Financial Services Reform Act 2001

No. 122, 2001

An Act to amend the law relating to financial services and markets, and for other purposes

[Assented to 27 September 2001]

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Financial Services Reform Act 2001.

2 Commencement

(1) The following provisions:

(a) this section and section 1;

(b) Part 1 of Schedule 3;

commence:

(d) if that day is the day on which the Corporations Act 2001 commences or an earlier day—immediately after the commencement of that Act.

(2) Subject to subsections (3) to (7), the remaining provisions of this Act commence on a day or days to be fixed by Proclamation.

(3) A day fixed by a Proclamation under subsection (2) cannot be a day before the day on which the Corporations Act 2001 commences.

(4) If a day fixed by a Proclamation under subsection (2) is the same day as the day on which the Corporations Act 2001 commences, the provisions of this Act to which that Proclamation applies are taken to commence immediately after the commencement of the Corporations Act 2001.

(5) The following provisions must commence on the same day:

(a) all the provisions of Schedule 1;

(b) all the provisions of Schedule 2.

(6) If a provision of this Act to which subsection (2) applies does not commence under that subsection within the period of 12 months beginning on the day on which the Corporations Act 2001 commences, it commences on the first day after the end of that period.

(7) Despite anything in subsections (2) to (6), the item in Part 2 of Schedule 1 that amends section 9 of the Corporations Act 2001 to insert a definition of offence based on does not commence if, at or before the time it would otherwise have commenced, item 1 of Schedule 1 to the Treasury Legislation Amendment (Application of Criminal Code) Act (No. 3) 2001 has commenced.

3 Schedule(s)

Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1—Financial Services and Markets

Part 1—Main amendments

Corporations Act 2001

1 Chapters 7 and 8

Repeal the Chapters, substitute:

Chapter 7—Financial services and markets

Part 7.1—Preliminary

Division 1—Object of Chapter and outline of Chapter

760A Object of Chapter

The main object of this Chapter is to promote:

(a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and

(b) fairness, honesty and professionalism by those who provide financial services; and

(d) the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.

760B Outline of Chapter

An outline of this Chapter is set out in the table below.

Part‑by‑Part outline of Chapter 7
	Part...	Covers...
1	7.1	definitions of key concepts and of commonly occurring expressions
2	7.2	licensing of financial markets other matters relating to financial markets
3	7.3	licensing of clearing and settlement facilities other matters relating to clearing and settlement facilities
4	7.4	limitation on ownership of certain licensees individuals who are disqualified from being involved in certain licensees
5	7.5	compensation regimes for financial markets
6	7.6	licensing of providers of financial services other related matters (e.g. restrictions on use of terminology; agreements with unlicensed persons relating to provision of financial services)
7	7.7	disclosure requirements for financial services licensees and their authorised representatives disclosure requirements for certain people who are not required to be licensed
8	7.8	other conduct requirements for financial services licensees (e.g. dealing with client money and property; financial records, statements and audit) special provisions relating to insurance
9	7.9	financial product disclosure requirements other requirements relating to issue and sale of financial products
10	7.10	market misconduct and other prohibited conduct relating to financial products and services
11	7.11	title to, and transfer of, certain securities and other financial products
12	7.12	qualified privilege in certain situations other miscellaneous matters

Division 2—Definitions

761A Definitions

In this Chapter:

able to be traded, in relation to a market, includes (but is not limited to) admitted to quotation on the market.

acquire, in relation to a financial product, has a meaning affected by section 761E.

arrangement means, subject to section 761B, a contract, agreement, understanding, scheme or other arrangement (as existing from time to time):

(a) whether formal or informal, or partly formal and partly informal; and

(b) whether written or oral, or partly written and partly oral; and

(c) whether or not enforceable, or intended to be enforceable, by legal proceedings and whether or not based on legal or equitable rights.

Australian CS facility licence means a licence under section 824B that authorises a person to operate a clearing and settlement facility.

Australian financial services licence means a licence under section 913B that authorises a person who carries on a financial services business to provide financial services.

Australian market licence means a licence under section 795B that authorises a person to operate a financial market.

authorised representative of a financial services licensee means a person authorised in accordance with section 916A or 916B to provide a financial service or financial services on behalf of the licensee.

basic deposit product means a deposit product that is a facility in relation to which the following conditions are satisfied:

(a) the terms applicable to the facility (the governing terms) do not permit the amount from time to time standing to the credit of the facility to be reduced otherwise than in consequence of one or more of the following:

(i) a withdrawal, transfer or debit on the instruction of, or by authority of, the depositor, not being on account of entry fees, exit fees or charges for the management of the funds (but this does not exclude charges for the maintenance of the facility itself);

(ii) a payment of charges or duties on deposits into, or withdrawals from, the facility that are payable under a law of the Commonwealth or of a State or Territory;

(iii) a payment that a law of the Commonwealth, or of a State or Territory, requires to be made out of the facility;

(iv) a payment that an order of a court requires to be made out of the facility;

(v) the exercise of a right to combine accounts;

(vi) the correction of an error;

(vii) any other circumstances specified in regulations made for the purposes of this subparagraph; and

(b) any return to be generated for the depositor on the amount from time to time standing to the credit of the facility is an amount that is set out in, or that is calculated by reference to a rate or rates that are set out in, the governing terms; and

(i) there is no minimum period before which funds cannot be withdrawn or transferred from the facility without a reduction in the return generated for the depositor; or

(ii) if there is such a period, it expires on or before the end of the period of 2 years starting on the day on which funds were first deposited in the facility; and

(d) funds are able to be withdrawn or transferred from the facility on the instruction of, or by authority of, the depositor:

(i) without any prior notice to the ADI that makes the facility available; or

(ii) if the ADI that makes the facility available is included in a class of ADIs specified in regulations made for the purposes of this subparagraph—subject to a prior notice requirement that does not exceed the period specified in those regulations in relation to that class of ADIs;

whether or not the withdrawal or transfer will attract a reduction in the return generated for the depositor as mentioned in subparagraph (c)(i); and

(e) any other conditions specified in regulations made for the purposes of this paragraph.

binder means an authorisation given to a person by a financial services licensee who is an insurer to do either or both of the following:

(a) enter into contracts that are risk insurance products on behalf of the insurer as insurer; or

(b) deal with and settle, on behalf of the insurer, claims relating to risk insurance products against the insurer as insurer;

but does not include an authorisation of a kind referred to in paragraph (a) that is limited to effecting contracts of insurance by way of interim cover unless there is also in existence an authority given by the insurer to the person to enter into, on behalf of the insurer and otherwise than by way of interim cover, contracts of insurance.

body regulated by APRA has the meaning given by subsection 3(2) of the Australian Prudential Regulation Authority Act 1998.

carried on in this jurisdiction, in relation to a financial services business, has a meaning affected by section 911D.

certificate cancellation provisions, in relation to a prescribed CS facility, means the provisions of the facility’s operating rules that deal with:

(a) the cancellation of documents of title to financial products transferred through the facility; and

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

class, in relation to financial products or financial services, has a meaning affected by regulations made for the purposes of section 761CA.

clearing and settlement facility has the meaning given by Division 6.

CS facility licensee means a person who holds an Australian CS facility licence.

custodial or depository service that a person provides has the meaning given by section 766E.

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

declared professional body means a body, or the part of a body, in relation to which a declaration under subsection 918B(1) is in force.

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

derivative has the meaning given by section 761D.

dispose, in relation to a financial product, includes terminate or close out the legal relationship that constitutes the financial product.

disqualified individual means an individual who is disqualified within the meaning given by section 853A.

execution‑related telephone advice has the meaning given by subsection 946B(1).

financial market has the meaning given by Division 5.

financial product has the meaning given by Division 3.

Note: References in this Chapter to financial products have effect subject to particular express exclusions for particular purposes—see e.g. sections 1010A and 1074A.

financial product advice has the meaning given by section 766B.

financial product advice law means:

(a) a provision of Chapter 7 that covers conduct relating to the provision of financial product advice (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial product advice; or

(b) a provision of Chapter 9 as it applies in relation to a provision referred to in paragraph (a); or

(c) a provision of Division 2 of Part 2 of the ASIC Act that covers conduct relating to the provision of financial product advice (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial product advice; or

(d) any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial product advice (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial product advice.

financial service has the meaning given by Division 4.

financial services business means a business of providing financial services.

Note: The meaning of carry on a financial services business is affected by section 761C.

Financial Services Guide means a Financial Services Guide required by section 941A or 941B to be given in accordance with Division 2 of Part 7.7.

financial services law means:

(a) a provision of this Chapter or of Chapter 5C, 6, 6A, 6B, 6C or 6D; or

(b) a provision of Chapter 9 as it applies in relation to a provision referred to in paragraph (a); or

(d) any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial services (whether or not it also covers other conduct), but only in so far as it covers conduct relating to the provision of financial services.

financial services licensee means a person who holds an Australian financial services licence.

foreign exchange contract means a contract:

(a) to buy or sell currency (whether Australian or not); or

(b) to exchange one currency (whether Australian or not) for another (whether Australian or not).

funeral benefit means a benefit that consists of the provision of funeral, burial or cremation services, with or without the supply of goods connected with such services.

general advice has the meaning given by subsection 766B(4).

general insurance product means a financial product described in paragraph 764A(1)(d).

holder, in relation to a financial product, means the person to whom the financial product was issued, or if it has (since issue) been disposed of to another person who has not themselves disposed of it, that other person (and hold has a corresponding meaning).

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

investment life insurance product means a financial product described in paragraph 764A(1)(f).

involved in a market licensee or CS facility licensee, or in an applicant for such a licence, has the meaning given by section 853B.

issue, in relation to a financial product, has a meaning affected by section 761E.

issuer, in relation to a financial product, has a meaning affected by section 761E.

kind, in relation to financial products or financial services, has a meaning affected by regulations made for the purposes of section 761CA.

licensed CS facility means a clearing and settlement facility the operation of which is authorised by an Australian CS facility licence.

licensed market means a financial market the operation of which is authorised by an Australian market licence.

life risk insurance product means a financial product described in paragraph 764A(1)(e).

listing rules of a financial market, or proposed financial market, means any rules (however described) that are made by the operator of the market, or contained in the operator’s constitution, and that deal with:

(a) admitting entities to, or removing entities from, the market’s official list, whether for the purpose of enabling financial products of those entities to be traded on the market or for other purposes; or

(b) the activities or conduct of entities that are included on that list.

lodge with ASIC, when used in a provision of this Chapter in relation to which regulations made for the purposes of this definition state that the lodgment is to be in a prescribed form, means lodge with ASIC in a prescribed form.

Note: See section 350 for the meaning of lodge in a prescribed form.

makes a market for a financial product has the meaning given by section 766D.

managed investment product means a financial product described in paragraph 764A(1)(b).

market licensee means a person who holds an Australian market licence.

operated in this jurisdiction:

(a) in relation to a financial market, has a meaning affected by section 791D; and

(b) in relation to a clearing and settlement facility, has a meaning affected by section 820D.

operating rules:

(a) of a clearing and settlement facility, or proposed clearing and settlement facility, means any rules (however described) made by the operator of the facility, or contained in the operator’s constitution, that deal with:

(i) the activities or conduct of the facility; or

(ii) the activities or conduct of persons in relation to the facility;

but does not include any such rules that deal with matters in respect of which licensed CS facilities must have written procedures under regulations made for the purposes of subsection 822A(2); or

(b) of a financial market, or proposed financial market, means any rules (however described), including the market’s listing rules (if any), that are made by the operator of the market, or contained in the operator’s constitution, and that deal with:

(i) the activities or conduct of the market; or

(ii) the activities or conduct of persons in relation to the market;

but does not include:

(iii) any such rules that deal with matters in respect of which licensed markets must have written procedures under regulations made for the purposes of subsection 793A(2); or

(iv) compensation rules within the meaning of Part 7.5.

participant:

(a) in relation to a clearing and settlement facility, means a person who is allowed to directly participate in the facility under the facility’s operating rules and, when used in any of the following provisions, also includes a recognised affiliate in relation to the facility:

(i) paragraph 821B(2)(b);

(ii) section 822B;

(iii) subsection 915F(2);

(iv) any other provisions prescribed by regulations made for the purposes of this subparagraph; and

(b) in relation to a financial market, means a person who is allowed to directly participate in the market under the market’s operating rules and, when used in any of the following provisions, also includes a recognised affiliate in relation to the market:

(i) paragraph 792B(2)(b);

(ii) section 793B;

(iii) section 883A;

(iv) subsection 915F(2);

(v) paragraphs 923B(3)(a) and (b);

(vi) any other provisions prescribed by regulations made for the purposes of this subparagraph.

person has a meaning affected by section 761F (which deals with partnerships) and section 761FA (which deals with multiple trustees).

personal advice has the meaning given by subsection 766B(3).

prescribed CS facility means a licensed CS facility that is prescribed by regulations made for the purposes of this definition.

Product Disclosure Statement means a Product Disclosure Statement:

(a) required by section 1012A, 1012B, 1012C or 1012I to be given in accordance with Division 2 of Part 7.9; or

(b) that section 1012H requires an issuer of a financial product to take reasonable steps to ensure is given to a new group member in accordance with Division 2 of Part 7.9.

provide, in relation to a financial product, has a meaning affected by section 761E.

recognised affiliate, in relation to a clearing and settlement facility or a financial market, means a person who is:

(a) recognised by the operating rules of the facility or market as a suitably qualified affiliate of the facility or market; and

(b) involved in the carrying on of a financial services business (including as an employee, director or in some other capacity).

relevant personal circumstances, in relation to advice provided or to be provided to a person in relation to a matter, are such of the person’s objectives, financial situation and needs as would reasonably be considered to be relevant to the advice.

retail client has the meaning given by section 761G.

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

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

security means:

(a) a share in a body; or

(b) a debenture of a body; or

(d) an option to acquire, by way of issue, a security covered by paragraph (a), (b) or (c);

but does not include an excluded security. In Part 7.11, it also includes a managed investment product.

Statement of Advice means a Statement of Advice required by section 946A to be given in accordance with Subdivisions C and D of Division 3 of Part 7.7.

superannuation product means a financial product described in paragraph 764A(1)(g).

Supplementary Financial Services Guide has the meaning given by section 943A.

Supplementary Product Disclosure Statement has the meaning given by section 1014A.

title document, for a financial product, means a certificate or other document evidencing ownership of the financial product.

wholesale client has the meaning given by section 761G.

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

If:

(a) an arrangement, when considered by itself, does not constitute a derivative, or some other kind of financial product; and

(b) that arrangement, and one or more other arrangements, if they had instead been a single arrangement, would have constituted a derivative or other financial product; and

the arrangements are, for the purposes of this Part, to be treated as if they together constituted a single arrangement.

761C Meaning of carry on a financial services business

In working out whether someone carries on a financial services business, Division 3 of Part 1.2 needs to be taken into account. However, paragraph 21(3)(e) does not apply for the purposes of this Chapter.

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

The regulations may include provisions identifying, or providing for the identification of, what constitutes a class or kind of financial products or financial services for the purposes of a provision or provisions of this Chapter.

761D Meaning of derivative

(1) For the purposes of this Chapter, subject to subsections (2), (3) and (4), a derivative is an arrangement in relation to which the following conditions are satisfied:

(a) under the arrangement, a party to the arrangement must, or may be required to, provide at some future time consideration of a particular kind or kinds to someone; and

(b) that future time is not less than the number of days, prescribed by regulations made for the purposes of this paragraph, after the day on which the arrangement is entered into; and

(c) the amount of the consideration, or the value of the arrangement, is ultimately determined, derived from or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, one or more of the following:

(i) an asset;

(ii) a rate (including an interest rate or exchange rate);

(iii) an index;

(iv) a commodity.

(2) Without limiting subsection (1), anything declared by the regulations to be a derivative for the purposes of this section is a derivative for the purposes of this Chapter. A thing so declared is a derivative despite anything in subsections (3) and (4).

(3) Subject to subsection (2), the following are not derivatives for the purposes of this Chapter even if they are covered by the definition in subsection (1):

(a) an arrangement in relation to which subparagraphs (i), (ii) and (iii) are satisfied:

(i) a party has, or may have, an obligation to buy, and another party has, or may have, an obligation to sell, tangible property (other than Australian or foreign currency) at a price and on a date in the future; and

(ii) the arrangement does not permit the seller’s obligations to be wholly settled by cash, or by set‑off between the parties, rather than by delivery of the property; and

(iii) neither usual market practice, nor the rules of a licensed market or a licensed CS facility, permits the seller’s obligations to be closed out by the matching up of the arrangement with another arrangement of the same kind under which the seller has offsetting obligations to buy;

but only to the extent that the arrangement deals with that purchase and sale;

(b) a contract for the future provision of services;

(d) anything declared by the regulations not to be a derivative for the purposes of this Chapter.

(4) Subject to subsection (2), an arrangement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative for the purposes of this Chapter merely because the arrangement provides for the consideration to be varied by reference to a general inflation index such as the Consumer Price Index.

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

General

(1) This section defines when a financial product is issued to a person. It also defines who the issuer of a financial product is. If a financial product is issued to a person:

(a) the person acquires the product from the issuer; and

(b) the issuer provides the product to the person.

Note: Some financial products can also be acquired from, or provided by, someone other than the issuer (e.g. on secondary trading in financial products).

Issuing a financial product

(2) Subject to this section, a financial product is issued to a person when it is first issued, granted or otherwise made available to a person.

(3) Subject to this section, a financial product specified in the table is issued to a person when the event specified for that product occurs:

When particular financial products are issued
Item	Financial product	Event
1	superannuation product	the person becomes a member of the fund concerned
2	RSA product	the account concerned is opened in the person’s name
3	derivative	the person enters into the legal relationship that constitutes the financial product

(3A) For the avoidance of doubt, none of the following are taken to give rise to the issue of a financial product to a person (the client):

(a) the client making a further contribution to a superannuation fund of which the client is already a member;

(b) the client making a further deposit into an RSA maintained in the client’s name;

(d) the client making a further deposit into a deposit product;

(e) the client engaging in conduct specified in regulations made for the purposes of this paragraph in relation to a financial product already held by the client.

Issuer of a financial product

(4) Subject to this section, the issuer, in relation to a financial product issued to a person (the client), is the person responsible for the obligations owed, under the terms of the facility that is the product:

(a) to, or to a person nominated by, the client; or

(b) if the product has been transferred from the client to another person and is now held by that person or another person to whom it has subsequently been transferred—to, or to a person nominated by, that person or that other person.

Note: For example, the issuer of a direct debit facility is the financial institution with which the account to be debited is held, rather than the persons to whom payments can be made using the facility.

(5) Subject to subsection (7), each person who is a party to a financial product that:

(a) is a derivative; and

(b) is not entered into, or acquired, on a financial market;

is taken to be an issuer of the product.

Note 1: Under paragraph (1)(a), each person who is a party to the derivative will also acquire the financial product at the time of its issue as specified in subsection (3).

Note 2: Although each party to the derivative is an issuer, whether any particular party has disclosure or other obligations under this Chapter will depend on the circumstances (e.g. whether the issue occurs in the course of a business of issuing financial products and whether any of the other parties is a retail client).

(6) Subject to subsection (7), the issuer of a financial product that:

(a) is a derivative; and

(b) is entered into, or acquired, on a financial market;

is taken to be:

(c) if the product is entered into, or acquired, on the market through an arrangement made by a financial services licensee acting on behalf of another person—the financial services licensee; or

(d) if the product is entered into, or acquired, on the market through an arrangement made by an authorised representative of a financial services licensee acting on behalf of another person (not being the licensee)—the financial services licensee; or

(e) if neither paragraph (c) nor (d) applies—the market operator.

(7) The regulations may make provision determining all or any of the following for the purposes of this Chapter:

(a) the meaning of issue (and/or related parts of speech, including issuer) in relation to a class of financial products;

(b) the meaning of acquire (and/or related parts of speech) in relation to a class of financial products;

Regulations made for the purposes of this subsection have effect despite anything else in this section.

761F Meaning of person—generally includes a partnership

(1) This Chapter applies to a partnership as if the partnership were a person, but it applies with the following changes:

(a) obligations that would be imposed on the partnership are imposed instead on each partner, but may be discharged by any of the partners;

(b) any contravention of a provision of this Chapter, or a provision of this Act that relates to a requirement in a provision of this Chapter, that would otherwise be a contravention by the partnership is taken (whether for the purposes of criminal or civil liability) to have been a contravention by each partner who:

(i) aided, abetted, counselled or procured the relevant act or omission; or

(ii) was in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the partner).

(2) For the purposes of this Chapter, a change in the composition of a partnership does not affect the continuity of the partnership.

(3) Subsections (1) and (2) have effect subject to:

(a) an express or implied contrary intention in a provision or provisions of this Chapter; and

(b) the regulations, which may exclude or modify the effect of those subsections in relation to specified provisions.

761FA Meaning of person—generally includes multiple trustees

(1) This section applies in relation to a trust while the trust continues to have:

(a) 2 or more trustees; or

(b) a single trustee who was a trustee of the trust at a time when it had 2 or more trustees.

(2) Subject to subsections (3) and (4), during a period while this section applies to a trust, this Chapter applies to the trust as if the trustee or trustees of the trust from time to time during the period constituted a single legal entity (the notional entity) that remained the same for the duration of that period.

Note: So, for example, while this section applies to a trust, a licence granted under this Chapter to the trustees of the trust will continue in force, despite a change in the persons who are the trustees.

(3) During any period or part of a period while this section applies to a trust and the trust has 2 or more trustees, this Chapter applies to the trustees as mentioned in subsection (2), but it applies with the following changes:

(a) obligations that would be imposed on the notional entity are imposed instead on each trustee, but may be discharged by any of the trustees;

(b) any contravention of a provision of this Chapter, or a provision of this Act that relates to a requirement in a provision of this Chapter, that would otherwise be a contravention by the notional entity is taken (whether for the purposes of criminal or civil liability) to have been a contravention by each trustee who:

(i) aided, abetted, counselled or procured the relevant act or omission; or

(ii) was in any way knowingly concerned in, or party to, the relevant act or omission (whether directly or indirectly and whether by any act or omission of the trustee).

(4) During any period or part of a period while this section applies to a trust and the trust has only one trustee, this Chapter applies to the trustee as mentioned in subsection (2), but it applies with the following changes:

(a) obligations that would be imposed on the notional entity are imposed instead on that single trustee;

(b) any contravention of a provision of this Chapter, or a provision of this Act that relates to a requirement in a provision of this Chapter, that would otherwise be a contravention by the notional entity is taken (whether for the purposes of criminal or civil liability) to have been a contravention by that single trustee.

(5) Subsections (2), (3) and (4) have effect subject to:

(a) an express or implied contrary intention in a provision or provisions of this Chapter; and

(b) the regulations, which may exclude or modify the effect of those subsections in relation to specified provisions.

761G Meaning of retail client and wholesale client

Providing a financial product or financial service to a person as a retail client

(1) For the purposes of this Chapter, a financial product or a financial service is provided to a person as a retail client unless subsection (5), (6) or (7) provides otherwise.

Note: The references in this section to providing a financial product to a person are not to be taken to imply that the provision of a financial product is not also the provision of a financial service (see the meaning of dealing in section 766C).

Acquiring a financial product or financial service as a retail client

(2) For the purposes of this Chapter, a person to whom a financial product or financial service is provided as a retail client is taken to acquire the product or service as a retail client.

Disposing of a financial product as a retail client

(3) If a financial product is provided to a person as a retail client, any subsequent disposal of all or part of that product by the person is, for the purposes of this Chapter, a disposal by the person as a retail client.

Wholesale clients

(4) For the purposes of this Chapter, a financial product or a financial service is provided to, or acquired by, a person as a wholesale client if it is not provided to, or acquired by, the person as a retail client.

General insurance products

(5) For the purposes of this Chapter, if a financial product is, or a financial service provided to a person relates to, a general insurance product, the product or service is provided to the person as a retail client if:

(a) either:

(i) the person is an individual; or

(ii) the insurance product is or would be for use in connection with a small business (see subsection (12)); and

(b) the general insurance product is:

(i) a motor vehicle insurance product (as defined in the regulations); or

(ii) a home building insurance product (as defined in the regulations); or

(iii) a home contents insurance product (as defined in the regulations); or

(iv) a sickness and accident insurance product (as defined in the regulations); or

(v) a consumer credit insurance product (as defined in the regulations); or

(vi) a travel insurance product (as defined in the regulations); or

(vii) a personal and domestic property insurance product (as defined in the regulations); or

(viii) a kind of general insurance product prescribed by regulations made for the purposes of this subparagraph.

In any other cases, the provision to a person of a financial product that is, or a financial service that relates to, a general insurance product does not constitute the provision of a financial product or financial service to the person as a retail client.

Superannuation products and RSA products

(6) For the purposes of this Chapter:

(a) if a financial product provided to a person is a superannuation product or an RSA product, the product is provided to the person as a retail client; and

(b) if a financial service (other than the provision of a financial product) provided to a person who is not covered by subparagraph (c)(i) or (ii) relates to a superannuation product or an RSA product, the service is provided to the person as a retail client; and

(i) the trustee of a superannuation fund, an approved deposit fund, a pooled superannuation trust or a public sector superannuation scheme (within the meaning of the Superannuation Industry (Supervision) Act 1993) that has net assets of at least $10 million; or

(ii) an RSA provider (within the meaning of the Retirement Savings Accounts Act 1997);

relates to a superannuation product or an RSA product, that does not constitute the provision of a financial service to the person as a retail client.

Other kinds of financial product

(7) For the purposes of this Chapter, 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 one or more of the following paragraphs apply:

(a) the price for the provision of the financial product, or the value of the financial product to which the financial service relates, equals or exceeds the amount specified in regulations made for the purposes of this paragraph as being applicable in the circumstances (but see also subsection (10)); or

(b) the financial product, or the financial service, is provided for use in connection with a business that is not a small business (see subsection (12));

(c) the financial product, or the financial service, is not provided for use in connection with a business, and the person who acquires the product or service gives the provider of the product or service, before the provision of the product or service, a copy of a certificate given within the preceding 6 months by a qualified accountant (as defined in section 9) that states that the person:

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

(ii) has a gross income for each of the last 2 financial years of at least the amount specified in regulations made for the purposes of this subparagraph a year;

(d) the person is a professional investor.

Offence proceedings—defendant bears evidential burden in relation to matters referred to in paragraphs (7)(a) to (d)

(8) In a prosecution for an offence based on a provision of this Chapter, a defendant bears an evidential burden in relation to the matters in paragraphs (7)(a) to (d) as if those matters were exceptions for the purposes of subsection 13.3(3) of the Criminal Code.

Other proceedings relating to subsection (7) products—presumption in non‑criminal proceedings of retail client unless contrary established

(9) If:

(a) it is alleged in a proceeding under this Chapter (not being a prosecution for an offence), or in any other proceeding (not being a prosecution for an offence) in respect of a matter arising under this Chapter, that a particular financial product or financial service was provided to a person as a retail client; and

(b) the product or the service is one to which subsection (7) applies;

it is presumed that the product or service was provided to the person as a retail client unless the contrary is established.

Note 1: There is no such presumption in relation to the provision of a product or service that is or relates to a general insurance product, a superannuation product or an RSA product. Whether or not such a product, or a service relating to such a product, was provided to a person as a retail client is to be resolved as provided in subsection (5) or (6), as the case requires.

Note 2: In criminal proceedings, a defendant bears an evidential burden in relation to the matters in paragraphs (7)(a) to (d) (see subsection (8)).

Regulations and paragraph (7)(a)

(10) In addition to specifying an amount or amounts for the purposes of paragraph (7)(a), the regulations may do either or both of the following:

(a) deal with how a price or value referred to in that paragraph is to be calculated, either generally or in relation to a specified class of financial products;

(b) modify the way in which that paragraph applies in particular circumstances.

Regulations and paragraph (7)(c)

(10A) In addition to specifying amounts for the purposes of subparagraphs (7)(c)(i) and (ii), the regulations may do either or both of the following:

(a) deal with how net assets referred to in subparagraph (7)(c)(i) are to be determined and valued, either generally or in specified circumstances;

(b) deal with how gross income referred to in subparagraph (7)(c)(ii) is to be calculated, either generally or in specified circumstances.

What happens if a package of general insurance products and other kinds of financial products is provided?

(11) If:

(a) either:

(i) in a single transaction, 2 or more financial products are provided to a person; or

(ii) a single financial service provided to a person relates to 2 or more financial products; and

(b) one or more, but not all, of the financial products are general insurance products;

subsection (5) applies to the transaction or service so far as it relates to the general insurance products, and subsection (6) or (7), as the case requires, applies to the transaction or service so far as it relates to other financial products.

Definition

(12) In this section:

small business means a business employing less than:

(a) if the business is or includes the manufacture of goods—100 people; or

(b) otherwise—20 people.

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

(1) A reference in a provision of this Chapter to this Chapter, or to a particular provision or group of provisions of this Chapter, includes (unless a contrary intention appears) a reference to regulations, or other instruments, made for the purposes of this Chapter, or for the purposes of that provision or any of those provisions, as the case requires.

(2) Subsection (1) has effect as if provisions in Part 10.2 (transitional provisions) that relate to matters dealt with in this Chapter were part of this Chapter.

Division 3—What is a financial product?

Subdivision A—Preliminary

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

General definition

(1) Subdivision B sets out a general definition of financial product. Subject to subsections (2) and (3), a facility is a financial product if it falls within that definition.

Specific inclusions

(2) Subdivision C identifies, or provides for the identification of, kinds of facilities that, subject to subsection (3), are financial products (whether or not they are within the general definition).

Overriding exclusions

(3) Subdivision D identifies, or provides for the identification of, kinds of facilities that are not financial products. These facilities are not financial products:

(a) even if they are within the general definition; and

(b) even if they are within a class of facilities identified as mentioned in subsection (2).

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

If a financial product is a component of a facility that also has other components, this Chapter, in applying to the financial product, only applies in relation to the facility to the extent it consists of the component that is the financial product.

Note: So, e.g., Part 7.9 does not require disclosures to be made in relation to those other components.

762C Meaning of facility

In this Division:

facility includes:

(a) intangible property; or

(b) an arrangement or a term of an arrangement (including a term that is implied by law or that is required by law to be included); or

Note: 2 or more arrangements may be taken to constitute a single arrangement—see section 761B.

Subdivision B—The general definition

763A General definition of financial product

(1) For the purposes of this Chapter, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:

(a) makes a financial investment (see section 763B);

(b) manages financial risk (see section 763C);

This has effect subject to section 763E.

(2) For the purposes of this Chapter, a particular facility that is of a kind through which people commonly make financial investments, manage financial risks or make non‑cash payments is a financial product even if that facility is acquired by a particular person for some other purpose.

(3) A facility does not cease to be a financial product merely because:

(a) the facility has been acquired by a person other than the person to whom it was originally issued; and

(b) that person, in acquiring the product, was not making a financial investment or managing a financial risk.

763B When a person makes a financial investment

For the purposes of this Chapter, a person (the investor) makes a financial investment if:

(a) the investor gives money or money’s worth (the contribution) to another person and any of the following apply:

(i) the other person uses the contribution to generate a financial return, or other benefit, for the investor;

(ii) the investor intends that the other person will use the contribution to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated);

(iii) the other person intends that the contribution will be used to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated); and

(b) the investor has no day‑to‑day control over the use of the contribution to generate the return or benefit.

Note 1: Examples of actions that constitute making a financial investment under this subsection are:

(a) a person paying money to a company for the issue to the person of shares in the company (the company uses the money to generate dividends for the person and the person, as a shareholder, does not have control over the day‑to‑day affairs of the company); or

(b) a person contributing money to acquire interests in a registered scheme from the responsible entity of the scheme (the scheme uses the money to generate financial or other benefits for the person and the person, as a member of the scheme, does not have day‑to‑day control over the operation of the scheme).

Note 2: Examples of actions that do not constitute making a financial investment under this subsection are:

(a) a person purchasing real property or bullion (while the property or bullion may generate a return for the person, it is not a return generated by the use of the purchase money by another person); or

(b) a person giving money to a financial services licensee who is to use it to purchase shares for the person (while the purchase of the shares will be a financial investment made by the person, the mere act of giving the money to the licensee will not of itself constitute making a financial investment).

763C When a person manages financial risk

For the purposes of this Chapter, a person manages financial risk if they:

(a) manage the financial consequences to them of particular circumstances happening; or

(b) avoid or limit the financial consequences of fluctuations in, or in the value of, receipts or costs (including prices and interest rates).

Note 1: Examples of actions that constitute managing a financial risk are:

(a) taking out insurance; or

(b) hedging a liability by acquiring a futures contract or entering into a currency swap.

Note 2: An example of an action that does not constitute managing a financial risk is employing a security firm (while that is a way of managing the risk that thefts will happen, it is not a way of managing the financial consequences if thefts do occur).

763D When a person makes non‑cash payments

(1) For the purposes of this Chapter, a person makes non‑cash payments if they make payments, or cause payments to be made, otherwise than by the physical delivery of Australian or foreign currency in the form of notes and/or coins.

Note: Examples of actions that constitute making non‑cash payments are:

(a) making payments by means of a facility for direct debit of a deposit account; or

(b) making payments by means of a facility for the use of cheques; or

(c) making payments by means of a purchased payment facility within the meaning of the Payment Systems (Regulation) Act 1998, such as a smart card; or

(d) making payments by means of traveller’s cheques (whether denominated in Australian or foreign currency).

(2) For the purposes of this Chapter, the following are not making non‑cash payments, even if they might otherwise be covered by subsection (1):

(a) making payments by means of a facility in relation to which one of the following applies:

(i) there is only one person to whom payments can be made by means of the facility;

(ii) the facility is, or is of a kind, specified in the regulations as being a facility that is not to be covered by this section because of restrictions relating to the number of people to whom payments can be made by means of the facility, or relating to the number of persons who can use the facility to make payments;

(b) making payments by means of:

(i) a letter of credit from a financial institution; or

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

(iii) a guarantee given by a financial institution.

763E What if a financial product is only incidental?

(1) If:

(a) something (the incidental product) that, but for this section, would be a financial product because of this Subdivision is:

(i) an incidental component of a facility that also has other components; or

(ii) a facility that is incidental to one or more other facilities; and

(b) it is reasonable to assume that the main purpose of:

(i) if subparagraph (a)(i) applies—the facility referred to in that subparagraph, when considered as a whole; or

(ii) if subparagraph (a)(ii) applies—the incidental product, and the other facilities referred to in that subparagraph, when considered as a whole;

is not a financial product purpose;

the incidental product is not a financial product because of this Subdivision (however, it may still be a financial product because of Subdivision C).

(2) In this section:

financial product purpose means a purpose of:

(a) making a financial investment; or

(b) managing financial risk; or

Subdivision C—Specific inclusions

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

(1) Subject to Subdivision D, the following are financial products for the purposes of this Chapter:

(a) a security;

(b) any of the following in relation to a registered scheme:

(i) an interest in the scheme;

(ii) a legal or equitable right or interest in an interest covered by subparagraph (i);

(iii) an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

(ba) any of the following in relation to a managed investment scheme that is not a registered scheme, other than a scheme (whether or not operated in this jurisdiction) in relation to which none of paragraphs 601ED(1)(a), (b) and (c) are satisfied:

(i) an interest in the scheme;

(ii) a legal or equitable right or interest in an interest covered by subparagraph (i);

(iii) an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

(d) a contract of insurance that is not a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, but not including such a contract of insurance:

(i) to the extent that it provides for a benefit to be provided by an association of employees that is an organisation within the meaning of the Workplace Relations Act 1996 for a member of the organisation or a dependant of a member; or

(ii) to the extent that it provides for benefits, pensions or payments described in paragraph 11(3)(c) of the Life Insurance Act 1995; or

(iii) to the extent that it provides for the provision of a funeral benefit; or

(iv) issued by an employer to an employee of the employer;

(e) a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is a contract of insurance, but not including such a policy:

(ii) to the extent that it provides for benefits, pensions or payments described in paragraph 11(3)(c) of the Life Insurance Act 1995; or

(iii) to the extent that it provides for the provision of a funeral benefit; or

(iv) issued by an employer to an employee of the employer;

(f) a life policy, or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is not a contract of insurance, but not including such a policy:

(ii) to the extent that it provides for benefits, pensions or payments described in paragraph 11(3)(c) of the Life Insurance Act 1995; or

(iii) to the extent that it provides for the provision of a funeral benefit; or

(iv) issued by an employer to an employee of the employer;

(g) a superannuation interest within the meaning of the Superannuation Industry (Supervision) Act 1993;

(h) an RSA (retirement savings account) within the meaning of the Retirement Savings Accounts Act 1997;

(i) any deposit‑taking facility made available by an ADI (within the meaning of the Banking Act 1959) in the course of its banking business (within the meaning of that Act), other than an RSA (RSAs are covered by paragraph (h));

(j) a debenture, stock or bond issued or proposed to be issued by a government;

(k) a foreign exchange contract that is not:

(i) a derivative (derivatives are covered by paragraph (c)); or

(ii) a contract to exchange one currency (whether Australian or not) for another that is to be settled immediately;

(m) anything declared by the regulations to be a financial product for the purposes of this section.

Note: Even though something is expressly excluded from one of these paragraphs, it may still be a financial product (subject to Subdivision D) either because:

(a) it is covered by another of these paragraphs; or

(b) it is covered by the general definition in Subdivision B.

(2) For the purpose of paragraphs (1)(d), (e) and (f), contract of insurance includes:

(a) a contract that would ordinarily be regarded as a contract of insurance even if some of its provisions are not by way of insurance; and

(b) a contract that includes provisions of insurance in so far as those provisions are concerned, even if the contract would not ordinarily be regarded as a contract of insurance.

Subdivision D—Specific exclusions

765A Specific things that are not financial products

(1) Despite anything in Subdivision B or Subdivision C, the following are not financial products for the purposes of this Chapter:

(a) an excluded security;

(b) an undertaking by a body corporate to pay money to a related body corporate;

(c) health insurance provided as part of a health insurance business (as defined in subsection 67(4) of the National Health Act 1953);

(d) insurance provided by the Commonwealth;

(e) State insurance or Northern Territory insurance, including insurance entered into by:

(i) a State or the Northern Territory; and

(ii) some other insurer;

as joint insurers;

(f) insurance entered into by the Export Finance and Insurance Corporation, other than a short‑term insurance contract within the meaning of the Export Finance and Insurance Corporation Act 1991;

(g) reinsurance;

(h) any of the following:

(i) a credit facility within the meaning of the regulations;

(ii) a facility for making non‑cash payments (see section 763D), if payments made using the facility will all be debited to a credit facility covered by subparagraph (i);

(i) a facility:

(i) that is an approved RTGS system within the meaning of the Payment Systems and Netting Act 1998; or

(ii) for the transmission and reconciliation of non‑cash payments (see section 763D), and the establishment of final positions, for settlement through an approved RTGS system within the meaning of the Payment Systems and Netting Act 1998;

(j) a facility that is a designated payment system for the purposes of the Payment Systems (Regulation) Act 1998;

(k) a facility for the exchange and settlement of non‑cash payments (see section 763D) between providers of non‑cash payment facilities;

(l) a facility that is:

(i) a financial market; or

(ii) a clearing and settlement facility; or

(iii) a payment system operated as part of a clearing and settlement facility;

(m) a contract to exchange one currency (whether Australian or not) for another that is to be settled immediately;

(n) so much of an arrangement as is not a derivative because of paragraph 761D(3)(a);

(p) an arrangement that is not a derivative because of subsection 761D(4);

(q) an interest in a superannuation fund of a kind prescribed by regulations made for the purposes of this paragraph;

(r) any of the following:

(i) an interest in something that is not a managed investment scheme because of paragraph (c), (e), (f), (k), (l) or (m) of the definition of managed investment scheme in section 9;

(ii) a legal or equitable right or interest in an interest covered by subparagraph (i);

(iii) an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

(s) any of the following in relation to a managed investment scheme (whether or not operated in this jurisdiction) in relation to which none of paragraphs 601ED(1)(a), (b) and (c) are satisfied and that is not a registered scheme:

(i) an interest in the scheme;

(ii) a legal or equitable right or interest in an interest covered by subparagraph (i);

(iii) an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii);

(t) a deposit‑taking facility that is, or is used for, State banking;

(u) a benefit provided by an association of employees that is an organisation within the meaning of the Workplace Relations Act 1996 for a member of the organisation or a dependant of a member;

(v) either of the following:

(i) a contract of insurance; or

(ii) a life policy or a sinking fund policy, within the meaning of the Life Insurance Act 1995, that is not a contract of insurance;

issued by an employer to an employee of the employer;

(w) a funeral benefit;

(x) physical equipment or physical infrastructure by which something else that is a financial product is provided;

(y) a facility, interest or other thing declared by regulations made for the purposes of this subsection not to be a financial product;

(z) a facility, interest or other thing declared by ASIC under subsection (2) not to be a financial product.

(2) ASIC may declare that a specified facility, interest or other thing is not a financial product for the purposes of this Chapter. The declaration must be in writing and ASIC must publish notice of it in the Gazette.

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

766A When does a person provide a financial service?

(1) For the purposes of this Chapter, subject to paragraph (2)(b), a person provides a financial service if they:

(a) provide financial product advice (see section 766B); or

(b) deal in a financial product (see section 766C); or

(d) operate a registered scheme; or

(e) provide a custodial or depository service (see section 766E); or

(f) engage in conduct of a kind prescribed by regulations made for the purposes of this paragraph.

(2) The regulations may set out:

(a) the circumstances in which persons facilitating the provision of a financial service (for example, by publishing information) are taken also to provide that service; or

(b) the circumstances in which persons are taken to provide, or are taken not to provide, a financial service.

(3) To avoid doubt, a person’s conduct is not the provision of a financial service if it is done in the course of work of a kind ordinarily done by clerks or cashiers.

(4) For the purposes of this section, a person is not operating a registered scheme merely because:

(a) they are acting as an agent or employee of another person; or

(b) they are taking steps to wind up the scheme.

766B Meaning of financial product advice

(1) For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:

(a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or

(b) could reasonably be regarded as being intended to have such an influence.

However, the provision or giving of an exempt document or statement is not to be taken to be a provision of financial product advice.

(2) There are 2 types of financial product advice: personal advice and general advice.

(3) For the purposes of this Chapter, personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where:

(a) the provider of the advice has considered one or more of the person’s objectives, financial situation and needs; or

(b) a reasonable person might expect the provider to have considered one or more of those matters.

(4) For the purposes of this Chapter, general advice is financial product advice that is not personal advice.

(5) The following advice is not financial product advice:

(a) advice given by a lawyer in his or her professional capacity, about matters of law, legal interpretation or the application of the law to any facts;

(b) except as may be prescribed by the regulations—any other advice given by a lawyer in the ordinary course of activities as a lawyer, that is reasonably regarded as a necessary part of those activities;

(c) except as may be prescribed by the regulations—advice given by a tax agent registered under Part VIIA of the Income Tax Assessment Act 1936, that is given in the ordinary course of activities as such an agent and that is reasonably regarded as a necessary part of those activities.

(6) If:

(a) in response to a request made by a person (the inquirer) to another person (the provider), the provider tells the inquirer the cost, or an estimate of the likely cost, of a financial product (for example, an insurance product); and

(b) that cost or estimate is worked out, or said by the provider to be worked out, by reference to a valuation of an item (for example, a house or car to which an insurance policy would relate), being a valuation that the provider suggests or recommends to the inquirer;

the acts of telling the inquirer the cost, or estimated cost, and suggesting or recommending the valuation, do not, of themselves, constitute the making of a recommendation (or the provision of any other kind of financial product advice) relating to the financial product.

(7) If:

(a) in response to a request made by a person (the inquirer) to another person (the provider), the provider tells the inquirer information about:

(i) the cost of a financial product; or

(ii) the rate of return on a financial product; or

(iii) any other matter identified in regulations made for the purposes of this subparagraph; and

(b) the request could also have been complied with (but was not also so complied with) by telling the inquirer equivalent information about one or more other financial products;

the act of telling the inquirer the information does not, of itself, constitute the making of a recommendation (or the provision of any other kind of financial product advice) in relation to the financial product referred to in paragraph (a).

(8) Subsections (5), (6) and (7) are not intended to affect, in any way, the determination of whether situations not covered by those subsections do, or do not, constitute the provision of financial product advice.

(9) In this section:

exempt document or statement means:

(a) a document prepared, or a statement given, in accordance with requirements of this Chapter, other than:

(i) a Statement of Advice; or

(ii) a document or statement of a kind prescribed by regulations made for the purposes of this subparagraph; or

(b) any other document or statement of a kind prescribed by regulations made for the purposes of this paragraph.

766C Meaning of dealing

(1) For the purposes of this Chapter, the following conduct (whether engaged in as principal or agent) constitutes dealing in a financial product:

(a) applying for or acquiring a financial product;

(b) issuing a financial product;

(d) varying a financial product;

(e) disposing of a financial product.

(2) Arranging for a person to engage in conduct referred to in subsection (1) is also dealing in a financial product, unless the actions concerned amount to providing financial product advice.

(3) A person is taken not to deal in a financial product if the person deals in the product on their own behalf (whether directly or through an agent or other representative), unless:

(a) the person is an issuer of financial products; and

(b) the dealing is in relation to one or more of those products.

(3A) For the purposes of subsection (3), a person (the agent) who deals in a product as an agent or representative of another person (the principal) is not taken to deal in the product on the agent’s own behalf, even if that dealing, when considered as a dealing by the principal, is a dealing by the principal on the principal’s own behalf.

(4) Also, a transaction entered into by a person who is, or who encompasses or constitutes in whole or in part, any of the following entities:

(a) a government or local government authority;

(b) a public authority or instrumentality or agency of the Crown;

is taken not to be dealing in a financial product by that person if the transaction relates only to:

(d) securities of that entity; or

(e) if the entity is a government—debentures, stocks or bonds issued or proposed to be issued by that government.

(5) Paragraph (4)(c) does not apply if the entity:

(a) carries on a business of investment in securities, interests in land or other investments; and

(b) in the course of carrying on that business, invests funds subscribed, whether directly or indirectly, after an offer or invitation to the public (within the meaning of section 82) made on terms that the funds subscribed would be invested.

(6) A transaction entered into by a sub‑underwriter of an issue of securities that relates only to the sub‑underwriting is taken not to be dealing in a financial product.

(7) The regulations may prescribe conduct that is taken not to be dealing in a financial product.

766D Meaning of makes a market for a financial product

(1) For the purposes of this Chapter, a person makes a market for a financial product if:

(a) either through a facility, at a place or otherwise, the person regularly states the prices at which they propose to acquire or dispose of financial products on their own behalf; and

(b) other persons have a reasonable expectation that they will be able to regularly effect transactions at the stated prices; and

(c) the actions of the person do not, or would not if they happened through a facility or at a place, constitute operating a financial market because of the effect of paragraph 767A(2)(a).

(2) Paragraph (1)(a) does not apply to a person stating prices at which they propose to acquire or dispose of financial products if:

(a) the person is the issuer of the products; and

(b) the products are superannuation products, managed investment products or financial products referred to in paragraph 764A(1)(ba) (which relates to unregistered managed investment schemes).

766E Meaning of provide a custodial or depository service

(1) For the purposes of this Chapter, a person (the provider) provides a custodial or depository service to another person (the client) if, under an arrangement between the provider and the client, or between the provider and another person with whom the client has an arrangement, (whether or not there are also other parties to any such arrangement), a financial product, or a beneficial interest in a financial product, is held by the provider in trust for, or on behalf of, the client or another person nominated by the client.

(2) The following provisions apply in relation to a custodial or depository service:

(a) subject to paragraph (b), for the purposes of this Chapter, the time at which a custodial or depository service is provided is the time when the financial product or beneficial interest concerned is first held by the provider as mentioned in subsection (1);

(b) for the purposes of Part 7.6, and of any other provisions of this Act prescribed by regulations made for the purposes of this paragraph, the continued holding of the financial product or beneficial interest concerned by the provider as mentioned in subsection (1) also constitutes the provision of a custodial or depository service.

Note: Because of paragraph (a) (subject to regulations made for the purposes of paragraph (b)), the requirements of Part 7.7 relating to financial services disclosure need only be complied with before the product or interest is first held by the provider. However, because of paragraph (b), the provider will be subject to the licensing and related requirements of Part 7.6 for so long as they continue to hold the product or interest.

(3) However, the following conduct does not constitute providing a custodial or depository service:

(a) the operation of a clearing and settlement facility;

(b) the operation of a registered scheme, or the holding of the assets of a registered scheme;

(c) the operation of a regulated superannuation fund, an approved deposit fund or a pooled superannuation trust (within the meaning of the Superannuation Industry (Supervision) Act 1993);

(d) the provision of services to a related body corporate;

(e) any other conduct of a kind prescribed by regulations made for the purposes of this paragraph.

Division 5—What is a financial market?

767A What is a financial market?

(1) For the purposes of this Chapter, a financial market is a facility through which:

(a) offers to acquire or dispose of financial products are regularly made or accepted; or

(b) offers or invitations are regularly made to acquire or dispose of financial products that are intended to result or may reasonably be expected to result, directly or indirectly, in:

(i) the making of offers to acquire or dispose of financial products; or

(ii) the acceptance of such offers.

(2) However, the following conduct does not constitute operating a financial market for the purposes of this Chapter:

(a) a person making or accepting offers or invitations to acquire or dispose of financial products on the person’s own behalf, or on behalf of one party to the transaction only, unless the regulations specify circumstances in which such conduct does constitute operating a financial market and the person’s conduct occurs in circumstances so specified;

(b) conducting treasury operations between related bodies corporate;

(c) a person, being the holder of a licence under an Australian law relating to the licensing of auctioneers, conducting an auction of forfeited shares;

(d) any other conduct of a kind prescribed by regulations made for the purposes of this paragraph.

Division 6—What is a clearing and settlement facility?

768A What is a clearing and settlement facility?

(1) For the purposes of this Chapter, a clearing and settlement facility is a facility that provides a regular mechanism for the parties to transactions relating to financial products to meet obligations to each other that:

(a) arise from entering into the transactions; and

(b) are of a kind prescribed by regulations made for the purposes of this paragraph.

Example 1: A facility that provides a regular mechanism for stockbrokers to pay for the shares they buy and to be paid for the shares they sell, and for records of those transactions to be processed to facilitate registration of the new ownership of the shares, would be a clearing and settlement facility (assuming that the relevant obligations are of a kind prescribed by regulations made for the purposes of this section).

Example 2: A facility that provides a regular mechanism for registering trade in derivatives on a futures market and that enables the calculation of payments that market participants owe by way of margins would also be a clearing and settlement facility (assuming that the relevant obligations are of a kind prescribed by regulations made for the purposes of this section).

(2) However, the following conduct does not constitute operating a clearing and settlement facility for the purposes of this Chapter:

(a) an ADI (within the meaning of the Banking Act 1959) acting in the ordinary course of its banking business;

(b) a person acting on their own behalf, or on behalf of one party to a transaction only;

(c) a person who provides financial services to another person dealing with the other person’s accounts in the ordinary course of the first person’s business activities;

(d) the actions of a participant in a clearing and settlement facility who has taken on the delivery or payment obligations, in relation to a particular financial product, of another person who is a party to a transaction relating to a financial product;

(e) conducting treasury operations between related bodies corporate;

(h) operating a facility for the exchange and settlement of non‑cash payments (see section 763D) between providers of non‑cash payment facilities;

(i) any other conduct of a kind prescribed by regulations made for the purposes of this paragraph.

Division 7—General provisions relating to civil and criminal liability

769A Application of Criminal Code to offences

The Criminal Code (except Part 2.5) applies to all offences based on the provisions of this Chapter.

Note 1: Chapter 2 of the Criminal Code sets out the general principles of criminal responsibility.

Note 2: For the meaning of offence based on a provision, see the definition in section 9.

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

(1) Subject to subsections (7) and (8), conduct engaged in on behalf of a body corporate:

(a) by a director, employee or agent of the body, within the scope of the person’s actual or apparent authority; or

(b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of the body, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent;

is taken, for the purposes of a provision of this Chapter, or a proceeding under this Chapter, to have been engaged in also by the body corporate.

(2) Conduct engaged in by a person (for example, the giving of money or property) in relation to:

(a) a director, employee or agent of a body corporate, acting within the scope of their actual or apparent authority; or

(b) any other person acting at the direction or with the consent or agreement (whether express or implied) of a director, employee or agent of a body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, employee or agent;

is taken, for the purposes of a provision of this Chapter, or a proceeding under this Chapter, to have been engaged in also in relation to the body corporate.

(3) If, in a proceeding under this Chapter in respect of conduct engaged in by a body corporate, it is necessary to establish the state of mind of the body, it is sufficient to show that a director, employee or agent of the body, being a director, employee or agent by whom the conduct was engaged in within the scope of the person’s actual or apparent authority, had that state of mind. For this purpose, a person acting as mentioned in paragraph (1)(b) is taken to be an agent of the body corporate concerned.

(4) Subject to subsections (7) and (8), conduct engaged in on behalf of a person other than a body corporate:

(a) by an employee or agent of the person, acting within the scope of the actual or apparent authority of the employee or agent; or

(b) by any other person acting at the direction or with the consent or agreement (whether express or implied) of an employee or agent of the first‑mentioned person, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent;

is taken, for the purposes of a provision of this Chapter, or of a proceeding under this Chapter, to have been engaged in also by the first‑mentioned person.

(5) Conduct engaged in by a person (for example, the giving of money or property) in relation to:

(a) an employee or agent of a person (the principal) other than a body corporate, acting within the scope of their actual or apparent authority; or

(b) any other person acting at the direction or with the consent or agreement (whether express or implied) of an employee or agent of a person (the principal) other than a body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the employee or agent;

is taken, for the purposes of a provision of this Chapter, or of a proceeding under this Chapter, to have been engaged in also in relation to the principal.

(6) If, in a proceeding under this Chapter in respect of conduct engaged in by a person other than a body corporate, it is necessary to establish the state of mind of the person, it is sufficient to show that an employee or agent of the person, being an employee or agent by whom the conduct was engaged in within the scope of the employee’s or agent’s actual or apparent authority, had that state of mind. For this purpose, a person acting as mentioned in paragraph (4)(b) is taken to be an agent of the person first referred to in subsection (4).

(7) Nothing in this section, or in any other law (including the common law), has the effect that, for the purposes of a provision of Part 7.7, or a proceeding under this Chapter that relates to a provision of Part 7.7, a financial service provided by person in their capacity as an authorised representative of a financial services licensee is taken, or taken also, to have been provided by that financial services licensee.

(8) Nothing in this section, or in any other law (including the common law), has the effect that, for the purposes of a provision of Division 2 of Part 7.9, or a proceeding under this Chapter that relates to a provision of Division 2 of Part 7.9, conduct engaged in by a person in their capacity as a regulated person (within the meaning of section 1011B) is taken, or taken also, to have been engaged in by another such regulated person.

(8A) Nothing in this section, other than subsections (7) and (8), excludes or limits the operation of subsection 601FB(2) in relation to the provisions of this Chapter or to proceedings under this Chapter.

(9) The regulations may provide that this section, or a particular provision of this section, has effect for specified purposes subject to modifications specified in the regulations. The regulations have effect accordingly.

(10) In this section:

(a) a reference to a proceeding under this Chapter includes a reference to:

(i) a prosecution for an offence based on a provision of this Chapter; and

(ii) a proceeding under a provision of Part 9.4B that relates to a provision of this Chapter; and

(iii) any other proceeding under any other provision of Chapter 9 that relates to a provision of this Chapter; and

(b) a reference to conduct is a reference to an act, an omission to perform an act, or a state of affairs; and

(c) a reference to the state of mind of a person includes a reference to the knowledge, intention, opinion, belief or purpose of the person and the person’s reasons for the person’s intention, opinion, belief or purpose.

Note: For the meaning of offence based on a provision, see the definition in section 9.

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

(1) For the purposes of this Chapter, or of a proceeding under this Chapter, if:

(a) a person makes a representation with respect to any future matter (including the doing of, or refusing to do, any act); and

(b) the person does not have reasonable grounds for making the representation;

the representation is taken to be misleading.

(2) Subsection (1) does not limit the circumstances in which a representation may be misleading.

(3) In this section:

proceeding under this Chapter has the same meaning as it has in section 769B.

Part 7.2—Licensing of financial markets

Division 1—Preliminary

790A Definition

In this Part:

clearing and settlement arrangements, for transactions effected through a financial market, means arrangements for the clearing and settlement of those transactions. The arrangements may be part of the market’s operating rules or be separate from those operating rules.

Division 2—Requirement to be licensed

791A Need for a licence

(1) A person must only operate, or hold out that the person operates, a financial market in this jurisdiction if:

(a) the person has an Australian market licence that authorises the person to operate the market in this jurisdiction; or

(b) the market is exempt from the operation of this Part.

Note 1: A market licensee may also provide financial services incidental to the operation of the market: see paragraph 911A(2)(d).

Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) For the purposes of an offence based on subsection (1), strict liability applies to paragraph (1)(b).

Note: For strict liability, see section 6.1 of the Criminal Code.

791B Other prohibitions on holding out

A person must not hold out:

(a) that the person has an Australian market licence; or

(b) that the operation of a financial market by the person in this jurisdiction is authorised by an Australian market licence; or

(d) that the person is a participant in a licensed market;

if that is not the case.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

791C Exemptions

(1) The Minister may, by publishing a notice in the Gazette, exempt from the operation of this Part a particular financial market or type of financial market.

(2) The Minister may, at any time, by publishing a notice in the Gazette:

(a) impose conditions, or additional conditions, on an exemption; or

(b) vary or revoke the conditions on an exemption; or

(3) However, the Minister may only take action under subsection (2) after:

(a) giving notice, and an opportunity to make submissions on the proposed action, to the operator of each financial market known by the Minister to be covered by the exemption; and

(b) if the exemption covers a type of financial market—causing a notice to be published in a newspaper or newspapers circulating generally in each State and internal Territory allowing a reasonable time within which the operator of each financial market covered by the exemption may make submissions on the proposed action.

This subsection does not apply to the Minister imposing conditions when an exemption is made.

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

(1) For the purposes of this Chapter, a financial market is taken to be operated in this jurisdiction if it is operated by a body corporate that is registered under Chapter 2A.

(2) Subsection (1) does not limit the circumstances in which a financial market is operated in this jurisdiction for the purposes of this Chapter.

Division 3—Regulation of market licensees

Subdivision A—Licensee’s obligations

792A General obligations

A market licensee must:

(a) to the extent that it is reasonably practicable to do so, do all things necessary to ensure that the market is a fair, orderly and transparent market; and

(b) comply with the conditions on the licence; and

(c) have adequate arrangements (whether they involve a self‑regulatory structure or the appointment of an independent person or related entity) for supervising the market, including arrangements for:

(i) handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the market operates in the way mentioned in paragraph (a); and

(ii) monitoring the conduct of participants on or in relation to the market; and

(iii) enforcing compliance with the market’s operating rules; and

(d) have sufficient resources (including financial, technological and human resources) to operate the market properly and for the required supervisory arrangements to be provided; and

(e) if section 881A requires there to be compensation arrangements in relation to the market that are approved in accordance with Division 3 of Part 7.5—ensure that there are such approved compensation arrangements in relation to the market; and

(f) if the licensee is a foreign body corporate—be registered under Division 2 of Part 5B.2; and

(g) if the licence was granted under subsection 795B(2) (overseas markets)—both:

(i) remain authorised to operate a financial market in the foreign country in which the licensee’s principal place of business is located; and

(ii) get the Minister’s approval under section 792H before that principal place of business becomes located in any other foreign country; and

(h) if the licensee, or a holding company of the licensee, is a widely held market body (within the meaning of Division 1 of Part 7.4)—take all reasonable steps to ensure that an unacceptable control situation (within the meaning of that Division) does not exist in relation to the body; and

(i) take all reasonable steps to ensure that no disqualified individual becomes, or remains, involved in the licensee (see Division 2 of Part 7.4).

792B Obligation to notify ASIC of certain matters

(1) A market licensee must give written notice to ASIC, as soon as practicable, if it becomes aware that it may no longer be able to meet, or has breached, an obligation under section 792A. If ASIC considers it appropriate to do so, ASIC may give the Minister advice about the matter.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) A market licensee must give written notice to ASIC, as soon as practicable, as required by the following paragraphs:

(a) if the licensee provides a new class of financial service incidental to the operation of the market, the licensee must give notice that includes details of the new class;

(b) if the licensee takes any kind of disciplinary action against a participant in the market, the licensee must give notice that includes:

(i) the participant’s name; and

(ii) the reason for and nature of the action taken;

(c) if the licensee has reason to suspect that a person has committed, is committing, or is about to commit a significant contravention of the market’s operating rules or this Act, the licensee must give notice that includes:

(i) the person’s name; and

(ii) details of the contravention or impending contravention; and

(iii) the licensee’s reasons for that belief.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) If a market licensee becomes aware of:

(a) a matter that the licensee considers has adversely affected, is adversely affecting, or may adversely affect the ability of a participant in the market, who is a financial services licensee, to meet the participant’s obligations as a financial services licensee; or

(b) a matter, concerning a participant in the market who is a financial services licensee, that is of a kind prescribed by regulations made for the purposes of this paragraph;

the market licensee must give a written report to ASIC on the matter and send a copy of it to the participant.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) A market licensee whose licence was granted under subsection 795B(2) (overseas markets) must, as soon as practicable, give written notice to ASIC if:

(a) the licensee ceases to be authorised to operate a financial market in the foreign country in which the licensee’s principal place of business is located; or

(b) there is a significant change to the regulatory regime applying in relation to the market in the foreign country in which the licensee’s principal place of business is located.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(5) As soon as practicable after:

(a) a person becomes or ceases to be a director, secretary or executive officer of a market licensee or of a holding company of a market licensee (including when a person changes from one of those positions to another); or

(b) a market licensee becomes aware that a person has come to have, or has ceased to have, more than 15% of the voting power in the licensee or in a holding company of the licensee;

the licensee must give written notice of this to ASIC. The notice must include such other information about the matter as is prescribed by regulations made for the purposes of this subsection.

Note 1: To the extent that the licensee is required to give the notice and information under any other provision of this Act, the licensee may comply with this subsection by doing so. It need not provide the same information twice.

Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).

792C Giving ASIC information about a listed disclosing entity

(1) If a market licensee makes information about a listed disclosing entity available to participants in the market (whether or not the licensee also makes the information available to anyone else), the licensee must give ASIC the same information as soon as practicable.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) However, the licensee is not required to give ASIC any information of a kind that is excluded by the regulations.

(3) ASIC may require the information to be given in a particular form.

792D Obligation to assist ASIC

(1) A market licensee must give such assistance to ASIC, or a person authorised by ASIC, as ASIC or the authorised person reasonably requests in relation to the performance of ASIC’s functions.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) Such assistance may include showing ASIC the licensee’s books or giving ASIC other information.

792E Obligation to give ASIC access to market facilities

A market licensee must give a person authorised by ASIC such reasonable access to the market’s facilities as the person requests for any of the purposes of this Chapter.

Note: Failure to comply with this section is an offence (see subsection 1311(1)).

792F Annual report

(1) A market licensee must, within 3 months after the end of its financial year, give ASIC an annual report on the extent to which the licensee complied with its obligations as a market licensee under this Chapter.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) The licensee must ensure that the annual report is accompanied by any information and statements prescribed by regulations made for the purposes of this subsection.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) The licensee must also ensure that the annual report is accompanied by any audit report that the Minister requires under subsection (4).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) The Minister may, by giving written notice to a market licensee, require the licensee to obtain an audit report on the annual report and on any information or statements accompanying it. The Minister must nominate to prepare the audit report:

(a) ASIC; or

(b) a specified person or body that is suitably qualified.

(5) ASIC must give the annual report and accompanying material to the Minister.

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

(1) If, in relation to a category of transactions, being all transactions or a class of transactions effected through a licensed market, the market licensee:

(a) does not have any clearing and settlement arrangements for transactions in that category; or

(b) has clearing and settlement arrangements for transactions in that category, but they are not arrangements with the operator of a clearing and settlement facility for the clearing and settlement of such transactions through the facility;

the market licensee must, before a person becomes a participant in the market, give the person written advice:

(c) if paragraph (a) applies—that the licensee does not have any clearing and settlement arrangements for transactions in that category, and that it is the responsibility of the parties to such transactions to make their own arrangements for the clearing and settlement of such transactions; or

(d) if paragraph (b) applies—setting out particulars of the clearing and settlement arrangements for transactions in that category.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) Within a reasonable time before a market licensee ceases, in relation to a category of transactions, being all transactions or a class of transactions effected through a licensed market, to have clearing and settlement arrangements (the terminating arrangements) with the operator of a particular clearing and settlement facility for the clearing and settlement of such transactions through the facility, the market licensee must give the participants in the market written advice:

(a) if the terminating arrangements are not being replaced by any other clearing and settlement arrangements—that the licensee will no longer have clearing and settlement arrangements for that category of transactions, and that it will be the responsibility of the parties to such transactions to make their own arrangements for the clearing and settlement of such transactions; or

(b) if the terminating arrangements are being replaced by new clearing and settlement arrangements—setting out particulars of the new arrangements.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

792H Change of country by foreign licensee

(1) In the case of a licence granted under subsection 795B(2), the Minister may approve the location of the licensee’s principal place of business in a new country only if:

(a) the new country is not Australia; and

(b) the operation of the market in that country will be subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of investor protection and market integrity they achieve, to the requirements and supervision to which financial markets are subject under this Act in relation to those matters.

(2) If, in relation to a licence granted under subsection 795B(2), the licensee’s principal place of business changes to become a place in Australia:

(a) the licence ceases to be in force from the time of the change; and

(b) if the licensee wishes the market to continue to be licensed, the licensee may apply for the grant of a new licence under subsection 795B(1); and

(c) the application must be assessed in accordance with Subdivision A of Division 4, subject to such modifications (if any) of that Subdivision as are set out in regulations made for the purposes of this paragraph.

(3) An application referred to in paragraph (2)(b) may be made in advance of the change of location of the principal place of business, and a decision on the application may be made before that time. However, any licence granted pursuant to the application does not come into force until the change occurs.

792I Making information about compensation arrangements publicly available

A market licensee must take reasonable steps to ensure that information about the compensation arrangements that are in place under Part 7.5 is available to the public free of charge.

Note: Failure to comply with this section is an offence (see subsection 1311(1)).

Subdivision B—The market’s operating rules and procedures

793A Content of the operating rules and procedures

(1) The operating rules of a licensed market must deal with the matters prescribed by regulations made for the purposes of this subsection.

(2) The regulations may also prescribe matters in respect of which a licensed market must have written procedures.

(3) However, subsections (1) and (2) do not apply if the licensee is also authorised to operate the market in the foreign country in which its principal place of business is located and the licence was granted under subsection 795B(2) (overseas markets).

(4) In a subsection (3) case, ASIC may determine, by giving written notice to the licensee, matters in respect of which the licensed market must have written procedures.

793B Legal effect of operating rules

The operating rules (other than listing rules) of a licensed market have effect as a contract under seal:

(a) between the licensee and each participant in the market; and

(b) between a participant and each other participant;

under which each of those persons agrees to observe the operating rules to the extent that they apply to the person and to engage in conduct that the person is required by the operating rules to engage in.

793C Enforcement of operating rules

(1) If a person who is under an obligation to comply with or enforce any of a licensed market’s operating rules fails to meet that obligation, an application to the Court may be made by:

(a) ASIC; or

(b) the licensee; or

(c) the operator of a clearing and settlement facility with which the licensee has clearing and settlement arrangements; or

(d) a person aggrieved by the failure.

(2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

(a) the person against whom the order is sought; or

(b) if that person is a body corporate—the directors of the body corporate;

about compliance with, or enforcement of, the operating rules.

(3) For the purposes of this section, a body corporate that is, with its acquiescence, included in the official list of a licensed market, or an associate of such a body corporate, is taken to be under an obligation to comply with the operating rules of that market to the extent to which those rules purport to apply to the body corporate or associate.

(4) For the purposes of this section, if a disclosing entity that is an undertaking to which interests in a registered scheme relate is, with the responsible entity’s acquiescence, included in the official list of a licensed market, the responsible entity, or an associate of the responsible entity, is taken to be under an obligation to comply with the operating rules of that market to the extent to which those rules purport to apply to the responsible entity or associate.

(5) For the purposes of this section, if a body corporate fails to comply with or enforce provisions of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the market is taken to be a person aggrieved by the failure.

(6) There may be other circumstances in which a person may be aggrieved by a failure for the purposes of this section.

793D Changing the operating rules

Licensed markets other than subsection 795B(2) markets

(1) As soon as practicable after a change is made to the operating rules of a licensed market, other than a market licensed under subsection 795B(2) (overseas markets), the licensee must lodge with ASIC written notice of the change. The notice must:

(a) set out the text of the change; and

(b) specify the date on which the change was made; and

(2) If no notice is lodged as required by subsection (1) with ASIC within 21 days after the change is made, the change ceases to have effect at the end of that period.

Subsection 795B(2) markets

(3) As soon as practicable after a change is made to the operating rules of a market the operation of which is licensed under subsection 795B(2) (overseas markets), the licensee must lodge with ASIC written notice of the change. The notice must:

(a) set out the text of the change; and

(b) specify the date on which the change was made; and

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

793E Disallowance of changes to operating rules

(1) This section does not apply in respect of an Australian market licence granted under subsection 795B(2) (overseas markets).

(2) As soon as practicable after receiving a notice under section 793D from a market licensee, ASIC must send a copy of the notice to the Minister.

(3) Within 28 days after ASIC receives the notice from the licensee, the Minister may disallow all or a specified part of the change to the operating rules.

(4) In deciding whether to do so, the Minister must have regard to the consistency of the change with the licensee’s obligations under this Part (including in particular the obligation mentioned in paragraph 792A(a)).

Note: The Minister must also have regard to the matters in section 798A.

(5) As soon as practicable after all or a part of a change is disallowed, ASIC must give notice of the disallowance to the licensee. The change ceases to have effect, to the extent of the disallowance, when the licensee receives the notice.

Subdivision C—Powers of the Minister and ASIC

794A Minister’s power to give directions

(1) If the Minister considers that a market licensee is not complying with its obligations as a market licensee under this Chapter, the Minister may give the licensee a written direction to do specified things that the Minister believes will promote compliance by the licensee with those obligations.

(2) The licensee must comply with the direction.

(3) If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

(4) The Minister may vary or revoke a direction at any time by giving written notice to the licensee.

794B Minister’s power to require special report

(1) The Minister may give a market licensee a written notice requiring the licensee to give ASIC a special report on specified matters. ASIC must give the report to the Minister.

(2) The notice may also require the licensee to give ASIC an audit report on the special report. The Minister must nominate to prepare the audit report:

(a) ASIC; or

(b) a specified person or body that is suitably qualified.

(3) The licensee must give the special report, and audit report (if any), to ASIC within the time required by the notice.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

794C ASIC to assess licensee’s compliance

(1) ASIC may do an assessment of how well a market licensee is complying with any or all of its obligations as a market licensee under this Chapter. In doing the assessment, ASIC may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

(2) In respect of the obligation in paragraph 792A(c), ASIC must do such an assessment at least once a year for each market licensee.

(3) As soon as practicable after doing an assessment under this section, ASIC must give a written report on the assessment to the licensee and to the Minister.

(4) If an assessment, or part of an assessment, relates to any other person’s affairs to a material extent, ASIC may, at the person’s request or of its own motion, give the person a copy of the written report on the assessment or the relevant part of the report.

(5) If an assessment, or part of an assessment, relates to a serious contravention of a law of the Commonwealth or of a State or Territory, ASIC may give a copy of the written report on the assessment, or the relevant part of the report, to:

(a) the Australian Federal Police; or

(b) the National Crime Authority; or

(d) an agency prescribed by regulations made for the purposes of this paragraph.

(6) Either the Minister or ASIC may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.

794D ASIC’s power to give directions

(1) If ASIC is of the opinion that it is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products by:

(a) giving a direction to a market licensee to suspend dealings in the financial product or class of financial products; or

(b) giving some other direction in relation to those dealings;

ASIC may give written advice to the licensee of that opinion and the reasons for it.

Example: Under paragraph (b), ASIC could give a direction to limit the kinds of dealings that are allowed in the financial product or class of financial products or to require a participant in the market to act in a specified manner in relation to dealings in the financial product or class of financial products.

(2) If, after receiving ASIC’s advice and reasons, the licensee does not take:

(a) in the case of a proposed direction to suspend dealings in the financial products—action to prevent such dealings; or

(b) in any other case—such other action as in ASIC’s view is adequate to address the situation raised in the advice;

and ASIC still considers that it is appropriate to give the direction to the licensee, ASIC may give the licensee the written direction with a statement setting out its reasons for making the direction.

(3) The direction has effect for the period specified in it (which may be up to 21 days). During that period, the licensee must comply with the direction and must not allow any dealings to take place contrary to it.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

(5) As soon as practicable after making or varying (see subsection (7)) a direction, ASIC must:

(a) give a copy of the direction or variation to the operator of each clearing and settlement facility with which the market licensee has clearing and settlement arrangements for transactions effected through the market; and

(b) give a written report to the Minister setting out ASIC’s reasons for making the direction or variation; and

(6) If, at any time after the licensee receives ASIC’s advice under subsection (1), the licensee requests in writing that ASIC refer the matter to the Minister, ASIC must do so immediately. In that event, the Minister may, if he or she considers it appropriate, require ASIC not to make, or to revoke, the direction. ASIC must immediately comply with such a requirement.

(7) ASIC may vary a direction by giving written notice to the licensee if ASIC is of the opinion that the variation is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products.

(8) ASIC may revoke a direction by giving written notice to the licensee. ASIC must also give written notice of the revocation to the operator of each clearing and settlement facility with which the market licensee has clearing and settlement arrangements for transactions effected through the market.

794E Additional directions to clearing and settlement facilities

(1) If ASIC gives a direction under section 794D, it may also give a written direction to the operator of each clearing and settlement facility with which the market licensee has clearing and settlement arrangements for transactions effected through the market:

(a) prohibiting the operator from acting in a manner inconsistent with the section 794D direction; and

(b) requiring the operator to do all that the operator is reasonably capable of doing to give effect to the section 794D direction.

(2) The operator must comply with the direction given to it under this section.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) If the operator fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the operator comply with the direction.

Division 4—The Australian market licence

Subdivision A—How to get a licence

795A How to apply for a licence

(1) A body corporate may apply for an Australian market licence by lodging with ASIC an application that:

(a) includes the information required by regulations made for the purposes of this paragraph; and

(b) is accompanied by the documents (if any) required by regulations made for the purposes of this paragraph; and

Note: For fees in respect of lodging applications, see Part 9.10.

(2) ASIC must, within a reasonable time, give the application to the Minister with advice about the application.

795B When a licence may be granted

General

(1) The Minister may grant an applicant an Australian market licence if the Minister is satisfied that:

(a) the application was made in accordance with section 795A; and

(b) the applicant will comply with the obligations that will apply if the licence is granted; and

(c) the applicant has adequate operating rules, and procedures, (see Subdivision B of Division 3) to ensure, as far as is reasonably practicable, that the market will operate as mentioned in paragraph 792A(a); and

(d) the applicant has adequate arrangements (whether they involve a self‑regulatory structure or the appointment of an independent person or related entity) for supervising the market, including arrangements for:

(i) handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the market operates in the way mentioned in paragraph 792A(a); and

(ii) monitoring the conduct of participants on or in relation to the market; and

(iii) enforcing compliance with the market’s operating rules; and

(e) the applicant has adequate clearing and settlement arrangements for transactions effected through the market, if the Minister considers that the applicant should have such arrangements; and

(f) neither subsection 881D(2) nor 882A(2) (relating to compensation arrangements) requires the Minister to reject the application; and

(g) no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

(h) no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4).

This subsection has effect subject to subsections (3) and (4).

Note: The Minister must also have regard to the matters in section 798A in deciding whether to grant a licence.

Alternative criteria for granting licence for overseas market

(2) If an applicant is authorised to operate a financial market in the foreign country in which its principal place of business is located, the Minister may grant the applicant an Australian market licence authorising the applicant to operate the same market in this jurisdiction. The Minister must be satisfied that:

(a) the application was made in accordance with section 795A; and

(b) the applicant will comply with the obligations that will apply if the licence is granted; and

(c) the operation of the market in that country is subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of investor protection and market integrity they achieve, to the requirements and supervision to which financial markets are subject under this Act in relation to those matters; and

(d) the applicant undertakes to cooperate with ASIC by sharing information and in other appropriate ways; and

(e) no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

(f) no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4); and

(g) any other requirements that are prescribed by regulations made for the purposes of this paragraph are satisfied.

This subsection has effect subject to subsections (3) and (4).

Note: The Minister must also have regard to the matters in section 798A in deciding whether to grant a licence.

Foreign bodies

(3) If the applicant is a foreign body corporate, the Minister:

(a) must not grant the applicant a licence unless the applicant is registered under Division 2 of Part 5B.2; and

(b) may otherwise grant a licence under either subsection (1) or (2) (if the relevant criteria are satisfied).

Disqualified individuals

(4) The Minister must not grant the applicant a licence unless:

(a) ASIC has notified the Minister that, as far as ASIC is aware, no disqualified individual is involved in the applicant (see Division 2 of Part 7.4); or

(b) 42 days have passed since the application was made and ASIC has not given a notice under subsection 853D(2) to the applicant within that 42 days.

795C Publication of notice of licence grant

If the Minister grants an Australian market licence, the Minister must publish a notice in the Gazette stating:

(a) the name of the licensee; and

(b) when the licence was granted; and

795D More than one licence in the same document

If the Minister grants a person 2 or more of the following:

(a) an Australian market licence;

(b) an Australian CS facility licence;

they may be included in the same document.

795E More than one market covered by the same licence

(1) The same Australian market licence may authorise the licensee to operate 2 or more financial markets.

(2) In that case, a reference in this Chapter to the market to which an Australian market licence relates is taken instead to be a reference to each of those financial markets severally.

(3) Before varying the conditions on an Australian market licence so as to add another market that the licensee is authorised to operate, the Minister must be satisfied of the matters listed in subsection 795B(1) or (2) (as appropriate) in relation to the market.

(4) An Australian market licence that authorises the licensee to operate 2 or more financial markets may be suspended or cancelled under Subdivision C in respect of one or some of those markets only, as if the licensee held a separate licence for each of the markets.

Subdivision B—The conditions on the licence

796A The conditions on the licence

(1) The Minister may, at any time:

(a) impose conditions, or additional conditions, on an Australian market licence; or

(b) vary or revoke conditions imposed on such a licence;

by giving written notice to the licensee. The Minister must also publish a notice in the Gazette with details of the action and when it took effect.

Note: As well as the requirements in this section, the Minister must also have regard to the matters in section 798A.

(2) The Minister may do so:

(a) on his or her own initiative, subject to subsection (3); or

(b) if the licensee lodges with ASIC an application for the Minister to do so, which is accompanied by the prescribed documents, if any.

Note: For fees in respect of lodging applications, see Part 9.10.

(3) The Minister may only impose conditions or additional conditions, or vary the conditions, on the licence on his or her own initiative if:

(a) he or she considers it appropriate to do so having regard to:

(i) the licensee’s obligations as a market licensee under this Chapter; and

(ii) any change in market operations or the conditions in which the market is operating; and

(b) the Minister gives the licensee written notice of the proposed action and an opportunity to make a submission before it takes effect.

This subsection does not apply to the Minister imposing conditions when a licence is granted.

(4) The Minister must ensure that each Australian market licence is subject to conditions that specify:

(a) the particular market that the licensee is authorised to operate; and

(b) the class or classes of financial products that can be dealt with on the market; and

(c) if the Minister considers that the licensee should have clearing and settlement arrangements for transactions effected through the market—the type of clearing and settlement arrangements that are adequate.

Note: If compensation arrangements in relation to the market are approved under Division 3 of Part 7.5, there must also be conditions as required by subsection 882A(4) or paragraph 882B(4)(b).

(6) ASIC must give the Minister any application and documents lodged under subsection (2).

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

797A Varying licences

(1) The Minister may vary an Australian market licence to take account of a change in the licensee’s name if the licensee lodges with ASIC an application for the variation, accompanied by the prescribed documents, if any.

Note 1: The conditions on the licence can be varied under section 796A.

Note 2: For fees in respect of lodging applications, see Part 9.10.

(2) The Minister must give written notice of the variation to the licensee.

(3) ASIC must give the Minister any application and documents lodged under subsection (1).

797B Immediate suspension or cancellation

The Minister may, by giving written notice to a market licensee, suspend the licence for a specified period, or cancel it, if:

(a) the licensee ceases to carry on the business of operating the market; or

(b) the licensee becomes an externally‑administered body corporate; or

(d) in the case of a licence granted under subsection 795B(2) (overseas markets):

(i) the licensee ceases to be authorised to operate a financial market in the foreign country in which the licensee’s principal place of business is located; or

(ii) there is a change to the regulatory regime applying in relation to the market to which the licence relates in the country in which the licensee’s principal place of business is located, and, because of that change, the Minister is no longer satisfied as mentioned in paragraph 795B(2)(c).

797C Suspension or cancellation following hearing and report

(1) If the Minister considers that a market licensee has breached, or is in breach of, one or more of its obligations as a market licensee under this Chapter, the Minister may give the licensee a written notice that requires the licensee to show cause, at a hearing before a specified person, why the licence should not be suspended or cancelled.

(2) The notice must specify:

(a) the grounds on which it is proposed to suspend or cancel the licence; and

(b) a reasonable time and place at which the hearing is to be held.

However, if the licensee consents, the person conducting the hearing may fix a different time or place.

(3) The person conducting the hearing must:

(a) give the licensee an opportunity to be heard at the hearing; and

(b) give the Minister:

(i) a report about the hearing; and

(ii) a recommendation about the grounds in the notice on which it is proposed to suspend or cancel the licence.

(4) After considering the report and recommendation, the Minister may:

(a) decide to take no further action in relation to the matter and give written advice of that decision to the licensee; or

(b) suspend the licence for a specified period, or cancel the licence, by giving written notice to the licensee.

Note: The Minister must also have regard to the matters in section 798A.

797D Effect of suspension

(1) A person whose Australian market licence is suspended is taken not to hold that licence while it is suspended.

(2) However, the Minister may specify in the written notice to the licensee that subsection (1) does not apply for specified purposes.

797E Variation or revocation of suspension

The Minister may at any time vary or revoke a suspension of an Australian market licence by giving written notice to the licensee.

797F Publication of notice of licence suspension or cancellation

(1) If the Minister:

(a) suspends, or varies or revokes a suspension of, an Australian market licence; or

(b) cancels an Australian market licence;

the Minister must publish a notice in the Gazette to that effect.

(2) The notice must state when the action took effect.

797G Suspension and cancellation only in accordance with this Subdivision

An Australian market licence cannot be varied, suspended or cancelled otherwise than in accordance with this Subdivision.

Note: The conditions on the licence can be varied under section 796A.

Division 5—Other matters

798A Matters to be taken into account by the Minister

(1) The Minister must have regard to certain matters in deciding whether to:

(a) grant an applicant an Australian market licence under section 795B; or

(b) impose, vary or revoke conditions on such a licence under section 796A; or

(d) disallow a change to the operating rules of a licensed market under section 793E.

(2) These are the matters the Minister must have regard to:

(a) the structure, or proposed structure, of the market;

(b) the nature of the activities conducted, or proposed to be conducted, on the market;

(d) the nature of the financial products dealt with, or proposed to be dealt with, on the market;

(e) the participants, or proposed participants, in the market and:

(i) whether those participants, in effecting transactions through the market, are, or will be, providing financial services to other persons; and

(ii) whether those participants acquire or dispose, or will acquire or dispose, of financial products through the market as retail clients or as wholesale clients; and

(iii) whether those participants are also, or will also be, participants in any other financial markets;

(f) the technology used, or proposed to be used, in the operation of the market;

(g) whether it would be in the public interest to take the action referred to in subsection (1);

(h) any relevant advice received from ASIC.

The Minister may also have regard to any other matter that the Minister considers relevant.

(3) If the Minister is deciding whether to take the action referred to in paragraph (1)(a), (b) or (c) in respect of an Australian market licence granted under subsection 795B(2) (overseas markets), the Minister must also have regard to:

(a) the criteria that the licensee or applicant satisfied to obtain an authorisation to operate the same market in the foreign country in which their principal place of business is located; and

(b) the obligations they must continue to satisfy to keep the authorisation; and

(d) whether adequate arrangements exist for cooperation between ASIC and the authority that is responsible for that supervision.

798B ASIC may give advice to Minister

ASIC may give advice to the Minister in relation to:

(a) any matter in respect of which the Minister has a discretion under this Part; or

(b) any other matter concerning financial markets.

Note: In some cases, the Minister must have regard to ASIC’s advice: see paragraph 798A(2)(h).

798C Self‑listing of markets

(1) A market licensee may be included in the market’s official list.

Note: There are certain matters that must be included in the market’s listing rules before the licensee is included in the official list: see subsection (4).

(2) In such a case, the financial products of the licensee may be traded on the market, if the licensee has entered into such arrangements as ASIC requires:

(a) for dealing with possible conflicts of interest that might arise from the licensee’s financial products being able to be traded on the market; and

(b) for the purposes of ensuring the integrity of trading in the licensee’s financial products.

Note: For fees in respect of ASIC performing functions under such arrangements, see Part 9.10.

(3) The licensee must comply with the arrangements.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) Before, and at all times while, the licensee is included in the market’s official list, the market’s listing rules must provide for ASIC, instead of the licensee, to make decisions and to take action (or to require the licensee to take action on ASIC’s behalf) in relation to these matters, and matters related to these matters:

(a) the admission of the licensee to the market’s official list;

(b) the removal of the licensee from that list;

Note: For fees in respect of ASIC performing this function, see Part 9.10.

(5) ASIC has the powers and functions that are provided for it in any listing rules or arrangements made for the purposes of this section.

(6) An Australian market licensee’s products must not be traded on the licensee’s own market otherwise than as allowed by this section.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(7) This section does not apply if the licence concerned was granted under subsection 795B(2) (overseas markets). Instead, the law of the country in which the market licensee’s principal place of business is located applies for all purposes connected with the inclusion of the licensee in the market’s official list.

798D Exemptions and modifications for self‑listing licensees

(1) ASIC may:

(a) exempt a market licensee whose financial products are able to be traded on the market from a modifiable provision (see subsection (7)); or

(b) declare that a modifiable provision applies to a market licensee whose financial products are able to be traded on the market as if specified provisions were omitted, modified or varied as specified in the declaration.

(2) An exemption or declaration must be in writing and ASIC must publish notice of it in the Gazette.

(3) An exemption may apply unconditionally or subject to specified conditions.

(4) If an exemption is granted subject to specified conditions, the market licensee must comply with those conditions.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(5) If an exemption is granted subject to specified conditions, the Court may, on ASIC’s application, order the licensee to comply with one or more of those conditions in a specified way.

(6) If conduct (including an omission) of a person would not have constituted an offence if:

(a) a particular condition had not been imposed on an exemption under paragraph (1)(a); or

(b) a particular declaration under paragraph (1)(b) had not been made;

that conduct does not constitute an offence unless, before the conduct occurred (in addition to complying with the gazettal requirement of subsection (2)), ASIC gave written notice setting out the text of the condition or the declaration to the person. In a prosecution for an offence to which this subsection applies, the prosecution must prove that this additional notification requirement was complied with before the conduct occurred.

(7) In this section:

modifiable provision means:

(a) section 205G and any of the provisions of Chapter 6, 6A, 6B, 6C, 6CA or 7; or

(b) regulations made for the purposes of that section or any of those provisions.

798E Other potential conflict situations

(1) The regulations may make provision in relation to the rules and procedures that are to apply in the case of conflicts, or potential conflicts, between the commercial interests of the licensee and the need for the licensee to ensure that the market operates in the way mentioned in paragraph 792A(a).

(2) In particular, such regulations may deal with the following:

(a) identifying when such a conflict, or potential conflict, is taken to arise;

(b) empowering ASIC, instead of the licensee, to make decisions and to take action under the market’s operating rules in relation to such a conflict or potential conflict;

(c) empowering ASIC to require the licensee to take action under the market’s operating rules (whether or not on ASIC’s behalf) in relation to such a conflict or potential conflict.

Note: For fees in respect of ASIC performing this function, see Part 9.10.

(3) Subsection (2) does not limit the generality of subsection (1).

Part 7.3—Licensing of clearing and settlement facilities

Division 1—Requirement to be licensed

820A Need for a licence

(1) A person must only operate, or hold out that the person operates, a clearing and settlement facility in this jurisdiction if:

(a) the person has an Australian CS facility licence that authorises the person to operate the facility in this jurisdiction; or

(b) the facility is exempt from the operation of this Part.

Note 1: A CS facility licensee may also provide financial services incidental to the operation of the facility: see paragraph 911A(2)(d).

Note 2: Failure to comply with this subsection is an offence: see subsection 1311(1).

(2) For the purposes of an offence based on subsection (1), strict liability applies to paragraph (1)(b).

Note: For strict liability, see section 6.1 of the Criminal Code.

820B Other prohibitions on holding out

A person must not hold out:

(a) that the person has an Australian CS facility licence; or

(b) that the operation of a clearing and settlement facility by the person in this jurisdiction is authorised by an Australian CS facility licence; or

if that is not the case.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

820C Exemptions

(1) The Minister may, by publishing a notice in the Gazette, exempt from the operation of this Part a particular clearing and settlement facility or type of clearing and settlement facility.

(2) The Minister may, at any time, by publishing a notice in the Gazette:

(a) impose conditions, or additional conditions, on an exemption; or

(b) vary or revoke the conditions on an exemption; or

(3) However, the Minister may only take action under subsection (2) after:

(a) giving notice, and an opportunity to make submissions on the proposed action, to the operator of each clearing and settlement facility known by the Minister to be covered by the exemption; and

(b) if the exemption covers a type of clearing and settlement facility—causing a notice to be published in a newspaper or newspapers circulating generally in each State and internal Territory allowing a reasonable time within which the operator of each facility covered by the exemption may make submissions on the proposed action.

This subsection does not apply to the Minister imposing conditions when an exemption is made.

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

(1) For the purposes of this Chapter, a clearing and settlement facility is taken to be operated in this jurisdiction if it is operated by a body corporate that is registered under Chapter 2A.

(2) Subsection (1) does not limit the circumstances in which a clearing and settlement facility is operated in this jurisdiction for the purposes of this Chapter.

Division 2—Regulation of CS facility licensees

Subdivision A—Licensee’s obligations

821A General obligations

A CS facility licensee must:

(aa) to the extent that it is reasonably practicable to do so:

(i) comply with standards determined under section 827D; and

(ii) do all other things necessary to reduce systemic risk; and

(a) to the extent that it is reasonably practicable to do so, do all things necessary to ensure that the facility’s services are provided in a fair and effective way; and

(b) comply with the conditions on the licence; and

(c) have adequate arrangements (whether they involve a self‑regulatory structure or the appointment of an independent person or related entity) for supervising the facility, including arrangements for:

(i) handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the facility’s services are provided in a fair and effective way; and

(ii) enforcing compliance with the facility’s operating rules; and

(d) have sufficient resources (including financial, technological and human resources) to operate the facility properly and for the required supervisory arrangements to be provided; and

(e) if the licensee is a foreign body corporate—be registered under Division 2 of Part 5B.2; and

(f) if the licence was granted under subsection 824B(2) (overseas clearing and settlement facilities)—both:

(i) remain authorised to operate a clearing and settlement facility in the foreign country in which the licensee’s principal place of business is located; and

(ii) get the Minister’s approval under section 821F before that principal place of business becomes located in any other foreign country; and

(g) if the licensee, or a holding company of the licensee, is a widely held market body (within the meaning of Division 1 of Part 7.4)—take all reasonable steps to ensure that an unacceptable control situation (within the meaning of that Division) does not exist in relation to the body; and

(h) take all reasonable steps to ensure that no disqualified individual becomes, or remains, involved in the licensee (see Division 2 of Part 7.4).

821B Obligation to notify ASIC of certain matters

(1) A CS facility licensee must give written notice to ASIC, as soon as practicable, if it becomes aware that it may no longer be able to meet, or has breached, an obligation under section 821A. If ASIC considers it appropriate to do so, ASIC may give the Minister advice about the matter.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) A CS facility licensee must give written notice to ASIC, as soon as practicable, as required by the following paragraphs:

(a) if the licensee provides a new class of financial service incidental to the operation of the facility, the licensee must give notice that includes details of the new class;

(b) if the licensee takes any kind of disciplinary action against a participant in the facility, the licensee must give notice that includes:

(i) the participant’s name; and

(ii) the reason for and nature of the action taken;

(c) if the licensee has reason to suspect that a person has committed, is committing, or is about to commit a significant contravention of the facility’s operating rules or this Act, the licensee must give notice that includes:

(i) the person’s name; and

(ii) details of the contravention or impending contravention; and

(iii) the licensee’s reasons for that belief.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) A CS facility licensee whose licence was granted under subsection 824B(2) (overseas clearing and settlement facilities) must, as soon as practicable, give written notice to ASIC if:

(a) the licensee ceases to be authorised to operate a clearing and settlement facility in the foreign country in which the licensee’s principal place of business is located; or

(b) there is a significant change to the regulatory regime applying in relation to the facility in the foreign country in which the licensee’s principal place of business is located.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) As soon as practicable after:

(a) a person becomes or ceases to be a director, secretary or executive officer of a CS facility licensee or of a holding company of a CS facility licensee (including when a person changes from one of those positions to another); or

(b) a CS facility licensee becomes aware that a person has come to have, or has ceased to have, more than 15% of the voting power in the licensee or in a holding company of the licensee;

the licensee must give written notice of this to ASIC. The notice must include such other information about the matter as is prescribed by regulations made for the purposes of this subsection.

Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1)).

Note 2: To the extent that the licensee is required to give the notice and information under any other provision of this Act, the licensee may comply with this subsection by doing so. It need not provide the same information twice.

821BA Obligation to notify Reserve Bank of certain matters

(1) A CS facility licensee must give written notice to the Reserve Bank of Australia (the Reserve Bank), as soon as practicable, if:

(a) the licensee becomes aware that it has failed to comply with standards determined under section 827D, or is likely to fail to comply with such standards; or

(b) the licensee becomes aware that it may no longer be able to meet, or has breached, its obligation under subparagraph 821A(aa)(ii).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) If the Reserve Bank considers it appropriate to do so, the Reserve Bank may give the Minister advice about the matter.

821C Obligation to assist

ASIC

(1) A CS facility licensee must give such assistance to ASIC, or a person authorised by ASIC, as ASIC or the authorised person reasonably requests in relation to the performance of ASIC’s functions.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) Such assistance may include showing ASIC the licensee’s books or giving ASIC other information.

Reserve Bank

(3) A CS facility licensee must give such assistance to the Reserve Bank of Australia (the Reserve Bank), or a person authorised by the Reserve Bank, as the Reserve Bank or the authorised person reasonably requests in relation to the performance of the Reserve Bank’s functions under this Part.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) Such assistance may include showing the Reserve Bank the licensee’s books or giving the Reserve Bank other information.

821D Obligation to give ASIC access to the facility

A CS facility licensee must give a person authorised by ASIC such reasonable access to the facility as the person requests for any of the purposes of this Chapter.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

821E Annual report

(1) A CS facility licensee must, within 3 months after the end of its financial year, give ASIC an annual report on the extent to which the licensee complied with its obligations as a CS facility licensee under this Chapter.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) The licensee must ensure that the annual report is accompanied by any information and statements prescribed by regulations made for the purposes of this subsection.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) The licensee must also ensure that the annual report is accompanied by any audit report that the Minister requires under subsection (4).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) The Minister may, by giving written notice to a CS facility licensee, require the licensee to obtain an audit report on the annual report and on any information or statements accompanying it. The Minister must nominate to prepare the audit report:

(a) ASIC; or

(b) a specified person or body that is suitably qualified.

(5) ASIC must give the annual report and accompanying material to the Minister.

821F Change of country by foreign licensee

(1) In the case of a licence granted under subsection 824B(2), the Minister may approve the location of the licensee’s principal place of business in a new country only if:

(a) the new country is not Australia; and

(b) the operation of the facility in that country will be subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of protection from systemic risk and the level of effectiveness and fairness of services they achieve, to the requirements and supervision to which clearing and settlement facilities are subject under this Act in relation to those matters.

(2) If, in relation to a licence granted under subsection 824B(2), the licensee’s principal place of business changes to become a place in Australia:

(a) the licence ceases to be in force from the time of the change; and

(b) if the licensee wishes the facility to continue to be licensed, the licensee may apply for the grant of a new licence under subsection 824B(1); and

(c) the application must be assessed in accordance with Subdivision A of Division 3, subject to such modifications (if any) of that Subdivision as are set out in regulations made for the purposes of this paragraph.

Subdivision B—The facility’s operating rules and procedures

822A Content of the operating rules and procedures

(1) The operating rules of a licensed CS facility must deal with the matters prescribed by regulations made for the purposes of this subsection.

(2) The regulations may also prescribe matters in respect of which a licensed CS facility must have written procedures.

(3) However, subsections (1) and (2) do not apply if the licensee is also authorised to operate the facility in the foreign country in which its principal place of business is located and the licence was granted under subsection 824B(2) (overseas clearing and settlement facilities).

(4) In a subsection (3) case, ASIC may determine, by giving written notice to the licensee, matters in respect of which the licensed CS facility must have written procedures.

822B Legal effect of operating rules

The operating rules of a licensed CS facility have effect as a contract under seal:

(a) between the licensee and each issuer of financial products in respect of which the facility provides its services; and

(b) between the licensee and each participant in the facility; and

(c) between each issuer of financial products in respect of which the facility provides its services and each participant in the facility; and

(d) between a participant in the facility and each other participant in the facility;

822C Enforcement of operating rules

(1) If a person who is under an obligation to comply with or enforce any of a licensed CS facility’s operating rules fails to meet that obligation, an application to the Court may be made by:

(a) ASIC; or

(b) the licensee; or

(c) the operator of a financial market with which the facility has arrangements to provide services for transactions effected through the market; or

(d) a person aggrieved by the failure.

(2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

(a) the person against whom the order is sought; or

(b) if that person is a body corporate—the directors of the body corporate;

about compliance with, or enforcement of, the operating rules.

822D Changing the operating rules

Licensed CS facilities other than subsection 824B(2) facilities

(1) As soon as practicable after a change is made to the operating rules of a licensed CS facility, other than a facility licensed under subsection 824B(2) (overseas clearing and settlement facilities), the licensee must lodge with ASIC written notice of the change. The notice must:

(a) set out the text of the change; and

(b) specify the date on which the change was made; and

(2) If no notice is lodged with ASIC, as required by subsection (1), within 21 days after the change is made, the change ceases to have effect at the end of that period.

Subsection 824B(2) facilities

(3) As soon as practicable after a change is made to the operating rules of a clearing and settlement facility the operation of which is licensed under subsection 824B(2) (overseas clearing and settlement facilities), the licensee must lodge with ASIC written notice of the change. The notice must:

(a) set out the text of the change; and

(b) specify the date on which the change was made; and

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

822E Disallowance of changes to operating rules

(1) This section does not apply in respect of an Australian CS facility licence granted under subsection 824B(2) (overseas clearing and settlement facilities).

(2) As soon as practicable after receiving a notice under section 822D from a CS facility licensee, ASIC must send a copy of the notice to the Minister.

(3) Within 28 days after ASIC receives the notice from the licensee, the Minister may disallow all or a specified part of the change to the operating rules.

Note: The Minister must also have regard to the matters in section 827A.

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

823A Minister’s power to give directions

(1) If the Minister considers that a CS facility licensee is not complying with its obligations as a CS facility licensee under this Chapter, the Minister may give the licensee a written direction to do specified things that the Minister believes will promote compliance by the licensee with those obligations.

(2) The licensee must comply with the direction.

(3) If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

(4) The Minister may vary or revoke a direction at any time by giving written notice to the licensee.

823B Minister’s power to require special report

(1) The Minister may give a CS facility licensee a written notice requiring the licensee to give ASIC a special report on specified matters. ASIC must give the report to the Minister.

(2) The notice may also require the licensee to give ASIC an audit report on the special report. The Minister must nominate to prepare the report:

(a) ASIC; or

(b) a specified person or body that is suitably qualified.

(3) The licensee must give the special report, and audit report (if any), to ASIC within the time required by the notice.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

823C ASIC to assess licensee’s compliance

(1) ASIC may do an assessment of how well a CS facility licensee is complying with its obligations as a CS facility licensee under this Chapter (other than its obligation under paragraph 821A(aa)). In doing the assessment, ASIC may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

(2) In respect of the obligation in paragraph 821A(c), ASIC must do such an assessment at least once a year for each CS facility licensee.

(3) As soon as practicable after doing an assessment under this section, ASIC must give a written report on the assessment to the Minister and a copy of the written report to the Reserve Bank of Australia.

(a) the Australian Federal Police; or

(b) the National Crime Authority; or

(d) an agency prescribed by regulations made for the purposes of this paragraph.

(6) Either the Minister or ASIC may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.

823CA Reserve Bank to assess licensee’s compliance

(1) At least once each year, the Reserve Bank of Australia (the Reserve Bank) must do an assessment of how well each CS facility licensee is complying with its obligation under paragraph 821A(aa). In doing the assessment, the Reserve Bank may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

(2) As soon as practicable after doing an assessment under this section, the Reserve Bank must give a written report on the assessment to the Minister and a copy of the written report to ASIC.

(3) If an assessment, or part of an assessment, relates to any other person’s affairs to a material extent, the Reserve Bank may, at the person’s request or of its own motion, give the person a copy of the written report on the assessment or the relevant part of the report.

(4) If an assessment, or part of an assessment, relates to a serious contravention of a law of the Commonwealth or of a State or Territory, the Reserve Bank may give a copy of the written report on the assessment, or the relevant part of the report, to:

(a) the Australian Federal Police; or

(b) the National Crime Authority; or

(d) an agency prescribed by regulations made for the purposes of this paragraph.

(5) Either the Minister or the Reserve Bank may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.

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

(1) If ASIC:

(a) considers that it is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products; or

(b) considers that a CS facility licensee has not done all things reasonably practicable to ensure the facility’s services are provided in a fair and effective way;

ASIC may give the licensee written advice that it intends to give the licensee a specified direction under this section. The advice must include the reasons for ASIC’s intention to give the direction.

(2) As soon as practicable after giving the advice to the licensee, ASIC must give notice of the advice to the operator of each financial market with which the facility has arrangements to provide services for transactions effected through the market.

(3) For the purpose of remedying the matter mentioned in subsection (1), ASIC may give the following directions to the licensee under this section:

(a) a direction not to provide the licensee’s services in relation to any transactions, of which the licensee receives notice after the direction takes effect, that relate to a specified financial product or class of financial products;

(b) any other direction concerning dealings with transactions that relate to a specified financial product or class of financial products.

(4) If, after receiving ASIC’s advice and reasons:

(a) the licensee does not take steps that in ASIC’s view are adequate to address the situation; and

(b) ASIC still considers that it is appropriate to give the direction to the licensee;

ASIC may give the licensee the direction, in writing, with a statement setting out the reasons for giving the direction.

(5) The direction has effect until the earlier of the following times:

(a) the time ASIC revokes the direction in accordance with subsection (10);

(b) the end of the period (which may be up to 21 days) specified in the direction as the period during which the direction is effective ends.

While the direction has effect, the licensee must comply with the direction and must not provide any services contrary to it.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(6) If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

(7) As soon as practicable after making or varying (see subsection (9)) a direction, ASIC must:

(a) give a copy of the direction or variation to:

(i) if the direction relates to a specified financial product—the issuer of that product; and

(ii) each of the operators mentioned in subsection (2); and

(b) give a written report to the Minister setting out ASIC’s reasons for making the direction or variation; and

(8) If, at any time after the licensee receives ASIC’s advice under subsection (1), the licensee requests in writing that ASIC refer the matter to the Minister, ASIC must do so immediately. In that event, the Minister may, if he or she considers it appropriate, require ASIC not to make, or to revoke, the direction. ASIC must immediately comply with such a requirement.

(9) ASIC may vary a direction by giving written notice to the licensee.

(10) ASIC may revoke a direction by giving written notice to the licensee. ASIC must also give written notice of the revocation to each of the operators mentioned in subsection (2).

823E Directions power—reduction of systemic risk

(1) If ASIC considers that a CS facility licensee has not done all things reasonably practicable to reduce systemic risk in the provision of the facility’s services, ASIC may give the licensee a direction, in writing, to take:

(a) specified measures to comply with the whole or a part of a standard determined under section 827D; or

(b) any other action that ASIC considers will reduce systemic risk in the provision of the facility’s services.

(2) The direction may deal with the time by which, or period during which, it is to be complied with. The time or period must be reasonable.

(3) The licensee must comply with the direction.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3A) If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

(4) ASIC may vary the direction by giving written notice to the licensee.

(5) The direction has effect until ASIC revokes it by giving written notice to the licensee.

(6) ASIC may revoke the direction if, at the time of revocation, it considers that the direction is no longer necessary or appropriate.

(7) Before giving, varying or revoking the direction, ASIC must consult the Reserve Bank of Australia. However, a failure to consult the Reserve Bank of Australia does not invalidate the direction, variation or revocation.

(8) The Reserve Bank of Australia may at any time request ASIC to make a direction under this section. However, ASIC is not required to comply with the request.

Division 3—The Australian CS facility licence

Subdivision A—How to get a licence

824A How to apply for a licence

(1) A body corporate may apply for an Australian CS facility licence by lodging with ASIC an application that:

(a) includes the information required by regulations made for the purposes of this paragraph; and

(b) is accompanied by the documents (if any) required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

(2) ASIC must, within a reasonable time, give the application to the Minister with advice about the application.

824B When a licence may be granted

General

(1) The Minister may grant an applicant an Australian CS facility licence if the Minister is satisfied that:

(a) the application was made in accordance with section 824A; and

(b) the applicant will comply with the obligations that will apply if the licence is granted; and

(c) the applicant has adequate operating rules, and procedures, (see Subdivision B of Division 2) for the facility to ensure, as far as is reasonably practicable, that systemic risk is reduced and the facility is operated in a fair and effective way; and

(i) handling conflicts between the commercial interests of the licensee and the need for the licensee to reduce systemic risk and ensure that the facility’s services are provided in a fair and effective way; and

(ii) enforcing compliance with the facility’s operating rules; and

(e) no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

(f) no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4).

This subsection has effect subject to subsections (3) and (4).

Note: The Minister must also have regard to the matters in section 827A in deciding whether to grant a licence.

Alternative criteria for granting licence to overseas clearing and settlement facility

(2) If an applicant is authorised to operate a clearing and settlement facility in the foreign country in which its principal place of business is located, the Minister may grant the applicant an Australian CS facility licence authorising the applicant to operate the same facility in this jurisdiction. The Minister must be satisfied that:

(a) the application was made in accordance with section 824A; and

(b) the applicant will comply with the obligations that will apply if the licence is granted; and

(c) the operation of the facility in that country is subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of protection from systemic risk and the level of effectiveness and fairness of services they achieve, to the requirements and supervision to which clearing and settlement facilities are subject under this Act in relation to those matters; and

(d) the applicant undertakes to cooperate with ASIC and the Reserve Bank of Australia by sharing information and in other ways; and

(e) no unacceptable control situation (see Division 1 of Part 7.4) is likely to result if the licence is granted; and

(f) no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4); and

(g) any other requirements that are prescribed by regulations made for the purposes of this subsection are satisfied.

This subsection has effect subject to subsections (3) and (4).

Note: The Minister must also have regard to the matters in section 827A in deciding whether to grant a licence.

Foreign bodies

(3) If the applicant is a foreign body corporate, the Minister:

(a) must not grant the applicant a licence unless the applicant is registered under Division 2 of Part 5B.2; and

(b) may otherwise grant a licence under either subsection (1) or (2) (subject to the relevant criteria being satisfied).

Disqualified individuals

(4) The Minister must not grant the applicant a licence unless:

(a) ASIC has notified the Minister that, as far as ASIC is aware, no disqualified individual is involved in the applicant (see Division 2 of Part 7.4); or

(b) 42 days have passed since the application was made and ASIC has not given a notice under subsection 853D(2) to the applicant within that 42 days.

824C Publication of notice of licence grant

If the Minister grants an Australian CS facility licence, the Minister must publish a notice in the Gazette stating:

(a) the name of the licensee; and

(b) the date on which the licence was granted; and

824D More than one licence in the same document

If the Minister grants a person 2 or more of the following:

(a) an Australian CS facility licence;

(b) an Australian market licence;

they may be included in the same document.

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

(1) The same Australian CS facility licence may authorise the licensee to operate 2 or more clearing and settlement facilities.

(2) In that case, a reference in this Chapter to the clearing and settlement facility to which an Australian CS facility licence relates is taken instead to be a reference to each of those facilities severally.

(3) Before varying the conditions on an Australian CS facility licence so as to add another facility that the licensee is authorised to operate, the Minister must be satisfied of the matters listed in subsection 824B(1) or (2) (as appropriate) in relation to the facility.

(4) An Australian CS facility licence that authorises the licensee to operate 2 or more clearing and settlement facilities may be suspended or cancelled under Subdivision C in respect of one or some of those facilities only, as if the licensee held a separate licence for each of the facilities.

Subdivision B—The conditions on the licence

825A The conditions on the licence

(1) The Minister may, at any time:

(a) impose conditions, or additional conditions, on an Australian CS facility licence; or

(b) vary or revoke conditions imposed on such a licence;

by giving written notice to the licensee. The Minister must also publish a notice in the Gazette with details of the action and when it took effect.

Note: As well as the requirements in this section, the Minister must also have regard to the matters in section 827A.

(2) The Minister may do so:

(a) on the Minister’s own initiative, subject to subsection (3); or

(b) if the licensee lodges with ASIC an application for the Minister to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

(3) The Minister may only impose conditions or additional conditions, or vary the conditions, on the licence on his or her own initiative if:

(a) he or she considers it appropriate to do so having regard to:

(i) the licensee’s obligations as a CS facility licensee under this Chapter; and

(ii) any change in the facility’s operations or the conditions in which the facility is operating; and

(b) the Minister gives the licensee written notice of the proposed action and an opportunity to make a submission before it takes effect.

This subsection does not apply to the Minister imposing conditions when a licence is granted.

(4) The Minister must ensure that each Australian CS facility licence is subject to conditions that specify:

(a) the particular facility that the licensee is authorised to operate; and

(b) the class or classes of financial products in respect of which the facility can provide services.

(5) ASIC must give the Minister any application and documents lodged under subsection (2).

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

826A Varying licences

(1) The Minister may vary an Australian CS facility licence to take account of a change in the licensee’s name if the licensee lodges with ASIC an application for the variation, accompanied by the documents, if any, required by regulations made for the purposes of this subsection.

Note 1: The conditions on the licence can be varied under section 825A.

Note 2: For fees in respect of lodging applications, see Part 9.10.

(2) The Minister must give written notice of the variation to the licensee.

(3) ASIC must give the Minister any application and documents lodged under subsection (1).

826B Immediate suspension or cancellation

The Minister may, by giving written notice to a CS facility licensee, suspend the licence for a specified period, or cancel it, if:

(a) the licensee ceases to carry on the business of operating the facility; or

(b) the licensee becomes an externally‑administered body corporate; or

(d) in the case of a licence granted under subsection 824B(2) (overseas clearing and settlement facilities):

(i) the licensee ceases to be authorised to operate a clearing and settlement facility in the foreign country in which the licensee’s principal place of business is located; or

(ii) there is a change to the regulatory regime applying in relation to the facility to which the licence relates in the country in which the licensee’s principal place of business is located, and, because of that change, the Minister is no longer satisfied as mentioned in paragraph 824B(2)(c).

826C Suspension or cancellation following hearing and report

(1) If the Minister considers that a CS facility licensee has breached one or more of its obligations as a CS facility licensee under this Chapter, the Minister may give the licensee a written notice that requires the licensee to show cause, at a hearing before a specified person, why the licence should not be suspended or cancelled.

(2) The notice must specify:

(a) the grounds on which it is proposed to suspend or cancel the licence; and

(b) a reasonable time and place at which the hearing is to be held.

However, if the licensee consents, the person conducting the hearing may fix a different time or place.

(3) The person conducting the hearing must:

(a) give the licensee an opportunity to be heard at the hearing; and

(b) give the Minister:

(i) a report about the hearing; and

(ii) a recommendation about the grounds in the notice on which it is proposed to suspend or cancel the licence.

(4) After considering the report and recommendation, the Minister may:

(a) decide to take no further action in relation to the matter and give written advice of that decision to the licensee; or

(b) suspend the licence for a specified period, or cancel the licence, by giving written notice to the licensee.

Note: The Minister must have regard to the matters in section 827A.

826D Effect of suspension

(1) A person whose Australian CS facility licence is suspended is taken not to hold that licence while it is suspended.

(2) However, the Minister may specify in the written notice to the licensee that subsection (1) does not apply for specified purposes.

826E Variation or revocation of suspension

The Minister may at any time vary or revoke a suspension of an Australian CS facility licence by giving written notice to the licensee.

826F Publication of notice of licence suspension or cancellation

(1) If the Minister:

(a) suspends, or varies or revokes a suspension of, an Australian CS facility licence; or

(b) cancels an Australian CS facility licence;

the Minister must publish a notice in the Gazette to that effect.

(2) The notice must state when the action took effect.

826G Suspension and cancellation only in accordance with this Subdivision

An Australian CS facility licence cannot be varied, suspended or cancelled otherwise than in accordance with this Subdivision.

Note: The conditions on the licence can be varied under section 825A.

Division 4—Other matters

827A Matters to be taken into account by the Minister

(1) The Minister must have regard to certain matters in deciding whether to:

(a) grant an applicant an Australian CS facility licence under section 824B; or

(b) impose, vary or revoke conditions on such a licence under section 825A; or

(d) disallow a change to the operating rules of a licensed CS facility under section 822E.

(2) These are the matters the Minister must have regard to:

(a) the structure, or proposed structure, of the facility;

(b) the nature of the services provided, or proposed to be provided, by the facility;

(d) the nature of the financial products in respect of which the facility provides services or proposes to provide services;

(e) the participants, or proposed participants, in the facility and whether those participants:

(i) in using the facility’s services, are, or will be, providing financial services to other persons; or

(ii) use, or will use, the facility’s services in respect of financial products they acquire or dispose of as retail clients or as wholesale clients; or

(iii) are, or will be, participants in a financial market, or other clearing and settlement facilities, as well;

(f) the technology used, or proposed to be used, in the operation of the facility;

(g) whether it would be in the public interest to take the action referred to in subsection (1);

(h) any relevant advice received from ASIC or the Reserve Bank of Australia.

The Minister may also have regard to any other matter that the Minister considers relevant.

(3) If the Minister is deciding whether to take the action mentioned in paragraph (1)(a), (b) or (c) in respect of an Australian CS facility licence granted under subsection 824B(2) (overseas clearing and settlement facilities), the Minister must also have regard to:

(a) the criteria that the licensee or applicant satisfied to obtain an authorisation to operate the same facility in the foreign country in which their principal place of business is located; and

(b) the obligations they must continue to satisfy to keep the authorisation; and

(d) whether adequate arrangements exist for cooperation between ASIC, the Reserve Bank of Australia and the authority, or authorities, that are responsible for that supervision.

827B ASIC may give advice to Minister

ASIC may give advice to the Minister in relation to:

(a) any matter in respect of which the Minister has a discretion under this Part; or

(b) any other matter concerning clearing and settlement facilities.

Note: In some cases, the Minister must have regard to ASIC’s advice: see paragraph 827A(2)(h).

827C Reserve Bank may give advice to Minister

The Reserve Bank of Australia may give advice to the Minister in relation to any matter concerning clearing and settlement facilities.

Note: In some cases, the Minister must have regard to the Reserve Bank’s advice: see paragraph 827A(2)(h).

827D Reserve Bank may determine financial stability standards

(1) The Reserve Bank of Australia (the Reserve Bank) may, in writing, determine standards for the purposes of ensuring that CS facility licensees conduct their affairs in a way that causes or promotes overall stability in the Australian financial system.

(2) The standards are to be complied with by:

(a) all CS facility licensees; or

(b) a specified class of CS facility licensees, in the case of a standard that is expressed to apply only in relation to that class.

(3) Before the Reserve Bank determines a standard, it must consult with:

(a) the CS facility licensees that will be required to comply with the standard; and

(b) ASIC.

(4) A standard may impose different requirements to be complied with in different situations or in respect of different activities.

(5) A standard:

(a) comes into force:

(i) unless subparagraph (ii) applies—on the day on which the determination of the standard is made; or

(ii) if that determination specifies a later day as the day on which the standard comes into force—on the day so specified; and

(b) continues in force until it is revoked.

(6) The Reserve Bank may vary a standard in writing. Before it does so, it must consult with:

(a) the CS facility licensees that will be required to comply with the standard if it is varied as proposed; and

(b) ASIC.

(7) If the Reserve Bank determines or varies a standard, it must, as soon as practicable:

(a) cause a notice advising of the determination of the standard, or of the variation of the standard, and summarising the purpose and effect of the standard or variation, to be published in the Gazette; and

(b) make the text of the notice available on the Internet; and

(i) each CS facility licensee to which the standard applies;

(ii) the Minister;

(iii) ASIC.

(8) The Reserve Bank may revoke a standard in writing. Before it does so, it must consult with ASIC.

(9) If the Reserve Bank revokes a standard, it must, as soon as practicable:

(a) cause a notice advising of the revocation of the standard to be published in the Gazette; and

(b) make the text of the notice available on the Internet; and

(i) each CS facility licensee to which the standard applied;

(ii) the Minister;

(iii) ASIC.

(10) The Reserve Bank must take reasonable steps to ensure that copies of the current text of the standards are available for inspection and purchase.

Part 7.4—Limits on involvement with licensees

Division 1—Limit on control of certain licensees

Subdivision A—15% voting power limit

850A Scope of Division

(1) This Division applies in relation to a body corporate that:

(a) has an Australian market licence or an Australian CS facility licence; or

(b) is the holding company of a body corporate that has an Australian market licence or an Australian CS facility licence;

and that is specified in regulations made for the purposes of this section.

(2) In this Division, such a body is called a widely held market body.

850B Meaning of unacceptable control situation

(1) For the purposes of this Division, an unacceptable control situation exists in relation to a widely held market body and in relation to a particular person if the person’s voting power in the body is more than:

(a) 15%; or

(b) in relation to a body other than the Australian Stock Exchange Limited—if an approval of a higher percentage is in force under Subdivision B in relation to the body and in relation to the person, that higher percentage; or

(c) in relation to the Australian Stock Exchange Limited—if the regulations prescribe a higher percentage in relation to the Australian Stock Exchange Limited in relation to the person, that higher percentage.

(2) Regulations made for the purposes of paragraph (1)(c) may not take effect earlier than the day after the last day on which the regulations may be disallowed under section 48 of the Acts Interpretation Act 1901.

850C Acquisitions of shares

If:

(a) a person, or 2 or more persons under an arrangement, acquire shares in a body corporate; and

(b) the acquisition has the result, in relation to a widely held market body, that:

(i) an unacceptable control situation comes into existence in relation to the body and in relation to a person; or

(ii) if an unacceptable control situation already exists in relation to the body and in relation to a person—there is an increase in the voting power of the person in the body;

the person or persons mentioned in paragraph (a) contravene this section.

Note: A contravention of this section is an offence (see subsection 1311(1)).

850D Remedial orders

(1) If an unacceptable control situation exists in relation to a widely held market body, the Court may make such orders as the Court considers appropriate for the purpose of ensuring that the unacceptable control situation ceases to exist.

(2) However, the Court may only make orders under this section on application by:

(a) the Minister; or

(b) ASIC; or

(d) a person who has any voting power in the body.

(3) The Court’s orders may include:

(a) an order directing the disposal of shares; or

(b) an order restraining the exercise of any rights attached to shares; or

(c) an order prohibiting or deferring the payment of any sums due to a person in respect of shares held by the person; or

(d) an order that any exercise of rights attached to shares be disregarded; or

(e) an order directing any person to do or refrain from doing a specified act, for the purpose of securing compliance with any other order made under this section; or

(f) an order containing such ancillary or consequential provisions as the Court thinks just.

(4) Subsection (3) does not, by implication, limit subsection (1).

(5) Before making an order under this section, the Court may direct that notice of the application be given to such persons as the Court thinks fit or be published in such manner as the Court thinks fit, or both.

(6) The Court may, by order:

(a) rescind, vary or discharge an order made by the Court under this section; or

(b) suspend the operation of such an order.

850E Injunctions

(1) If any conduct (including a refusal or failure to act) amounts or would amount to a contravention of this Division in relation to a particular widely held market body, the body is taken, for the purposes of section 1324, to be a person whose interests are affected by the conduct.

(2) Subsection (1) does not, by implication, limit the class of persons whose interests are affected by the conduct.

(3) The Minister has the same powers as ASIC to apply for an injunction under section 1324 in relation to a contravention of this Division.

(4) The powers in sections 850D and 1324 do not, by implication, limit each other.

Subdivision B—Approval to exceed 15% voting power limit

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

(1) A person may apply for approval to have voting power of more than 15% in a particular widely held market body (other than the Australian Stock Exchange Limited) by lodging with ASIC an application that:

(a) specifies the percentage of voting power (if any) the person currently has in the widely held market body; and

(b) specifies the percentage of voting power the person is seeking approval to have in the body; and

Note: For fees in respect of lodging applications, see Part 9.10.

(2) ASIC must give the application to the Minister as soon as possible.

851B Approval of application

(1) If the Minister is satisfied that it is in the national interest to approve the applicant having voting power in the widely held market body of more than 15%, the Minister may grant the application.

(2) If the Minister grants the application, the Minister must:

(a) give written notice of the approval to the applicant; and

(b) specify the percentage of the voting power the Minister approves the applicant having in the widely held market body (which may or may not be the percentage the applicant applied for); and

(i) specify the period during which the approval remains in force; or

(ii) specify that the approval remains in force indefinitely.

(3) If the Minister refuses the application, the Minister must give written notice of the refusal to the applicant.

(4) As soon as practicable, the Minister must arrange for a copy of a notice of approval under this section to be:

(a) published in the Gazette; and

(b) given to the body concerned.

851C Duration of approval

(1) An approval under section 851B remains in force:

(a) if the notice of approval specifies a period during which the approval remains in force—until the end of that period, or if the Minister extends that period, until the end of that extended period; or

(b) otherwise—indefinitely.

Extension of approval

(2) A person who holds an approval under section 851B that is in force for a specified period may apply to extend that period by lodging with ASIC an application that sets out the person’s reasons for making the application.

Note: For fees in respect of lodging applications, see Part 9.10.

(3) ASIC must give the application to the Minister as soon as possible.

(4) If the Minister is satisfied that it is in the national interest to grant the extension, the Minister may grant the application.

(5) If the Minister grants the application, the Minister must:

(a) give written notice of the extension to the applicant; and

(b) specify the extended period during which the approval remains in force (which may or may not be the period the applicant applied for).

(6) If the Minister refuses the application, the Minister must give written notice of the refusal to the applicant.

(7) As soon as practicable, the Minister must arrange for a copy of a notice of extension under this section to be:

(a) published in the Gazette; and

(b) given to the widely held market body concerned.

851D Conditions of approval

(1) An approval under section 851B is subject to such conditions (if any) as are specified in the notice of approval.

(2) The Minister may, by written notice given to a person who holds an approval under section 851B:

(a) impose one or more conditions or further conditions to which the approval is subject; or

(b) revoke or vary any condition:

(i) imposed under paragraph (a); or

(ii) specified in the notice of approval.

(3) The Minister’s power under subsection (2) may be exercised:

(a) on the Minister’s own initiative; or

(b) on application by the person who holds the approval.

(4) An application made by a person under paragraph (3)(b) must be lodged with ASIC and must set out the person’s reasons for making the application.

Note: For fees in respect of lodging applications, see Part 9.10.

(5) ASIC must give the application to the Minister as soon as possible.

(6) If the Minister refuses an application under paragraph (3)(b), the Minister must give written notice of the refusal to the applicant.

(7) As soon as practicable, the Minister must arrange for a copy of a notice under subsection (2) to be:

(a) published in the Gazette; and

(b) given to the widely held market body concerned.

(8) A person who holds an approval under section 851B must give written notice to ASIC if they become aware that they have breached a condition to which the approval is subject.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

851E Varying percentage approved

Application by holder of approval

(1) A person who holds an approval under section 851B may apply to vary the percentage specified in the approval by lodging with ASIC an application that:

(a) specifies the percentage of the voting power the person currently has in the widely held market body concerned; and

(b) specifies the percentage of the voting power the person is seeking approval to have in the body; and

Note: For fees in respect of lodging applications, see Part 9.10.

(2) ASIC must give the application to the Minister as soon as possible.

(3) If the Minister is satisfied that it is in the national interest to vary the percentage, the Minister may grant the application.

(4) If the Minister grants the application, the Minister must:

(a) give written notice of the variation to the applicant; and

(b) specify the variation granted (which may or may not be the variation the applicant applied for).

(5) If the Minister refuses an application, the Minister must give written notice of the refusal to the applicant.

Minister’s own initiative

(6) The Minister may, by written notice given to a person who holds an approval under section 851B, vary the percentage specified in the approval if the Minister is satisfied that it is in the national interest to do so.

Percentage varied upwards

(7) If the Minister varies a percentage upwards, the variation takes effect on the day the notice of variation is given.

Percentage varied downwards

(8) If the Minister varies a percentage downwards, the variation takes effect on the day specified in the notice of variation. The specified day must be a day at least 90 days after the day on which the notice is given.

Notification of variation

(9) As soon as practicable, the Minister must arrange for a copy of a notice of variation under this section to be:

(a) published in the Gazette; and

(b) given to the widely held market body concerned.

851F Revoking an approval

(1) The Minister may, by written notice given to a person who holds an approval under section 851B in relation to a widely held market body, revoke the approval if the Minister is satisfied that:

(a) it is in the national interest to do so; or

(b) an unacceptable control situation exists in relation to the widely held market body and in relation to the person; or

(2) The revocation takes effect on the day specified in the notice of revocation. The specified day must be a day at least 90 days after the day on which the notice is given.

(3) If a person who holds an approval under section 851B requests the Minister to revoke the approval, the Minister must, by written notice given to the person, revoke the approval. The revocation takes effect on the day specified in the notice of revocation.

(4) As soon as practicable, the Minister must arrange for a copy of a notice of revocation under this section to be:

(a) published in the Gazette; and

(b) given to the widely held market body concerned.

851G Further information about applications

(1) This section applies to an application under this Subdivision.

(2) The Minister may, by written notice given to the applicant, require the applicant to give the Minister, within a specified period, further information about the application.

(3) The Minister may refuse to consider the application until the applicant gives the Minister the information.

851H Time limit for Minister’s decision

(1) The Minister must make a decision on an application under this Subdivision within 30 days after receiving the application.

(2) However, before the end of the 30 days, the Minister may decide to extend the period for considering the application until the end of 60 days after the application was received.

(3) If the Minister has not made a decision within the 30 days (or the 60 days, if subsection (2) applies), the Minister is taken to have granted whatever was applied for. As soon as practicable after that happens, the Minister must arrange for a notice to that effect to be:

(a) published in the Gazette; and

(b) given to the widely held market body concerned.

(4) The time for making the decision stops running if the Minister gives a notice under section 851G in relation to the application, and does not start again until the notice is complied with.

(5) The time limit in this section does not apply to an application under section 851A or 851E if an unacceptable control situation exists in relation to the applicant and in relation to the relevant widely held market body at any time before the Minister makes a decision.

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

(1) A person holding a particular percentage of voting power in a body at its specification time (see subsection (3)) is taken at that time to be granted an approval under section 851B to hold that percentage of voting power in the body if:

(a) in a case where the body’s specification time occurs at the same time as the commencement of this section—the person holding the percentage of voting power in the body immediately before the specification time did not, to any extent, constitute a contravention of previous law (see subsection (3)); and

(b) whether the body’s specification time occurs at the same time as, or after, the commencement of this section—on the body’s specification time, the person holding that percentage of voting power in the body would (apart from this section) constitute an unacceptable control situation.

Note: Conditions can be imposed on the approval under section 851D and then varied or revoked in accordance with that section.

(2) The Minister is taken to have complied with the Minister’s obligations under section 851B in relation to the granting of the approval to the person.

(3) In this section:

contravention of previous law means a contravention of a provision of Part 7.1A of this Act as in force immediately before the commencement of this section.

specification time, in relation to a body, means the time a body first becomes specified in regulations made for the purposes of section 850A.

Subdivision C—Other matters

852A Acquisition of property

(1) The Court must not make an order under section 850D if:

(a) the order would result in the acquisition of property from a person otherwise than on just terms; and

(b) the order would be invalid because of paragraph 51(xxxi) of the Constitution.

(2) Section 1350 does not apply in relation to the making of an order under section 850D.

(3) In this section:

acquisition of property has the same meaning as in paragraph 51(xxxi) of the Constitution.

just terms has the same meaning as in paragraph 51(xxxi) of the Constitution.

852B Anti‑avoidance

(1) If:

(a) one or more persons enter into, begin to carry out or carry out a scheme; and

(b) it would be concluded that the person, or any of the persons, who entered into, began to carry out or carried out the scheme or any part of the scheme did so for the sole or dominant purpose of avoiding the application of any provision of Subdivision A in relation to any person or persons (whether or not mentioned in paragraph (a)); and

(c) as a result of the scheme or a part of the scheme, a person (the controller) increases the controller’s voting power in a widely held market body;

the Minister may give the controller a written direction to cease having that voting power within a specified time.

(2) A person who is subject to a written direction under subsection (1) must comply with the direction.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) In this section:

increase voting power includes increasing it from a starting point of nil.

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

853A Who is disqualified

For the purposes of this Division, an individual is disqualified if:

(a) a declaration by ASIC that the individual is disqualified is in effect under section 853C; or

(b) the individual is disqualified from managing a corporation under section 206B; or

853B When an individual is involved in an operator

For the purposes of this Division, an individual is involved in a market licensee or a CS facility licensee, or an applicant for such a licence, if:

(a) the individual is a director, secretary or executive officer of the licensee or applicant, or in a holding company of the licensee or applicant; or

(b) the individual has more than 15% of the total voting power in the licensee or applicant, or in a holding company of the licensee or applicant.

853C Declaration by ASIC

(1) ASIC may declare in writing that an individual who is involved in a licensed financial market operator or licensed CS facility operator, or in an applicant for a licence of either of those kinds, is disqualified for the purposes of this Division.

(2) ASIC may make such a declaration only if ASIC is satisfied that, because the individual is unfit to be involved in the licensee or applicant, there is a risk that the licensee or applicant will breach its obligations under this Chapter if the declaration is not made.

(3) In deciding whether an individual is unfit as mentioned in subsection (2), ASIC must take into account such matters as the individual’s fame, character and integrity, rather than his or her competence, experience, knowledge or other such attributes.

(4) A declaration may be expressed to remain in effect for a specified period or until a specified event occurs. Otherwise, it remains in effect indefinitely (unless it is revoked under section 853E).

853D Procedure for declaration

(1) ASIC must not make a declaration under section 853C unless it has followed the procedure in this section.

(2) Within 42 days after:

(a) a body corporate applies for an Australian market licence or an Australian CS facility licence; or

(b) ASIC receives other information that may be relevant to deciding whether to make a declaration under section 853C about an individual who is involved in an applicant for an Australian market licence or an Australian CS facility licence, or in an existing licensee;

ASIC may give the applicant or licensee written notice that ASIC proposes to make a declaration under section 853C about the individual in question.

(3) ASIC must give a copy of the notice to the individual and to the Minister.

(4) The notice must:

(a) state the grounds on which ASIC proposes to make the declaration; and

(b) require the applicant or licensee, and the individual, to show, at a hearing before a specified person, why the declaration should not be made; and

However, if the applicant or licensee, and the individual, consent, the person conducting the hearing may fix a different time or place.

(5) The person conducting the hearing must:

(a) give the applicant or licensee, and the individual, an opportunity to be heard at the hearing; and

(b) give ASIC:

(i) a report about the hearing; and

(ii) a recommendation about the grounds in the notice on which it is proposed to make the declaration.

(6) As soon as practicable after the hearing, ASIC must:

(a) decide whether to make the declaration; and

(b) give each of the following persons a copy of the declaration, or a written notice of its decision not to make the declaration:

(i) the applicant or licensee;

(ii) the individual;

(iii) the Minister.

853E Revoking a declaration

(1) ASIC may, in writing, revoke a declaration under section 853C if it is no longer satisfied as mentioned in subsection 853C(2) in relation to the individual in question.

(2) ASIC must give a copy of the revocation to the relevant applicant or licensee, the individual and the Minister.

853F Obligations on disqualified individuals

(1) A disqualified individual must not become involved in a market licensee or a CS licensee.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) A disqualified individual who is involved in a market licensee or CS licensee must take all reasonable steps to ensure that he or she ceases to be involved in the licensee.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

853G Notification by ASIC

If ASIC becomes aware that an individual who is involved in a market licensee or a CS facility licensee is disqualified because of paragraph 853A(b) or (c), ASIC must notify the individual, the licensee and the Minister as soon as practicable.

Division 3—Miscellaneous

854A Record‑keeping and giving of information

(1) The regulations may make provision for and in relation to requiring a person:

(a) to keep and retain records that are relevant to whether a person has voting power in a widely held market body and, if so, how much; and

(b) to keep and retain records that are relevant to determining whether any disqualified individual is involved in a market licensee or a CS facility licensee; and

(d) to give a widely held market body information that is relevant to the matter mentioned in paragraph (a).

(2) The regulations may provide that information given in accordance with a requirement covered by paragraph (1)(c) or (d) must be verified by statutory declaration.

(3) However, an individual is not required to give information in accordance with a requirement covered by paragraph (1)(c) or (d) if the information might tend to incriminate the individual or expose the individual to a penalty.

(4) A person contravenes this section if:

(a) the person makes or keeps a record in compliance, or purported compliance, with a requirement covered by subsection (1); and

(b) the person does so knowing that the record:

(i) is false or misleading; or

(ii) omits any matter or thing without which the record is misleading.

Note: A contravention of this subsection is an offence (see subsection 1311(1)).

(5) Regulations made for the purposes of this section may make provision for or in relation to a matter by conferring a power on the Minister.

854B Exemptions and modifications by regulations

(1) The regulations may:

(a) exempt a person or class of persons from all or specified provisions of this Part; or

(b) provide that this Part applies as if specified provisions were omitted, modified or varied as specified in the regulations.

(2) Without limiting subsection (1), regulations made for the purposes of this section may declare that provisions of this Part are modified so that they apply (with or without further modifications) in relation to persons, bodies or situations to which they would not otherwise apply.

(3) For the purpose of this section, the provisions of this Part include:

(a) definitions in this Act, or in the regulations, as they apply to references in this Part; and

(b) any provisions of Part 10.2 (transitional provisions) that relate to provisions of this Part.

Part 7.5—Compensation regimes for financial markets

Division 1—Preliminary

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

Nothing in this Part applies in relation to:

(a) a financial market the operation of which is licensed under subsection 795B(2); or

(b) an application for the grant of a licence under that subsection.

880B Definitions

(1) In this Part:

adequate has a meaning affected by subsection (2).

borrowing includes obtaining credit.

compensation arrangements are arrangements that consist of:

(a) a set of rules about compensation; and

(b) a source of funds from which compensation is payable; and

compensation rules means rules referred to in paragraph (a) of the definition of compensation arrangements.

Division 3 arrangements means compensation arrangements approved under Division 3.

Division 3 loss means a loss described in section 885C, other than a loss that section 885D provides is to be taken not to be a Division 3 loss.

Division 4 arrangements means the arrangements constituted by Division 4.

fidelity fund, in relation to a financial market, means a fund consisting principally of contributions made by:

(a) participants and past participants in the market; or

(b) participants and past participants in:

(i) the market; and

(ii) one or more other financial markets;

the purpose, or the main purpose, of which is to provide a source of funds for the payment of compensation to clients of participants. Any investments made using money in the fund are taken to form part of the fund.

NGF means the National Guarantee Fund that continues in existence under section 889A.

operating rules, in relation to the SEGC, means the rules referred to in section 890D.

Part 7.5 arrangements means Division 3 arrangements or Division 4 arrangements.

pay compensation includes provide compensation in a form other than money.

SEGC means the body corporate in relation to which a nomination as the Securities Exchanges Guarantee Corporation is in force under section 890A.

(2) For the purposes of this Part, the question whether proposed compensation arrangements, compensation arrangements as proposed to be changed, or compensation arrangements that have been approved, are adequate is to be determined in accordance with Subdivision D of Division 3.

Division 2—When there must be a compensation regime

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

(1) If:

(a) any of the participants in a licensed market, in effecting transactions through the market, provide financial services for persons as retail clients; and

(b) in connection with the provision of those financial services, those persons will or may give money or other property, or authority over property, to those participants; and

there must be compensation arrangements in relation to the market that are approved in accordance with Division 3.

(2) The compensation regime applicable in relation to financial markets to which Division 4 applies is as constituted by that Division.

881B Additional requirements for the licence application

(1) A person who is applying for an Australian market licence must state in their application:

(a) whether any of the participants in the market, in effecting transactions through the market, will provide financial services for persons as retail clients; and

(b) if any participants will so provide financial services to persons as retail clients—whether, in connection with the provision of those financial services, those persons will or may give money or other property, or authority over property, to those participants.

(2) If:

(a) participants in the market will provide financial services to persons as retail clients as mentioned in paragraph (1)(a); and

(b) in connection with the provision of those financial services, those persons will or may give money or property, or authority over property, to those participants;

the application must:

(c) contain the information, in relation to the proposed compensation arrangements, required by regulations made for the purposes of this paragraph and be accompanied by a copy of the proposed compensation rules; or

(d) state that the market is or will be covered by Division 4, and set out evidence, in accordance with the requirements (if any) of the regulations, in support of that statement.

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

If a licence application contains information in relation to proposed compensation arrangements as required by paragraph 881B(2)(c), the Minister must deal with the application in accordance with section 882A.

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

(1) If a licence application contains a statement in accordance with paragraph 881B(2)(d), the Minister must consider whether he or she is satisfied that the market will be covered by Division 4.

(2) If the Minister is not so satisfied, the application for the licence must be rejected.

(3) If the Minister is so satisfied, the Minister may (subject to the other provisions about granting licences) grant the licence.

Note: The other provisions about granting licences are in Subdivision A of Division 4 of Part 7.2.

Division 3—Approved compensation arrangements

Subdivision A—Approval of compensation arrangements

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

(1) If an application for an Australian market licence contains information in relation to proposed compensation arrangements in accordance with paragraph 881B(2)(c), the Minister must treat the application as also being an application for approval of the compensation arrangements and, for that purpose, must consider whether the proposed arrangements are adequate.

(2) If the Minister does not consider that the proposed compensation arrangements are adequate, the application for the licence must be rejected.

(3) If the Minister considers that the proposed compensation arrangements are adequate, the Minister may (subject to the other provisions about granting licences) grant the licence. On the granting of the licence, the Minister is taken to have approved the compensation arrangements.

Note: The other provisions about granting licences are in Subdivision A of Division 4 of Part 7.2.

(4) In the conditions of the licence, the Minister must:

(a) deal with the minimum amount of cover required in relation to the compensation arrangements in such manner as the Minister thinks appropriate; and

(b) identify the source of funds available to cover claims, on the basis of which the Minister approves the arrangements (see section 885H).

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

(1) If the operator of a licensed market wants to have compensation arrangements for the market approved after the licence has been granted, the operator must apply for approval in accordance with this section.

(2) The application must:

(a) contain the information, in relation to the proposed compensation arrangements, required by regulations made for the purposes of this paragraph and be accompanied by a copy of the proposed compensation rules; and

(b) be made to the Minister by lodging the application with ASIC.

Note: For fees in respect of lodging applications, see Part 9.10.

(3) If the Minister does not consider that the proposed compensation arrangements are adequate, the application for approval must be rejected.

(4) If the Minister considers that the proposed compensation arrangements are adequate, the Minister must:

(a) approve the compensation arrangements in writing; and

(b) vary the conditions of the operator’s licence so as to:

(i) deal with the minimum amount of cover required in relation to the compensation arrangements in such manner as the Minister thinks appropriate; and

(ii) identify the source of funds available to cover claims, on the basis of which the Minister approves the arrangements (see section 885H).

(5) In varying licence conditions as mentioned in paragraph (4)(b), the Minister must proceed under section 796A as though the licensee had applied for the variation to be made.

882C Revocation of approval

The Minister may at any time revoke an approval of compensation arrangements if the Minister considers that the arrangements are not adequate.

882D Minister’s power to give directions

(1) If the Minister considers that a market licensee’s approved compensation arrangements are no longer adequate, the Minister may give the licensee a written direction to do specified things that the Minister believes will ensure that the arrangements become adequate once more.

(2) The licensee must comply with the direction.

(3) If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

(4) The Minister may vary or revoke a direction at any time by giving written notice to the licensee.

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

883A Legal effect of compensation rules

Compensation rules forming part of Division 3 arrangements for a financial market have effect as a contract under seal between the operator of the market and each participant in the market under which each of those persons agrees to observe the rules to the extent that they apply to the person and engage in conduct that the person is required by the rules to engage in.

883B Enforcement of compensation rules

(1) If a person who is under an obligation to comply with or enforce any of the compensation rules forming part of Division 3 arrangements for a financial market fails to meet that obligation, an application to the Court may be made by:

(a) ASIC; or

(b) the operator of the market; or

(i) there are clearing and settlement arrangements (as defined in section 790A) for some or all transactions effected through the market; and

(ii) those arrangements are with the operator of the facility; or

(d) a person aggrieved by the failure.

(2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

(a) the person against whom the order is sought; or

(b) if that person is a body corporate—the directors of the body corporate;

about compliance with, or enforcement of, the compensation rules.

(3) For the purposes of this section, if the operator of the market fails to comply with or enforce provisions of the compensation rules, a person who is, under the rules, entitled to make a claim for compensation is (whether or not they have actually made a claim) taken to be a person aggrieved by the failure.

(4) There may be other circumstances in which a person may be aggrieved by a failure for the purposes of this section.

883C Other sources of funds for compensation

Nothing in this Division makes the operator of a financial market liable to pay compensation from any source of funds other than the source identified in the licence conditions under paragraph 882A(4)(b) or subparagraph 882B(4)(b)(ii).

883D Payment of levies

(1) This section applies if, under the compensation rules forming part of Division 3 arrangements for a particular financial market, a levy is payable by all or some of the participants in the market in order to ensure that adequate funds are available for the purposes of the arrangements.

(2) The levy is payable to the operator of the market, as agent for the Commonwealth, by each of the participants affected.

Note: For the imposition and amount of the levy, see the Corporations (Compensation Arrangements Levies) Act 2001.

(3) An amount of levy payable under subsection (2) must be paid within the time and in the manner specified by the operator either generally or in relation to a particular case.

(4) Whenever an amount of levy (the levy amount) is paid under this section, or under section 6 of the Corporations (Compensation Arrangements Levies) Act 2001, to the operator of a market as agent for the Commonwealth:

(a) the operator must pay an amount equal to the levy amount to the Commonwealth; and

(b) the Consolidated Revenue Fund is appropriated by that amount for the purpose of payment to the operator; and

(d) the operator must deal with the amount it receives under paragraph (c) in accordance with the compensation rules.

(5) A payment of an amount to the operator of a market as required by paragraph (4)(c) in respect of a particular levy amount is subject to a condition that, if the Commonwealth becomes liable to refund the whole or a part of the levy amount, the operator must pay the Commonwealth an amount equal to the amount that the Commonwealth is liable to refund.

(6) The Financial Management and Accountability Act 1997 does not apply in relation to the payment of an amount of levy under this section to the operator of a market as agent for the Commonwealth. However, the operation of that Act in relation to the following payments is not affected:

(a) the payment of an amount to the Commonwealth as required by paragraph (4)(a); or

(b) the payment of an amount by the Commonwealth as required by paragraph (4)(c).

The operator must, in accordance with the regulations, notify the Commonwealth of payments of levy it receives as agent for the Commonwealth.

(7) An amount payable by an operator as required by paragraph (4)(a) may be set off against an amount payable to the operator as required by paragraph (4)(c).

Subdivision C—Changing Division 3 arrangements

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

(1) The operator of a financial market in relation to which there are Division 3 arrangements must not change those arrangements except in accordance with this Subdivision.

(2) However, a change may be made to Division 3 arrangements otherwise than in accordance with this Subdivision if:

(a) the change is not to a matter required by section 885B to be dealt with in the compensation rules; and

(b) the change is merely a minor administrative change.

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

(1) If the proposed change is to a matter required by section 885B to be dealt with in the compensation rules, the change may only be made by changing the rules.

(2) As soon as practicable after the change is made, the operator must lodge with ASIC written notice of the change.

(3) The notice must:

(a) set out the text of the change; and

(b) specify the date on which the change was made; and

(4) If no notice is lodged with ASIC within 21 days after the change is made, the change ceases to have effect.

(5) As soon as practicable after receiving a notice under subsection (2), ASIC must send a copy of the notice to the Minister.

(6) Within 28 days after receiving the copy of the notice, the Minister may disallow all or a specified part of the change to the compensation rules.

(7) The Minister must not disallow all or part of the change unless the Minister considers that, because of the change, or that part of the change, the compensation arrangements are not adequate.

(8) As soon as practicable after all or part of a change is disallowed, ASIC must give notice of the disallowance to the operator of the market concerned. The change ceases to have effect, to the extent of the disallowance, when the operator receives the notice.

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

(1) If:

(a) the proposed change is to a matter that is not required by section 885B to be dealt with in the compensation rules (including a matter that is dealt with in the compensation rules even though it is not required to be dealt with in those rules); and

(b) the change is not merely a minor administrative change;

the operator must not make the change unless:

(d) the change has been approved by the Minister.

(2) The application for approval must:

(a) include the information, required by regulations made for the purposes of this paragraph, in relation to the proposed change; and

(b) be made to the Minister by lodging the application with ASIC.

Note: For fees in respect of lodging applications, see Part 9.10.

(3) If the Minister does not consider that the compensation arrangements as proposed to be changed are adequate, the application for approval must be rejected.

(4) If the Minister considers that the compensation arrangements as proposed to be changed are adequate, the Minister must approve the change.

(5) If:

(a) the proposed change is to a matter that is dealt with in the compensation rules even though it is not required to be dealt with in those rules; and

(b) the change is approved;

the operator may make any change to the compensation rules that is necessary to give effect to the change that has been approved or that is incidental to giving effect to that change.

(6) If a change to the compensation rules is made as permitted by subsection (5), the operator must, as soon as practicable after the change is made, give ASIC written notice of the change.

(7) A notice required by subsection (6) must:

(a) set out the text of the change; and

(b) specify the date on which it was made; and

Subdivision D—Are compensation arrangements adequate?

885A Purpose of this Subdivision

(1) This Subdivision applies for the purpose of determining, for the purposes of a provision of this Division:

(a) whether:

(i) proposed compensation arrangements are adequate; or

(ii) compensation arrangements as proposed to be changed are adequate; or

(b) whether compensation arrangements that have been approved are adequate.

(2) A reference in this Subdivision to the arrangements is a reference to the proposed arrangements, the arrangements as proposed to be changed, or the arrangements that have been approved, as the case requires.

(3) A reference in this Subdivision to the compensation rules is a reference to the compensation rules, or the proposed compensation rules, forming part of the arrangements under consideration.

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

(1) The arrangements are adequate if, and only if, the Minister is satisfied that:

(a) the compensation rules provide adequate coverage for Division 3 losses (see sections 885C and 885D); and

(b) the compensation rules provide for adequate compensation to be paid in respect of Division 3 losses (see section 885E); and

(c) the compensation rules deal adequately with how compensation in respect of Division 3 losses is to be paid (see section 885F); and

(d) the compensation rules deal adequately with the making and determination of claims in respect of Division 3 losses, and with the notification of the outcome of such claims (see section 885G); and

(e) the arrangements provide for an adequate source of funds for paying compensation in respect of Division 3 losses and in respect of any other losses covered by the arrangements (see section 885H); and

(f) the arrangements include adequate arrangements for administration and monitoring (see section 885I); and

(g) under the arrangements, potential claimants have reasonable and timely access to the compensation regime; and

(h) if the licensee ceases (for whatever reason) to be required to have Division 3 arrangements, the rights of people to seek compensation under the arrangements, being rights that accrued while the licensee was required to have such arrangements, will be adequately protected.

(2) In considering the matters mentioned in subsection (1), the Minister must also have regard to the matters mentioned in section 885J.

(3) The matters that may be dealt with in compensation rules are not limited to matters mentioned in this section.

885C The losses to be covered

(1) Subject to section 885D, the compensation rules must cover losses (Division 3 losses) of a kind described in the following paragraphs:

(a) a person (the client) gave money or other property, or authority over property, to a person (the participant):

(i) who was a participant in the market at that time; or

(ii) who the client reasonably believed to be a participant in the market at that time and who was a participant in the market at some earlier time; and

(b) the money or other property, or the authority, was given to the participant in connection with effecting a transaction, or proposed transaction, covered by provisions of the operating rules of the market relating to transactions effected through the market; and

(c) the effecting of the transaction through the market constitutes or would constitute the provision of a financial service to the client as a retail client; and

(d) the client suffers a loss because of:

(i) if the client gave the participant money or other property—the defalcation or fraudulent misuse of the money or other property by the participant; or

(ii) if the client gave the participant authority over property—the fraudulent misuse of that authority by the participant.

(2) The compensation rules must provide that a claim relating to an alleged loss caused by defalcation or fraudulent misuse may be allowed even if:

(a) the person against whom the defalcation or misuse is alleged has not been convicted or prosecuted; and

(b) the evidence on which the claim is allowed would not be sufficient to establish the guilt of that person on a criminal trial in respect of the defalcation or fraudulent misuse.

(3) The compensation rules may exclude losses of a kind described above that occur in specified situations. However, the compensation arrangements will not be adequate unless the Minister is satisfied that those exclusions are appropriate.

885D Certain losses that are not Division 3 losses

(1) If, in relation to a loss suffered by a person:

(a) the requirements of subsection 885C(1) are satisfied in relation to a participant and 2 or more financial markets; and

(b) the person did not (expressly or impliedly) instruct the participant to use a particular one of those markets; and

(c) it is not reasonably apparent from the usual business practice of the participant which of those markets the participant would use when acting for the person;

the loss is taken not to be a Division 3 loss.

(2) If, in relation to a loss suffered by a person:

(a) the requirements of subsection 885C(1) are satisfied in relation to a participant and a financial market; and

(b) the loss is also connected (see section 888A) with a financial market to which Division 4 applies; and

(d) it is not reasonably apparent from the usual business practice of the participant which of those markets the participant would use when acting for the person;

the loss is taken not to be a Division 3 loss.

(3) If, in relation to a loss suffered by a person:

(a) the transaction referred to in paragraph 885C(1)(b) could have been effected otherwise than through a financial market; and

(b) the person did not (expressly or impliedly) instruct the participant concerned to effect the transaction through a financial market; and

(c) it is not reasonably apparent from the usual business practice of the participant that the transaction would be effected through a financial market;

the loss is taken not to be a Division 3 loss.

885E The amount of compensation

(1) Subject to this section, the compensation rules must provide that the amount of compensation to be paid in respect of a Division 3 loss is to be not less than the sum of:

(a) the actual pecuniary loss suffered by the claimant, calculated by reference to the market value of any relevant assets or liabilities as at the date on which the loss was suffered; and

(b) the claimant’s reasonable costs of, and disbursements incidental to, the making and proof of the claim.

(2) The compensation rules may provide for the amount of compensation payable in respect of a Division 3 loss to be reduced by reference to a right of set‑off available to the claimant.

(3) The compensation rules may impose an upper limit on the amount of compensation to which a person is entitled in respect of a claim in particular circumstances, or an upper limit on the total amount of compensation to which persons are entitled in respect of claims referable to a particular event or circumstance.

(4) That upper limit may be specified in the compensation rules or determined by a method specified in the rules.

(5) The compensation rules must also provide for the payment to the claimant of interest at the rate applicable under the regulations on the amount of the actual pecuniary loss, or so much of that loss as from time to time has not been compensated by an instalment or instalments of compensation, in respect of the period starting on the day when the loss was suffered and ending on the day when the compensation, or the last instalment of compensation, is paid.

(6) The compensation rules may provide for what is to happen if there are insufficient funds to meet claims in respect of Division 3 losses and in respect of any other losses covered by the arrangements. For example, they may provide for the prioritisation of claims, or the apportionment of available funds between claims.

(7) In other provisions of this Division a reference to compensation in respect of a Division 3 loss includes (unless the contrary intention appears) a reference to interest referred to in subsection (5).

885F Method of payment of compensation

(1) The compensation rules must deal with how compensation in respect of Division 3 losses is to be paid.

(2) Without limiting subsection (1), the compensation rules may provide for compensation to be paid in a lump sum or by instalments.

885G Making and determination of claims

(1) The compensation rules must provide for how claims in respect of Division 3 losses are to be made and determined, and for how claimants are notified of the outcome of their claims.

(2) Without limiting subsection (1), the compensation rules may:

(a) require a person making a claim to pay money, or transfer other property, in support of a claim; and

(b) provide for claims to be disallowed unless persons exercise rights of set‑off; and

(d) provide for claims to be partially allowed (including, for example, in a case where the operator considers that the claimant’s conduct contributed to the loss).

885H The source of funds—general

There must be an adequate source of funds available to cover claims made under the compensation arrangements in respect of Division 3 losses and in respect of any other losses covered by the arrangements.

Note 1: For example, the source of funds may consist of:

(a) a fidelity fund; or

(b) insurance arrangements; or

Note 2: The source of funds does not have to consist of a single thing. It may consist of a combination of different things.

885I Administration and monitoring

(1) The arrangements must include arrangements for:

(a) the administration of the compensation arrangements; and

(b) monitoring compliance with the compensation arrangements and reporting breaches of the arrangements to the board of the operator of the market; and

(c) monitoring the adequacy of the arrangements and reporting to the board of the operator of the market on the need for, or desirability of, changes to the compensation arrangements.

(2) Without limiting subsection (1), the arrangements may give responsibilities to:

(a) the operator of the market, or a related company, or a director or employee of the operator or a related company; or

(b) a committee; or

(3) The people who may be members of a committee referred to in paragraph (2)(b) include, but are not limited to:

(a) participants in the market, or representatives of such participants; and

(b) members of the board of the operator of the market.

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

(1) In considering whether the arrangements are adequate, the Minister must also have regard to:

(a) the services provided by the market and by the participants in the market; and

(b) any risk assessment report in relation to the market given to the Minister under section 892K.

(2) The Minister may take into account such other matters as the Minister thinks appropriate.

Subdivision E—Other provisions about Division 3 arrangements

886A Only one claim in respect of the same loss

If:

(a) a claim by a person for compensation in respect of a particular Division 3 loss suffered by the person has been allowed under Division 3 arrangements; and

(b) the person makes or has made another claim under those Division 3 arrangements, or under other Division 3 arrangements, in respect of the same loss;

that other claim must not be allowed.

886B Regulations relating to fidelity funds

The regulations may include provisions relating to how a fidelity fund, or part of a fidelity fund, is to be dealt with if:

(a) the operator of a financial market becomes insolvent, within the meaning of the regulations; or

(b) a financial market merges with another financial market; or

(c) a financial market ceases to operate (otherwise than because of a merger), or ceases to be required by subsection 881A(1) to have approved compensation arrangements.

Division 4—NGF Compensation regime

Subdivision A—Application of Division

887A Markets to which this Division applies

This Division applies to a financial market that is operated by:

(a) a body corporate that is a member of the SEGC; or

(b) a body corporate that is a subsidiary of such a member;

other than any such market that the regulations state is not covered by this Division.

Subdivision B—Claims for and payment of compensation

888A The situations in which compensation may be claimed

(1) The situations in which compensation may be claimed in respect of a loss that is connected with a financial market to which this Division applies are as specified in the regulations.

(2) Without limiting subsection (1), a loss is connected with a financial market if it is caused by a participant, or past participant, in the market.

888B Kinds of compensation available

The regulations may provide that compensation under this Division is to take the form of a payment of money or some other form (for example, a transfer of financial products).

888C Amount of compensation payable

(1) The amount of compensation (including the value of any non‑monetary compensation) to which a person is entitled in respect of a claim that is allowed is to be as determined in accordance with the regulations.

(2) Without limiting subsection (1), the regulations may do all or any of the following:

(a) provide for the amount of compensation to be determined by agreement with the claimant, or by arbitration if agreement cannot be reached; and

(b) provide for the payment of interest on the amount of the claimant’s loss; and

(c) provide for the amount of compensation to be reduced by reference to a right of set‑off available to the claimant or by reference to the extent to which the claimant was responsible for causing the loss; and

(d) impose an upper limit on the amount of compensation to which a person is entitled in respect of a claim in particular circumstances, or an upper limit on the total amount of compensation to which persons are entitled in respect of claims referable to a particular event or circumstance.

(3) An upper limit referred to in paragraph (2)(d) may be specified in the regulations or determined by a method specified in the regulations.

(4) The regulations may also provide for a claimant to be paid an amount in respect of the claimant’s reasonable costs of, and disbursements incidental to, the making and proof of the claim (whether or not the claim is allowed in whole or in part).

(5) The regulations may also provide for a claimant to be paid an amount in respect of the claimant’s reasonable costs of, and disbursements incidental to, attempting to recover the loss (whether or not the claim is allowed in whole or in part).

888D Payment of compensation

(1) The regulations may provide for the compensation to be paid in a lump sum or by instalments.

(2) The regulations may make other provisions in relation to how compensation is to be paid.

888E Making and determination of claims

(1) Claims are to be made and determined in accordance with:

(a) the regulations; and

(b) any relevant provisions of the SEGC’s operating rules.

(2) Without limiting subsection (1), the regulations, or the SEGC’s operating rules, may do all or any of the following:

(a) require a person making a claim to pay money, or transfer other property, to the SEGC in support of a claim;

(b) provide for claims to be disallowed unless persons exercise rights of set‑off;

(d) provide for claims to be partially allowed (including, for example, in a case where the SEGC considers that the claimant’s conduct contributed to the loss).

(3) The regulations, or the SEGC’s operating rules, may impose other requirements to be complied with by the SEGC in relation to claims (including, for example, requirements to notify claimants whether their claims have been allowed).

(4) If a provision of the SEGC’s operating rules is wholly or partly inconsistent with regulations made for the purposes of this section, the provision of the SEGC’s operating rules is, to the extent of the inconsistency, of no effect.

888F The SEGC has power to determine claims

The SEGC has power to determine claims in accordance with this Division.

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

If the SEGC allows a claim, neither the allowance of the claim, nor any other act done by SEGC as a result of allowing the claim, constitutes an admission (by anyone) of any liability, other than the liability to provide compensation in respect of the claim in accordance with this Division.

888H Claimant may apply to Court if claim disallowed

(1) If the SEGC has disallowed a claim, the claimant may bring proceedings in the Court to establish the claim. The proceedings must be brought within 3 months of notice of the disallowance of the claim.

(2) If the SEGC has neither allowed nor disallowed a claim within a reasonable period after it was made, the claimant may bring proceedings in the Court to establish the claim.

(3) If, in proceedings under subsection (1) or (2), the Court is satisfied that the claim should be allowed, the Court:

(a) must, by order, make a declaration accordingly and direct the SEGC to allow the claim and deal with it in accordance with this Division; and

(b) may, at any time after the order is made, on application made (whether before or after the order is made) by the claimant or the SEGC, give such directions relating to the claim as the Court thinks just and reasonable.

(4) In proceedings to establish a claim, all questions of costs are in the discretion of the Court.

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

Money or other property of the SEGC that is not part of the NGF is not available to be applied in respect of a claim that has been allowed by the SEGC, whether or not under an order of the Court.

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

(1) The SEGC may enter into a contract with a person (the insurer) carrying on a fidelity insurance business under which the SEGC will be insured or indemnified against liability in respect of claims to the extent and in the manner provided by the contract.

(2) The contract may relate to all claims or only to certain claims as specified in the contract. The contract may, for example, exclude claims relating to the conduct of a particular financial services licensee.

(3) The following persons each have qualified privilege in respect of the publication of a statement that the contract does not apply with respect to claims relating to the conduct of a particular financial services licensee:

(a) the SEGC and the members of its board;

(b) any body corporate that is a member of the SEGC;

(d) any employee of a body covered by paragraph (a), (b) or (c).

(4) A person who has made a claim does not have a right of action against the insurer in respect of the contract or a right or claim in respect of money paid by the insurer in accordance with the contract.

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

The SEGC may pay money out of the NGF to acquire financial products for the purpose of providing compensation (in accordance with the regulations) that takes the form of a transfer of financial products.

Subdivision C—The NGF

889A Continuation of the National Guarantee Fund

The National Guarantee Fund that continued to exist under section 928B of this Act before the repeal of that section by the Financial Services Reform Act 2001 continues in existence as the National Guarantee Fund for the purposes of this Part.

889B Compensation to be provided out of the NGF

Compensation payable under this Division is to be paid out of the NGF.

889C The SEGC to keep the NGF

(1) The SEGC must keep and administer the NGF.

(2) The assets of the NGF are the property of SEGC, but must be kept separate from all other property and must be held on trust by the SEGC for the purposes of this Division.

889D What the NGF consists of

The NGF consists of:

(a) money and other property constituting the NGF before the commencement of this Chapter; and

(b) money paid into the NGF in accordance with section 889J or 889K; and

(d) money paid to the SEGC under a contract of insurance or indemnity referred to in section 888J; and

(e) money paid into the NGF under subsection 889F(2); and

(f) the interest and profits from time to time accruing from the investment of the NGF; and

(g) money recovered by or on behalf of the SEGC in the exercise of a right of action that the SEGC has by virtue of a provision of this Part; and

(h) money and other property paid or transferred to the SEGC for inclusion in the NGF in accordance with regulations referred to in section 891B; and

(i) all other money and other property lawfully paid into, or forming part of, the NGF.

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

(1) If the SEGC considers that, in the interests of the sound financial management of the NGF, money should be borrowed for the purpose of meeting a payment due out of the NGF, the SEGC may borrow money for that purpose on such terms and conditions as the SEGC thinks appropriate.

(2) The SEGC may give security, including over the assets of the NGF, in respect of the SEGC’s obligations in relation to a borrowing under subsection (1).

(3) If:

(a) money borrowed under subsection (1) is a loan from a body corporate that is a member of the SEGC; and

(b) the body corporate borrowed money for the purpose of making the loan to the SEGC;

the SEGC may give security, including over the assets of the NGF, in relation to the body corporate’s obligations in respect of the borrowing referred to in paragraph (b).

889F Money borrowed and paid to the SEGC

(1) This section applies if money borrowed by the SEGC under subsection 889E(1) is paid to the SEGC.

(2) The SEGC must pay the money into the NGF.

(3) If:

(a) the money was borrowed for the purpose of meeting a payment due out of the NGF; and

(b) the borrowed money has been paid into the NGF; and

then, for the purposes of section 889J, the amount in the NGF is taken to be reduced by the amount of the borrowed money.

889G Money borrowed and not paid to the SEGC

(1) This section applies if money borrowed by the SEGC under subsection 889E(1) is not paid to the SEGC but is payable to other persons at the direction of the SEGC.

(2) The SEGC must not direct that any of the money be paid to a person unless the payment is of a kind that can, under section 889H, be made out of the NGF.

889H Payments out of the NGF

Subject to regulations made for the purposes of this section, the following are to be paid out of the NGF, in such order as the SEGC considers appropriate:

(a) amounts, including costs, disbursements and interest, that any provision of this Part requires to be paid in connection with claims;

(b) all legal and other expenses incurred:

(i) in investigating or defending claims; or

(ii) in relation to the NGF; or

(iii) in the exercise by the SEGC of the rights and powers vested in it by any provision of this Part in relation to the NGF;

(d) amounts to be paid to acquire financial products as mentioned in section 888K;

(e) premiums payable in respect of contracts of insurance or indemnity entered into by the SEGC under section 888J;

(f) payments of principal, interest and other amounts payable by the SEGC in respect of money borrowed, and security given, under section 889E;

(g) the expenses incurred in the administration of the NGF, including the salaries and wages of persons employed by the SEGC in relation to the NGF;

(h) amounts to be paid to a body corporate in accordance with a direction of the Minister under section 891A;

(i) any other money payable out of the NGF in accordance with a provision of this Part.

889I Minimum amount of the NGF

(1) The minimum amount in relation to the NGF is:

(a) unless paragraph (b) applies—$80,000,000; or

(b) if a determination is in force under subsection (2)—the amount specified in the determination.

(2) The SEGC may, in writing, determine an amount (whether greater than, or less than, $80,000,000) to be the minimum amount in relation to the NGF. The determination does not come into force until it has been approved by the Minister.

(3) The SEGC must publish in the Gazette notice of a determination that has come into force under subsection (2). The notice must specify the date when the determination came into force.

(4) If the amount in the NGF falls below the minimum amount, the SEGC must consider what action needs to be taken.

889J Levy by the SEGC

(1) If the amount in the NGF is less than the minimum amount applicable under section 889I, the SEGC may determine in writing that:

(a) the operators of all, or a class, of the financial markets to which this Division applies; or

(b) all, or a class, of the participants in any of these markets;

must pay a levy to the SEGC.

(2) The levy is payable to the SEGC, as agent for the Commonwealth, in accordance with this section.

Note: For the imposition and amount of the levy, see the Corporations (National Guarantee Fund Levies) Act 2001.

(3) A levy payable under this section must be paid within the period and in the manner determined in writing by the SEGC.

(4) Whenever an amount of levy (the levy amount) is paid under this section, or under subsection 6(2) of the Corporations (National Guarantee Fund Levies) Act 2001, to the SEGC as agent for the Commonwealth:

(a) the SEGC must pay an amount equal to the levy amount to the Commonwealth; and

(b) the Consolidated Revenue Fund is appropriated by that amount for the purpose of payment to the SEGC; and

(d) the SEGC must pay the amount it receives under paragraph (c) into the NGF.

(5) Whenever an amount of levy (the levy amount) is paid under subsection 6(1) of the Corporations (National Guarantee Fund Levies) Act 2001, to the operator of a financial market as agent for the Commonwealth:

(a) the operator must pay an amount equal to the levy amount to the SEGC; and

(b) the SEGC must pay an amount equal to the amount so paid to it to the Commonwealth; and

(d) the Commonwealth must pay the amount so appropriated to the SEGC; and

(e) the SEGC must pay the amount it receives under paragraph (d) into the NGF.

(6) A payment of an amount to the SEGC as required by paragraph (4)(c) or (5)(d) in respect of a particular levy amount is subject to a condition that, if the Commonwealth becomes liable to refund the whole or a part of the levy amount, the SEGC must pay the Commonwealth an amount equal to the amount that the Commonwealth is liable to refund. The SEGC may pay, out of the NGF, any amount so required to be paid to the Commonwealth.

(7) The Financial Management and Accountability Act 1997 does not apply in relation to the payment of an amount of levy under this section to the SEGC, or the operator of a financial products market, as agent for the Commonwealth. However, the operation of that Act in relation to the following payments is not affected:

(a) the payment of an amount to the Commonwealth as required by paragraph (4)(a) or (5)(b); or

(b) the payment of an amount by the Commonwealth as required by paragraph (4)(c) or (5)(d).

The SEGC must, in accordance with the regulations, notify the Commonwealth of payments of levy it receives as agent for the Commonwealth, and the operator of a financial market must, in accordance with the regulations, notify the Commonwealth of payments it receives as agent for the Commonwealth as mentioned in paragraph (5)(a).

(8) An amount payable by the SEGC as required by paragraph (4)(a) may be set off against an amount payable to the SEGC as required by paragraph (4)(c), and an amount payable by the SEGC as required by paragraph (5)(b) may be set off against an amount payable to the SEGC as required by paragraph (5)(d).

889K Levy by market operator

(1) An operator of a financial market who must pay an amount of levy (the primary levy amount) under section 889J may determine in writing that participants in the market must pay a levy (the contributory levy). The determination must be such that the total of the amounts of contributory levy payable by the participants does not exceed the primary levy amount. The contributory levy is payable to the operator as agent for the Commonwealth.

Note: For the imposition and amount of the levy, see the Corporations (National Guarantee Fund Levies) Act 2001.

(2) If a determination is made under subsection (1), the contributory levy is payable by each participant in the market who, when the determination is made, is in a class of participants in the market determined in writing by the operator for the purposes of the levy.

(3) The amount of contributory levy payable by a participant under a determination under subsection (1) must be paid within the period, and in the manner, specified in writing by the operator either generally or in relation to particular participants or classes of participants.

(4) Whenever an amount of levy (the levy amount) is paid under this section, or under subsection 6(3) of the Corporations (National Guarantee Fund Levies) Act 2001, to the operator of a financial market as agent for the Commonwealth:

(a) the operator must pay an amount equal to the levy amount to the Commonwealth; and

(b) the Consolidated Revenue Fund is appropriated by that amount for the purpose of payment to the SEGC; and

(d) the SEGC must pay the amount it receives under paragraph (c) into the NGF; and

(e) the operator’s liability to pay the primary levy amount is reduced by the amount paid into the NGF under paragraph (d).

(5) A payment of an amount to the SEGC as required by paragraph (4)(c) in respect of a particular contributory levy amount is subject to a condition that, if the Commonwealth becomes liable to refund the whole or a part of the contributory levy amount, the SEGC must pay the Commonwealth an amount equal to the amount that the Commonwealth is liable to refund. The SEGC may pay, out of the NGF, any amount so required to be paid to the Commonwealth.

(6) The Financial Management and Accountability Act 1997 does not apply in relation to the payment of an amount of levy under this section to the operator of a financial market as agent for the Commonwealth. However, the operation of that Act in relation to the following payments is not affected:

(a) the payment of an amount to the Commonwealth as required by paragraph (4)(a); or

(b) the payment of an amount by the Commonwealth as required by paragraph (4)(c).

The operator must, in accordance with the regulations, notify the Commonwealth of payments of levy it receives as agent for the Commonwealth.

Subdivision D—The SEGC

890A Minister to nominate the SEGC

(1) Subject to subsection (3), the Minister may nominate in writing as the Securities Exchanges Guarantee Corporation a body corporate (whenever incorporated) that is, for the purposes of the national corporate laws, a company limited by guarantee.

(2) ASIC must cause a copy of a nomination by the Minister under subsection (1) to be published in the Gazette.

(3) The Minister may only nominate a body corporate under subsection (1) if he or she is satisfied that:

(a) the Australian Stock Exchange Limited is a member of the body corporate; and

(b) each of the other members of the body corporate is a market licensee; and

(c) the body corporate’s constitution provides that only market licensees may become or remain members of the body corporate; and

(d) the body corporate will, if nominated under subsection (1), be able to perform and exercise the SEGC’s functions and powers under this Division adequately and with due regard to the interests of the public; and

(e) the body corporate has obtained, or will within a reasonable period after being nominated under subsection (1) obtain, indemnity insurance in respect of its liabilities for:

(i) negligence in; and

(ii) defalcation, or fraudulent misuse of property, by an officer, employee or agent of the body corporate in connection with;

the performance or exercise of the SEGC’s functions or powers under this Division, or has made or will make other satisfactory provisions for meeting those liabilities; and

(f) the body corporate’s business rules make satisfactory provision:

(i) for ensuring the safety of property received by the body corporate; and

(ii) generally for the protection of the interests of the public.

890B The SEGC’s functions and powers

(1) In addition to the legal capacity and powers it has because of section 124, the SEGC has such functions and powers as are conferred, or expressed to be conferred, on it by or under this Part.

(2) Section 125 does not apply in relation to a function or power conferred, or expressed to be conferred, as mentioned in subsection (1) of this section.

(3) The SEGC is to perform the functions, and may exercise the powers, that are conferred on it by or under this Part.

(4) The SEGC is to administer the arrangements constituted by this Division.

890C Delegation

(1) Subject to this section, all decisions of the SEGC in relation to the performance of its functions, and the exercise of its powers, under this Part must be made by the board of the SEGC.

(2) The board of the SEGC must not delegate any of the following powers of the SEGC:

(a) the power to borrow under section 889E;

(b) the power to determine the order of payments under section 889H;

(d) the power to make operating rules under section 890D;

(e) the power (or duty) to make a payment under section 891A.

(3) Otherwise, the board of the SEGC may delegate any of their powers under this Part in accordance with section 198D.

890D Operating rules of the SEGC

The SEGC may make rules (operating rules) relating to the performance or exercise of its powers or duties under this Part, or relating to matters permitted by this Part to be dealt with in its operating rules.

890E Legal effect of the SEGC’s operating rules

The SEGC’s operating rules have effect as a contract under seal between the SEGC and each member of the SEGC under which each of those persons agrees to observe the operating rules to the extent that they apply to the person and engage in conduct that the person is required by the operating rules to engage in.

890F Enforcement of the SEGC’s operating rules

(1) If a person who is under an obligation to comply with or enforce any of the SEGC’s operating rules fails to meet that obligation, an application to the Court may be made by:

(a) ASIC; or

(b) the SEGC; or

(d) a person aggrieved by the failure.

(2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

(a) the person against whom the order is sought; or

(b) if that person is a body corporate—the directors of the body corporate;

about compliance with, or enforcement of, the operating rules.

890G Changing the SEGC’s operating rules

(1) As soon as practicable after a change is made to the SEGC’s operating rules, the SEGC must lodge with ASIC written notice of the change.

(2) The notice must:

(a) set out the text of the change; and

(b) specify the date on which the change was made; and

(3) If no notice is lodged with ASIC within 21 days after the change is made, the change ceases to have effect.

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

(1) As soon as practicable after receiving a notice under section 890G, ASIC must send a copy of the notice to the Minister.

(2) Within 28 days after ASIC received the notice under section 890G, the Minister may disallow all or a specified part of the change to the SEGC’s operating rules.

(3) As soon as practicable after all or part of a change is disallowed, ASIC must give notice of the disallowance to the SEGC. The change ceases to have effect, to the extent of the disallowance, when the SEGC receives the notice.

Subdivision E—Other provisions relating to compensation under this Division

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

(1) If the Minister is satisfied that a body corporate specified in regulations made for the purposes of this section has made adequate arrangements covering all or part of the clearing and settlement system support that this Division provides for, the Minister may, in writing, direct the SEGC to pay a specified amount to that body corporate out of the NGF.

(2) The Minister may, in writing, impose conditions to be complied with by the SEGC or the body corporate, or both, in relation to the payment.

(3) The SEGC and the body corporate must comply with the direction and with any applicable conditions to which the direction is subject.

(4) Before giving a direction under subsection (1), the Minister must be satisfied that, after the payment is made, the NGF will still have an adequate amount of assets to meet claims.

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

(1) In this section:

joining market means a financial market that:

(a) is operated by a body corporate that becomes a member of the SEGC after the commencement of this Division, or by a subsidiary of such a body corporate; and

(b) is a financial market to which this Division applies.

(2) The regulations may make provisions of a transitional or saving nature dealing with the transition, in relation to a joining market, from the compensation regime previously applicable in relation to the market to the arrangements constituted by this Division.

(3) Without limiting subsection (2), the regulations may require money or other property (including money or other property in a fidelity fund) to be paid or transferred to the SEGC for inclusion in the NGF.

(4) The regulations may also provide for the allocation of part of the NGF as being for use for the purposes of claims arising in connection with the joining market.

(5) The regulations may make modifications of provisions of this Division and Division 5 that are necessary or convenient to take account of allocations of a kind referred to in subsection (4).

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

Regulations made for the purposes of a provision of this Division may make different provision in respect of different financial markets to which this Division applies and in respect of different circumstances.

Division 5—Provisions common to both kinds of compensation arrangements

892A Definitions

In this Division:

regulated fund means:

(a) a fidelity fund that is the source, or a source, of funds under Division 3 arrangements; or

(b) the NGF; or

relevant authority, in relation to Part 7.5 arrangements, means:

(a) if the arrangements are Division 3 arrangements of a financial market—the operator of the market; or

(b) if the arrangements are Division 4 arrangements—the SEGC.

892B How regulated funds are to be kept

(1) Money in:

(a) a fidelity fund that is the source, or a source, of funds under Division 3 arrangements; or

(b) the NGF;

must, until applied in paying claims or otherwise spent for the purposes of this Part, or invested in accordance with section 892C, be kept by the relevant authority in an account or accounts:

(d) of a kind prescribed by regulations made for the purposes of this paragraph;

separate from any account or accounts in which other money is kept.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) The regulations may impose additional requirements to be complied with in relation to the keeping of a regulated fund that covers 2 or more financial markets.

(3) If:

(a) a source of funds under Division 3 arrangements for a financial market is something other than a fidelity fund; and

(b) the operator of the market, or a person involved in the administration of the arrangements, receives money from that source of funds;

the money received must, until applied in paying claims or otherwise spent for the purposes of this Part, or invested in accordance with section 892C, be kept by the relevant authority in an account or accounts:

(d) of a kind prescribed by regulations made for the purposes of this paragraph;

separate from any account or accounts in which other money is kept.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

892C Money in regulated funds may be invested

(1) Money in a regulated fund that is not immediately required for the purposes of meeting claims may be invested in any way in which trustees are for the time being authorised by law in force in a State or Territory in this jurisdiction to invest trust funds.

(2) The relevant authority may, with the approval of ASIC, appoint a person to invest on behalf of the relevant authority money to which subsection (1) applies.

(3) ASIC must not grant approval to the appointment of a person under subsection (2) unless it is satisfied that:

(a) the person has appropriate qualifications and expertise to perform the duties of the appointment; and

(b) the relevant authority has adequate indemnity insurance in respect of its liabilities for any negligence, or any defalcation or fraudulent misuse of property, by the person in the performance of those duties, or has made other satisfactory provisions for meeting those liabilities.

(4) A person appointed under subsection (2) must perform the duties of the appointment in accordance with the directions of the relevant authority and subject to such conditions (if any) as the relevant authority imposes.

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

(1) The relevant authority in relation to Part 7.5 arrangements may require a person:

(a) to deliver to the relevant authority documents or copies of documents, including documents of, or evidencing, title to financial products; or

(b) to make out and deliver to the relevant authority a statement of evidence;

that the relevant authority considers will assist it in determining a claim for compensation that has been made, or that the relevant authority considers are necessary for the purpose of exercising the subrogated rights and remedies it has in relation to a claim (see section 892F).

(2) The requirement must be made by notice in writing given to the person. The notice must:

(a) so far as it requires documents or copies referred to in paragraph (1)(a)—identify or describe the documents or copies that are required; and

(b) so far as it requires a statement referred to in paragraph (1)(b)—describe the matters in relation to which the person’s evidence is required, and set out any requirements to be complied with in relation to how the statement is made out.

(3) The person must comply with the requirement.

(4) If the person fails, without reasonable excuse, to comply with the requirement, the relevant authority may apply to the Court for, and the Court may make, an order that the person comply with the direction.

(5) If the person fails, without reasonable excuse, to comply with the requirement, the relevant authority may disallow a claim made by the person.

Note: This subsection would not apply if the person subject to the requirement were someone other than a claimant.

(6) The relevant authority may, in writing, delegate the power given by this section to a person involved in the administration of the Part 7.5 arrangements.

(7) The relevant authority must return any documents (other than copies of documents) provided to it under this section as soon as practicable after the claim referred to in subsection (1) has been determined, and any proceedings relating to the determination of the claim (including any arising from the subrogation of the relevant authority for the claimant) have been completed.

(8) Subsection (7) does not apply if:

(a) another law prohibits or prevents the return of the documents; or

(b) the documents are no longer in the custody of the relevant authority; or

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

(1) If Division 3 arrangements give responsibilities (as mentioned in paragraph 885I(2)(c)) to a person acting under an arrangement with the operator of the market concerned, the person may give the operator a written request to give such assistance as the person requires for the purpose of fulfilling the person’s responsibilities under the arrangement.

(2) The SEGC may give a member of the SEGC, or a subsidiary of a member of the SEGC, a written request to give such assistance as the SEGC requires for the purpose of:

(a) dealing with a claim; or

(b) the assessment of risks to the NGF.

(3) A requirement for assistance under subsection (1) or (2) must be reasonable.

(4) A person who is required under this section to give assistance must give the assistance.

(5) If the person fails to give the assistance, the person who required the assistance may apply to the Court for, and the Court may make, an order that the other person give the assistance.

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

(1) If compensation in respect of a claim is paid under Part 7.5 arrangements, the relevant authority in relation to the arrangements is subrogated, to the extent of that payment, to all the claimant’s rights and remedies in relation to the loss to which the claim relates.

(2) The relevant authority may also recover from the participant or participants who caused the loss the costs it incurred in determining the claim.

892G Excess money in compensation funds

(1) The regulations may determine, or provide a method for determining, when there is excess money in a regulated fund.

(2) The regulations may make provision in relation to how excess money in a regulated fund may be, or is to be, dealt with. The regulations may make different provision in relation to different funds.

892H Accounting and reporting for regulated funds

(1) The relevant authority in relation to Part 7.5 arrangements must, in relation to each regulated fund established in connection with the arrangements, keep written financial records that:

(a) correctly record and explain the fund’s transactions and financial position and performance; and

(b) would enable true and fair financial statements to be prepared and audited;

and must retain the financial records for 7 years after the transactions covered by the records are completed.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) Within 2 months after the end of each financial year of the relevant authority, the authority must cause financial statements and notes to those financial statements (within the meaning of section 295) for the regulated fund to be made out as at the end of that financial year.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) A registered company auditor must be appointed to audit the accounts of the regulated fund in accordance with whichever of the following paragraphs applies:

(a) if there is only one relevant authority for the fund, that relevant authority must appoint a registered company auditor to audit the fund’s accounts;

(b) if there is more than one relevant authority for the fund:

(i) each of those relevant authorities must ensure that a registered company auditor is appointed in accordance with subparagraph (ii) to audit the fund’s accounts; and

(ii) the appointment is to be made by one or more of the relevant authorities, with the consent of such of the relevant authorities (if any) as do not make the appointment; and

(iii) a relevant authority must not purport to appoint a person to audit the fund’s accounts unless each other relevant authority (if any) who has not also made the appointment has consented to the appointment.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) If there is more than one relevant authority for a fund and they cannot agree on which auditor to appoint, ASIC may, on the written application of any of the authorities, appoint an auditor who consents to being so appointed.

(5) The auditor must:

(a) audit the accounts of the regulated fund and the financial statements; and

(b) do the things required by sections 307 and 308 in relation to those documents, as if the audit were being done under Chapter 2M.

(6) The relevant authority for the regulated fund must, within 14 days after receiving the auditor’s report, lodge with ASIC a copy of the report and a copy of the financial statements. If there is more than one relevant authority for the regulated fund, the copy must be given to ASIC by at least one of those authorities, or else they all contravene this subsection.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(7) If the regulated fund is the NGF, the relevant authority (being the SEGC) must:

(a) give a copy of the audited financial statements to each member of the SEGC; and

(b) cause a copy of the audited financial statements to be laid before the annual general meeting of each member of the SEGC next following the making of that report.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

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

The regulations may impose reporting requirements to be complied with by the relevant authority in relation to Division 3 arrangements in relation to situations in which compensation under the arrangements is provided otherwise than out of a regulated fund.

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

The regulations may provide for specified persons to have qualified privilege in respect of specified things done:

(a) under compensation rules forming part of Division 3 arrangements; or

(b) under regulations made for the purposes of a provision or provisions of Subdivision B of Division 4.

892K Risk assessment report

(1) For the purposes of monitoring compliance with, and the operation of, this Part, the Minister may, by giving the operator of a financial market written notice, require the operator:

(a) to cause a risk assessment report to be prepared in relation to the market in accordance with the requirements specified in the notice; and

(b) to give that report to the Minister by the time specified in the notice.

(2) The operator must comply with the notice.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

Division 6—Miscellaneous

893A Exemptions and modifications by regulations

(1) The regulations may:

(a) exempt a person or class of persons from all or specified provisions of this Part; or

(b) exempt a financial market or class of financial markets from all or specified provisions of this Part; or

(c) provide that this Part applies in relation to a person or a financial market, or a class of persons or financial markets, as if specified provisions were omitted, modified or varied as specified in the regulations.

(2) For the purpose of this section, the provisions of this Part include:

(a) definitions in this Act, or in the regulations, as they apply to references in this Part; and

(b) any provisions of Part 7.2 that refer to provisions of this Part; and

Part 7.6—Licensing of providers of financial services

Division 1—Preliminary

910A Definitions

In this Part, unless the contrary intention appears:

representative of a person means:

(a) if the person is a financial services licensee:

(i) an authorised representative of the licensee; or

(ii) an employee or director of the licensee; or

(iii) an employee or director of a related body corporate of the licensee; or

(iv) any other person acting on behalf of the licensee; or

(b) in any other case:

(i) an employee or director of the person; or

(ii) an employee or director of a related body corporate of the person; or

(iii) any other person acting on behalf of the person.

Division 2—Requirement to be licensed or authorised

911A Need for an Australian financial services licence

(1) Subject to this section, a person who carries on a financial services business in this jurisdiction must hold an Australian financial services licence covering the provision of the financial services.

Note 1: Also, a person must not provide a financial service contrary to a banning order or disqualification order under Division 8.

Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) However, a person is exempt from the requirement to hold an Australian financial services licence for a financial service they provide in any of the following circumstances:

(a) the person provides the service as representative of a second person who carries on a financial services business and who:

(i) holds an Australian financial services licence that covers the provision of the service; or

(ii) is exempt under this subsection from the requirement to hold an Australian financial services licence that covers the provision of the service;

Note: However, representatives must still comply with section 911B even if they are exempted from this section by this paragraph.

(b) the service is the issue, variation or disposal of a financial product by the person (the product provider) pursuant to an arrangement (an intermediary authorisation) between the product provider and a financial services licensee under which:

(i) the financial services licensee, or their authorised representatives, may make offers to people to arrange for the issue, variation or disposal of financial products by the product provider; and

(ii) the product provider is to issue, vary or dispose of financial products in accordance with such offers, if they are accepted;

provided that the offer pursuant to which the issue, variation or disposal is made was covered by the financial services licensee’s Australian financial services licence;

(ba) the service is the entry into of an intermediary authorisation referred to in paragraph (b);

(i) the service is the variation or disposal of a financial product by the person;

(ii) the same person issued the original product;

(iii) the person provides the service at the direct request of the person to whom it is provided (rather than through an intermediary);

(d) the service is, or is provided incidentally to, the operation of a licensed market, or a licensed CS facility, operated by the person;

(ea) the service is the provision of general advice and all of the following apply:

(i) the advice is provided in a newspaper or periodical of which the person is the proprietor or publisher;

(ii) the newspaper or periodical is generally available to the public otherwise than only on subscription;

(iii) the sole or principal purpose of the newspaper or periodical is not the provision of financial product advice;

(eb) the service is the provision of general advice and all of the following apply:

(i) the advice is provided in the course of, or by means of, transmissions that the person makes by means of an information service (see subsection (6)), or that are made by means of an information service that the person owns, operates or makes available;

(ii) the transmissions are generally available to the public;

(iii) the sole or principal purpose of the transmissions is not the provision of financial product advice;

(ec) the service is the provision of general advice and all of the following apply:

(i) the advice is provided in sound recordings, video recordings, or data recordings;

(ii) the person makes the recordings available to the public by supplying copies of them to the public and/or by causing the recordings (if they are sound recordings) to be heard by the public, causing the recordings (if they are video recordings) to be seen and heard by the public, or the contents of the recordings (if they are data recordings) to be displayed or reproduced for the public;

(iii) the sole or principal purpose of the recordings is not the provision of financial product advice;

(f) the person provides the service while performing functions, or exercising powers, in any of the following capacities or circumstances:

(i) as an official receiver or trustee within the meaning of the Bankruptcy Act 1966;

(ii) as a receiver, receiver and manager, or liquidator (whether appointed by a court or otherwise);

(iii) as a person appointed by a court to carry on a financial services business;

(iv) as the Public Trustee acting under a law, prescribed by regulations made for the purposes of this paragraph, of a State or Territory;

(v) as an administrator of a body corporate;

(vi) as an administrator of a deed of company arrangement executed by a body corporate;

(vii) as a trustee or person administering a compromise or arrangement between a body corporate and another person or persons;

(viii) as a personal representative of a deceased person other than a deceased financial services licensee;

(ix) subject to subsection (3), as a personal representative of a deceased financial services licensee;

(x) in the administration of a bankrupt estate or in the winding up of a body corporate or partnership;

(g) all of the following apply:

(i) the person is a body regulated by APRA;

(ii) the service is one in relation to which APRA has regulatory or supervisory responsibilities;

(iii) the service is provided only to wholesale clients;

(h) all of the following apply:

(i) the person is regulated by an overseas regulatory authority;

(ii) the regulatory authority is approved by ASIC in writing for the purposes of this paragraph;

(iii) the service is provided in the course of carrying on the business or undertaking which causes that regulation to be required;

(iv) the service is provided only to wholesale clients;

(i) the person provides the service only to related bodies corporate of the person;

(j) the person provides the service in the person’s capacity as trustee of a self‑managed superannuation fund (within the meaning of the Superannuation Industry (Supervision) Act 1993);

(k) the provision of the service is covered by an exemption prescribed in regulations made for the purposes of this paragraph;

(l) the provision of the service is covered by an exemption specified by ASIC in writing and published in the Gazette.

Note: A defendant bears an evidential burden in relation to the matters in this subsection. See subsection 13.3(3) of the Criminal Code.

(3) Subparagraph (2)(f)(ix) only applies until whichever of these happens first:

(a) the end of 6 months after the death of the licensee;

(b) the removal or discharge of the personal representative;

(4) A person is not exempt under any paragraph of subsection (2) for a financial service they provide if the service is the operation of a registered scheme.

(5) The exemption under paragraph (2)(ea), (eb) or (ec), or an exemption under paragraph (2)(k) or (l), may apply unconditionally or subject to conditions:

(a) in the case of the exemption under paragraph (2)(ea), (eb) or (ec), or an exemption under paragraph (2)(k)—specified in regulations made for the purposes of this paragraph; or

(b) in the case of an exemption under paragraph (2)(l)—specified by ASIC in writing published in the Gazette.

(6) In this section:

information service means:

(a) a broadcasting service; or

(b) an interactive or broadcast videotext or teletext service or a similar service; or

(d) any other service identified in regulations made for the purposes of this paragraph.

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

(1) A person (the provider) must only provide a financial service in this jurisdiction on behalf of another person (the principal) who carries on a financial services business if one or more of the following paragraphs apply:

(a) these conditions are satisfied:

(i) the principal holds an Australian financial services licence covering the provision of the service; and

(ii) the provider is an employee or director of the principal or of a related body corporate of the principal; and

(iii) the provider is not an employee or director, or authorised representative, of any other person who carries on a financial services business and who is not a related body corporate of the principal; and

(iv) the provider is not an employee or director, or authorised representative, of a related body corporate of a person of the kind mentioned in subparagraph (iii);

(b) these conditions are satisfied:

(i) the principal holds an Australian financial services licence covering the provision of the service; and

(ii) the provider is an authorised representative of the principal; and

(iii) the authorisation covers the provision of the service by the provider; and

(iv) in the case of a provider who is an employee or director of any other person (the second principal) who carries on a financial services business, or of a related body corporate of such a second principal—if the provider provides any financial services in this jurisdiction on behalf of the second principal, the provider does so as an authorised representative of the second principal;

(i) the principal holds an Australian financial services licence covering the provision of the service; and

(ii) the provider is an employee of an authorised representative of the principal; and

(iii) the authorisation covers the provision of the service by the authorised representative; and

(iv) the service is the provision of a basic deposit product or of a facility for making non‑cash payments (see section 763D) that is related to a basic deposit product, or is the provision of a financial product of a kind prescribed by regulations made for the purposes of this subparagraph;

(d) the provider holds their own Australian financial services licence covering the provision of the service;

Note: However, in general a financial services licensee cannot be the authorised representative of another financial services licensee: see sections 916D and 916E.

(e) if the principal (rather than the provider) provided the service, the principal would not need an Australian financial services licence because the provision of the service would be exempt under subsection 911A(2).

Note 1: Also, a person must not provide a financial service on behalf of another person contrary to a banning order or disqualification order under Division 8.

Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) Paragraphs (1)(a), (b) and (c) do not apply if the provider is a financial services licensee, unless the principal is an insurer and the provider is acting under a binder given by the principal.

(3) If, as mentioned in paragraph (1)(d), the provider holds their own Australian financial services licence covering the provision of the service, then, for the purposes of the other provisions of this Chapter, the service is taken to be provided by the provider (and not by the principal) unless regulations made for the purposes of this subsection provide otherwise.

911C Prohibition on holding out

A person must not hold out:

(a) that the person has an Australian financial services licence; or

(b) that a financial service provided by the person or by someone else is exempt from the requirement to hold an Australian financial services licence; or

(d) that conduct, or proposed conduct, of the person is within authority (within the meaning of Division 6) in relation to a particular financial services licensee; or

(e) that a body is a declared professional body; or

(f) that a person is a member of a declared professional body;

if that is not the case.

Note: Failure to comply with this section is an offence (see subsection 1311(1)).

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

(1) For the purposes of this Chapter, a financial services business is taken to be carried on in this jurisdiction by a person if, in the course of the person carrying on the business, the person engages in conduct that is:

(a) intended to induce people in this jurisdiction to use the financial services the person provides; or

(b) is likely to have that effect;

whether or not the conduct is intended, or likely, to have that effect in other places as well.

(2) This section does not limit the circumstances in which a financial services business is carried on in this jurisdiction for the purposes of this Chapter.

Division 3—Obligations of financial services licensees

912A General obligations

(1) A financial services licensee must:

(a) do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; and

(b) comply with the conditions on the licence; and

(ca) take reasonable steps to ensure that its representatives comply with the financial services laws; and

(d) unless the licensee is a body regulated by APRA—have available adequate resources (including financial, technological and human resources) to provide the financial services covered by the licence and to carry out supervisory arrangements; and

(e) maintain the competence to provide those financial services; and

(f) ensure that its representatives are adequately trained, and are competent, to provide those financial services; and

(g) if those financial services are provided to persons as retail clients—have a dispute resolution system complying with subsection (2); and

(h) unless the licensee is a body regulated by APRA—have adequate risk management systems; and

(j) comply with any other obligations that are prescribed by regulations made for the purposes of this paragraph.

(2) To comply with this subsection, a dispute resolution system must consist of:

(a) an internal dispute resolution procedure that:

(i) complies with standards, and requirements, made or approved by ASIC in accordance with regulations made for the purposes of this subparagraph; and

(ii) covers complaints against the licensee made by retail clients in connection with the provision of all financial services covered by the licence; and

(b) membership of one or more external dispute resolution schemes that:

(i) is, or are, approved by ASIC in accordance with regulations made for the purposes of this subparagraph; and

(ii) covers, or together cover, complaints (other than complaints that may be dealt with by the Superannuation Complaints Tribunal established by section 6 of the Superannuation (Resolution of Complaints) Act 1993) against the licensee made by retail clients in connection with the provision of all financial services covered by the licence.

(3) Regulations made for the purposes of subparagraph (2)(a)(i) or (2)(b)(i) may also deal with the variation or revocation of:

(a) standards or requirements made by ASIC; or

(b) approvals given by ASIC.

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

(1) If a financial services licensee provides a financial service to persons as retail clients, the licensee must have arrangements for compensating those persons for loss or damage suffered because of breaches of the relevant obligations under this Chapter by the licensee or its representatives. The arrangements must meet the requirements of subsection (2).

(2) The arrangements must:

(a) if the regulations specify requirements that are applicable to all arrangements, or to arrangements of that kind—satisfy those requirements; or

(b) be approved in writing by ASIC.

(3) Before approving arrangements under paragraph (2)(b), ASIC must have regard to:

(a) the financial services covered by the licence; and

(b) whether the arrangements will continue to cover persons after the licensee ceases carrying on the business of providing financial services, and the length of time for which that cover will continue; and

(4) Regulations made for the purposes of paragraph (3)(c) may, in particular, prescribe additional details in relation to the matters to which ASIC must have regard under paragraphs (3)(a) and (b).

912C Direction to provide a statement

(1) ASIC may, by giving written notice to a financial services licensee, direct the licensee to give to ASIC a written statement containing the specified information about:

(a) the financial services provided by the licensee or its representatives; or

(b) the financial services business carried on by the licensee.

(1A) Notices under subsection (1):

(a) may be sent out at any time; and

(b) may be sent to one or more particular licensees, or to each licensee in one or more classes of licensee, or to all licensees; and

(2) ASIC may also, by giving written notice to the licensee, direct the licensee to obtain an audit report, prepared by a suitably qualified person specified in the notice, on such a statement before the statement is given to ASIC.

(3) The licensee must comply with a direction given under this section:

(a) within the time specified in the direction if that is a reasonable time; or

(b) in any other case—within a reasonable time.

ASIC may extend the time within which the licensee must comply with the direction by giving written notice to the licensee.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

912D Obligation to notify ASIC of certain matters

(1) As soon as practicable, and in any case within 3 days, after a financial services licensee becomes aware that it can no longer meet, or has breached, an obligation under section 912A or 912B, the licensee must give a written report to ASIC on the matter.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) A financial services licensee must give written notice to ASIC, as soon as practicable, if the licensee becomes a participant in a licensed market or a licensed CS facility, or ceases to be such a participant. The notice must say when this happened and identify the market or facility.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

912E Surveillance checks by ASIC

(1) A financial services licensee and its representatives must give such assistance to ASIC, or a person authorised by ASIC, as ASIC or the authorised person reasonably requests in relation to whether the licensee and its representatives are complying with the financial services laws, and in relation to the performance of ASIC’s other functions.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) Such assistance may include showing ASIC the licensee’s books or giving ASIC other information.

912F Obligation to cite licence number in documents

(1) Whenever a financial services licensee identifies itself in a document in connection with providing financial services under the licence, or otherwise in connection with the licence, the document must include the licensee’s licence number (see section 913C).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) An offence based on subsection (1) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

Division 4—Australian financial services licences

Subdivision A—How to get a licence

913A Applying for a licence

A person may apply for an Australian financial services licence by lodging an application with ASIC that:

(a) includes the information required by regulations made for the purposes of this paragraph; and

(b) is accompanied by the documents (if any) required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

913B When a licence may be granted

(1) ASIC must grant an applicant an Australian financial services licence if (and must not grant such a licence unless):

(a) the application was made in accordance with section 913A; and

(b) ASIC has no reason to believe that the applicant will not comply with the obligations that will apply under section 912A if the licence is granted; and

(ca) the applicant has provided ASIC with any additional information requested by ASIC in relation to matters that, under this section, can be taken into account in deciding whether to grant the licence; and

(d) the applicant meets any other requirements prescribed by regulations made for the purposes of this paragraph.

Note: ASIC must not grant an Australian financial services licence to a person contrary to a banning order or disqualification order (see Division 8).

(2) If the applicant is a natural person, ASIC must be satisfied that there is no reason to believe that the applicant is not of good fame or character.

(3) If the applicant is not a single natural person, ASIC must be satisfied:

(a) that:

(i) if the applicant is a body corporate—there is no reason to believe that any of the applicant’s responsible officers are not of good fame or character; or

(ii) if the applicant is a partnership or the trustees of a trust—there is no reason to believe that any of the partners or trustees who would perform duties in connection with the holding of the licence are not of good fame or character; or

(b) if ASIC is not satisfied of the matter in paragraph (a)—that the applicant’s ability to provide the financial services covered by the licence would nevertheless not be significantly impaired.

(4) In considering whether there is reason to believe that a person is not of good fame or character, ASIC must (subject to Part VIIC of the Crimes Act 1914) have regard to:

(a) any conviction of the person, within 10 years before the application was made, for serious fraud; and

(b) whether the person has held an Australian financial services licence that was suspended or cancelled; and

(d) any other matter ASIC considers relevant.

Note: Part VIIC of the Crimes Act 1914 includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them.

(5) However, ASIC may only refuse to grant a licence after giving the applicant an opportunity:

(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and

(b) to make submissions to ASIC in relation to the matter.

913C Licence numbers

ASIC must give each Australian financial services licence a unique licence number when it is granted, and must notify the licensee of that number.

Subdivision B—The conditions on the licence

914A The conditions on the licence

(1) Subject to this section, ASIC may, at any time, by giving written notice to a financial services licensee:

(a) impose conditions, or additional conditions, on the licence; and

(b) vary or revoke conditions imposed on the licence.

Note: Subsection 923B(3) restricts the circumstances in which ASIC can impose a condition authorising a person to assume or use a restricted word or expression under that section.

(2) ASIC may do so:

(a) on its own initiative; or

(b) if the licensee lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

(3) ASIC may only impose conditions or additional conditions, or vary the conditions, on the licence after giving the licensee an opportunity:

(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and

(b) to make submissions to ASIC in relation to the matter.

This subsection does not apply to ASIC imposing conditions when a licence is granted.

(4) If the licensee, or a related body corporate, is a body (the APRA body) regulated by APRA, other than an ADI (within the meaning of the Banking Act 1959), then the following provisions apply:

(a) ASIC cannot:

(i) impose, vary or revoke a condition on the licence that, in ASIC’s opinion, has or would have the result of preventing the APRA body from being able to carry on all or any of its usual activities (being activities in relation to which APRA has regulatory or supervisory responsibilities); or

(ii) vary a condition so that it would, in ASIC’s opinion, become a condition that would have a result as described in subparagraph (i);

unless ASIC has first consulted APRA about the proposed action;

(b) if ASIC imposes, varies or revokes a condition on the licence and paragraph (a) does not apply to that action, ASIC must, within one week, inform APRA of the action that has been taken.

(5) If the licensee, or a related body corporate, is an ADI (within the meaning of the Banking Act 1959), then the following provisions apply:

(a) subject to paragraphs (b) and (c), the powers that ASIC would otherwise have under this section:

(i) to impose, vary or revoke a condition on the licence that, in ASIC’s opinion, has or would have the result of preventing the ADI from being able to carry on all or any of its banking business (within the meaning of the Banking Act 1959); or

(ii) to vary a condition so that it would, in ASIC’s opinion, become a condition that would have a result as described in subparagraph (i);

are instead powers of the Minister;

(b) the following provisions apply in relation to a power to which paragraph (a) applies:

(i) the procedures for the exercise of the power are the same as would apply if ASIC could exercise the power, except that the Minister must not exercise the power unless he or she has first considered advice from ASIC on the proposed action, being advice given after ASIC has consulted APRA about the proposed action;

(ii) ASIC (rather than the Minister) must still conduct any hearing required under paragraph (3)(a) and receive any submissions under paragraph (3)(b);

(c) if ASIC imposes, varies or revokes a condition on the licence and paragraph (a) does not apply to that action, ASIC must, within one week, inform APRA of the action that has been taken.

(5A) A failure to comply with a requirement of subsection (4) or (5) to consult or inform APRA about, or to consider advice from ASIC about, an imposition, variation or revocation of a condition does not invalidate the action taken.

(6) ASIC must ensure that the licence is subject to a condition that specifies the particular financial services or class of financial services that the licensee is authorised to provide.

(7) The financial services or class of financial services may be specified by reference to particular financial products, or classes of financial products.

(8) The licence is subject to such other conditions as are prescribed by regulations made for the purposes of this subsection. However, ASIC cannot vary or revoke those conditions.

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

915A Varying licences

(1) ASIC may vary an Australian financial services licence to take account of a change in the licensee’s name if the licensee lodges with ASIC an application for the variation, accompanied by the documents, if any, required by regulations made for the purposes of this subsection.

Note 1: The conditions on the licence can be varied under section 914A.

Note 2: For fees in respect of lodging applications, see Part 9.10.

(2) ASIC must give written notice of the variation to the licensee.

915B Immediate suspension or cancellation

Licence held by a natural person

(1) ASIC may suspend or cancel an Australian financial services licence held by a natural person, by giving written notice to the person, if the person:

(a) ceases to carry on the financial services business; or

(b) becomes an insolvent under administration; or

(d) becomes incapable of managing their affairs because of mental or physical incapacity; or

(e) lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

Licence held by a partnership

(2) ASIC may suspend or cancel an Australian financial services licence held by a partnership, by giving written notice to the partnership, if:

(a) the partnership ceases to carry on the financial services business; or

(b) 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 the partnership; or

(d) the partnership lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

Licence held by a body corporate

(3) ASIC may suspend or cancel an Australian financial services licence held by a body corporate, by giving written notice to the body, if the body:

(a) ceases to carry on the financial services business; or

(b) becomes an externally‑administered body corporate; or

(c) is a responsible entity of a registered scheme whose members have suffered, or are likely to suffer, loss or damage because the body has breached this Act; or

(d) lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

(4) ASIC may suspend or cancel an Australian financial services licence held by the trustees of a trust, by giving written notice to the trustees, if:

(a) the trustees of the trust cease to carry on the financial services business; or

(b) a trustee who is a natural person:

(i) becomes an insolvent under administration; or

(ii) is convicted of serious fraud; or

(iii) becomes incapable of managing their affairs because of physical or mental incapacity; or

(d) the trustees lodge with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note 1: For fees in respect of lodging applications, see Part 9.10.

Note 2: If there is only one trustee, subsection (1) will apply (if the trustee is a natural person), and subsection (3) will apply (if the trustee is a body corporate).

915C Suspension or cancellation after offering a hearing

(1) ASIC may suspend or cancel an Australian financial services licence (subject to complying with subsection (4)) in any of the following cases:

(a) the licensee has not complied with their obligations under section 912A;

(aa) ASIC has reason to believe that the licensee will not comply with their obligations under section 912A;

(b) ASIC is no longer satisfied of the matter in whichever of subsection 913B(2) or (3) applied at the time the licence was granted (about whether the licensee, or the licensee’s representatives, are of good fame or character);

(d) a banning order or disqualification order under Division 8 is made against a representative of the licensee and ASIC considers that the representative’s involvement in the provision of the licensee’s financial services will significantly impair the licensee’s ability to meet its obligations under this Chapter.

(2) ASIC may also cancel an Australian financial services licence (subject to complying with subsection (4)) if:

(a) the application for the licence was false in a material particular or materially misleading; or

(b) there was an omission of a material matter from the application.

(3) An Australian financial services licence is suspended or cancelled by ASIC giving written notice to the licensee.

(4) However, ASIC may only suspend or cancel an Australian financial services licence under this section after giving the licensee an opportunity:

(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and

(b) to make submissions to ASIC on the matter.

915D Effect of suspension

(1) A suspended Australian financial services licence has no effect while it remains suspended.

(2) Subsection (1) has effect subject to section 915H.

915E Revocation of suspension

ASIC may at any time revoke the suspension of an Australian financial services licence by giving written notice to the licensee.

915F Date of effect and publication of cancellation or suspension

(1) A variation, suspension, revocation of a suspension, or cancellation, of an Australian financial services licence takes effect when the written notice of that action is given to the licensee.

(2) As soon as practicable after the notice is given to the licensee, ASIC must:

(a) publish a notice of the action in the Gazette; and

(b) if the licensee is a participant in a licensed market or a licensed CS facility—give written notice of the action to the operator of the market or facility.

A notice under this subsection must state when the action took effect.

915G Statement of reasons

A notice of suspension or cancellation given to a licensee under this Subdivision must be accompanied by a statement of reasons for the action taken.

915H ASIC may allow licence to continue in effect

In the written notice of suspension or cancellation that ASIC gives to the licensee, ASIC may specify that the licence continues in effect as though the suspension or cancellation had not happened for the purposes of specified provisions of this Act in relation to specified matters, a specified period, or both.

915I Special procedures for APRA‑regulated bodies

(1) If a financial services licensee, or a related body corporate, is a body (the APRA body) regulated by APRA, other than an ADI (within the meaning of the Banking Act 1959), the following provisions apply:

(a) ASIC cannot suspend or cancel the licensee’s licence if doing so would, in ASIC’s opinion, have the result of preventing the APRA body from being able to carry on all or any of its usual activities (being activities in relation to which APRA has regulatory or supervisory responsibilities), unless ASIC has first consulted APRA about the proposed action;

(b) if ASIC suspends or cancels the licensee’s licence and paragraph (a) does not apply to that action, ASIC must, within one week, inform APRA of the action that has been taken.

(2) If:

(a) a financial services licensee is an ADI (within the meaning of the Banking Act 1959); or

(b) a related body corporate of a financial services licensee is an ADI (within the meaning of the Banking Act 1959), and cancellation or suspension of the licensee’s licence would, in ASIC’s opinion, have the result of preventing the ADI from being able to carry on all or any of its banking business (within the meaning of the Banking Act 1959);

the following provisions have effect:

(c) subject to paragraph (d), the powers that ASIC would otherwise have under this Subdivision to cancel or suspend the licensee’s licence, or to subsequently revoke a suspension to which this subsection applied, are instead powers of the Minister;

(d) the procedures for the exercise of a power to which paragraph (c) applies are the same as would apply if ASIC could exercise the power, except that the Minister must not exercise the power unless he or she has first considered advice from ASIC on the proposed action, being advice given after ASIC has consulted APRA about the proposed action;

(e) ASIC (rather than the Minister) must still conduct any hearing required under paragraph 915C(4)(a) and receive any submissions under paragraph 915C(4)(b).

(3) A failure to comply with a requirement of subsection (1) or (2) to consult or inform APRA about, or to consider advice from ASIC about, a cancellation or suspension, or a revocation of a suspension, of a licence does not invalidate the action taken.

915J Variation, suspension and cancellation only under this Subdivision

An Australian financial services licence cannot be varied, suspended or cancelled otherwise than under this Subdivision.

Note: The conditions on the licence can be varied under section 914A.

Division 5—Authorised representatives

916A How representatives are authorised

(1) A financial services licensee may give a person (the authorised representative) a written notice authorising the person, for the purposes of this Chapter, to provide a specified financial service or financial services on behalf of the licensee.

(2) The financial services specified may be some or all of the financial services covered by the licensee’s licence.

(3) An authorisation under subsection (1) is void to the extent that it purports to authorise a person to provide a financial service:

(a) that is not covered by the licensee’s licence; or

(b) contrary to a banning order or disqualification order under Division 8.

(3A) A person must not give a purported authorisation if that purported authorisation is void to any extent under subsection (3).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) An authorisation may be revoked at any time by the licensee giving written notice to the authorised representative.

916B Sub‑authorisations

(1) Subject to subsection (3), an authorised representative of a financial services licensee cannot, in that capacity, make a person their authorised representative or an authorised representative of the licensee.

(2) A purported authorisation contrary to this section is void.

(2A) A person must not give a purported authorisation if that purported authorisation is contrary to this section.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) A body corporate that is an authorised representative of a financial services licensee may, in that capacity, give an individual a written notice authorising that individual, for the purposes of this Chapter, to provide a specified financial service or financial services on behalf of the licensee, but only if the licensee consents in writing given to the body corporate.

(4) The financial services specified may be some or all of the financial services covered by the licensee’s licence.

(5) The licensee may give consent under subsection (3) in respect of either a specified individual or a specified class of individuals (the membership of which might change from time to time).

(5A) If a licensee gives consent under subsection (3) to a body corporate, the licensee must keep a copy of the consent for 5 years after the day on which it ceases to have effect.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(6) An individual who is authorised as mentioned in subsection (3) is an authorised representative of the relevant licensee.

(7) An authorisation of an individual as mentioned in subsection (3) may be revoked at any time by:

(a) the licensee; or

(b) the body corporate that gave the individual the authorisation;

giving written notice to the individual.

(8) If a person revokes the authorisation of an individual under subsection (7), that person must inform, in writing, the other person who could have revoked the authorisation.

(9) To avoid doubt, an authorisation given as mentioned in subsection (3) is taken, for the purposes of sections 916C to 916F, to be given by the body corporate, not the licensee.

916C Authorised representative of 2 or more licensees

(1) One person can be the authorised representative of 2 or more financial services licensees, but only if:

(a) each of those licensees has consented to the person also being the authorised representative of each of the other licensees; or

(b) each of those licensees is a related body corporate of each of the other licensees.

(2) A purported authorisation given in breach of this requirement is void.

(3) A person must not give a purported authorisation if that purported authorisation is in breach of this requirement.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

916D Licensees cannot authorise other licensees

(1) A financial services licensee cannot be the authorised representative of another financial services licensee.

Note 1: Instead, the first licensee could use their own licence to provide financial services on behalf of the second licensee (assuming that the first licensee’s licence covered the provision of those services). See paragraph 911B(1)(d).

Note 2: There is an exception to this rule in section 916E.

(2) A purported authorisation given in breach of this requirement is void.

(2A) A person must not give a purported authorisation if that purported authorisation is given in breach of this requirement.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2B) The requirement in subsection (1) does not prohibit a financial services licensee from being an authorised representative in circumstances covered by section 916E.

Note: In a prosecution for an offence based on subsection (2A), a defendant bears an evidential burden in relation to the matters in this subsection. See subsection 13.3(3) of the Criminal Code.

(3) As well, an authorisation that starts to breach this requirement, because the person authorised is subsequently granted an Australian financial services licence, is void.

916E Licensees acting under a binder

(1) Despite section 916D, a financial services licensee (the authorised licensee) may be the authorised representative of another financial services licensee who is an insurer, if the authorised licensee acts under a binder given by the insurer.

(2) For all purposes connected with contracts that are risk insurance products, or with claims against the insurer, in respect of which the authorised licensee acts under the binder:

(a) the authorised licensee is taken to act on behalf of the insurer and not the insured; and

(b) if the insured in fact relied in good faith on the conduct of the authorised licensee, the authorised licensee is taken to act on behalf of the insurer regardless of the fact that the authorised licensee did not act within the scope of the binder.

916F Obligation to notify ASIC etc. about authorised representatives

(1) A person must lodge with ASIC a written notice (in accordance with subsection (2)), within 10 business days, if the person authorises a representative to provide a financial service as mentioned in section 916A or 916B.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(1A) A person who authorises an individual to provide a financial service on behalf of a financial services licensee as mentioned in section 916B must give the licensee written notice (in accordance with subsection (2)), within 10 business days of the individual being authorised to provide the financial service, if the licensee’s consent to the authorisation was given in respect of a specified class of individuals.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) The notice must include the following details:

(a) the name and business address of the representative;

(b) details of the authorisation, including the date on which it was made and what the representative is authorised to do on behalf of the relevant licensee;

(c) details of each other financial services licensee on behalf of whom the representative is an authorised representative.

(3) A person must notify ASIC, by lodging a written notice, within 10 business days if:

(a) the person authorised a representative under section 916A or 916B and there is a change in any details relating to the representative that are required to be included under subsection (2); or

(b) the person revokes the authorisation of a representative under section 916A or 916B.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) For the purposes of an offence based on subsection (3), strict liability applies to the physical element of circumstance of the offence, that the details mentioned in subsection (3) changed.

Note: For strict liability, see section 6.1 of the Criminal Code.

916G ASIC may give licensee information about representatives

(1) If ASIC considers it appropriate to do so, it may give information to a financial services licensee about a person who ASIC believes is, or will be, a representative of the licensee. However, ASIC may only do so if it believes, on reasonable grounds, that the information is true.

(2) A financial services licensee to whom the information is given may only make use of, make a record of, or give to another person, the information for a purpose connected with:

(a) the licensee making a decision about what action (if any) to take in relation to the representative, as a consequence of receiving the information; or

(b) the licensee taking action pursuant to such a decision.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) A person to whom information has been given for a purpose or purposes under subsection (2) or this subsection, may only make use of, make a record of, or give to another person, that information for that purpose or any of those purposes.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) A person has qualified privilege in respect of an act done by the person under subsection (2) or (3).

(5) A person to whom information is given in accordance with this section must not give any of the information to a court, or produce in a court a document that sets out some or all of the information, except:

(a) for a purpose connected with:

(i) a financial services licensee making a decision about what action (if any) to take in relation to the representative, as a consequence of receiving some or all of the information; or

(ii) a financial services licensee taking action pursuant to that decision; or

(iii) proving in a proceeding in that court that particular action taken by a financial services licensee in relation to the representative was taken pursuant to that decision; or

(b) in a proceeding in that court, in so far as the proceeding relates to an alleged breach of this section; or

(d) in a proceeding about giving to a court false information some, at least, of which was the information given under this section.

(6) A reference in this section to a financial services licensee taking action in relation to a representative is a reference to the licensee:

(a) taking action by way of making, terminating or varying the terms and conditions of an agreement; or

(b) otherwise taking action in relation to an agreement;

to the extent that the agreement relates to the representative acting on behalf of the licensee.

(7) Subsection (5) also has the effect it would have if:

(a) a reference in it to a court were a reference to a court of an external Territory or of a country outside Australia and the external Territories; and

(b) paragraphs (5)(b) and (c) were omitted.

Division 6—Liability of financial services licensees for representatives

917A Application of Division

(1) This Division applies to any conduct of a representative of a financial services licensee:

(a) that relates to the provision of a financial service; and

(b) on which a third person (the client) could reasonably be expected to rely; and

(2) In this Division, a reference to a representative’s conduct being within authority in relation to a particular financial services licensee is, subject to subsection (3), a reference to:

(a) if the representative is an employee of the licensee or of a related body corporate of the licensee—conduct being within the scope of the employee’s employment; or

(b) if the representative is a director of the licensee or of a related body corporate of the licensee—conduct being within the scope of the director’s duties as director; or

(3) If:

(a) a person is the representative of more than one financial services licensee in respect of a particular class of financial service; and

(b) the person engages in conduct relating to that class of service; and

then, for the purposes of this Division:

(d) the person is taken, in respect of the conduct, to have acted within authority in relation to the licensee or to each licensee who issued or transferred a financial product as a result of the conduct; and

(e) the person is, in respect of the conduct, taken not to have acted within authority in relation to any licensee who did not issue or transfer a financial product as a result of the conduct.

917B Responsibility if representative of only one licensee

If the representative is the representative of only one financial services licensee, the licensee is responsible, as between the licensee and the client, for the conduct of the representative, whether or not the representative’s conduct is within authority.

917C Representatives of multiple licensees

(1) This section applies if the representative is the representative of more than one financial services licensee.

Financial service covered by only one authority

(2) If:

(a) the representative is the representative of one of the licensees only in respect of a particular class of financial service; and

(b) the conduct relates to that class of service;

that licensee is responsible for the conduct, as between that licensee and the client, whether or not the conduct is within authority.

Financial service covered by multiple authorities: conduct within authority for one or more of them

(3) If:

(a) the representative is the representative of more than one of the licensees in respect of a particular class of financial service; and

(b) the conduct relates to that class of service; and

(i) only one of those licensees (the authorising licensee); or

(ii) two or more of those licensees (the authorising licensees);

then:

(d) if subparagraph (c)(i) applies—the authorising licensee is responsible for the conduct, as between that licensee and the client; or

(e) if subparagraph (c)(ii) applies—the authorising licensees are jointly and severally responsible for the conduct, as between themselves and the client.

All other cases

(4) In any other case, all of the licensees are jointly and severally responsible for the conduct, as between themselves and the client, whether or not the representative’s conduct is within authority in relation to any of them.

917D Exception if lack of authority is disclosed to client

A financial services licensee is not responsible under section 917B or 917C for the conduct of their representative if:

(a) the conduct is not within authority in relation to the licensee (or in relation to any of the licensees, if there were more than one); and

(b) the representative disclosed that fact to the client before the client relied on the conduct; and

(c) the clarity and the prominence of the disclosure was such as a person would reasonably require for the purpose of deciding whether to acquire the relevant financial service.

Note: A person must not hold out that conduct, or proposed conduct, of the person is within authority in relation to a particular financial services licensee, unless that is the case. See section 911C.

917E Responsibility extends to loss or damage suffered by client

The responsibility of a financial services licensee under this Division extends so as to make the licensee liable to the client in respect of any loss or damage suffered by the client as a result of the representative’s conduct.

917F Effect of Division

(1) If a financial services licensee is responsible for the conduct of their representative under this Division, the client has the same remedies against the licensee that the client has against the representative.

(2) The licensee and the representative (along with any other licensees who are also responsible) are all jointly and severally liable to the client in respect of those remedies.

(3) However, nothing in this Division imposes:

(a) any criminal responsibility; or

(b) any civil liability under a provision of this Act apart from this Division;

on a financial services licensee that would not otherwise be imposed on the licensee.

(4) This Division does not relieve a representative of a financial services licensee of any liability they have to the client or the licensee.

(5) An agreement is void in so far as it purports to alter or restrict the operation of section 917B, 917C, 917D or 917E.

(6) However, subsection (5) does not apply to the extent that the agreement:

(a) provides for a representative of a financial services licensee to indemnify the licensee for a liability of the licensee in respect of the representative; or

(b) provides for a financial services licensee, for whom a representative acts, to indemnify another financial services licensee for a liability in respect of the representative.

(7) A financial services licensee must not make, or offer to make, an agreement that is, or would be, void under subsection (5).

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

Subdivision A—Banning orders

920A ASIC’s power to make a banning order

(1) ASIC may make a banning order against a person, by giving written notice to the person, if:

(a) ASIC suspends or cancels an Australian financial services licence held by the person; or

(b) the person has not complied with their obligations under section 912A; or

(ba) ASIC has reason to believe that the person will not comply with their obligations under section 912A; or

(bb) the person becomes an insolvent under administration; or

(d) if the person is a declared professional body—ASIC revokes the declaration; or

(e) the person has not complied with a financial services law; or

(f) ASIC has reason to believe that the person will not comply with a financial services law.

(2) However, ASIC may only make a banning order against a person after giving the person an opportunity:

(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and

(b) to make submissions to ASIC on the matter.

(3) Subsection (2) does not apply in so far as ASIC’s grounds for making the banning order are or include the following:

(a) that the suspension or cancellation of the relevant licence took place under section 915B;

(b) that the person has been convicted of serious fraud.

920B What is a banning order?

(1) A banning order is a written order that prohibits a person from providing any financial services or specified financial services in specified circumstances or capacities.

(2) The order may prohibit the person against whom it is made from providing a financial service:

(a) permanently; or

(b) for a specified period, unless ASIC has reason to believe that the person is not of good fame or character.

(3) A banning order may include a provision allowing the person against whom it was made, subject to any specified conditions:

(a) to do specified acts; or

(b) to do specified acts in specified circumstances;

that the order would otherwise prohibit them from doing.

920C Effect of banning orders

(1) A person against whom a banning order is made cannot be granted an Australian financial services licence contrary to the banning order.

(2) A person contravenes this subsection if:

(a) the person engages in conduct; and

(b) the conduct breaches a banning order that has been made against the person.

Note: A contravention of this subsection is an offence (see subsection 1311(1)).

920D Variation or cancellation of banning orders

(1) ASIC may vary or cancel a banning order, by giving written notice to the person against whom the order was made, if ASIC is satisfied that it is appropriate to do so because of a change in any of the circumstances based on which ASIC made the order.

(2) ASIC may do so:

(a) on its own initiative; or

(b) if the person against whom the order was made lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10.

(3) If ASIC proposes not to vary or cancel a banning order in accordance with an application lodged by a person under paragraph (2)(b), ASIC must give the person an opportunity:

(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and

(b) to make submissions to ASIC on the matter.

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

(1) A banning order, or variation or cancellation of a banning order, takes effect when it is given to the person against whom the order is or was made.

(2) ASIC must publish a notice in the Gazette as soon as practicable after making, varying or cancelling a banning order. The notice must state when the action took effect and:

(a) in the case of the making of a banning order—set out a copy of the banning order; or

(b) in the case of the variation of a banning order—set out a copy of the banning order as varied.

(3) However, if the banning order contains a provision of the kind referred to in subsection 920B(3) and ASIC considers that the Gazette notice would be unreasonably long if that provision were included, the notice may instead set out a summary of the provision’s effect.

(4) If ASIC makes a banning order against a person who is a participant in a licensed market or a licensed CS facility, or varies a banning order against such a person, ASIC must give the operator of the market or facility written notice of the making of the order or the variation.

920F Statement of reasons

(1) A banning order given to a person must be accompanied by a statement of reasons for the order.

(2) If ASIC varies a banning order made against a person, ASIC must, on request by the person, give the person a statement of reasons for the variation.

Subdivision B—Disqualification by the Court

921A Disqualification by the Court

(1) ASIC may apply to the Court for an order or orders under this section in relation to a person if ASIC:

(a) cancels an Australian financial services licence held by the person; or

(b) makes a banning order against the person that is to operate permanently.

(2) The Court may make:

(a) an order disqualifying the person, permanently or for a specified period, from providing any financial services, or specified financial services, in specified circumstances or capacities; or

(b) any other order the Court considers appropriate.

(3) The Court may revoke or vary an order made under subsection (2).

(4) A person against whom such an order is made cannot be granted an Australian financial services licence contrary to the order.

(5) If the Court makes or varies an order under this section in relation to a person who is a participant in a licensed market or a licensed CS facility, ASIC must give the operator of the market or facility written notice of the making of the order or the variation.

Division 9—Registers relating to financial services

922A Registers relating to financial services

(1) ASIC must establish and maintain one or more registers relating to financial services.

(2) The regulations may prescribe the way in which the register or registers must be established or maintained, including the details that ASIC must enter in the register or registers in respect of the following persons or bodies:

(a) financial services licensees;

(b) authorised representatives of financial services licensees;

(e) any other persons or bodies that are prescribed by regulations made for the purposes of this paragraph.

922B Inspection of Registers

(1) A person may inspect the register or registers relating to financial services established under this Division and may make copies of, or take extracts from, the register or registers.

(2) The regulations may prescribe the fees that a person must pay ASIC to do the things mentioned in subsection (1).

(3) Any disclosure necessary for the purposes of this section is authorised by this section.

Division 10—Restrictions on use of terminology

923A Restriction on use of certain words or expressions

(1) A person contravenes this subsection if:

(a) either:

(i) the person carries on a financial services business or provides a financial service (whether or not on behalf of another person); or

(ii) another person (the provider) provides a financial service on behalf of the first person; and

(b) the first person assumes or uses, in this jurisdiction, a restricted word or expression in relation to that business or service.

Note 1: For the meanings of restricted word or expression and assume or use, see subsection (5).

Note 2: A contravention of this subsection is an offence (see subsection 1311(1)).

(2) However, it is not a contravention of subsection (1) for a person to assume or use a restricted word or expression if:

(a) the person does not receive any of the following:

(i) commissions (apart from commissions that are rebated in full to the person’s clients);

(ii) forms of remuneration calculated on the basis of the volume of business placed by the person with an issuer of a financial product;

(iii) other gifts or benefits from an issuer of a financial product which may reasonably be expected to influence the person; and

(b) none of the following persons receives any of the things covered by paragraph (a):

(i) the person’s employer (if any);

(ii) if the person provides the financial service on behalf of another person (as mentioned in subparagraph (1)(a)(i))—that other person;

(iii) any other person identified (whether by reference to a class of person or otherwise) in regulations made for the purposes of this subparagraph; and

(c) if subparagraph (1)(a)(ii) applies in relation to a financial service—the provider mentioned in that subparagraph does not receive any of the things mentioned in paragraph (a) of this subsection in respect of the provision of that service; and

(d) in carrying on a financial services business, or providing financial services, the person operates free from direct or indirect restrictions relating to the financial products in respect of which they provide financial services; and

(e) in carrying on that business, or providing those services, the person operates without any conflicts of interest that might:

(i) arise from their associations or relationships with issuers of financial products; and

(ii) reasonably be expected to influence the person in carrying on the business or providing the services.

Note: A defendant bears an evidential burden in relation to the matters in subsection (2). See subsection 13.3(3) of the Criminal Code.

(3) The reference in paragraph (2)(d) to direct or indirect restrictions does not include a reference to restrictions imposed on a person by:

(a) the conditions on an Australian financial services licence; or

(b) this Chapter or regulations made for the purposes of this Chapter.

(4) If a person assumes or uses a word or expression in circumstances that give rise to the person committing an offence based on subsection (1) of this section, the person is guilty of such an offence in respect of:

(a) the first day on which the offence is committed; and

(b) each subsequent day (if any) on which the circumstances that gave rise to the person committing the offence continue (including the day of conviction for any such offence or any later day).

(5) In this section:

(a) a reference to a restricted word or expression is a reference to:

(i) the word independent, impartial or unbiased; or

(ii) any other word or expression specified in the regulations as a restricted word or expression for the purposes of this section; or

(iii) any other word or expression (whether or not in English) that is of like import to a word or expression covered by any of the previous subparagraphs; and

(b) a reference to a word or expression being assumed or used includes a reference to the word or expression being assumed or used:

(i) as part of another word or expression; or

(ii) in combination with other words, letters or other symbols.

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

(1) A person contravenes this subsection if:

(a) the person carries on a financial services business or provides a financial service (whether or not on behalf of another person); and

(b) the person assumes or uses, in this jurisdiction, a restricted word or expression in relation to that business or service; and

(c) the person is not authorised, by the conditions on an Australian financial services licence held by the person, or by a person in relation to whom they are a representative, to assume or use that word or expression (see subsection (3)).

Note 1: For the meanings of restricted word or expression and assume or use, see subsection (4).

Note 2: A contravention of this subsection is an offence (see subsection 1311(1)).

(2) If a person assumes or uses a word or expression in circumstances that give rise to the person committing an offence based on subsection (1), the person is guilty of such an offence in respect of:

(a) the first day on which the offence is committed; and

(b) each subsequent day (if any) on which the circumstances that gave rise to the person committing the offence continue (including the day of conviction for any such offence or any later day).

(3) ASIC can only impose a condition on an Australian financial services licence authorising a person to assume or use a restricted word or expression in these circumstances:

(a) in the case of a word or expression covered by subparagraph (4)(a)(i)—if the person:

(i) can, under the licence, provide a financial service relating to securities (whether or not the person can provide other financial services under the licence as well); and

(ii) is a participant in a licensed market whose licence covers dealings in securities;

(b) in the case of a word or expression covered by subparagraph (4)(a)(ii)—if the person:

(i) can, under the licence, provide a financial service relating to derivatives (whether or not the person can provide other financial services under the licence as well); and

(ii) is a participant in a licensed market whose licence covers dealings in derivatives;

(i) can, under the licence, provide a financial service relating to contracts of insurance (whether or not the person can provide other financial services under the licence as well); and

(ii) in providing that service, acts on behalf of intending insureds;

(d) in the case of a word or expression covered by subparagraph (4)(a)(iv)—if the person:

(i) can, under the licence, provide a financial service relating to contracts of general insurance (whether or not the person can provide other financial services under the licence as well); and

(ii) in providing that service, acts on behalf of intending insureds;

(e) in the case of a word or expression covered by subparagraph (4)(a)(v)—if the person:

(i) can, under the licence, provide a financial service relating to contracts of life insurance (whether or not the person can provide other financial services under the licence as well); and

(ii) in providing that service, acts on behalf of intending insureds;

(f) in the case of a word or expression covered by subparagraph (4)(a)(vi)—in the circumstances (if any) that are prescribed by regulations made for the purposes of this paragraph, or after ASIC has considered the matters (if any) that are so prescribed.

(4) In this section:

(a) a reference to a restricted word or expression is a reference to:

(i) the expression stockbroker or sharebroker, or any other word or expression (whether or not in English) that is of like import to that expression; or

(ii) the expression futures broker, or any other word or expression (whether or not in English) that is of like import to that expression; or

(iii) the expression insurance broker or insurance broking, or any other word or expression (whether or not in English) that is of like import to that expression; or

(iv) the expression general insurance broker, or any other word or expression (whether or not in English) that is of like import to that expression; or

(v) the expression life insurance broker, or any other word or expression (whether or not in English) that is of like import to that expression; or

(vi) any other expression or word specified in the regulations as a restricted word or expression for the purposes of this section, or any other word or expression (whether or not in English) that is of like import to such a word or expression; and

(b) a reference to a word or expression being assumed or used includes a reference to the word or expression being assumed or used:

(i) as part of another word or expression; or

(ii) in combination with other words, letters or other symbols; and

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

Subdivision A—Agreements affected

924A Agreements with certain unlicensed persons

(1) Subdivision B applies to an agreement entered into by a person (in this section and Subdivision B called the non‑licensee) and another person (in this section and Subdivision B called the client) (not being a financial services licensee) that constitutes, or relates to, the provision of a financial service by the non‑licensee if:

(a) the agreement is entered into in the course of a financial services business carried on by the non‑licensee; and

(b) the non‑licensee does not hold an Australian financial services licence covering the provision of the financial service, and is not exempt from the requirement to hold such a licence.

Note: It does not matter whether the financial service is provided to the client as a wholesale client or as a retail client.

(2) Subdivision B applies to the agreement whether or not anyone else is a party to the agreement.

Subdivision B—Effect on agreements

925A Client may give notice of rescission

(1) Subject to this section, the client may, whether before or after completion of the agreement, give to the non‑licensee a written notice stating that the client wishes to rescind the agreement.

(2) The client may only give a notice under this section within a reasonable period after becoming aware of the facts entitling the client to give the notice.

(3) The client is not entitled to give a notice under this section if the client engages in conduct by engaging in which the client would, if the entitlement so to give a notice were a right to rescind the agreement for misrepresentation by the non‑licensee, be taken to have affirmed the agreement.

(4) The client is not entitled to give a notice under this section if, within a reasonable period before the agreement was entered into, the non‑licensee informed the client (whether or not in writing) that the non‑licensee did not hold an Australian financial services licence.

(5) If, at a time when an Australian financial services licence held by the non‑licensee was suspended, the non‑licensee informed the client that the licence was suspended, the non‑licensee is to be taken for the purposes of subsection (4) to have informed the client at that time that the non‑licensee did not hold the licence.

(6) None of subsections (2), (3) and (4) limits the generality of either of the others.

(7) Subject to this section, the client may give a notice under this section whether or not:

(a) the notice will result under section 925B in rescission of the agreement; or

(b) the Court will, if the notice so results, be empowered to make a particular order, or any order at all, under section 925D.

925B Effect of notice under section 925A

A notice given under section 925A rescinds the agreement unless rescission of the agreement would prejudice a right, or an estate in property, acquired by a person (other than the non‑licensee) in good faith, for valuable consideration and without notice of the facts entitling the client to give the notice.

925C Client may apply to Court for partial rescission

(1) If the client gives a notice under section 925A but the notice does not rescind the agreement because rescission of it would prejudice a right or estate of the kind referred to in section 925B, the client may, within a reasonable period after giving the notice, apply to the Court for an order under subsection (4) of this section.

(2) The Court may extend the period for making an application under subsection (1).

(3) If an application is made under subsection (1), the Court may make such orders expressed to have effect until the determination of the application as it would have power to make if the notice had rescinded the agreement under section 925B and the application were for orders under section 925D.

(4) On an application under subsection (1), the Court may make an order:

(a) varying the agreement in such a way as to put the client in the same position, as nearly as can be done without prejudicing such a right or estate acquired before the order is made, as if the agreement had not been entered into; and

(b) declaring the agreement to have had effect as so varied at and after the time when it was originally made.

(5) If the Court makes an order under subsection (4), the agreement is to be taken for the purposes of section 925D to have been rescinded under section 925B.

(6) An order under subsection (4) does not affect the application of section 925F or 925H in relation to the agreement as originally made or as varied by the order.

925D Court may make consequential orders

(1) Subject to subsection (2), on rescission of the agreement under section 925B, the Court, on the application of the client or the non‑licensee, may make such order or orders as it would have power to make if the client had duly rescinded the agreement because of misrepresentation by the non‑licensee.

(2) The Court is not empowered to make a particular order under subsection (1) if the order would prejudice a right, or an estate in property, acquired by a person (other than the non‑licensee) in good faith, for valuable consideration and without notice of the facts entitling the client to give the notice.

925E Agreement unenforceable against client

(1) This section:

(a) applies while both of the following are the case:

(i) the client is entitled to give a notice under section 925A;

(ii) a notice so given will result under section 925B in rescission of the agreement; and

(b) applies after the agreement is rescinded under section 925B;

but does not otherwise apply.

(2) The non‑licensee is not entitled, as against the client:

(a) to enforce the agreement, whether directly or indirectly; or

(b) to rely on the agreement, whether directly or indirectly and whether by way of defence or otherwise.

925F Non‑licensee not entitled to recover commission

(1) Without limiting the generality of section 925E, this section:

(a) applies while the client is entitled to give a notice under section 925A; and

(b) applies after the client so gives a notice, even if the notice does not result under section 925B in rescission of the agreement;

but does not otherwise apply.

(2) The non‑licensee is not entitled to recover by any means (including, for example, set‑off or a claim on a quantum meruit) any brokerage, commission or other fee for which the client would, but for this section, have been liable to the non‑licensee under or in connection with the agreement.

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

For the purposes of determining, in a proceeding in a court, whether or not the non‑licensee is, or was at a particular time, entitled as mentioned in subsection 925E(2) or 925F(2), it is to be presumed, unless the contrary is proved, that section 925E or 925F, as the case may be, applies, or applied at that time, as the case may be.

925H Client may recover commission paid to non‑licensee

(1) Without limiting the generality of section 925D, if the client gives a notice under section 925A, the client may, even if the notice does not result under section 925B in rescission of the agreement, recover from the non‑licensee as a debt the amount of any brokerage, commission or other fee that the client has paid to the non‑licensee under or in connection with the agreement.

(2) ASIC may, if it considers that it is in the public interest to do so, bring an action under subsection (1) in the name of, and for the benefit of, the client.

925I Remedies under this Division additional to other remedies

The client’s rights and remedies under this Division are additional to, and do not prejudice, any other right or remedy of the client.

Part 7.7—Financial services disclosure

Division 1—Preliminary

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

If a financial services licensee is, in providing a financial service, acting as the authorised representative of another financial services licensee (see section 916E), this Part applies to the first‑mentioned licensee, in relation to the service, in the capacity of authorised representative (rather than the capacity of licensee).

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

(1) If:

(a) apart from this section, a person (the providing entity) would be required by a provision of this Part to give another person (the client) a particular document (for example, a Financial Services Guide or a Statement of Advice), or particular information or a particular statement; and

(b) the providing entity has not had a reasonable opportunity to give (in accordance with section 940C) the client the document, information or statement by the time they are required by this Part to give it to the client;

the fact that the providing entity has not given the document, information or statement to the client as required by the provision is not a contravention of the provision.

Note: In a prosecution for an offence, a defendant bears an evidential burden in relation to the matters in this section (see subsection 13.3(3) of the Criminal Code).

(2) For the purposes of subsection (1), the providing entity is not taken not to have had a reasonable opportunity to provide the document, information or statement if:

(a) section 940C (or regulations made for the purposes of that section) permit the document, information or statement to be sent to an address (including an electronic address) or fax number nominated by the client; and

(b) the client has not given the providing entity an address (including an electronic address) or fax number to which the document, information or statement can be sent; but

(c) the providing entity has had a reasonable opportunity to make, but has not made, reasonable enquiries of the client to obtain such an address or fax number.

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

(1) For the purposes of this Part (unless a contrary intention appears), a Financial Services Guide, a Supplementary Financial Services Guide or a Statement of Advice, or information or a statement that section 950D or 950E requires to be given, is given by a person (the providing entity) to another person (the client) if (and only if):

(a) it is:

(i) given to the client, or to the client’s agent, personally; or

(ii) sent to the client, or the client’s agent, at an address (including an electronic address) or fax number nominated by the client or the client’s agent; or

(iii) otherwise made available to the client, or the client’s agent, as agreed between the client, or the client’s agent, and the providing entity; and

(b) it is in printed or electronic form.

(2) For the purposes of this Part (unless a contrary intention appears), information that subsection 941C(7) or 946B(6) requires to be given by a person (the providing entity) to another person (the client) is given by the providing entity to the client if (and only if):

(a) it is given to the client, or the client’s agent, orally; or

(b) it is in printed or electronic form and is:

(i) given to the client, or the client’s agent, personally; or

(ii) sent to the client, or the client’s agent, at an address (including an electronic address) or fax number nominated by the client or the client’s agent; or

(iii) otherwise made available to the client, or the client’s agent, as agreed between the client or the client’s agent and the providing entity; or

(3) For the purposes of this Part (unless a contrary intention appears), information that subsection 941C(5) or 946B(3) requires to be given by a person (the providing entity) to another person (the client) is given by the providing entity to the client if (and only if) it is given to the client, or the client’s agent, in accordance with the applicable requirements of regulations made for the purposes of this subsection.

(4) For the purposes of this Part (unless a contrary intention appears), a statement that subsection 941D(2) or 946C(2) requires to be given by a person (the providing entity) to another person (the client) is given by the providing entity to the client if (and only if) it is given orally to the client or the client’s agent.

(5) For the purposes of this section, a document, information or statement to which this section applies is sent to a person at an address if, and only if:

(a) the document, information or statement is sent to the address; and

(b) either:

(i) the envelope or other container in which it is sent; or

(ii) the message that accompanies it;

is addressed to the person.

(6) A document, information or statement to which this section applies may be given or sent to a person’s agent only if the agent is not acting as the person’s agent in one of the following capacities:

(a) a financial services licensee;

(b) an authorised representative of a financial services licensee;

(d) a person who is not required to hold an Australian financial services licence because the person is covered by:

(i) paragraph 911A(2)(j); or

(ii) an exemption in regulations made for the purposes of paragraph 911A(2)(k); or

(iii) an exemption specified by ASIC for the purposes of paragraph 911A(2)(l);

(e) a person who is required to hold an Australian financial services licence but who does not hold such a licence;

(f) an employee, director or other representative of a person referred to in paragraph (a), (b), (c), (d) or (e).

(7) The regulations may specify requirements as to:

(a) the manner in which a document, information or statement may be given to a person; and

(b) the presentation, structure and format for a document, information or statement that is to be given in electronic form.

The giving of the document, information or statement is not effective unless those requirements are satisfied.

940D General approach to offence provisions

Subdivision A of Division 7 contains provisions creating offences by reference to various rules contained in Divisions of this Part. However, it does not create all the offences relating to those rules, as some offences are created by subsection 1311(1). Where offences are created by subsection 1311(1) in relation to a rule, this is indicated by a note at the end of the provision containing the rule.

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

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

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

(1) A financial services licensee (the providing entity) must give a person a Financial Services Guide in accordance with this Division if the providing entity provides a financial service to the person (the client) as a retail client.

(2) This section has effect subject to section 941C.

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

(1) An authorised representative (the providing entity) of a financial services licensee (the authorising licensee), or of 2 or more financial services licensees (the authorising licensees), must give a person a Financial Services Guide in accordance with this Division if the providing entity, as a representative of the authorising licensee, or one or more of the authorising licensees, provides a financial service to the person (the client) as a retail client.

Note: If the providing entity is the authorised representative of 2 or more financial services licensees, each of those licensees is, for the purposes of this Division, an authorising licensee in relation to the financial service provided to the client, even though the providing entity may not have been acting as representative of each of those licensees in providing the service to the client.

(2) A Financial Services Guide must not be given to the person by the providing entity unless the authorising licensee, or each of the authorising licensees, has authorised its distribution by the providing entity.

(3) This section has effect subject to section 941C.

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

Client has already received the information

(1) The providing entity does not have to give the client a Financial Services Guide (the new FSG) if the client has already received a Financial Services Guide that contains all of the information that the new FSG is required to contain.

Providing entity is product issuer dealing in own products

(2) The providing entity does not have to give the client a Financial Services Guide if:

(a) the providing entity is an issuer of financial products; and

(b) the financial service is a dealing (see section 766C) in financial products, other than derivatives able to be traded on a licensed market, issued by the providing entity, and does not also relate to financial products issued by someone else.

Note: The issuer will however have to comply with the Product Disclosure Statement requirements (see Division 2 of Part 7.9).

Providing entity is merely operating a registered scheme

(3) The providing entity does not have to give the client a Financial Services Guide if:

(a) the providing entity is the responsible entity of a registered scheme; and

(b) the financial service consists only of the operation of that scheme by the providing entity.

Financial product advice given in a public forum

(4) The providing entity does not have to give the client a Financial Services Guide if the financial service is general advice provided in a public forum.

(4A) The regulations may define what constitutes a public forum for the purposes of subsection (4).

(5) However, if subsection (4) applies and the client is not given a Financial Services Guide before the advice is provided, the client must instead, before the advice is provided, be given the information that would be required to be in the Financial Services Guide by paragraphs 942B(2)(a), (e) and (f), or paragraphs 942C(2)(a), (c), (f) and (g), as the case requires.

Certain basic deposit and other products

(6) The providing entity does not have to give the client a Financial Services Guide if the financial service is a dealing (see section 766C) in, or otherwise relates to, any of the following:

(a) a basic deposit product;

(b) a facility for making non‑cash payments (see section 763D) that is related to a basic deposit product;

(7) However, if subsection (6) applies and the client is not given a Financial Services Guide before the service is provided, the client must instead, before the service is provided, be given the information that would be required to be in the Financial Services Guide by paragraphs 942B(2)(a) and (h), or paragraphs 942C(2)(a) and (i), as the case requires.

Regulations may specify other exemptions

(8) A Financial Services Guide does not have to be given to the client in circumstances specified in regulations made for the purposes of this subsection.

941D Timing of giving Financial Services Guide

General rule

(1) Subject to this section, the Financial Services Guide must be given to the client as soon as practicable after it becomes apparent to the providing entity that the financial service will be, or is likely to be, provided to the client, and must in any event be given to the client before the financial service is provided.

Time critical cases

(2) If:

(a) the client expressly instructs that they require the financial service to be provided immediately, or by a specified time; and

(b) it is not reasonably practicable to give the Financial Services Guide to the client before the service is provided as so instructed;

the providing entity must instead give the client a statement that complies with subsection (3) before the service is provided.

(3) The statement must contain:

(a) the information that would be required to be in the Financial Services Guide by paragraphs 942B(2)(e), (f) and (i), or paragraphs 942C(2)(f), (g) and (j), as the case requires; and

(b) such other information as would be required to be in the Financial Services Guide as is particularly relevant to the financial service to be provided.

(4) The client must then be given the Financial Services Guide within 5 days after being given the statement, or sooner if practicable.

941E Information must be up to date

The information in the Financial Services Guide must be up to date as at the time when it is given to the client.

Note: A Supplementary Financial Services Guide containing updated information may be given with a Financial Services Guide that has become out of date. The updated information is taken to be included in the Financial Services Guide (see section 943D.)

941F Obligation to give updated Financial Services Guide

If:

(a) the Financial Services Guide is given to the client before the financial service is provided; and

(b) the following conditions are satisfied:

(i) there is a change in circumstances before the service is provided, and the Financial Services Guide does not contain the information it would be required to contain if it were given to a person immediately after that change;

(ii) the fact that the Financial Services Guide does not contain the up to date information is materially adverse from the point of view of a reasonable person deciding, as a retail client, whether to proceed to be provided with the financial service;

the providing entity must, before the service is provided, give the client:

(d) a Supplementary Financial Services Guide (see Subdivision C) that updates the information in the Financial Services Guide.

Subdivision B—Content and authorisation of Financial Services Guide

942A Title of Financial Services Guide

(1) The title “Financial Services Guide” must be used on the cover of, or at or near the front of, a Financial Services Guide.

(2) In any other part of a Financial Services Guide, “Financial Services Guide” may be abbreviated to “FSG”.

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

(1) This section applies if the providing entity is a financial services licensee.

(2) Subject to subsection (3) and to the regulations (see subsection (4)), the Financial Services Guide must include the following statements and information:

(a) a statement setting out the name and contact details of the providing entity; and

(b) a statement setting out any special instructions about how the client may provide instructions to the providing entity; and

(c) information about the kinds of financial services (the authorised services) that the providing entity is authorised by its licence to provide, and the kinds of financial products to which those services relate; and

(d) information about who the providing entity acts for when providing the authorised services; and

(e) information about the remuneration (including commission) or other benefits that any of the following is to receive in respect of, or that is attributable to, the provision of any of the authorised services:

(i) the providing entity;

(ii) a related body corporate of the providing entity;

(iii) a director or employee of the providing entity or a related body corporate;

(iv) an associate of any of the above;

(v) any other person in relation to whom the regulations require the information to be provided;

(f) information about any associations or relationships between the providing entity, or any related body corporate, and the issuers of any financial products, being associations or relationships that might reasonably be expected to be capable of influencing the providing entity in providing any of the authorised services; and

(g) if the providing entity provides execution‑related telephone advice (see section 946B)—a statement in relation to which the following requirements are satisfied:

(i) the statement must indicate that the client may request a record of execution‑related telephone advice that is provided to them, if they have not already been provided with a record of that advice;

(ii) the statement must set out particulars of how the client may request such a record;

(iii) any limitations in those particulars on the time within which the client may request such a record must be consistent with any applicable requirements in regulations made for the purposes of this subparagraph or, if there are no such applicable requirements, must be such as to allow the client a reasonable opportunity to request a record of the advice; and

(h) information about the dispute resolution system that covers complaints by persons to whom the providing entity provides financial services, and about how that system may be accessed; and

(i) if the providing entity acts under a binder in providing any of the authorised services—a statement that:

(i) identifies the services provided under the binder; and

(ii) states that they are provided under a binder; and

(iii) explains the significance of the services being provided under a binder; and

(j) if the providing entity is a participant in a licensed market or a licensed CS facility—a statement that the providing entity is a participant in that market or facility; and

(k) any other statements or information required by the regulations.

Note: A Supplementary Financial Services Guide containing additional information may be given with a Financial Services Guide that does not contain all the required information. The additional information is taken to be included in the Financial Services Guide (see section 943D.)

(3) Subject to subsection (4), the level of information about a matter that is required is such as a person would reasonably require for the purpose of making a decision whether to acquire financial services from the providing entity as a retail client.

(4) The regulations may provide all or any of the following:

(a) that a provision of subsection (2) does not apply in a particular situation;

(b) that particular information is not required by a provision of subsection (2), either in a particular situation or generally;

(c) a more detailed statement of the information that is required by a provision of subsection (2), either in a particular situation or generally;

(d) that certain supplementary information must be given or made available to the client in some other way.

(5) The Financial Services Guide must be dated. The date must be the date on which the Financial Services Guide was prepared or its preparation was completed.

(6) The Financial Services Guide may also contain other information.

(6A) The information included in the Financial Services Guide must be worded and presented in a clear, concise and effective manner.

(7) The regulations may require the providing entity, in circumstances specified in the regulations, to provide the client, on request, with more detailed information about remuneration (including commission) or other benefits of a kind referred to in paragraph (2)(e).

(8) If:

(a) the Financial Services Guide includes a statement to the effect that a client may request a record of execution‑related telephone advice; and

(b) the client is provided with execution‑related telephone advice to which that statement applies; and

the providing entity must comply with a request made in accordance with that statement for a record of that advice.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

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

(1) This section applies if the providing entity is an authorised representative.

(2) Subject to subsection (3) and to the regulations (see subsection (4)), the Financial Services Guide must include the following statements and information:

(a) a statement setting out the name and contact details of the providing entity; and

(b) a statement setting out any special instructions about how the client may provide instructions to the providing entity; and

(i) setting out the name and contact details of the authorising licensee, or of each of the authorising licensees; and

(ii) stating that the providing entity is the authorised representative of that licensee or those licensees; and

(d) information, in relation to the authorising licensee or each of the authorising licensees, about the kinds of financial services (the authorised services) that the providing entity provides as representative of the authorising licensee, and the kinds of financial products to which those services relate; and

(e) information about who the authorising licensee, or each of the authorising licensees, acts for when financial services are provided on their behalf by the providing entity; and

(f) information about the remuneration (including commission) or other benefits that any of the following is to receive in respect of, or that is attributable to, the provision of any of the authorised services:

(i) the providing entity;

(ii) an employer of the providing entity;

(iii) the authorising licensee, or any of the authorising licensees;

(iv) an employee or director of the authorising licensee, or of any of the authorising licensees;

(v) an associate of any of the above;

(vi) any other person in relation to whom the regulations require the information to be provided; and

(g) information about any associations or relationships between:

(i) the providing entity, or any employer of the providing entity, and the issuers of any financial products; or

(ii) the authorising licensee, or any of the authorising licensees, or any related body corporate of the authorising licensee or any of the authorising licensees, and the issuers of any financial products;

being associations or relationships that might reasonably be expected to be capable of influencing the providing entity in providing any of the authorised services; and

(h) if the providing entity, when acting as representative of the authorising licensee or any of the authorising licensees, provides execution‑related telephone advice (see section 946B)—a statement in relation to which the following requirements are satisfied:

(ii) the statement must set out particulars of how the client may request such a record;

(i) information about the dispute resolution system that covers complaints by persons to whom the providing entity provides financial services when acting as representative of the authorising licensee or any of the authorising licensees, and about how that system may be accessed; and

(j) if the providing entity acts under a binder in providing any of the authorised services—a statement that:

(i) identifies the services provided under the binder; and

(ii) states that they are provided under a binder; and

(iii) explains the significance of the services being provided under a binder; and

(k) if the providing entity, or the authorising licensee or any of the authorising licensees, is a participant in a licensed market or a licensed CS facility—a statement that the providing entity or authorising licensee is a participant in that market or facility; and

(l) a statement to the effect that the distribution of the Financial Services Guide by the providing entity has been authorised by the authorising licensee, or by each of the authorising licensees; and

(m) any other statements or information required by the regulations.

(3) Subject to subsection (4), the level of detail of information about a matter that is required is such as a person would reasonably require for the purpose of making a decision whether to acquire financial services from the providing entity as a retail client.