attachment A

 

Details of the Corporations Amendment (Compensation Arrangements) Regulation 2013

 

Section 1 - Name of Regulation

 

Section 1 provides that the name of the Regulation is the Corporations Amendment (Compensation Arrangements) Regulation 2013.

 

Section 2 - Commencement

 

Section 2 provides that the Regulation commences on the day after it is registered.

 

Section 3 - Authority

 

Section 3 provides that the Regulation is made under the Corporations Act 2001 (the Act).

 

Section 4 - Amendment of Corporations Regulations 2001

 

Section 4 provides that Schedule 1 amends the Corporations Regulations 2001 (the Principal Regulations).

 

Schedule 1 - Amendments

 

Item [1] - Regulation 8.2.04 (table, item 1)

 

Chapter 8 of the Act contains a regulatory framework for the mutual recognition of securities offers between Australia and overseas jurisdictions.  Section 1200G(13) of the Act states that a home regulator for a recognised jurisdiction (in this case New Zealand) is an authority in the recognised jurisdiction whose functions are equivalent to those of the Australian Securities and Investment Commission (ASIC) and that is prescribed by the Principal Regulations as the home regulator for that jurisdiction.

 

Section 1200G(14) of the Act states that if there is more than one authority in a recognised jurisdiction whose functions are equivalent to those of ASIC and that is prescribed under section 1200G(13), the Principal Regulations may prescribe the matters in relation to which that authority is to be regarded as the home regulator.

 

A table in Regulation 8.2.04 sets out the names of certain New Zealand (NZ) regulators which are to be regarded as the NZ home regulator for purposes of certain provisions contained in Chapter 8 of the Act.

 

Item 1 in the table prescribes the New Zealand Registrar of Companies as the NZ regulator where people wishing to offer securities under the mutual recognition regime are required to lodge their offer documents.  The function of accepting these offer documents is now performed by the Registrar of Financial Service Providers based on the New Zealand Financial Service Providers (Registration and Dispute Resolution) Act 2008.

 

The Regulation therefore replaces 'New Zealand Registrar of Companies' in the table with 'Registrar of Financial Service Providers of New Zealand'.

 

Item [2] - Regulation 8.2.04 (table, item 2)

 

Item 2 in the table names the regulator that oversees offer documents in NZ.  This function is now performed by the Financial Markets Authority based on the NZ Financial Markets Authority Act 2011.  The Regulation replaces 'New Zealand Securities Commission' in Item 2 of the table in Regulation 8.2.04 with 'Financial Markets Authority of New Zealand'.

 

Item [3] - Item 6 of Schedule 8C (heading)

 

The heading of Item 6 in Schedule 8C of the Principal Regulations is changed to reflect the amendments made by the Regulation.  The existing subsection 885D(2) contained in Item 6 currently replaces the original subsection 885D(2) in the Act.  Instead, it is proposed to leave original subsection 885D(2) in the Act intact and insert the later subsection 885D(2) in Schedule 8C after it as subsection 885D(2A).  The later version of subsection 885D(2) clarifies which compensation arrangements should apply in circumstances where a loss is suffered on a financial market which is covered by both Division 3 and Division 4 compensation arrangements.

 

This achieves the outcome whereby both of these versions of subsection 885D(2) are in force, thereby covering all scenarios where there could be some doubt as to which compensation arrangements should apply for losses suffered by investors.  The original subsection 885D(2) applies in circumstances where the transaction could have been executed on multiple markets with different compensation arrangements, and the later version, which now becomes subsection 885D(2A), caters for circumstances where a single market with more than one compensation arrangement is involved.

 

The heading of Item 6 of Schedule 8C is therefore amended to clarify that the subsection contained in that item is to be inserted after the original subsection 885D(2) in the Act.

 

Item [4] - Item 6 of Schedule 8C

 

It is clarified that the subsection contained in Item 6 of Schedule 8C does not replace original subsection 885D(2) but is to be inserted after that subsection.

 

Item [5] - Item 6 of Schedule 8C

 

Subsection 885D(2) in Item 6 of Schedule 8C is renamed subsection 885D(2A), and it is clarified that in the circumstances set out in the subsection, i.e. where a single financial market has more than one compensation arrangement, the provisions set out in subsection 885D(2A) prevail over those contained in 885D(2).

 

Item [6] - At the end of item 6 of Schedule 8C

 

This item inserts a new subsection (2B) in Item 6 of Schedule 8C which creates an exception from the general default position contained in the original subsection 885D(2) in the Act that the Division 4 compensation arrangements (i.e. the National Guarantee Fund) apply in the case of transactions that could have been executed on multiple markets.  The new subsection 2B allows an investor in this situation to also make a claim from a Division 3 compensation fund, provided the claim is connected to a transaction completed on the financial market covered by that compensation fund, and provided that the investor is unable to obtain compensation from the National Guarantee Fund.

 

 

 

ATTACHMENT B

Statement of Compatibility with Human Rights

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

Corporations Amendment (Compensation Arrangements) Regulation 2013

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

Overview of the Legislative Instrument

A first provision in the Corporations Amendment (Compensation Arrangements) Regulation 2013 (the Regulation) amends the names of two NZ regulators listed in the table in regulation 8.2.04 of the Corporations Regulations 2001 which are no longer correct due to recent reforms to the NZ regulatory framework.

 

A second set of provisions in the Regulation provides certain clarifications with respect to the operation of the compensation arrangements prescribed in Part 7.5 of the Act.  There are circumstances where a loss incurred by an investor may be connected with more than one set of compensation arrangements, for example where a loss arises from a transaction that could be executed on two markets covered by different arrangements respectively.  The Corporations Act 2001 (the Act) currently does not provide any guidance on which compensation arrangements should apply in this situation.  The Regulation provides clarification as to which compensation arrangement should apply for investors wishing to claim compensation for losses suffered.

 

The Regulation states that the default compensation fund in such circumstances is the National Guarantee Fund (the NGF), which is the main fidelity fund for the Australian Securities Exchange and other financial markets. 

 

The Regulation includes a further amendment which ensures that a person seeking compensation in such circumstances would have to first approach the NGF, but if they are unable to obtain compensation from the NGF, and provided that the loss arises in connection with a transaction completed on a market covered by another compensation arrangement, they are also able to apply to that other arrangement for compensation.

 

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.