First Reading
1998-1999-2000-2001
The Parliament of the
Commonwealth of Australia
HOUSE OF REPRESENTATIVES
Presented and read a first time
Financial Services Reform Bill 2001
No. , 2001
(Treasury)
A Bill for an Act to amend the law relating to financial services and markets, and for other purposes
ISBN: 0642 468281
Contents
Part 1--Main amendments 3
Corporations Act 2001 3
Part 2--Consequential amendments 445
Australian Securities and Investments Commission Act 2001 445
Corporations Act 2001 473
Corporations Act 2001 527
Part 1--Technical and other minor amendments 537
Australian Securities and Investments Commission Act 2001 537
Corporations Act 2001 537
Part 2--Telephone monitoring during takeovers 542
Corporations Act 2001 542
A Bill for an Act to amend the law relating to financial services and markets, and for other purposes
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:
(c) unless paragraph (d) applies--on the day on which this Act receives the Royal Assent; or
(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
(c) fair, orderly and transparent markets for financial products; 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.
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
(c) either:
(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 (whether or not a 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.
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.
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 subsection 766B(1).
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 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:
(a) the provision of funeral, burial or cremation services, with or without the supply of goods connected with such services; or
(b) the payment of money, on the death of a person, for the purpose of meeting the whole or a part of the expenses of and incidental to the funeral, burial or cremation of the person.
general advice has the meaning given by subsection 766B(4).
general insurance product means a financial product described in paragraph 764A(1)(d).
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.
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) or (l).
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 means:
(a) in relation to a clearing and settlement facility--a person who is allowed to directly participate in the facility under the facility's operating rules; and
(b) in relation to a financial market--a person who is allowed to directly participate in the market under the market's operating rules.
person has a meaning affected by section 761F (which deals with partnerships).
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.
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
(c) a legal or equitable right or interest in a security covered by paragraph (a) or (b); 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.
(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
(c) it is reasonable to assume that the parties to the arrangements regard them as constituting a single scheme;
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.
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;
(c) anything that is covered by a paragraph of subsection 764A(1), other than paragraph (c) of that subsection;
(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
|
(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;
(c) the meaning of provide (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.
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) 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 are always retail
(6) For the purposes of this Chapter, if a financial product is, or a financial service provided to a person relates to, a superannuation product or an RSA product, the product or service is provided to the person as a retail client (regardless of the circumstances in which it is provided, and regardless of the provider's and the person's circumstances).
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 $2.5 million; or
(ii) has a gross income for each of the last 2 financial years of at least $250,000 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. The matter is to be resolved as set out in subsection (5).
Note 2: The provision of a product or service that is or relates to a superannuation product or an RSA product will always be a provision to a person as a retail client--see subsection (6).
Note 3: 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.
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
761H References to this Chapter include references to regulations made for the purposes of this Chapter 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 made for the purposes of this Chapter, or for the purposes of that provision or any of those provisions, as the case requires.
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
(c) a combination of intangible property and an arrangement or term of an arrangement.
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);
(c) makes non-cash payments (see section 763D).
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 be 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);
(c) a derivative;
(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:
(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;
(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:
(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;
(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 (the second currency) that is to be settled immediately by the physical delivery of notes and/or coins in the second currency;
(l) any of the following:
(i) an interest in a managed investment scheme operated outside this jurisdiction that section 601ED would require to be registered if it was operated in this jurisdiction;
(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);
(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 (the second currency) that is to be settled immediately by the physical delivery of notes and/or coins in the second currency;
(n) so much of an arrangement as is not a derivative because of paragraph 761D(3)(a);
(o) an arrangement that is not a derivative because of paragraph 761D(3)(b);
(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:
(i) an interest in a managed investment scheme operated outside this jurisdiction that section 601ED would not require to be registered if it was operated in this jurisdiction;
(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) equipment or 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
(c) make a market for a financial product (see section 766D); 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;
but does not include anything in an exempt document.
(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 the objectives, financial situation and needs of the person; or
(b) a reasonable person might expect the provider to have considered those matters.
(4) For the purposes of this Chapter, general advice is financial product advice that is not personal advice.
(5) 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 is not financial product advice.
(6) In this section:
exempt document means:
(a) a document prepared in accordance with requirements of this Chapter, other than:
(i) a Statement of Advice; or
(ii) a document of a kind prescribed by regulations made for the purposes of this subparagraph; or
(b) any other document 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 constitutes dealing in a financial product:
(a) applying for or acquiring a financial product;
(b) issuing a financial product;
(c) in relation to securities or managed investment interests--underwriting the securities or interests;
(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, unless:
(a) the person is an issuer of financial products; and
(b) the dealing is in relation to one or more of those products.
(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;
(c) a body corporate or an unincorporated body;
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 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).
766E Meaning of provide a custodial or depository service (1) For the purposes of this Chapter, a person provides a custodial or depository service if:
(a) under an arrangement with a person (the client), they have possession or control of assets of the client in connection with the person providing a financial product to the client; and
(b) they carry out one or more of the following functions:
(i) settling a transaction relating to the assets;
(ii) collecting or distributing dividends or other pecuniary benefits derived from the assets;
(iii) paying tax or other costs associated with the assets;
(iv) exercising rights (for example, voting rights) attached to or derived from the assets;
(v) any other function necessary or incidental to the safeguard or administration of the assets.
(2) A person also provides a custodial or depository service if:
(a) they agree, or undertake, to provide a custodial or depository service as mentioned in subsection (1); or
(b) they arrange for someone else to provide a client with a custodial or depository service as mentioned in subsection (1).
(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;
(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) 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;
(f) operating 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;
(g) operating a facility that is a designated payment system for the purposes of the Payment Systems (Regulation) Act 1998;
(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.
(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 with the operator of a clearing and settlement facility for the operator to provide the facility's services for those transactions. It does not matter whether the facility is operated by the market licensee or someone else.
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
(c) that a financial market is exempt from the operation of this Part; 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
(c) revoke an exemption.
(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) do all things necessary to ensure that the market operates in a way that promotes the objectives of fairness, orderliness and transparency, to the extent that it is reasonably practicable to do so (and in particular to the extent that those objectives are consistent with one another); 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 in 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 an individual 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 Advice to participants if no clearing and settlement arrangements (1) A market licensee that does not have clearing and settlement arrangements for transactions effected through the market must advise a person in writing, before the person becomes a participant in the market, that:
(a) the licensee does not have those arrangements; and
(b) it is the responsibility of the parties to those transactions to make their own arrangements for clearing and settlement.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) Within a reasonable time before a market licensee ceases to have clearing and settlement arrangements for transactions effected through the market, the licensee must advise participants in the market in writing that:
(a) the licensee will no longer have those arrangements; and
(b) it will be the responsibility of the parties to those transactions to make their own arrangements for clearing and settlement.
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
(c) contain an explanation of the purpose of the change.
(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
(c) contain an explanation of the purpose of the change.
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
(c) the Director of Public Prosecutions; 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
(c) give a copy of the report to the licensee.
(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
(c) complies with the requirements of section 881B (relating to compensation arrangements).
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 in 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
(c) the conditions on the licence.
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.
(5) If there are compensation arrangements in relation to the market that are approved under Division 3 of Part 7.5, the Minister must ensure, in the conditions, that the minimum amount of cover required in relation to the compensation arrangements is dealt with in a manner that the Minister thinks appropriate.
(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
(c) the licensee asks the Minister to do so; 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
(c) suspend or cancel such a licence under section 797C; 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;
(c) the size, or proposed size, of 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 sa