed by the operator to address deficiencies in the design or operation of established internal controls or other procedures.

Note 2:   The operator performing the functions referred to in item 3 of the table may add information relating to its identity, for example, by printing out statements on its own stationery.

(k)   The operator must:

(i)    maintain, document and comply with adequate internal control procedures to ensure compliance with the Act and the conditions of this instrument;

(ii)   after the end of each financial year of the operator;

(A)  cause a registered company auditor to conduct an audit and prepare a report setting out the auditor's opinion as to whether:

(I)   the operator has complied with the internal control procedures; and

(II)  the internal control procedures met the requirements of this instrument at all times during the financial year; and

(B)  lodge a copy of that report when lodging accounts under section 989B of the Act; and

(iii)  ensure that where any aspect of the performance of the IDPS has been contracted to another person, the contract with that person contains provisions requiring that person:

(A)  to maintain, document and comply with adequate internal control procedures to ensure compliance with the Act and the conditions of this instrument in relation to the functions that the person performs; and

(B)  to provide the auditor conducting the audit referred to in subparagraph 2(k)(ii) with all reasonable assistance and access to allow the auditor to carry out the audit in relation to the functions performed by the person.

(l)    The operator must take all reasonable steps to ensure that a person promoting the IDPS is a financial services licensee or a representative of a financial services licensee.

For the purposes of these conditions:

(m)  a document is taken as given to a person:

(i)    when it is received in accessible form by that person or their agent, being an agent (their “eligible agent”) who is not either:

(A)  the operator; or

(B)  an associate (within the meaning given by Division 2 of Part 1.2 of the Act as if this paragraph 2(m) were included in Chapter 7 of the Act) of the operator; or

(ii)   if there is no way of sending the document that may reasonably be expected to result in it being received by that person or their eligible agent

— when all reasonable steps are taken to send it to that person or their eligible agent; or

(iii)  one business day after an email is sent to the email address of the person or their eligible agent that the operator reasonably believes is the address of the person or eligible agent where the person has agreed to receive the document by email; or

(iv)  one business day after an email is sent containing a hypertext link to the document to the email address of the person or their eligible agent that the operator reasonably believes is the address of the person or eligible agent where:

(A)  the person has agreed to receive documents in that manner; and

(B)  the operator has no reason to suspect that the person is unlikely by mere scrolling or use of direct hypertext links to be able to see all of the contents of the document by using the emailed hypertext link; and

(C)  the document can be downloaded free of charge (excluding any normal fees payable to the recipient's internet service provider); and

(D)  the hypertext link is accompanied by a prominent statement to the effect that the recipient is advised to access the document and download it; or

(v)   when it would be delivered in the ordinary course of post, if it is posted as a letter prepaid from the operator to an address of the person or their eligible agent that the operator reasonably believes is the address of the person or eligible agent.

       For the purposes of this paragraph an email is “sent” when the email would be taken to be dispatched under section  14 of the Electronic Transactions Act 1999 if this instrument were a law of the Commonwealth for the purposes of that section.

(n)   a document is taken as having been given if:

(i)    a copy of the document is given in accordance with  paragraph (m); and

(ii)   the giver takes reasonable steps to ensure that the document received by the person is complete and unaltered;

(o)   a document is taken to be a copy of another document regardless of:

(i)    immaterial differences in the sequence in which information is presented;

(ii)   prompts and links if they are not likely to:

(A)  cause a reasonable person to confuse the contents of the document with another document; or

(B)  reduce the likelihood of a reasonable person reading any part of the document;

(iii)  the absence from (or simplification in) the document of graphics of a promotional or decorative nature; and

(iv)  the inclusion in the document of codes or features to control the display of the document which do not otherwise alter the sense or content of the document.

 

3      People involved in operating or promoting the  IDPS

A person (other than a person performing functions of the IDPS in accordance with a contract between that person and the client of the IDPS) who is involved in the operation or promotion of an IDPS is exempt from:

(c)   Chapter 5C of the Act for the operation of the IDPS;

(d)  Parts 6D.2 and 6D.3 of the Act for offers of accessible securities through the IDPS (except where the person is the issuer of those securities);

(e)   Division 8 of Part 7.8 and from Part 7.9 of the Act (other than section 1012IA and associated provisions) in relation to a financial product that is:

(i)    an interest in a managed investment scheme arising out of participation or proposed participation in the IDPS; or

(ii)   held or that may be held by a client because the legal ownership of a financial product is held by a custodian for the client as part of the IDPS (but not in relation to the financial products that the custodian holds);

       including in relation to:

(iii)  an offer to issue;

(iv)  an offer to arrange for the issue;

(v)   the issue of;

(vi)  the acceptance of an offer to acquire; and

(vii) a recommendation to acquire,

       the financial product, on the condition that and for so long as the person does not:

(f)   knowingly cause or procure the operator or any custodian of the IDPS to breach a condition referred to in paragraph 2; or

(g)   engage in misleading or deceptive conduct or conduct likely to mislead or deceive in connection with the IDPS.

Note: The exemption would apply in relation to a managed investment product that is an equitable right in an interest in a registered scheme where the custodian is the member of the scheme. No exemption is given for any requirements that apply to the financial product held by the custodian. For example, an issuer of financial products to the custodian would have to comply with section 1017E of the Act in relation to money paid by the custodian for financial products.

4      Issuers of accessible securities

An issuer is exempt from Parts 6D.2 and 6D.3 of the Act for offers of accessible securities through an IDPS to the extent that those provisions may require a disclosure document to include information about the IDPS or the rights attached to the accessible securities where they differ from the rights that a person would have if they acquired the accessible securities directly, on the following conditions and for so long as they are met:

(a)   The issuer has lodged (if required) a disclosure document for the accessible securities that complies with the Act.

(b)   Except for a rights issue, the issuer has either:

(i)    agreed in writing with an operator of the IDPS who performs transactional functions of the IDPS to the use of the disclosure document as disclosure to clients and prospective clients of the IDPS; or

(ii)   stated in the disclosure document that the issuer  authorises the use of the disclosure document as disclosure to clients and prospective clients of the IDPS or a class of IDPSs which includes the IDPS.

(c)   The issuer must:

(i)    where there is an agreement of the kind referred to in subparagraph 4(b)(i) — promptly notify the operator of the IDPS with whom the issuer has that agreement; and

(ii)   where the disclosure document contains an authorising statement of the kind referred to in subparagraph 4(b)(ii) — promptly notify each applicant for accessible securities who could reasonably be suspected of being an operator or custodian of an IDPS,

       if, except as previously disclosed to the operator or applicant:

(iii)  a supplementary or replacement document has been lodged in relation to the disclosure document; or

(iv)  the issuer would not be permitted by the Act to make offers of accessible securities under the disclosure document; or 

(v)   the disclosure document is withdrawn before its original expiry.

(d)  Except for a rights issue, the issuer must not issue accessible securities to a custodian in connection with an IDPS unless the issuer has obtained an undertaking in writing from each person who the issuer is aware is an operator of the IDPS that the operator will comply with the conditions set out in paragraph 2 of this instrument or, where the undertaking was provided before the date of this instrument the corresponding provisions of CO [00/210]. Where the issuer receives an application for accessible securities from a person who could reasonably be suspected of being an operator or custodian of an IDPS in relation to which the issuer does not have such undertakings, the issuer must ask the applicant whether they are applying in connection with an IDPS.

(e)   The issuer must retain a copy of the undertaking referred to in paragraph 4(d) for 7 years after the issuer last issues any accessible securities to a custodian of the relevant IDPS.

(f)   The issuer must not issue accessible securities through an IDPS if the issuer is aware of any non-compliance by the operator of the IDPS with the conditions contained in paragraph 2 of this instrument.

 

 

Notes to ASIC Class Order [CO 02/294]

Note 1

ASIC Class Order [CO 02/294] (in force under s601QA(1)(a),  741(1)(a),  992B(1)(a) and  1020F(1)(a) of the Corporations Act 2001) as shown in this compilation comprises that Class Order amended as indicated in the tables below.

Table of Instruments

Instrument number

Date of making or FRLI registration

Date of commencement

Application, saving or transitional provisions

[CO 02/294]

11/3/2002 (see F2006B01239)

11/3/2002

 

[CO 04/606]

1/6/2004 (see F2006B01240)

1/6/2004

-

[CO 04/734]

28/6/2004 (see F2006B01241)

28/6/2004

-

[CO 04/1568]

17/12/2004 (see F2006B01242)

17/12/2004

-

[CO 07/480]

2/7/2007 (see F2007L02072)

2/7/2007

-

Table of Amendments

ad. = added or inserted     am. = amended     rep. = repealed     rs. = repealed and substituted

Provision affected

How affected

Para 1..........................

am. [CO 04/606]; [CO 04/1568] and [CO 07/480]

Para 2(c)......................

am. [CO 04/606]

Para 2(d).....................

am. [CO 04/606]

Para 2(e)......................

am. [CO 04/606]

Para 2(e)(xii)...............

am. [CO 07/480]

Para 2(e)(xii)(A).........

rs. [CO 07/480]

Para 2(e)(xii)(BA).......

ad. [CO 07/480]

Para 2(e)(xii)(BB).......

ad. [CO 07/480]

Para 2(f)......................

am. [CO 04/606]

Para 2(g).....................

am. [CO 04/606]

Para 2(ga)....................

ad. [CO 04/1568]

Para 2(h).....................

am. [CO 04/606] and [CO 04/1568]

Para 2(i)......................

am. [CO 04/606]

Para 2(j)......................

rs. [CO 04/606]

Para 2(j) Table.............

am. [CO 04/734] and [CO 07/480]

Para 2(k)(ii)(B)...........

rs. [CO 04/606]

Para 2(l)......................

rs. [CO 04/606]

Para 2(m)....................

rs. [CO 04/606]

Para 3..........................

am. [CO 04/606]

Para 3(d).....................

rs. [CO 04/606]