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ASIC Class Order [CO 14/571]

Authoritative Version
  • - F2014L00977
  • No longer in force
CO 14/571 Orders/ASIC Class Orders as made
This instrument extends the date of ASIC Class Order CO 13/898 to 12 July 2016.
Administered by: Treasury
Registered 10 Jul 2014
Tabling HistoryDate
Tabled HR14-Jul-2014
Tabled Senate14-Jul-2014
Date of repeal 11 Jul 2014
Repealed by Division 1 of Part 5A of the Legislative Instruments Act 2003

ASIC CLASS ORDER [CO 14/571]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

 

The Australian Securities and Investments Commission (ASIC) makes ASIC Class Order [CO 14/571] under paragraphs 601QA(1)(b), 926A(2)(a), 992B(1)(a) and 1020F(1)(a) of the Corporations Act 2001 (the Act).

 

Paragraph 601QA(1)(b) of the Act provides that ASIC may declare that Ch 5C of the Act apply to a person as if the provisions were omitted, modified or varied in a certain way.

 

Paragraph 926A(2)(a) of the Act provides that ASIC may exempt a person from a provision of Pt 7.6 of the Act (other than Divs 4 and 8).

 

Paragraph 992B(1)(a) of the Act provides that ASIC may exempt a person from a provision of Pt 7.8 of the Act.

 

Paragraph 1020F(1)(a) of the Act provides that ASIC may exempt a person from a provision of Pt 7.9 of the Act.

 

1.         Background

 

On 20 October 2009, the Full Federal Court held in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147 that a funded representative action and solicitors’ retainers for two representative proceedings against Brookfield Multiplex Ltd in the Federal Court were a managed investment scheme that should have been registered for the purposes of the Act.

 

Section 9 of the Act provides that, subject to certain exemptions, a managed investment scheme includes a scheme that has the following features:

 

(a)        people contribute money or money's worth as consideration to acquire rights to benefits produced by the scheme

(b)        any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (members) who hold interests in the scheme

(c)        the members do not have day to day control over the operation of the scheme.

 

Section 601ED of the Act requires that a managed investment scheme must be registered with ASIC including where it has more than 20 members or is promoted by a professional promoter in certain circumstances.

 

Section 601MB of the Act provides that contracts are voidable at the option of a member of a scheme where an invitation or offer is made and the offeror has failed to comply with s601ED or Div 2 of Pt 7.9.

 

Section 911A of the Act requires that a person carrying on a business of providing financial services must hold an Australian financial services licence (AFSL) that authorises them to provide that financial service.

 

Section 911B of the Act requires that a person must only provide a financial service on behalf of another person who carries on a financial services business where certain conditions are satisfied.

 

Section 992A of the Act prohibits a person from offering financial products in the course of, or because of, an unsolicited meeting or telephone call.  Section 992AA prohibits such conduct in relation to interests in managed investment schemes.

 

Part 7.9 of the Act imposes various disclosure obligations on the issuer of a financial product, including to give a Product Disclosure Statement and provide ongoing disclosure in certain circumstances.

 

The Government is currently in the process of considering its position to exempt representative proceedings and proof of debt arrangements that are subject to a conditional costs agreement from:

(a)        the definition of managed investment scheme in s9 of the Act; and

(b)        Pts 7.6, 7.7, 7.8 and 7.9 of the Act.

 

On 11 July 2013 ASIC executed Class Order [CO 13/898] to provide time for the Government to consider this new legislative reform.  [CO 13/898]:

 

  1. provides for Ch 5C to apply as if the definition of a “managed investment scheme” in s9 of the Act were varied to exclude a litigation funding scheme and a proof of debt funding scheme funded by conditional costs agreements.

  2. exempts persons from the requirements to hold an Australian financial services licence or act as an authorised representative of a licensee to provide financial services associated with a litigation funding scheme and a proof of debt funding scheme that is funded by conditional costs agreements.

 

  1. exempts persons from the requirement to comply with the hawking prohibitions in ss992A and 992AA in relation to a litigation funding scheme and a proof of debt funding scheme that is funded by conditional costs agreements.

  2. exempts persons from the requirement to comply with the disclosure provisions in Pt 7.9 of the Act in relation to interests in a litigation funding scheme and a proof of debt funding scheme that is funded by conditional costs agreements.

 

Relief equivalent to that referred to paragraphs 2 to 4 is also given in relation to arrangements that are financial products but not interests in managed investment schemes that are similar to litigation funding schemes and proof of debt funding schemes that are funded by conditional costs agreements.

 

This is to allow a lawyer or law firm providing a financial service in relation to a litigation scheme or proof of debt scheme that is funded by a conditional costs agreement to operate without compliance with the requirements of the Act while the Government considers making regulations in this area.

 

2.         Purpose of [CO 14/571]

 

This class order will extend the relief in CO 13/898 to enable representative proceedings and proof of debt arrangements that are subject to a conditional costs agreement from:

(a)        the definition of managed investment scheme in s9 of the Act; and

(b)        Pts 7.6, 7.7, 7.8 and 7.9 of the Act.

 

until 12 July 2016. This is to allow further time for the Government to consider its position on whether to exempt litigation funding arrangements and proof of debt funding arrangements under similar terms as those in [CO 13/898].

 

3.         Operation of [CO 14/571]

 

Class Order [CO 14/571] amends [CO 13/898] by replacing '12 July 2014 in paragraph 9 with "12 July 2016".

4.         Consultation

 

ASIC consulted with Treasury in relation to making this instrument. ASIC did not undertake wider consultation with respect to [CO 14/571] as it is minor and machinery in nature as it provides relief only for a short period pending the Government's decision.   

 

 


 

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

ASIC Class Order [CO 14/571]

 

This class order is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the class order

 

ASIC Class Order [CO 14/571] extends the relief in [CO 13/898] to enable the temporary operation of representative proceedings and proof of debt arrangements funded by conditional costs agreements without compliance with the requirements of the Act until 12 July 2016. The objective of [CO 13/898] is to allow a lawyer or law firm providing a financial service in relation to a litigation scheme or proof of debt scheme that is funded by conditional costs agreements to operate without compliance with the requirements of the Act while the Government considers making regulations in this area.


Human rights implications

 

This class order does not engage any of the applicable rights or freedoms.

 

Conclusion

 

This class order is compatible with human rights as it does not raise any human rights issues.