Navigation: Previous Page | Contents | Next Page
Chapter 4 - The Corporations Amendment Regulations 2003 (No. 3), Statutory Rules 2003 No. 85
4.1
Although submissions to the inquiry focused on
regulation 7.1,29, the Committee sought explanations of the purpose of a number
of regulations in Statutory Rules 2003 No. 85 beyond that provided in the
Explanatory Statement. In particular the Committee sought clarification on:
- regulation 7.1.33D concerning investment linked insurance
products;
- regulation 7.6.01(1)(la) concerning non-cash payment facilities;
and
- regulation 12.7.06 concerning the Friendly Societies Code.
Regulation 7.1.33D
4.2
A person who carries on a financial services
business must hold an Australian Financial Services Licence covering the
provision of the financial services under subsection 911A(1) of the Corporations
Act (the Act). The term ‘financial services business’ is defined as ‘a
business of providing financial services’.[1]
The term, ‘financial service’, is in turn defined in section 766A of the Act.
4.3
Section 766A(2)(b) permits regulations to set out
the circumstances in which persons are taken to provide, or are taken not to
provide, a financial service. Corporations Regulations 7.1.30—7.1.33B in
Division 3 of Part 7.1 of the Corporations Regulations specify a number of
activities which are taken not to amount to providing a financial service
within the meaning of paragraph 766A(1)(a) of the Act. Under regulation 7.1.33A,
the provision of a recommendation or statement of opinion about the allocation
of funds among certain general asset types is taken not to amount to providing
a financial service within the meaning of paragraph 766A(1)(a).
4.4
The Corporations Regulations include new
regulation 7.1.33D in Division 3 of Part 7.1 of the Corporations Regulations.
Regulation 7.1.33D provides that a person is not taken to provide a financial
service if he/she makes a market for a financial product and is the issuer of
the product and the product is an investment‑linked life insurance policy
under an investment‑linked contract (within the meaning of the Life Insurance
Act 1995).
4.5
The Explanatory Statement provided the following
explanation:
Unit-linked life insurance products share a number of common
features with superannuation products and managed investment schemes, which are
listed under an exemption from the definition of ‘making a market’ in
subsection 766D(2) of the Act. The regulation will ensure that simply
calculating unit prices in relation to their redemption value will not of
itself constitute making a market. This will result in a comparable treatment
with the exemption currently available to superannuation products and managed
investment schemes.
4.6
Mr Mike Rosser, Department of the Treasury, further explained:
The rationale for this regulation is that the way the
legislation is framed, the operation of the ‘making a market’ provisions which
require licensing can inadvertently capture certain types of investment
products that are provided where, each period, the offerer of the product has
to provide a price at which it can be redeemed. That could constitute making a
market, but the purpose of the regulation is to recognise that what it is doing
is actually providing a service to the person to tell them what the value of
that would be at a particular point in time. It is not about making generally
available the willingness to form part of a making a market transaction. It is
not a general offer to the public; it is actually in respect of a specific
client.[2]
Regulation 7.6.01(1)(la)
4.7
Regulation 7.6.01(1) lists services that are
exempt from the requirement to hold an Australian financial services licence.
Regulation 7.6.01(1)(la) includes in the list of exempt services in regulation
7.6.01(1) a financial service provided by one person to another if the
financial service is provided in the ordinary course of the person’s business,
the first person holds a licence authorising the provision of financial
services other than the financial service provided in the ordinary course of
the person’s business or does not hold a licence and the financial service
consists of advising in relation to a non-cash payments facility or arranging
to deal in a non‑cash payments facility to pay for a financial product or
service.
The Explanatory Statement provided the following
explanation:
Regulation 7.6.01(1)(la) extends the relief from licensing
provided by 7.6.01(1) to financial service providers. That is, relief from
licensing is provided for financial service providers who, as part of their
business, advise their customers or clients on the options available for making
payments for goods or services supplied, or make arrangements to put a payment
facility in place.
4.8
Mr Rosser further explained:
It is a refinement of the provision that deals with the definition
of what a non‑cash payment is, to the extent of defining what types of products
are subject to FSR licensing obligations. The definition that is in the
legislation at the moment talks about a transaction where there is one party
involved in the transaction, which gives rise to a difficulty when that party
is in effect a joint party—that is, it is an account or facility that is held
in the name of more than one person—as it means that, if it were held in the
name of more than one person, it would be subject to an exemption. So the
refinement is to say that one party can include a jointly held product.[3]
Regulation 12.7.06
4.9
Regulation 12.7.06 provides for certain
provisions of the Friendly Societies code to cease to apply to FSR licensees. The
Explanatory Statement provided the following explanation:
This regulation is intended to ensure that a Friendly Society
transitioning into the FSR Act’s disclosure regime does not have to comply with
multiple disclosure requirements. Schedule 4 of the Act concerns the Transfer
of Financial Institutions and Friendly Societies. If a body to which this
schedule applies transitions to the FSR’s disclosure regime, the application of
paragraph 36 of Schedule 4 of the Act would mean that two separate disclosure
regimes might apply to such products. Therefore, the Schedule 4 disclosure
provisions will apply the sooner of 11 March 2004 or opting in to the Part 7.9
disclosure regime.
4.10
Mr Yik, the Treasury,
further explained:
That was a transitional amendment as part of coming into the FSR
regime. The old schedule 4 applied to friendly societies. There was no method
to disapply that provision, so that basically came into the new FSR regime.
They had the old regime applying to them as well. All this regulation says is
that you have only one regime applying to you—you do not need more than one: it
is either FSR or the old schedule 4.[4]
Conclusion
4.11
The Committee notes the information provided by
the Department of the Treasury on the above regulations. There is nothing in
the evidence to suggest that the regulations should be amended.
Senator Grant Chapman
Chairman
Navigation: Previous Page | Contents | Next Page
Top
|