House of Representatives

Explanatory Memorandum

(Circulated by authority of the Assistant Treasurer, Minister for Housing and Minister for Homelessness, Social and Community Housing, the Hon Michael Sukkar MP)

Chapter 12: CCIVs - Delegated legislation for regulatory framework

Outline of chapter

12.1 This Chapter sets out the delegated legislation-making powers in the new law that are specific to CCIVs. Part 8B.9 of Chapter 8B allows ASIC to make exemptions and modifications for CCIVs in relation to specified parts of new Chapter 8B. A regulation-making power to modify the operation of the Corporations Act for CCIVs is also included.

Comparison of key features of new law and current law

Detailed explanation of new law

Exemption and modification powers

12.2 ASIC may make exemption and modification orders in relation to the following provisions of Chapter 8B:

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Part 8B.2 (registration of a CCIV);

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Part 8B.3 (corporate governance of a CCIV);

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sections 1230J and 1230K (redemptions for non-liquid sub-funds);

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Division 4 of Part 8B.4 (financial reports and audits of CCIVs);

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Division 9 of Part 8B. 6 (deregistration and transfer of registration); and

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Part 8B.7 (control, financial services and disclosure).

[Schedule 1, item 4, subsection 1243(1)]

12.3 ASIC's exemption and modification powers do not apply to any other parts of Chapter 8B.

12.4 The exemption or modification may relate to a specified security, a specified class of securities or all securities, and relate to any other matter generally or as specified. [Schedule 1, item 4, subsection 1243(3)]

12.5 These orders are either made by legislative or notifiable instrument. If the order relates to all sub-funds of all CCIVs, or all sub-funds of a specified class of CCIVs, or a specified class of sub-funds of CCIVs, then the order must be made by legislative instrument. [Schedule 1, item 4, subsections 1243(2) and (5)]

12.6 Exemption and modification orders must be made by notifiable instrument if it relates to a specified CCIV or a specified entity. Such an order may apply to the CCIV or entity in respect of a specified sub-fund, a specified class of sub-funds or all sub-funds of the CCIV. [Schedule 1, item 4, subsections 1243(2) and (6) to (8)]

12.7 Additionally, ASIC can exercise its exemption power unconditionally or subject to specified conditions. If there are specified conditions, the person to whom the condition applies must comply with those conditions. Only ASIC may apply to the Court for an order that the person comply with the condition in a specified way. [Schedule 1, item 4, subsection 1243(4)]

12.8 ASIC must give a copy of an exemption or declaration that relates to a specified person to that person as soon as reasonably practicable after the exemption or declaration is made. [Schedule 1, item 4, subsection 1243(9)]

12.9 These exemption and modification powers allow ASIC to provide timely administrative relief in circumstances where the strict operation of the new CCIV regime produces unintended or unforeseen results that are not consistent with the policy intent. In particular, issues may arise that were not contemplated at the time of drafting because CCIVs is a new, untested regime. In this context, it is appropriate for ASIC to be able to provide relief where the issues to be addressed are too individual and specific to justify addressing them by legislative means.

12.10 In exercising these powers, the appropriate length of the sunsetting period for each legislative instrument will be considered and will depend on matters including whether:

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there would be appreciable business uncertainty about the operation of the CCIV regime if the sunsetting period for the instrument was shorter;

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the particular instrument deals with confined or unique circumstances affecting a particular class of entities or products which do not fit within the strict operation of the primary law but would result in anomalous or inconsistent outcomes that would be inconsistent with the intent of the primary law; and

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the particular instrument makes minor and technical changes which support the practical operation of the CCIV regime.

12.11 It is also expected that if these exemption and modification powers are used, ASIC will monitor the operation of the instrument and respond accordingly if it becomes apparent that the length of the sunsetting period may not be appropriate.

12.12 ASIC presently has a range of exemption and modification powers under the Corporations Act, including in relation to MISs, takeovers, fundraising, licensing of financial services, accounting and disclosure requirements for financial products. The scope of ASIC's exemption and modification powers for CCIVs mirrors these existing powers in the Corporations Act.

12.13 The exemption and modification powers are subject to the usual safeguards, including administrative review by the Administrative Appeals Tribunal, judicial review and consideration in appropriate circumstances by the Commonwealth Ombudsman. Additionally, any legislative instruments made using the exemption and modification powers would also be subject to disallowance and parliamentary scrutiny.

Regulations

12.14 The regulations may modify the operation of the Corporations Act (including the operation of Chapter 8B) for:

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a specified CCIV;

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a specified class of CCIVs;

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all CCIVs;

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a specified class of sub-funds;

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all sub-funds of a specified class of CCIVs; or

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all sub-funds of all CCIVs.

[Schedule 1, item 4, subsection 1243A]

12.15 This regulation-making power is included to ensure timely resolution of any unforeseen outcomes arising from a new, untested regime. Enabling the modification of the operation of the Corporations Act by regulations will provide the Government with the necessary flexibility to make targeted adjustments that may be necessary to address inappropriate or anomalous outcomes that would be inconsistent with the policy intention of the establishment of CCIVs.