Commonwealth Numbered Regulations - Explanatory Statements

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CORPORATIONS AMENDMENT REGULATIONS 2002 (NO. 6) 2002 NO. 145

Statutory Rules 2002 No. 145

Issued by the Parliamentary Secretary to the Treasurer

Corporations Act 2001

Corporations Amendment Regulations 2002 (No. 6)

Section 1364 of the Corporations Act 2001 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act.

The purpose of the Regulations is to support the reforms to the regulation of the financial services industry, which were included in the Financial Services Reform Act 2001 (FSRA) and associated legislation by amending the disclosure requirements with respect to child superannuation accounts, and to make minor technical amendments.

The Regulations:

-       amend to disclosure requirements to implement the Government's election commitment on child superannuation accounts so that the relevant parties making investment decisions are appropriately informed, have the necessary consents and have access to cooling-off provisions;

-       minor technical amendments to:

:       clarify the role of Ministerial approval related to the use of excess money transferred from the National Guarantee Fund to the Financial Industry Development Account; and

:       repeal insider trading exceptions that were introduced pending the passage of amendments contained in the Financial Services Reform (Consequential Provisions) Act 2002 and which are no longer required, as the relevant amendments have now been passed.

Details of the Regulations are set out in the Attachment.

The Regulations commence as follows:

•       Regulations 1 to 3 and Schedule 1 of the Regulations commence on gazettal; and

•       Schedule 2 of the Regulations, which relates to the disclosure provision for the implementation of the Government's superannuation for life policy, commence on 1 July 2002 to coincide with the commencement of related amendments to the Superannuation Industry (Supervision) Regulations 1994.

ATTACHMENT

PROPOSED SCHEDULE 1 - AMENDMENTS COMMENCING ON GAZETTAL

1.       Excess Money from Compensation Funds - Amendments to Division 5 of Part 7.5

The purpose of these amendments is to clarify provisions of the regulations that deal with the payment of excess money from compensation funds into financial industry development accounts of relevant market licensees and its subsequent use by market licensees.

The amendments clarify that the role of the Minister under regulation 7.5.88 is to approve matters as 'approved purposes' towards which excess money that is held in financial industry development accounts may be paid. The amendments also clarify that approval is not required in relation to an initial decision to transfer excess money into the financial industry development account of a market licensee.

2.       Repeal of regulations 9.12.02 to 9.12.04

The purpose of these regulations was to extend the scope of the insider trading exceptions contained in sections 1043H to 1043J of the Act. The regulations were made pending the passage of then proposed legislative amendments to the relevant provisions. As the relevant amendments have now been passed, the regulations are no longer required. They have therefore been repealed.

3.       Securities Industry Development Account (SIDA) Funding - Part 10.2, Division 8 and Regulation 10.2.27A

The purpose of this regulation is to maintain the effect of ministerial approvals that were granted under subsection 945(3) of the Old Corporations Act, but in relation to which the relevant funds had not been paid into the Australian Stock Exchange's (ASX) SIDA at the time of Financial Services Reform Act 2001 (FSRA) commencement (and could not therefore continue to be dealt with by the ASX under the existing regime, as maintained in force by the Acts Interpretation Act 1901).

The regulation deems ministerial approvals of approved purposes under subsection 945(3) of the Old Corporations Act that were in force at FSRA commencement to have been made after FSRA commencement under subregulation 7.5.88(1). This allows excess money from the National Guarantee Fund that is paid into the ASX's financial industry development account (FIDA) after FSRA commencement to be used for purposes approved by the Minister under subsection 945(3) of the old Corporations Act without the need to re-make approvals under regulation 7.5.88.

Any conditions that were imposed under subsection 945(5) are be deemed to be imposed by the Minister under subregulation 7.5.88(3).

The description in the heading for Part 10.2, Division 8 has also been clarified.

PROPOSED SCHEDULE 2 - AMENDMENTS COMMENCING ON 1 JULY 2002

CHILD SUPERANNUATION ACCOUNTS

In the 2002-03 Budget, the Government confirmed its superannuation election commitment to extend the circumstances under which contributions to superannuation can be made to allow individuals to contribute on behalf of children. Contributions of up to $3,000 per three-year period will be allowed on their behalf.

Superannuation entities which offer superannuation interests to the general public are referred to as public offer entities. Subject to the terms and conditions of the entity any individual will be permitted to make a contribution on behalf of a child to a public offer entity provided that they have the consent of the child's legal representative, parent or guardian.

Members of corporate funds and industry funds which are not public offer entities are generally required to be employees, or former employees, of an employer which has an agreement with the trustee of the fund. In order to facilitate child contributions, a fund will be able to extend membership to a child (without becoming a public offer entity) when an existing member of the fund makes contributions on behalf of the child.

The child superannuation account measures commence on 1 July 2002.

Related operative and transitional disclosure provisions for the child superannuation account measures are contained in the Superannuation Industry (Supervision) Regulations 1993.

Ongoing disclosure of information relating the child superannuation account is provided under existing provisions of the Corporations Act 2001.

The Regulations provide for the following disclosure arrangements in relation to the issue of a superannuation interest to a child (other than those opened by an employer of the child).

4.       Interpretation - Subregulation 7.9.01(1)

Amendments to subregulation 7.9.01(1) insert definitions required to implement the child superannuation account measures.

5.       DISCLOSURE PRIOR TO ISSUE - REGULATIONS 7.9.04(1)(A) AND 7.9.07AA

The regulations require all superannuation entities (including non-public offer superannuation funds) to provide a Product Disclosure Statement (PDS) to a person who is applying for the issue of a child account. It has been necessary to extend the obligation to provide a PDS as the person who is applying for the product, may not be the person who will hold the product. Where this situation occurs, existing disclosure obligations under Part 7.9 of Act still require the provision of a PDS to the product holder.

These measures ensure that applicants (and where the applicant is a third party - the child's legal representative, parent or guardian) are able to make an informed decision regarding the acquisition and/or the giving of consent for the acquisition.

6.       Application form requirements - Regulations 7.9.12A & 7.9.74(2)

Generally superannuation entities must receive an eligible application or application before opening an account for a child. This requirement is to ensure that the consent of the child's legal personal representative, parent or guardian has been obtained and that appropriate information to identify the affected parties has been provided.

A distinction between eligible applications and other forms of application has been necessary as a PDS may not be provided to an applicant (for example, section 1012D of the Corporations Act 2001 details circumstances where a PDS is not required). An eligible application is defined under section 1016A of the Corporations Act 2001 so that a form is required that is included, accompanying or derived from a PDS.

Due to the nature of self managed funds, application requirements have not been applied to these funds where the application is the child's legal personal representative, parent or guardian.

7.       Cooling-off provisions - Regulation 7.9.68A

The applicant, rather than the holder of the product (being the child or their legal representative), will receive a right of return under the cooling-off provisions when the applicant is a third party. It is the decision of the applicant to acquire the product and it can be expected that it will be the applicant's money that is to be contributed.

Consistent with the existing provisions under the Corporations Act, cooling-off rights will not apply in relation to non-public offer superannuation entities.