Commonwealth Numbered Regulations - Explanatory Statements

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Issued by the authority of the Minister for Financial Services and Regulation

Corporations Act 1989

Corporations Amendment Regulations 1999 (No. 2)

Section 22 of the Corporations Act 1989 (the Act) empowers the Governor-General to make regulations, not inconsistent with the Act or the Corporations Law (the Law), prescribing matters required or permitted by the Law to be prescribed by regulations, or necessary or convenient to be prescribed by regulations for carrying out or giving effect to the Corporations Law.

Regulations 7.3.02B - 7.3.02D of the Corporations Regulations 1990 prescribe certain licence conditions which give effect to the recommendations made by the then Australian Securities Commission (ASC) in its 1995 report: 'Good Advice, Licensing Review of Investment Advisory Services'. These regulations require all licensees who provide investment advisory services to retail investors to give those investors an Advisory Services Guide.

The amendments to Corporations Regulations 7.3.02B - 7.3.021) are purely consequential changes to reflect amendments made to the Corporations Law on 1 July 1998 resulting from the passage of the Company Law Review Act 1998, the Managed Investments Act 1998 and the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998. The amendments therefore reflect a move to consistency with the Corporations Law.

In addition, Corporations Regulations 7.3.02B-7.3.02D provide who may be treated as non-retail investors and the list includes large proprietary companies. The regulations will clarify the intention that large unlisted public companies are also to be treated as non-retail investors.

Details of the regulations are contained in the Attachment.

The regulations commence on gazettal.


Details of Proposed Regulations

Regulation 1

Regulation 1 provides that the regulations are the Corporations Amendment Regulations 1999 (No. 2)

Regulation 2

Regulation 2 provides that the regulations commence on gazettal.

Regulation 3

Regulation 3 provides that Schedule 1 amends the Corporations Regulations 1990.

Schedule 1

Item 1

Sub-regulation 7.3.02B(8)(f) is amended by changing the reference to 'bank' to 'an authorised deposit-taking institution'.

Items 2 and 3

Sub-regulations 7.3.02B(8)(i) and (j) are amended by changing the references:

*       'prescribed interest scheme' to 'managed investment scheme'; and

*       'trustee or management company' to 'responsible entity or other operator'.

Items 4 and 5

Sub-regulation 7.3.02B(8)(p) is amended by changing the reference:

*       'documents mentioned in subsection 3.17B(2)' to 'reports mentioned in subsection 319(1)'; and

*        section 317B of the Corporations Law' to 'that subsection'.

Items 6 and 7

New sub-regulation 7.3.02B(8)(qa) is inserted to clarify the intention that large unlisted public companies are to be treated as non-retail investors. Where an unlisted public company satisfies any two of the listed criteria, it is to be treated as a non-retail investor. The criteria used is based on sub-section 45A(3) of the Corporations Law which is used to determine whether a proprietary company is large or small.

The new sub-paragraph is also to apply to foreign entities.

Items 8 -11

To clarify the interpretation, the term 'retail' is inserted before all references to 'investor' in subregulation 7.3.02D(1).

In addition, the definition of 'retail investor' as found in sub-regulation 7.3.02B(10) is inserted in sub-regulation 7.3.02D(3).

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