Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012-2013
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CORPORATIONS AMENDMENT (SIMPLE CORPORATE BONDS AND OTHER
MEASURES) BILL 2013
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Minister for Financial Services and Superannuation, the Hon William Shorten MP)
Table of Contents
Glossary 1
General outline and financial impact ....................................................... 3
Chapter 1 General Amendments .................................................... 5
Chapter 2 Amendments relating to the use of the
expressions `financial planner' and `financial
adviser'........................................................................ 27
Chapter 3 Statement of Compatibility with Human Rights ............ 33
Index 35
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
AGD Attorney-General's Department
ASIC Australian Securities and Investments
Commission
ASIC Act Australian Securities and Investments
Commission Act 2001
The Bill The Corporations Amendment (Simple
Corporate Bonds and Other Measures)
Bill 2013
Corporations Act Corporations Act 2001
CGS Commonwealth Government Securities
FOFA Future of Financial Advice
Licence Australian Financial Services Licence
Licensee Australian Financial Services Licensee
Regulations Corporations Regulations 2001
1
General outline and financial impact
Outline
Schedule 1 of the Corporations Amendment (Simple Corporate Bonds and
Other Measures) Bill 2013 (the Bill) amends the Corporations Act 2001
(the Corporations Act) to facilitate improved trading of retail corporate
bonds in Australia.
Schedule 2 of the Bill amends the Corporations Act to define the terms
`financial planner' and `financial adviser' and to restrict the use of these
terms and terms of like import. This measure supports the FOFA reforms
by empowering consumers of financial services to identify genuine
providers of financial product advice.
The Future of Financial Advice (FOFA) reforms -- of which the
Corporations Amendment (Future of Financial Advice) Act 2012 and the
Corporations Amendment (Further Future of Financial Advice Measures)
Act 2012 form part -- improve the trust and confidence of Australian
retail investors in the financial planning sector. The FOFA reforms are
designed to tackle conflicts of interest that have threatened the quality of
financial advice provided to Australian investors.
Date of effect: Sections 1 to 3 of the Bill have effect the day after the Act
receives the Royal Assent. Schedule 1 of the Bill has effect on a day fixed
by Proclamation or the day after six months after Royal Assent.
Schedule 2 takes effect from the later of 1 July 2013 or the day after the
Act receives the Royal Assent.
Proposal announced: The measures that give effect to the simple
corporate bonds regime were announced in a media release titled `A
competitive and sustainable banking system' by the Deputy Prime
Minister and Treasurer, dated 12 December 2010 and included in the
2011/12 Budget.
On 22 March 2012, during the second reading debate on the FOFA
legislation, the Minister for Financial Services and Superannuation, the
Hon Bill Shorten MP, announced the Government's intention to introduce
legislation into Parliament by 1 July 2013 that enshrined the term
`financial planner' or `financial adviser' in law.
Financial impact: No financial impact.
Human rights implications: This Bill does not raise any human rights
issue. See Chapter 3 -- Statement of Compatibility with Human Rights,
paragraphs 3.3 to 3.5.
Compliance cost impact: This Bill reduces the compliance costs faced by
issuers of certain retail corporate bonds.
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Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
Summary of regulation impact statement
Regulation impact on business
Impact: The Office of Best Practice Regulation has confirmed that the
Schedule 1 amendments of the Bill do not require a regulation impact
statement. Schedule 2 will have a minor impact on businesses and the
not-for-profit sector. Accordingly, no Regulation Impact Statement has
been prepared.
4
Chapter 1
General Amendments
Outline of chapter
1.1 Schedule 1 of this Bill amends the Corporations Act to facilitate
increased trading in retail corporate bonds in Australia, through both
direct and indirect processes.
Context of amendments
1.2 The proposed measures to facilitate increased trading of retail
corporate bonds in Australia are one of the initiatives undertaken by the
Government to promote a competitive and sustainable financial system.
The overall objective of the measures are to improve the attractiveness for
corporations of issuing corporate bonds to retail investors while ensuring
effective consumer protections are maintained.
1.3 In 2012, as part of its broader commitment to foster a deep and
liquid corporate bond market, the Government facilitated retail trading in
Commonwealth Government Securities (CGS). Making CGS accessible
to retail investors through financial markets is a crucial element of the
Government's commitment. CGS provides retail investors with a visible
pricing benchmark for investments they may wish to make in corporate
bonds.
1.4 The measures in Schedule 1 of the Bill continue the
Government's commitment to establishing a strong and liquid retail debt
market in Australia by facilitating increased offerings of corporate bonds
to retail investors in Australia through:
· a streamlined disclosure regime;
· changes to the civil liability provisions in respect to corporate
bonds issued to retail investors; and
· clarifying the application of the defences in respect to
misleading and deceptive statements and omissions in
disclosure documents relating to corporate bonds issued to
retail investors.
1.5 The Corporations Act governs the fundraising practices of
corporate entities in Australia. The provisions in the Corporation Act that
relate to fundraising, particularly those that relate to the obligation to
prepare a disclosure document (generally a prospectus) and its content, are
contained in Chapter 6D.
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Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
1.6 Currently, the Corporations Act requires a corporation to prepare
a full prospectus for the offer of corporate bonds to retail investors. In a
full prospectus a corporation is required to disclose all of the information
that investors and their professional advisors may reasonably require to
make an informed assessment of:
· the rights and liabilities attaching to the securities offered;
and
· the assets and liabilities, financial position and performance,
profits and losses and prospects of the body that is to issue
the securities.
1.7 The prospectus must contain this information to the extent that
relevant persons involved in the preparation of the prospectus actually
know the information or ought reasonably to have obtained the
information by making inquiries. In addition to the general disclosure
requirement, the Act also sets out a number of specific requirements for
particular information to be disclosed.
1.8 While the issue of corporate bonds to retail investors requires a
full prospectus, the issue of corporate bonds to sophisticated or
professional investors (commonly referred to as `wholesale investors')
does not require a disclosure document such as a prospectus, on the basis
that wholesale investors are considered to have sufficient resources and
bargaining power to evaluate investments.
1.9 The Corporations Act also sets out a number of prohibitions in
connection with the offering of securities, including an:
· offer of securities in a body that doesn't exist;
· offer of securities without a current disclosure document; and
· offer of securities under a disclosure document that contains
a misleading or deceptive statement or has an omission of
material that is required under the Corporations Act.
1.10 A contravention of the prohibitions could lead to both criminal
and civil liability. Chapter 6D of the Corporations Act currently includes
a special civil liability regime. This civil liability regime provides that
each current or proposed director of the company making the offer and the
revenant underwriter to the offer, may all be held liable in respect of a
misstatement or omission in a prospectus. A person who suffers loss or
damage as a result of such a contravention may recover the amount of that
loss or damage from any of those persons even if they did not commit and
were not involved in the particular contravention.
1.11 There are a number of defences that apply in relation to both
civil and criminal liability for a misstatement or omission in a disclosure
document. The most important is the due diligence defence for
prospectuses. It provides that a person will not be liable because of a
6
General Amendments
misleading or deceptive statement in a prospectus or an omission from a
prospectus if a person can prove that:
· they made all inquiries (if any) that were reasonable in the
circumstances; and
· after doing so believed, on reasonable grounds, that the
statement was either not misleading or deceptive or that there
was no omission from the prospectus in relation to a
particular matter.
1.12 Stakeholders have indicated that the current requirements under
the Corporations Act for offers of corporate bonds to retail investors
create a regulatory bias for companies to structure their fundraising either
solely to wholesale investors or only to retail investors in the form of a
rights issue or share purchase plan. This Bill contains measures to address
this perceived regulatory bias.
Summary of new law
1.13 The amendments in Schedule 1of this Bill introduce a
mandatory, 2-part prospectus for certain bond issuances to simplify the
disclosure obligations for companies. While the framework for the 2-part
prospectus will be contained in the Corporations Act (in particular, the
eligibility criteria for using a 2-part prospectus), the content and structure
of the 2-part prospectus will be specified by regulations.
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Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
1.15 The 2-part prospectus will be structured in the following
manner:
· Base: the base part would have a life of three years. The base
prospectus will have general information about the issuer and
the issue that is unlikely to change significantly over three
years. Issuers will have the option of releasing a base
prospectus in anticipation of making an actual offer of bonds.
Issuers will not generally need to update the base document.
· Offer-specific: for each fund raising tranche, issuers will
need to release a second document outlining the key details
of the offer, that being the offer-specific prospectus. The
offer-specific prospectus will have similarities with the
cleansing notice regime for other offerings, whereby it will
include a statement outlining that the issuer has complied
with their continuous disclosure obligations. Issuers will
need to disclose in the second part any matters material to a
consideration of an investment in the bonds that have not
already been the subject of continuous disclosure.
1.16 To ensure that the new 2-part prospectus regime is sufficiently
streamlined, certain material (as prescribed in regulations) will be able to
be incorporated by reference in both the base prospectus and the
offer-specific prospectus.
1.17 The amendments in the Bill to the directors' liabilities have been
designed to reduce the burden on directors when issuing corporate bonds
to retail investors under the 2-part prospectus regime and will provide
directors with greater clarity on the steps required as part of the due
diligence process in relation to certain criminal liability offences.
Comparison of key features of new law and current law
New law Current law
The issuance of certain corporate The issuance of corporate bonds to
bonds to retail investors will require retail investors requires the provision
the provision of a 2-part simple of a full prospectus.
corporate bond prospectus.
Simple corporate bonds will be able Simple retail corporate bonds like
to be traded using simple retail other bonds can be traded directly,
corporate bonds depository interests. but are not able to be traded as
depository interests.
8
General Amendments
New law Current law
Directors and proposed directors of a Directors and proposed directors of a
body making an offer have liability body making an offer, have liability
for any misstatement in, or omission for any misstatement in, or omission
from, the disclosure document where from, the disclosure document
they are involved in a contravention (whether or not that director was
of subsection 728(1). involved in a contravention of
subsection 728(1)).
Detailed explanation of new law
Part 1 Amendments Relating to Simple Corporate Bonds
1.18 The amendments to the Corporations Act provide a new
disclosure regime for bodies undertaking a fundraising by making an
`offer of simple corporate bonds' (as provided in new section 713A). The
subject of the offer, that is the `simple corporate bonds' are debt securities
that satisfy the conditions prescribed in new section 713A. [Schedule 1,
items 3 and 5, subsection 9]
1.19 The new disclosure regime will require body corporates to issue
a 2-part simple corporate bonds prospectus (as outlined in new
section 713B). The 2-part simple corporate bonds prospectus will consist
of two elements, a base prospectus (as outlined in new section 713C) and
an offer-specific prospectus (as outlined in new section 713D). [Schedule 1,
items 1,2 and 4, subsection 9]
Parallel trading of simple corporate bonds
1.20 To facilitate parallel trading of simple corporate bonds in the
wholesale and retail markets, the Corporations Act has been amended to
allow simple corporate bonds in the wholesale market to be offered to
retail investors using depository interests (which is a beneficial interest in
the simple corporate bond).
1.21 Depositary interests provide retail investors with a beneficial
ownership in an underlying security. This practice is commonly used in
financial markets. The recent legislation passed in late 2012 for the
trading of CGS utilises depositary interests to facilitate retail trading of
CGS. The use of depository interests for simple corporate bonds
recognises the benefits of aligning the market practices associated with
retail trading of CGS with simple corporate bonds.
1.22 To enable the beneficial interests to be used for simple corporate
bonds, two new definitions have been inserted into section 9 of the
Corporations Act.
· The definition of a simple corporate bond depository interest
as inserted into section 9 means a beneficial interest in the
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Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
simple corporate bonds, where the interest is or was issued
by a simple corporate bonds depositary nominee. [Schedule 1,
item 6, subsection 9]
· The definition of a simple corporate bond depository
nominee means a person who issues to someone else one or
more beneficial interests, with the agreement of the body that
issued the simple corporate bonds, in simple corporate bonds
that the person:
- owns legally;
- would own beneficially, apart from the issue of those
interests; or
- has a beneficial interest.
[Schedule 1, item 7, subsection 9]
1.23 A depository nominee is only able to make an offer of simple
corporate bond depository interests if they have the agreement of the
issuing body. As such, the disclosure for an offer of simple corporate
bond depository interests is the disclosure required to be provided by the
issuer of the simple corporate bond (the underlying asset) not the simple
corporate bond depositary nominee.
1.24 Therefore, in order to remove the disclosure requirements from
the depository nominee for the offer of simple corporate bond depository
interests, where the simple corporate bonds depository interests are issued
under a 2-part simple corporate bonds prospectus, the depository interests
are not a securities to which Chapter 6D applies. [Schedule 1, item 10,
subsection 700(1)]
1.25 To ensure that the disclosure requirements for the offer of
simple corporate bond depository interests are appropriately dealt within
the Corporations Act, the definition of security in section 761A has been
modified to include a simple corporate bonds depository interest.
[Schedule 1, item 45 and 46, section 761A]
1.26 A regulation making power has been inserted into Chapter 2L so
that the requirement for a trust deed and trustee is able to be removed for
the making of specified offer of debentures or a specified class of offers of
debentures. This regulation making power has been inserted to ensure
that regulation can to be made, if after future consultation with
stakeholders it is considered appropriate, to remove an offer of simple
corporate bonds depository interests from Chapter 2L and provided
appropriate consumer protections remain in place. [Schedule 1, item 8,
section 283AA]
1.27 Divisions 3 and 4 of Part 7.11 of the Corporations Act regulate
the transfer of title in relation to designated securities. It is necessary to
ensure that these provisions apply to simple corporate bonds depository
interests, which would partly be achieved by expanding the list of
10
General Amendments
securities in existing section 1073A to include simple corporate bonds
depository interests. It is noted that, because of the way the law in this
part of the Corporations Act is drafted, an additional regulation will have
to be made to ensure that Division 4 of Part 7.11 applies to simple
corporate bonds depository interests.
1.28 Therefore, a simple corporate bonds depository interest has been
inserted into subsection 1073A(1) and a consequential amendment has
been made to the note in subsection 1073E(1). [Schedule 1, items 47 and 48,
paragraph 1073A(1)(da) and subsection 1073E(1)]
1.29 The changes to the Corporations Act in respect to simple
corporate bond depository interests provide a strong platform for the
parallel trading of simple corporate bonds in the wholesale and retail
markets. However, further changes (through regulation) will be required
to ensure that all regulatory requirements that affect the trading of simple
corporate bonds in wholesale and retail markets can be appropriately
satisfied.
Offer of simple corporate bonds
1.30 If a body corporate makes an offer of debt securities where the
debt securities are taken to be simple corporate bonds (as they satisfy the
conditions set out in the Corporations Act), the offer will be considered to
be an offer of simple corporate bonds. [Schedule 1, item 22,
paragraphs 713A(1)(a) and(b)]
Simple corporate bonds
1.31 To reduce the possible risk to investors, only relatively low risk
and less complex bonds are able to take advantage of the streamlined
disclosure regime, which requires that the debt securities satisfy the
following conditions:
· The securities must be debentures as defined in section 9 of
the Corporations Act. [Schedule 1, item 22, subsection 713A(2)]
· The securities must be quoted on a prescribed financial
market. [Schedule 1, item 22, subsections 713A(3) and (4)]
· The securities must be denominated in Australian currency.
[Schedule 1, item 22, subsection 713A(5)]
· The fixed term of the securities cannot exceed 10 years.
[Schedule 1, item 22, subsection 713A(6)]
· The principal and any accrued interest must be repaid to the
holder at the end of fixed term of the security. [Schedule 1,
item 22, subsection 713A(7)]
· The interest rate must be either a fixed or floating rate. A
floating rate is comprised of a reference rate (to which the
11
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
issuer has no direct control) and a fixed margin set by the
issuer. [Schedule 1, item 22, subsection 713A(8)]
· The securities can be subject to an increase in the fixed rate
or the fixed margin in respect to the interest payable but
cannot be subject to a decrease in the interest payable.
[Schedule 1, item 22, subsections 713A(9) and (10)]
· Interest payments under the security must be paid
periodically and cannot be deferred or capitalised by the
issuing body. [Schedule 1, item 22, paragraphs 713A(11)(a), (b) and
(c)]
· The face value for the security cannot exceed $1,000.
[Schedule 1, item 22, subsection 713A(12)]
· Securities can only be redeemed prior to the end of the fixed
term in the following specified circumstances
- at the option of the holder of the security;
- as a result of the acceptance of an offer made to the holder
by the issuing body to buy back the security;
- due to a change in a law, or in the application or
interpretation of a law, if that change, application or
interpretation has a negative effect on the tax treatment of
the securities;
- when there is a change of control of the issuing body (as
defined in the terms of the security) and the redemption
does not take effect unless all securities issued under the
offer are redeemed; and
- when fewer than 10 per cent of the securities issued under
the offer remain on issue and the redemption does not take
effect unless all securities in the class are redeemed.
[Schedule 1, item 22, subsection 713A (13)]
· Debt to security holders is not subordinated to debts to
unsecured creditors. [Schedule 1, item 22, subsection 713A(14)]
· The securities must not be able to be converted into another
class of securities. [Schedule 1, item 22, subsection 713A(15)
· The price payable for the securities must be the same for all
persons who accept the offer. [Schedule 1, item 22,
subsection 713A(16)]
· The body offering the securities must have continuously
quoted securities, or is a wholly-owned subsidiary of a body
corporate that has continuously quoted securities.
12
General Amendments
- If the issuing body is a wholly-owned subsidiary of a
body corporate the body corporate must guarantee, or
agreed to guarantee, the repayment of any money
deposited or lent to the borrower under the securities, and
must also guarantee, or agree to guarantee, the repayment
of interest payable on the securities.
The trading in those continuously quoted securities must not
have been suspended for more than a total of five days during
the 12-month period preceding the offer (or if the securities
have been quoted for less than 12 months, during the period
which the securities have been quoted).
If at a particular time, there is no prospectus, to determine
whether a body has continuously quoted securities, it can be
assumed that a prospectus exists and the date of that
prospectus is the first day of the offer made under that
prospectus.
[Schedule 1, item 22, subsections 713A(17)and (18)]
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Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
· The most recent auditor's report on the most recent financial
statements (either the yearly or half yearly statements) for the
body issuing the securities (and if the securities are issued by
a wholly-owned subsidiary of a body corporate which has
continuously quoted securities, for that body corporate) must
not include:
- a statement that the auditor is of the opinion that the
report is not in accordance with this Act; or
- a description of a defect or an irregularity in the financial
report; or
- a description of a deficiency, failure or shortcoming in
respect of the matters referred to in paragraph 307(b), (c)
or (d); or
- an emphasis of matter paragraph related to going concern.
a. An auditor is required to include in their report an
emphasis of matter paragraph if they conclude that a
material uncertainty exists that leads to significant
doubt about the ability of the company to continue as
a going concern (continue to operate) and that
uncertainty has been adequately disclosed in the
financial reports. The purpose of the inclusion of an
`emphasis of matter' paragraph is to draw the readers
of the report attention of to the relevant disclosures
relating to the particular matters.
[Schedule 1, item 22, subsections 713A(19 )and 713A (20)]
1.32 In addition to satisfying the above conditions:
· the securities;
· the offer of the securities;
· the body issuing the securities; and
· if the issuing body is a wholly-owned subsidiary of a body
corporate which has continuously quoted securities, that body
corporate;
must comply with any other conditions or requirements as set
out in regulation. [Schedule 1, item 22, subsections 713A(24), (25),
(26) and (27)]
1.33 The Australian Securities and Investments Commission (ASIC)
has the power to make a determination, which has the effect of preventing
a body from relying on a 2-part simple corporate bond prospectus to offer
simple corporate bonds. The determination must be published by ASIC in
the Gazette. [Schedule 1, item 22, subsections 713A(21), (22) and (23)]
14
General Amendments
2-part prospectus for simple corporate bonds
1.34 When investing in debt securities it is important that retail
investors receive all relevant information to enable them to make effective
investment decisions. In respect to debt securities, this is facilitated
through the requirement for issuers to provide a full prospectus in respect
to an offering of debt securities. However, recognising that the terms of
some debt securities make them relatively lower risk and less complex,
the measures in the Bill require a 2-part prospectus to be used as the
appropriate vehicle to ensure retail investors receive the relevant
information.
1.35 A 2-part simple corporate bonds prospectus is a type of
prospectus in the Corporations Act. In accordance with Division 3 of
Chapter 6D, a prospectus is a type of disclosure document. As such, a
2-part simple corporate bonds prospectus will be taken to be a disclosure
document of Chapter 6D for all related purposes. [Schedule 1, item 22,
subsection 713B(2)]
1.36 A 2-part simple corporate bonds prospectus for an offer of
simple corporate bonds for issue by a body is a combination of a base
prospectus for the period during which the offer is made and an
offer-specific prospectus for the offer. As a 2-part simple corporate bonds
prospectus is a combination of a base prospectus and an offer-specific
prospectus, the base prospectus and the offer-specific prospectus are not
seen to be prospectuses in their own right, and as such they are not taken
to be prospectuses or a disclosure document for the purpose of
Chapter 6D. [Schedule 1, item 22, paragraphs 713B(1)(a) and (1)(b), subsections (3)
and (4)]
1.37 The life of a 2-part simple corporate bonds prospectus for an
offer of simple corporate bonds commences on the day the relevant
offer-specific prospectus for the offer is lodged with ASIC. The expiry of
a 2-part simple corporate bonds prospectus for a simple corporate bond
offer is the expiry date for the offer-specific prospectus for the offer.
[Schedule 1, item 22, subsections 713B(5) and (6)]
Example 1.1
On 1 August 2013, Marley Ltd lodged a base prospectus with ASIC for
offering simple corporate bonds. At the time of lodging the base
prospectus, Marley Ltd also lodged with ASIC an offer-specific
prospectus for simple corporate bonds. Under the offer of the simple
corporate bonds, Marley Ltd disclosed in the offer-specific that the
offer ended on 30 September 2013. After the initial success of the first
offering of the simple corporate bonds, Marley Ltd undertook a second
tranche. In respect to the second tranche, Marly Ltd lodged an
offer-specific prospectus with ASIC on 1 March 2014 and disclosed
that the offer would end on the 31 April 2014.
Under the initial offering (the first tranche) the life of the 2-part
prospectus was two months (1 August to 30 September) and under the
15
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
second tranche the life of the 2-part simple corporate bonds prospectus
was two months (1 March to 31 April)
1.38 To facilitate consumer outcomes, the use of electronic
communication in the form of website publication of the 2-part prospectus
is required. In this regard, the base prospectus lodged for offering simple
corporate bonds must be available on the issuing body's website
throughout its life of three years (which begins the date on which the base
prospectus is lodged with ASIC). For an offer specific prospectus, the
issuing body must make their offer specific prospectus available on their
body's website throughout the application period of the offer. [Schedule 1,
item 22, subsections 713B(7) and (8)]
Base prospectus
1.39 A document prepared and lodged with ASIC for the purpose of
making an offer of debt securities -- that satisfy the conditions that
establish the debt securities as simple corporate bonds -- is a base
prospectus for simple corporate bonds if the following requirements are
satisfied:
· the document is expressed such that is to be taken to be the
base prospectus for all offers of simple corporate bonds made
by the body during the three year life of the document;
· the document must state that there will be an offer-specific
prospectus for each offer of simple corporate bonds during
the three year life of the document; and
· the document must state that the 2-part simple corporate
bond prospectus for each such offer will consist of the base
prospectus and an offer-specific prospectus for the particular
offer.
[Schedule 1, item 22, subsections 713C(1) and (2),
paragraph 713C(3)(a), subparagraphs 713C(3)(b)(i) and (ii)]
1.40 In addition to satisfying the above conditions, a base prospectus
must also contain any information or statements specified in the
regulations. [Schedule 1, item 22, subsections 713C(5) and (6)]
1.41 If a base prospectus is replaced with a new base prospectus (the
replacement document), the period to which the replacement document
applies commences at the time at which it is lodged with ASIC and ends
at the time the original base prospectus was to end. [Schedule 1, item 22,
subsection 713C(4))]
1.42 When setting out information in the base prospectus,
information contained in documents lodged with ASIC does not need to
be incorporated into the base prospectus. Instead it can be incorporated
by reference. When referring to a document lodged with ASIC, the base
prospectus must identify the document or the part of the document that
contains the information that was lodged with ASIC. The reference must
16
General Amendments
also inform people of their right to obtain a copy of the document lodged
with ASIC. [Schedule 1, item 22, paragraphs 713E(1)(a) and (b)]
1.43 Further, the reference must have sufficient information about the
contents of the document (to which the reference is being made) to allow
a person to decide whether they wish or need to obtain a copy of the
document or the part of a document. [Schedule 1, item 22, paragraph713E(2)(b)]
1.44 If the information referred to is primarily of interest to
professional analysts, advisors or investors with specialist information
needs, the reference must also include a description of the document or
part of the document. The reference must also include a statement
indicating that the information is primarily of interest to those people.
[Schedule 1, item 22, paragraph 713E(2)(a)]
1.45 The document or part of a document to which the reference is
being made must be lodged with ASIC. In addition to documents required
by the Corporations Act to be lodged with ASIC, other supplementary
documents to which references are made can be lodged with ASIC for this
purpose. [Schedule 1, item 22, subsections 713E(3) and (4)]
1.46 The issuer of the proposed offer must provide any documents
lodged with ASIC, to which references are made in the base prospectus,
free to retail investors during the life of the base prospectus which is the
three-year period beginning on the date that the base prospectus was
lodged with ASIC. [Schedule 1, item 22, subsection 713E(5)]
Offer-specific prospectus
1.47 A document that is prepared and lodged with ASIC for the
proposed making of a particular offer of debt securities (that satisfy the
conditions that establish the debt securities as simple corporate bonds) is
an offer-specific prospectus if the following requirements are satisfied:
· the document must state that it is the offer-specific
prospectus for the offer; and
· the document must state that no securities will be issued
under the offer after the expiry date specified in the
document.
- The expiry date must not be later than 13 months after the
date the document is lodged with ASIC. If a replacement
document is provided, the expiry date of the replacement
document must be the same as that of the original
document; and
· the document must state that there is a base prospectus that is
applicable to the offer and that the disclosure document for
the offer consists of the offer-specific prospectus and the
base prospectus; and
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Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
· the first offer made under the document, which purports to
rely on a particular base prospectus lodged with ASIC for
offering simple corporate bonds, will be required to have a
minimum subscription of $50 million in order for that
document to be an offer-specific prospectus. Subsequent
offers made in respect to the base prospectus to which an
offer has been made (where the minimum subscription
requirement has been satisfied) do not have to satisfy the
minimum subscription requirement.
[Schedule 1, item 22, subsections 713D(2),(3) and (5),
paragraphs 713D(1)(a), (b) and 317D(4)(a) and (b)]
1.48 In addition to satisfying the above conditions, the offer-specific
prospectus must also contain any information or statements specified in
the regulations. [Schedule 1, item 22, subsections 713C(6) and (7)]
1.49 To ensure retail investors are provided with up to date disclosure
in respect of a particular offer, the offer-specific prospectus may include
material that modifies or supplements the base prospectus. [Schedule 1,
item 22, subsection 713C(8)]
1.50 Consistent with the base prospectus, when setting out
information in the offer-specific prospectus, information contained in
documents lodged with ASIC does not need to be incorporated into the
offer-specific prospectus. Instead it can be incorporated by reference.
When referring to a document lodged with ASIC, the offer-specific
prospectus must identify the document or the part of the document that
contains the information lodged with ASIC. The reference must also
inform people of their right to obtain a copy of the document lodged with
ASIC. [Schedule 1, item 22, paragraphs 713E(1)(a) and (b)]
1.51 Further, the reference must have sufficient information about the
contents of the document (to which the reference is being made) to allow
a person to decide whether they wish or need to obtain a copy of the
document or part of a document. [Schedule 1, item 22, paragraph713E(2)(b)]
1.52 If the information referred to is primarily of interest to
professional analysts, advisors or investors with specialist information
needs, the reference must also include a description of the document or
part of the document and must include a statement indicating that the
information is primarily of interest to those people. [Schedule 1, item 22,
paragraph 713E(2)(a)]
1.53 The document or part of a document to which the reference is
being made must be lodged with ASIC. In addition to documents required
by the Corporations Act to be lodged with ASIC, documents to which
references are being made can be lodged with AISC for this purpose.
[Schedule 1, item 22, subsections 713E(3) and (4)]
1.54 The issuer of the proposed offer must provide any documents
lodged with ASIC to which references are being made in the offer-specific
18
General Amendments
prospectus for free during the application period of the offer-specific
prospectus. [Schedule 1, item 22, paragraph 713E(5)(a)]
Supplementary or replacement document
1.55 If an issuer becomes aware of a misleading or deceptive
statement in the 2-part simple corporate bond prospectus or an omission
from the document of information required for the document to be
compliant with the 2-part prospectus regime (where there is a material
adverse impact on an investor), or when a new circumstance has arisen
since the disclosure document was lodged with ASIC, and that particular
circumstance would have been required to be disclosed in the document to
be compliant with the 2-part simple corporate bonds prospectus regime,
an issuer may:
· if the document is the base prospectus:
- include material in the offer-specific prospectus to
supplement or modify the base prospectus; or
- lodge a replacement document with ASIC;
· if the document is the offer-specific prospectus
- lodge a supplementary with ASIC; or
- lodge a replacement document with ASIC.
[Schedule 1, item 31, paragraphs 719A(1)(a), (b)(c), (d) and (e)]
1.56 If the wording in a base prospectus or offer-specific prospectus
becomes or is not presented in a clear, concise and effective manner, a
replacement base prospectus or offer-specific prospectus may be lodged
with ASIC. [Schedule 1, item 31, subsection 719A(2) and (3)]
1.57 Section 715A of the Corporations Act provides the general
requirement that information in a disclosure document must be worded
and presented in a clear concise and effective manner.
1.58 In recognition of the fact that both the base prospectus and the
offer-specific prospectus are taken `in totality' to be the disclosure
document in respect to a particular offer of simple corporate bonds, the
requirement for the base and offer-specific prospectuses to be presented in
a clear, concise and effective manner will apply in such a way that both
the base prospectus and the offer prospectus will need to, when read
together, be clear, concise and effective.
1.59 While any inconsistencies between the base and offer-specific
prospectuses may be seen to result in the simple corporate bond 2-part
prospectus not being clear, concise and effective, the fact that the
offer-specific prospectus contains information that supplements and/or
modifies the base document does not necessarily imply that the 2-part
prospectus is not presented in a clear, concise and effective manner.
19
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
1.60 If an issuer lodges a supplementary offer-specific prospectus, the
issuer must provide, at the beginning of the document, a statement that the
document is a supplementary document, a reference to the offer-specific
prospectus to which the document supplements, and references to any
other pervious supplementary documents lodged in respect of the
particular offer. [Schedule 1, item 31, paragraphs 719A(4)(a), (b) and (c)]
1.61 A statement that indicates that the supplementary document
should be read together with the offer-specific prospectus and any other
supplementary documents lodged with ASIC are also required to be
provided at the start of the document. [Schedule 1, item 31,
paragraphs 719A(4)(d)]
1.62 Once a supplementary offer-specific prospectus has been lodged
with ASIC, it is taken in conjunction with the offer-specific prospectus,
which it supplements to be the relevant offer-specific prospectus for the
issuance from the time of lodgement. [Schedule 1, item 31, subsection 719A(7)]
1.63 If an issuer lodges a replacement document for a base prospectus
or offer-specific prospectus, the issuer must provide, at the beginning of
the document, a statement indicating that the document is a replacement
document and that it is the replacement document for the previous base
prospectus or offer-specific prospectus. [Schedule 1, item 31,
subsections 719A(5) and (6) ]
1.64 Once the replacement document is lodged with ASIC, it is taken
that:
· if the replacement document is replacing the offer-specific
prospectus, the replacement document is taken to be offer the
specific prospectus for the issuance from that time; and
· if the replacement document is replacing the base prospectus,
the replacement document is taken to be the base prospectus
for the issuance from that time.
[Schedule 1, item 31, subsections 719A(8)and (9)]
Directors' liability
Liability to pay compensation
1.65 The Corporations Act prohibits a person from offering securities
under a disclosure document if, among other things, there is a misleading
or deceptive statement, an omission of required material, or a new
circumstance has arisen.
1.66 If there is an offer of securities and a person suffers loss or
damage because of a misleading or deceptive statement, an omission of
required material, or where a new circumstance had arisen in a disclosure
a document, the person has the right to recover compensation for that loss
20
General Amendments
or damage from a range of persons including each director of the body
making the offer.
1.67 However, for an offer of simple corporate bonds under the 2-part
simple corporate bonds prospectus, the range of persons to which the
person has the right to recover compensation for a loss or damage does
not include directors or proposed directors of the body making the offer
(and, if the body is a wholly-owned subsidiary of a body corporate, does
not include directors or proposed directors of that body corporate) unless
the director or proposed director is involved in, among other things, the
misleading or deceptive statement, the omission of required material, or
where new circumstances have not been reflected in the disclosure
document as required by the Corporations Act.
Part 2 Amendments relating to False or misleading statements etc
Reasonable steps obligations
1.68 In respect to the requirement to take reasonable steps in Part 9.4
of the Corporations Act, the person will be taken to have taken reasonable
steps to ensure that:
· A statement or information was not false or misleading in a
material particular--
- If the person proves that all inquiries (if any) that were
reasonable in the circumstances to make were made, and
after making those inquiries the person believed on
reasonable grounds that the statement or information was
not misleading in a material particular. [schedule 1, items 52
and 53, subsections 1308(10) and 1309(7)]
- If the person proves that they relied on information
provided to them by somebody other than a director,
employee or agent of the body (if the person is a body) or
someone other than an employee or agent of the
individual (if the person is an individual) and the reliance
placed on the information by the person was reasonable in
the circumstances. [schedule 1, items 52 and 53,
subsections 1308(12) and 1309(9)]
· The information in a document did not omit or have omitted
from it any matter or thing that without which the document
would be misleading or deceptive in a material respect:
- If the person proves that all inquiries (if any) that were
reasonable in the circumstances were made, and after
making those inquiries the person believed on reasonable
grounds that there was no such omission. [schedule 1,
item 52 , subsection 1308(11)]
21
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
- If the person proves that they relied on information
provided to the person by somebody other than a director,
employee or agent of the body (if the person is a body), or
someone other than an employee or agent of the
individual (if the person is an individual), and the reliance
placed on the information by the person was reasonable in
the circumstances. [Schedule 1, item 52, subsection 1308(13)]
· The information in the document did not omit or have
omitted from it any matter or thing that would render the
information in the document misleading in a material
particular:
- If the person has made all inquiries (if any) that were
reasonable in the circumstances to make, and after making
those inquiries the person believed on reasonable grounds
that there was no such omission. [schedule 1, item 53,
subsection 1309(8)]
- If the person proves that they relied on information
provided to the person by somebody other than a director,
employee or agent of the body (if the person is a body), or
someone other than an employee or agent of the
individual (if the person is an individual), and the reliance
placed on the information by the person was reasonable in
the circumstances. [Schedule 1, item 53, subsection 1309(10)]
Application and transitional provisions
1.69 The amendments in sections 1 to 3 of the Bill have effect the day
after the Act receives Royal Assent. Schedule 1 of the Bill has effect on a
day fixed by Proclamation. However, if the provisions do not commence
within the period of 6 months from the day the Act receives Royal Assent,
they will commence on the day after the end of that period.
Consequential amendments
1.70 The content requirements under division 2 of part 6.5 in respect
to the contents of a bidders statement if-- any securities (other than
managed investment products) are offered as consideration under the bid;
the bidder is the body that has issued or will issue the securities; or a
person who controls that body all material that would be required in the
prospectus for the offer of those securities by the bidder, will be either the
material required by 710 to 713 or 713C to 713E. [Schedule 1, item 9,
paragraph 636(1)(g)]
1.71 The table in section 705 that shows what disclosure documents
are to be used if an offer of securities needs disclosure to investors under
22
General Amendments
part 6D.2 has been amended to include 2-part simple corporate bonds (as
well as the relevant sections).
1.72 Further, to ensure the ability of an issuer of simple corporate
bonds to continue to offer simple corporate bonds for two years after
commencement, a note has been added to section 705. This note clarifies
that in accordance with s 709(1) a prospectus other than a 2-part simple
corporate bonds prospectus can be issued for retail corporate bonds for
two years after commencement. [Schedule 1, item 11 and 12, section 705]
1.73 The ability for issuers to not provide investors with disclosure in
respect to offers that are made to existing debenture holders does not
extend to the offer of simple corporate bonds or the offer of debentures if
the offer is made to holders of simple corporate bonds. [Schedule 1, item 13,
subsection 708(14)]
1.74 To remove the requirement for a prospectus to be prepared for
an offer of simple corporate bonds, an amendment has been made to
provide that a prospectus or a short form prospectus disclosure document
will not include an offer of securities that is an offer of simple corporate
bonds. [Schedule 1, item 14, subsection 709(1)]
1.75 To provide flexibility for issuers of simple corporate bonds for
the period of two years after commencement, an issuer will:
· if the offer of simple corporate bonds needs disclosure under
Part 6D.2 and the offer begins during the two-year period:
either prepare:
- a prospectus; or
- a 2-part simple corporate bonds prospectus in accordance
with sections 713B to 713E.
· however, if an offer of simple corporate bonds needs
disclosure under Part 6D.2 and the offer begins after the
2 year period the issuer must prepare a 2-part simple
corporate bonds prospectus.
[Schedule 1, item 15, subsection 709(1A), (1B) and (1C)]
1.76 Under Chapter 6D and issuer may be able to provide a profile
statement for an offer of corporate bonds. However, an issuer is not able
to provide a profile statement for an offer of simple corporate bonds.
[Schedule 1, item 16, subsection 709(2)]
1.77 An issuer is not able to provide an information statement for an
offer of simple corporate bonds after the two year period after
commencement has ended. Prior to the two year period ending an issuer
will be able to use an information statement if they satisfy
subsection 709(4). [Schedule 1, item 17, section 709(4)]
23
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
1.78 The general disclosure test for content and the specific
disclosure requirements that apply to prospectuses do not apply to a 2-part
simple corporate bond prospectus. [Schedule 1, items 18 and 19, sections 710
and 711]
1.79 Further, the content requirements for short-from prospectuses
and the special content rules for continuously quoted securities do not
apply to 2-part simple corporate bonds prospectuses. [Schedule 1, items 20
and 21, sections 712 and 713]
1.80 The table in section 717 that provides an overview of the
procedure for offering securities has been amended to include references
for the preparation of a 2-part simple corporate bonds prospectus and to
include a reference for when supplementary or replacement documents
relating to 2-part simple corporate bonds prospectus may be lodged with
ASIC. [Schedule 1, items 24,25 and 26, section 717]
1.81 The general requirement for lodging a disclosure document for
an offer of securities does not apply to the 2-part simple corporate bonds
prospectus, as the requirement for the lodging of the 2-part simple
corporate bonds prospectus is located in section 713B. [Schedule 1, items 27
and 28, section 718]
1.82 To reflect that a simple corporate bond requires a tailored
approach to the lodgement of supplementary or replacement documents, a
2-part simple corporate bonds prospectus is not covered by the operation
of section 719. In addition, the heading of section 719 has been repealed
and replaced with lodging supplementary or replacement document --
general'. [Schedule 1, item 29 and 30, section 719 (Heading), subsection 719(6)]
1.83 The table in section 720 that outlines the consent required for the
lodgement of a document has been amended to remove offers of simple
retail corporate bonds from offers of securities for issue and has been
amended such that the consent requirements for an offer of simple
corporate bonds are outlined separately.
1.84 In this regard, an offer of simple corporate bonds under the
2-part simple corporate bonds prospectus requires the consent of:
· every director of, and every person named in the document as
a proposed director of, the body; and
· if the simple corporate bond is in a managed investment
scheme made available:
- by the body every director of that body; or
- by an individual.
[Schedule 1, items 32 and 33, section 720]
1.85 The inclusion of references to the 2-part simple corporate
prospectus have been made to ensure that the issuers have choices open to
them where there is an omission from the disclosure document of
24
General Amendments
information, or where a person becomes aware of a new circumstance that
would have been required to be included in the 2-part simple corporate
bond prospectus. [Schedule 1, item 34, subparagraphs 724(1)(c)(ii) and (d)(ii)]
1.86 The note to subsection 724(2) has been amended to provide a
reference to new section 719A in respect to the lodging of supplementary
or replacement documents for a 2-part simple corporate bonds
prospectuses. [Schedule 1, item 35, subsection 724(2)]
1.87 The table in subsection 724(3) has been amended to exclude
2-part simple corporate bonds prospectuses from a prospectus in row 3,
and inserts a new circumstance -- that being the disclosure document is a
2-part simple corporate bonds prospectus. The document requirements for
this new circumstance -- that of a supplementary or replacement
document -- corrects deficiencies or changes the terms of the offer is also
inserted. [Schedule 1, items 36 and 37, subsection 724(3)]
1.88 Under a 2-part simple corporate bond prospectus, an issuer is
able to lodge a base prospectus with ASIC and use that base prospectus
for a period of three years. In order to make an offer of simple corporate
bonds, the issuer is required to provide an offer-specific prospectus that
together with the base prospectus forms the disclosure document for the
offer. As the base document can be used for a period of three years, the
issuer may wish to offer subsequent tranches of the simple corporate
bonds. When the issuers makes additional offers no waiting period will
apply after the lodgement of the offer-specific prospectus before the
processing of applications for the simple corporate bonds provided the
they are the same class as existing securities that are quoted on a
prescribed market immediately before the application period with the
exception of differences in respect to the:
· fixed term of the securities,
· rate at which the interest is payable under the securities, and
· date on which the holders are to be paid interest under the
securities.
[Schedule 1, item 38, subsection 727(3)]
1.89 To ensure that the provisions dealing with misstatement in, or
omission from, disclosure documents apply to simple corporate bonds
prospectuses, references to the 2-part simple corporate prospectus
disclosure documents have been made to cover an omission from the
disclosure document of information or where a new circumstance has
arisen that would have been required to be included in the 2-part simple
corporate bond prospectus. [Schedule 1, items 39 and 40, paragraph 728(1)(b) and
subparagraph 728(1)(c)(ii)]
1.90 The table in subsection 729(1) has been amended such that the
liability for loss or damage for a contravention of subsection 728(1) for
each director or person named as a proposed director of a body making an
25
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
offer if the offer is made by the body does not apply in respect to a 2-part
simple corporate bond prospectus. [Schedule 1, item 41, section 729]
1.91 The liability placed on people liable on a disclosure document to
inform the person making the offer about deficiencies in the disclosure
document will continue to apply to directors and proposed directors.
[Schedule 1, item 44, subsection 730(1)]
1.92 Furthermore, references to the 2-part simple corporate
prospectus disclosure documents have been made to ensure that
section 730 of the Corporations Act applies appropriately. [Schedule 1,
items 42 and 43, paragraph 730(1)(b) and subparagraph 730(1)(c)(ii)]
1.93 To ensure that ASIC is not prevented from making a
determination under new section 713A(19) a reference to the new
subsection has been inserted into the provisions relating to the effect of a
failure to comply with an infringement notice in Chapter 9 of the
Corporations Act. [Schedule 1, item 49and subparagraph 1317DAG(5)(a)]
1.94 When considering whether reasonable steps have been taken
when there was false or misleading, or if an omission of a thing that
without that thing the document would be misleading in respect to an
offer, materiality is to be taken into account. [Schedule 1, items 50 and 51,
subsection 1308(4)]
26
Chapter 2
Amendments relating to the use of the
expressions `financial planner' and
`financial adviser'
Outline of chapter
2.1 This chapter explains the amendments to Part 7.6 of the
Corporations Act 2001 (the Corporations Act), which restrict the use of
the terms `financial planner', `financial adviser', and terms of like import.
2.2 All references to legislative provisions in this chapter are to the
Corporations Act unless otherwise stated.
Context of amendments
2.3 On 26 April 2010, the then Minister for Financial Services,
Superannuation and Corporate Law, the Hon Chris Bowen MP,
announced the FOFA reforms.
2.4 The FOFA reforms represent the Government's response to the
2009 Inquiry into Financial Products and Services in Australia by the
Parliamentary Joint Committee on Corporations and Financial Services,
which considered a variety of issues associated with corporate collapses,
including Storm Financial and Opes Prime. The FOFA reforms are
implemented by the Corporations Amendment (Future of Financial
Advice) Act 2012 and the Corporations Amendment (Further Future of
Financial Advice Measures) Act 2012.
2.5 This measure complements the FOFA reforms by clearly
identifying genuine providers of financial product advice, thereby
improving consumer trust in the financial planning and advice industry.
By prohibiting anyone who is not authorised under an Australian financial
services licence (Licence) from holding themselves out to be a financial
adviser or financial planner, this measure enhances consumer protection
and improves outcomes for consumers.
2.6 On 22 March 2012, during the second reading debate on the
FOFA reforms, the Minister for Financial Services and Superannuation,
the Hon William Shorten MP, announced the Government's intention to
introduce legislation into Parliament by 1 July 2013 enshrining the terms
`financial planner' and `financial adviser' in law'. Schedule 2 of the Bill
amends the Corporations Act to define these terms.
27
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
2.7 Restricting these terms is intended to provide consumers with
certainty that a person using the term is authorised to do so under a
Licence. The Corporations Act defines and restricts the use of a number
of other terms, for example, `stockbroker', `futures broker', and
`insurance broker'. However, there have been no specific restrictions on
the terms `financial adviser' and `financial planner'. Through restricting
the use of the terms `financial adviser' and `financial planner', the
measure will enable the corporate regulator, the Australian Securities and
Investment Commission (ASIC) to take specific action against persons
who hold themselves out to be financial advisers or financial planners
without being able to do so under a Licence.
2.8 The measure makes it an offence for a person to assume or use
the terms `financial adviser', `financial planner' or terms of similar
importance, unless they meet the statutory criteria in the Bill.
Importantly, as a result of restricting the terms, unlicensed providers such
as property spruikers who represent that they are genuine providers of
financial product advice will have committed an offence under the
Corporations Act.
Summary of new law
2.9 A person must not use the terms `financial adviser', `financial
planner' or terms of like import, in relation to a financial services business
or a financial service, unless the person is able under the Licence regime
to provide personal financial advice on designated financial products.
Comparison of key features of new law and current law
New law Current law
Use of the terms `financial adviser', No restriction on the use of `financial
`financial planner' and terms of like adviser', `financial planner' or like
import is restricted to those persons terms.
able to provide personal advice on This means that property spruikers
designated financial products. and other individuals who are not
This means that relevant Licence authorised under a Licence are not
holders, for example stockbrokers, restricted from using the terms
will be able to use the restricted `financial planner' or `financial
terms. adviser'.
Persons who do not hold Licences
will not be able to use the restricted
terms. For example, property
spruikers who use the restricted terms
will commit an offence attracting a
penalty of 10 penalty units per day if
28
Amendments relating to the use of the expressions `financial planner' and `financial adviser'
New law Current law
an individual, and 50 penalty units
per day if a corporation.
Detailed explanation of new law
2.10 Schedule 2 places restrictions on the use of the terms `financial
adviser' and `financial planner'. It is an offence for a person to use one of
the terms -- or a term of like import -- without meeting the statutory
criteria for their use. The penalty for individuals who contravene the
Schedule is 10 penalty units per day or part day for each day the offence is
committed. The penalty for corporations who contravene the Schedule is
50 penalty units per day or part day for each day the offence is committed.
2.11 Schedule 2 will help to protect consumers from unlicensed
persons such as `product spruikers' who might hold themselves out to be
authorised financial advisers when they are not. It will provide consumers
of financial services confidence in being able to identify genuine
providers of financial product advice.
2.12 A person contravenes Schedule 2 if the person carries on a
financial services business or provides a financial service, or another
person provides a financial service on behalf of the relevant person, and
the relevant person assumes or uses a restricted word or expression in
relation to that business or service. [Schedule 2, item 1, subsection 923C(1)]
2.13 A person assumes or uses a word or expression when, for
example, the person includes the word or expression in its advertising
material, business listings, or in communication with consumers. A
person is still taken to assume or use a word or expression even if the
word or expression is being used as part of another word or expression, or
in combination with other words, letters or symbols. [Schedule 2, item 1,
paragraph 923C(4)(b)]
2.14 The restricted words or expressions are `financial adviser',
`financial planner', any word or expression prescribed by regulation, or
any word or expression of like import to `financial adviser' and `financial
planner'. [Schedule 2, item 1, paragraph 923C(4)(a)]
2.15 Terms which would be considered to be of like import would be
terms such as `financial planning adviser' and `financial advising agent'.
It is important that provision be made to prescribe other words or
expressions by regulation, as persons wishing to avoid the application of
this measure may refer to themselves in new terms that are similarly
misleading to consumers.
2.16 A person does not contravene the provision if the statutory
criteria are met. Those criteria are that the person either:
29
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
· holds a Licence, under which the person can provide
personal advice on designated products; or
· provides personal advice on designated products on behalf
of a Licensee, where under that Licence the Licensee may
provide personal advice on designated products.
[Schedule 2, item 1, subsection 923C(2)]
2.17 A `designated financial product' is a financial product other than
a general insurance product (other than a sickness and accident insurance
product), a consumer credit insurance product, a basic deposit product, a
non cash payment product, or a First Home Saver Account (FHSA)
deposit account. [Schedule 2, item 1, subsection 923C(5)]
2.18 A `general insurance product' is defined in
paragraph 764A(1)(d) of the Corporations Act as a contract of insurance
that is not a life policy (with certain exceptions). A sickness and accident
insurance product is defined by regulations made for the purposes of
subparagraph 761G(5)(b)(iv) of the Corporations Act. Regulation 7.1.14
of the Corporations Regulations 2001 (the Regulations) defines a sickness
and accident insurance product. A `consumer credit insurance product' is
defined by regulations made for the purposes of subparagraph 761G(5)(v)
of the Corporations Act. Regulation 7.1.15 of the Regulations defines a
consumer credit insurance product. A `basic deposit product' is defined in
section 761A of the Corporations Act. A non cash payment product is a
facility through which, or through the acquisition of which, a person
makes non cash payments. An `FHSA deposit account' is described in
paragraph 8(c)(i) of the First Home Saver Accounts Act 2008. [Schedule 2,
item 1, subsection 923C(5)]
2.19 The intention of the definition of `designated financial products'
is to capture more complex types of financial products, or less well
understood financial products, which may be associated with greater risks
for consumers. It is appropriate that only those authorised to provide
advice on this more sophisticated set of financial products be able to use
the terms `financial adviser' or `financial planner'. It is not a requirement
that the Licence include a condition specifying certain types of financial
products. It is enough that, under the terms of the Licence, the Licensee
would be able to provide advice on one or more of these types of
products.
2.20 A person must hold a Licence to carry on a financial service
business, including a business providing financial product advice. The
requirement to hold a Licence does not apply where the person is subject
to an exemption (outlined in subsection 911A(2) of the Corporations Act).
`Financial product advice' is defined in subsection 766B(1) of the
Corporations Act as a recommendation or statement of opinion intended
to influence a decision in relation to a financial product or class of
products. `Personal advice' is defined in subsection 766B(3) of the
Corporations Act as financial product advice directed to a person in
30
Amendments relating to the use of the expressions `financial planner' and `financial adviser'
circumstances where the adviser has considered the person's objectives,
financial situation and needs.
2.21 Persons authorised only to provide general advice will not be
able to call themselves `financial advisers' or `financial planners'.
Similarly, persons not authorised to provide any form of financial product
advice will not be able to call themselves `financial planners' or `financial
advisers'.
2.22 The consequence of this measure is that, when a consumer is
presented with a representation from a person carrying on a financial
services business using the term `financial adviser' or `financial planner',
the consumer will know that the person is able to provide personal advice
as regulated by Chapter 7 of the Corporations Act. Those who are not
able to provide personal advice on designated products under this regime
will not be able to use the terms, and will contravene section 923C if they
do.
2.23 A contravention of subsection 923C(1) is an offence. A person
who uses a restricted term without meeting the criteria commits an
offence on the first day of contravention, and on each subsequent day of
contravention. [Schedule 2, item 1, subsection 923C(3)]
2.24 An offence against subsection 923C(1) is punishable, on
conviction, by a penalty not exceeding 10 penalty units for each day, or
part of a day, in respect of which the offence is committed. [Schedule 2,
item 2, Schedule 3]
Application and transitional provisions
2.25 The amendments in Schedule 2 commence on the later of
1 July 2013 and the day after the Act receives the Royal Assent.
31
Chapter 3
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Corporations Amendment (Simple Corporate Bonds and Other Measures)
Bill 2013
3.1 This Bill is compatible with the human rights and freedoms
recognised or declared in the international instruments listed in section 3
of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview
3.2 Schedule 1 of the Corporations Amendment (Simple Corporate
Bonds and Other Measures) Bill 2013 (the Bill) amends the Corporations
Act 2001 (the Corporations Act) to facilitate increased trading of corporate
bonds to retail investors in Australia.
3.3 Schedule 2 of the Bill restricts the use of the terms `financial
adviser', `financial planner' and terms of like import to persons able to
provide personal advice on designated financial products. Only those able
to provide a certain level of financial advice will be able to use the terms
in relation to a financial service or business.
Human rights implications
3.4 This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
3.5 This Bill is compatible with human rights as it does not raise any
human rights issues.
The Hon William Shorten MP, the Minister for Financial
Services and Superannuation.
33
Index
Schedule 1: General amendments
Bill reference Paragraph number
Items 1,2 and 4, subsection 9 1.19
Items 3 and 5, subsection 9 1.18
Item 7, subsection 9 1.22
Item 8, subsection 9 1.22
Item 8, section 283AA 1.26
Item 9, paragraph 636(1)(g) 1.69
Item 10, subsection 700(1) 1.24
Item 10, paragraph 700(1) 1.70
Item 11 and 12, section 705 1.72
Item 13, subsection 708(14) 1.73
Item 14, subsection 709(1) 1.74
Item 15, subsection 709(1A), (1B) and (1C) 1.74
Item 16, subsection 709(2) 1.76
Item 17, section 709(4) 1.77
Items 18 and 19, sections 710 and 711 1.78
Items 20 and 21, sections 712 and 713 1.79
Item 22, subsection 713A (13) 1.31
Item 22, subsection 713A(14) 1.31
Item 22, subsection 713A(15) 1.31
Item 22, subsection 713A(16) 1.31
Item 22, subsections 713A(17)and (18) 1.31
Item 22, subsections 713A(19 )and 713A (20) 1.31
Item 22, subsections 713A(24), (25), (26) and (27) 1.32
Item 22, subsections 713A(21), (22) and, (23) 1.33
Item 22, subsection 713B(2) 1.35
Item 22, paragraphs 713B(1)(a) and (1)(b), subsections (3) and (4) 1.36
Item 22, subsections 713B(5) and (6) 1.37
Item 22, subsections 713B(7) and (8) 1.38
Item 22, subsections 713C(1) and (2), paragraph 713C(3)(a), 1.39
subparagraphs 713C(3)(b)(i) and (ii)
35
Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013
Bill reference Paragraph number
Item 22, subsections 713C(5) and (6) 1.40
Item 22, subsection 713C(4)) 1.41
Item 22, paragraphs 713E(1)(a) and (b) 1.42, 1.50
Item 22, paragraph713E(2)(b) 1.43, 1.51
Item 22, paragraph 713E(2)(a) 1.44, 1.52
Item 22, subsections 713E(3) and (4) 1.45, 1.53
Item 22, subsection 713E(5) 1.46
Item 22, subsections 713D(2) and (3), paragraphs 713D(1)(a), (b) 1.47
and 317D(4)(a) and (b)
Item 22, subsections 713C(6) and (7) 1.48
Item 22, subsection 713C(8) 1.49
Item 22, paragraph 713E(5)(a) 1.54
Item 22, paragraphs 713A(1)(a) and(b) 1.30
Item 22, subsection 713A(2) 1.31
Item 22, subsections 713A(3) and (4) 1.31
Item 22, subsection 713A(5) 1.31
Item 22, subsection 713A(6) 1.31
Item 22, subsection 713A(7) 1.31
Item 22, subsection 713A(8) 1.31
Item 22, subsections 713A(9) and (10) 1.31
Item 22, paragraphs 713A(11)(a), (b) and (c) 1.31
Item 22, subsection 713A(12) 1.31
Items 24,25 and 26, section 717 1.80
Items 27 and 28, section 718 1.81
Item 29 and 30, section 719 (Heading), subsection 719(6) 1.82
Item 31, subsections 719A(8)and (9) 1.63
Item 31, paragraphs 719A(1)(a), (b)(c), (d) and (e) 1.54
Item 31, subsection 719A(2) and (3) 1.55
Item 31, paragraphs 719A(4)(a), (b) and (c) 1.59
Item 31, paragraphs 719A(4)(d) 1.60
Item 31, subsection 719A(7) 1.61
Item 31, subsections 719A(5) and (6 1.62
Items 32 and 33, section 720 1.84
Item 34, subparagraphs 724(1)(c)(ii) and (d)(ii) 1.85
Item 35, subsection 724(2) 1.86
Items 36 and 37, subsection 724(3) 1.87
36
Index
Bill reference Paragraph number
Item 38, subsection 727(3) 1.88
Items 39 and 40, paragraph 728(1)(b) and subparagraph 728(1)(c)(ii) 1.89
Items 42 and 43, paragraph 730(1)(b) and subparagraph 730(1)(c)(ii) 1.92
Item 44, subsection 730(1) 1.91
Item 45 and 46, section 761A 1.25
Items 47 and 48, paragraph 1073A(1)(da) and subsection 1073E(1) 1.28
Item 49 paragraph 1317DAG(5)(a) 1.93
Items 50 and 51 subsection 1308(4) 1.94
Item 52, subsection 1308(13) 1.67
Items 52 and 53, subsections 1308(10) and 1309(7) 1.67
Items 52 and 53, subsections 1308(12) and 1309(9) 1.67
Item 52 , subsection 1308(11) 1.67
Item 53, subsection 1309(10) 1.67
Item 53, subsection 1309(8) 1.67
Section 729 1.90
Schedule 2: Amendments relating to the use of the
expressions `financial planner' and `financial adviser'
Bill reference Paragraph number
Item 1, subsection 923C(1) 2.12
Item 1, paragraph 923C(4)(b) 2.13
Item 1, paragraph 923C(4)(a) 2.14
Item 1, subsection 923C(2) 2.16
Item 1, subsection 923C(5) 2.17
Item 1, subsection 923C(5) 2.18
Item 1, subsection 923C(3) 2.23
Item 2, Schedule 3 2.24
37