House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

General outline and financial impact

Enhancing ASIC's Capabilities

Amendments relating to competition in the financial system

Schedule 1 of this Bill amends the Australian Securities and Investments Commission Act 2001 (ASIC Act) to require ASIC to consider the effects that the performance of its functions and the exercise of its powers will have on competition in the financial systems.

Date of effect: The day after Royal Assent.

Proposal announced: Schedule 1 implements the recommendation made by the Financial System Inquiry to add competition to ASIC's mandate. The Government accepted this recommendation in October 2015.

Financial impact: None.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.1 to 3.4.

Compliance cost impact: None.

Amendments relating to engagement of ASIC staff

Schedule 2 of this Bill amends the ASIC Act to allow ASIC to employ staff outside of the Public Service Act 1999 (PSA).

Date of effect: 1 July 2019.

Proposal announced: Schedule 2 implements the recommendation made by the ASIC Capability Review that ASIC should no longer be required to employ staff under the PSA. The Government accepted this recommendation on 20 April 2016.

Financial impact: None.

Human rights implications: This Schedule does not raise any human rights issue. See Statement of Compatibility with Human Rights - Chapter 3, paragraphs 3.5 to 3.8.

Compliance cost impact: None.

Chapter 1 Amendments relating to competition in the financial system

Outline of chapter

1.1 This chapter explains the amendment in Schedule 1 to the Bill to require ASIC to consider the effects that the performance of its functions and the exercise of its powers will have on competition in the Australian financial system.

Context of amendments

1.1 In October 2015, the Government accepted recommendation 30 of the Financial System Inquiry (FSI) to include consideration of competition in ASIC's mandate.

Summary of new law

1.2 Schedule 1 to the Bill amends the ASIC Act to require ASIC to consider competition in the financial system when performing its functions and exercising its powers.

Comparison of key features of new law and current law

Detailed explanation of new law

1.3 Schedule 1 to the Bill amends the ASIC Act to require ASIC to consider the effects that the performance of its functions and the exercise of its powers will have on competition in the financial system. [Schedule 1, item 1, subsection 1(2A) of the ASIC Act]

1.4 ASIC already must strive to improve the performance of the financial system in the interests of the efficiency and development of the economy (see paragraph 1(2)(a) of the ASIC Act). As competition is important to improving the performance of the financial system and will impact on the efficiency and development of the economy, ASIC is already implicitly required to consider competition.

1.5 However, an explicit reference to take competition issues into account would oblige ASIC to consciously consider how its actions may impact on competition in the financial system and will enable ASIC to favour one option over another due to its effects on competition.

1.6 Some of the specific aspects of competition that ASIC may have regard to include:

•

whether the decision will create a barrier to entry, making it more difficult for new firms to enter the industry;

•

whether the decision will create regulatory advantages for some companies over others competing in the same sector, or generally across the industry as a whole;

•

whether the decision will improve consumers' ability to exert demand-side competitive pressure in a market;

•

whether the decision will disproportionately impact small entities (for example by imposing obligations that do not appropriately scale the regulatory risks presented by those entities) and the impact that would have on competition; and

•

whether alternative competitively-neutral approaches can be identified.

1.7 Competition should not be considered in isolation. ASIC should consider competition in conjunction with the elements in subsection 1(2) of the ASIC Act, such as striving to improve the performance of the financial system and promoting commercial certainty and economic development and efficiency while reducing business costs.

1.8 For example, ASIC may decide to proceed with an intervention that has a detrimental impact on competition because the intervention would significantly improve confident and informed participation by investors in the market.

1.9 ASIC is required to determine the weight it will give to competition based on the relevant circumstances.

1.10 In cases where competition is not relevant to how ASIC performs its functions and exercises its powers (for example, internal corporate functions), ASIC could note that competition has no bearing on the function or power.

1.11 The measure is not intended to limit or expand the scope of ASIC's regulatory responsibilities. The Australian Competition and Consumer Commission will remain as the competition regulator across the economy.

Application and transitional provisions

1.12 Schedule 1 will commence the day after Royal Assent.

Chapter 2 Amendments relating to the engagement of ASIC staff

Outline of chapter

2.1 This chapter explains the amendments in Schedule 2 to the Bill to remove the requirement for ASIC staff to be engaged under the PSA.

Context of amendments

2.2 On 20 April 2016, the Government announced it accepted the recommendation in the ASIC Capability Review that ASIC should no longer be required to employ staff under the PSA. This is consistent with the earlier findings of the FSI.

2.3 This change will support ASIC to more effectively recruit and retain staff in positions requiring specialist skills. It will bring ASIC into line with other financial regulators (the Australian Prudential Regulation Authority and the Reserve Bank of Australia) that are also able to recruit staff outside of the PSA.

Summary of new law

2.4 Schedule 2 of the Bill:

•

provides for ASIC to employ staff directly rather than under the PSA;

•

allows certain functions to be delegated to ASIC senior staff members;

•

ensures that ASIC members who hold a position as the ASIC Chairperson or a Deputy Chairperson are only able to delegate any powers and functions specific to the role of Chairperson or Deputy Chairperson to another member or senior staff member;

•

requires the ASIC Chairperson to determine an ASIC Code of Conduct and ASIC Values;

•

provides for appropriate arrangements to transition ASIC staff engaged under the PSA to be engaged directly under the ASIC Act; and

•

provides for adequate disclosure of interest requirements to apply to staff members

Comparison of key features of new law and current law

Detailed explanation of new law

2.5 Part 1 of Schedule 2 to the Bill amends the ASIC Act to cease the requirement for ASIC staff to be engaged under the PSA.

2.6 Part 2 of Schedule 2 to the Bill makes consequential amendments to the Corporations Act, Business Names Registration Act and Mutual Assistance in Business Regulation Act, including in relation to delegations to ASIC staff once ASIC ceases to engage staff under the PSA.

Ceasing the requirement for ASIC to engage staff under the PSA

2.7 The requirement for ASIC to engage staff under the PSA in section 120 of the ASIC Act is repealed. Instead, the ASIC Chairperson is able to engage permanent, temporary and casual staff under a written agreement for the performance of ASIC's functions and powers. The ASIC Chairperson must determine the terms and conditions of employment including remuneration. [Schedule 2, item 7, section 120 of the ASIC Act]

2.8 The definition of 'staff member' in ASIC is updated to include staff employed by the ASIC Chairperson under section 120 of the ASIC Act rather than staff employed under the PSA. [Schedule 2, item 2, subsection 5(1) of the ASIC Act]

2.9 Once ASIC staff cease to be employed under the PSA, the existing provisions to delegate powers and functions to SES or SES equivalent employees will not be effective as ASIC will cease to have SES employees and it will not be apparent which members of ASIC staff would be the equivalent of an SES employee.

2.10 As such, a new definition for 'senior staff member' in ASIC is prescribed so that delegations under the ASIC and other Acts can be made to staff who meet this definition. The ASIC Chairperson will make a determination identifying 'senior staff members' in ASIC. [Schedule 2, item 1, subsection 5(1) of the ASIC Act]

2.11 The ASIC Chairperson's determination to identify which staff members are a 'senior staff member' must be a written instrument and may outline a senior staff member as a staff member who holds or acts in a certain position. The determination made by the Chairperson is a legislative instrument and will therefore be subject to appropriate Parliamentary scrutiny. [Schedule 2, item 9, section 122A of the ASIC Act]

2.12 Once ASIC ceases to employ staff under the PSA, the ASIC Chairperson will employ staff, including consultants, on behalf of ASIC and not on behalf of the Commonwealth. [Schedule 2, item 8, subsection 121(1) of the ASIC Act).

2.13 The functions and powers of the ASIC Chairperson or a Deputy Chairperson of ASIC may only be delegated to another ASIC member or a senior staff member of ASIC. [Schedule 2, item 6, paragraph 119A(2)(c) of the ASIC Act]

Governance of staff

2.14 New staff governance arrangements are required for ASIC staff as the existing provisions in the PSA will no longer apply.

2.15 As ASIC staff will no longer be bound by the APS Code of Conduct, the Chairperson of ASIC is required to determine an ASIC Code of Conduct. The ASIC Code of Conduct must be in writing and will apply to all staff employed by ASIC. To avoid doubt, the ASIC Code of Conduct is not a legislative instrument as it has an administrative rather than a legislative character. [Schedule 2, item 11, section 126B of the ASIC Act]

2.16 Similarly, as ASIC staff will no longer be bound by the APS Values, the Chairperson of ASIC is required to determine the ASIC Values. The ASIC Values must be in writing and will apply to all staff employed by ASIC. The ASIC Chairperson is required to uphold and promote the ASIC Values. To avoid doubt, the ASIC Values is not a legislative instrument as it has an administrative rather than a legislative character. [Schedule 2, item 11, section 126C of the ASIC Act]

2.17 The Chairperson of ASIC is required to take reasonable steps to minimise conflicts of interest by having adequate disclosure of interest requirements that apply to all staff employed by ASIC. [Schedule 2, item 11, section 126A ASIC Act]

2.18 The existing requirement for consultants to notify ASIC of their direct and indirect pecuniary interests that could result in a conflict of interest is maintained. Consistent with the current approach, the requirement will not apply to staff seconded to ASIC who are employed under the PSA as they are subject to the APS Code of Conduct. These disclosure requirements will also not apply to staff employed by ASIC as they will be subject to the ASIC Code of Conduct which would provide equivalent disclosure requirements. [Schedule 2, item 10, paragraph 125(1)(a) of the ASIC Act)]

2.19 There is no change to the requirement for ASIC delegates and members to also provide notification of their direct and indirect pecuniary interests that could result in a conflict of interest.

2.20 Section 10A of the ASIC Act currently provides that the ASIC Chairperson is not subject to direction by ASIC in relation to the Chairperson's performance of functions or exercise of power in relation to ASIC under the Public Governance, Performance and Accountability Act 2013 and the PSA. As ASIC staff will no longer be employed under the PSA, section 10A is amended so that the ASIC Chairperson is not subject to direction in relation to Parts 6 and 7 of the ASIC Act which deals with staff and preventing conflicts of interests. [Schedule 2, item 3, section 10A of the ASIC Act]

Consequential amendments

2.21 The existing provisions in the ASIC Act, Corporations Act, Business Names Registration Act and Mutual Assistance in Business Regulation Act are amended to allow functions to be delegated to 'senior staff members' of ASIC as determined by the ASIC Chairperson instead of 'SES or acting SES employees'. These changes are required because once ASIC ceases to employ staff under the PSA, ASIC will cease to have SES employees and it will not be apparent which members of ASIC staff would be the equivalent of an SES employee. [Schedule 2, items 4, 5 and 14 to 19, paragraph 102(2C)(b) and subsection 102(2C) of the ASIC Act, subsection 79(1) and paragraph 80(1)(b) of the Business Names Registration Act, paragraphs 1101J(c) and 50-10(4)(c) of Schedule 2 of the Corporations Act, and paragraphs 22(2)(aa) and 22(2)(b) of the Mutual Assistance in Business Regulation Act]

2.22 As section 120 of the ASIC Act is modified to allow the Chairperson to employ staff under the ASIC Act, a cross references has been updated. [Schedule 2, item 13, section 96 of the ASIC Act]

Application and transitional provisions

2.23 The amendments in Schedule 2 of the Bill apply from 1 July 2019.

2.24 Transitional provisions are required to ensure that certain existing conditions, rights and contracts continue to apply to ASIC staff as they transition from engagement under the PSA to engagement under the ASIC Act.

2.25 The definitions for certain terms relevant to the transitional provisions are provided for in item 12 of Part 1 of Schedule 2 to the Bill. [Schedule 2, item 12, section 309 of the ASIC Act]

2.26 ASIC staff employed under a written agreement immediately before commencement of the Bill on 1 July 2019 will continue to be employed under the written agreement from 1 July 2019. [Schedule 2, item 12, section 310 of the ASIC Act]

2.27 ASIC staff who are APS employees immediately before commencement of the Bill on 1 July 2019 will:

•

cease to be employed under the PSA from 1 July 2019;

•

become employed on the same terms, conditions and with the same accrued entitlements under a written agreement under the ASIC Act from 1 July 2019; and

•

maintain their continuity of service with ASIC.

[Schedule 2, item 12, section 311 of the ASIC Act]

2.28 These changes to ASIC's engagement of staff will not affect any promotions, performance management or disciplinary actions commenced before 1 July 2019. [Schedule 2, item 12, section 311 of the ASIC Act]

2.29 The changes in this Bill relating to the employment of ASIC staff will not give rise to any entitlements to receive payments or any other benefits merely because an ASIC staff member is no longer engaged under the PSA. [Schedule 2, item 12, section 311 of the ASIC Act]

2.30 The ASIC EA will continue to be effective until a new enterprise agreement is made. The ASIC EA will cover the Chairperson of ASIC on behalf of ASIC and all staff employed under the ASIC Act who were covered by the ASIC EA immediately before the commencement day of this Bill and for new staff employed by ASIC after the commencement day of this Bill until a new enterprise agreement is made. [Schedule 2, item 12, section 312 of the ASIC Act]

2.31 The transitional provisions in Schedule 2 to this Bill do not prevent the terms and conditions of a staff member's employment after 1 July 2019 from being varied in accordance with those terms or conditions or by law, award, determination or agreement. [Schedule 2, item 12, section 313 of the ASIC Act]

2.32 The Minister may make transitional rules prescribing matters of a transitional nature for 12 months after the Bill commences on 1 July 2019. The transitional rule will remain in effect for a maximum of 12 months unless a shorter period was specified. The transitional rule may apply either in relation to a particular person or class of persons. Transitional rules that apply to a class of persons will be legislative instruments. [Schedule 2, item 12, section 314 of the ASIC Act]

2.33 To avoid doubt, the transitional rules cannot be used to create an offence, civil penalty, provide powers for arrest, detention, entry, search or seizure, impose a tax, set an amount to be appropriated from the Consolidated Revenue Fund under an appropriation in this Act and amend this Act. This ensures any transitional rules made by the Minister are to be of transitional nature relating to the employment of ASIC staff. [Schedule 2, item 12, section 314 of the ASIC Act]

Chapter 3 Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Consideration of competition

3.1 Schedule 1 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 amends the Australian Securities and Investments Commission Act 2001 to require ASIC to consider competition in the financial system when performing its functions and exercising its powers.

Human rights implications

3.3 The amendments in Schedule 1 do not engage any of the applicable rights or freedoms.

Conclusion

3.4 Schedule 1 is compatible with human rights as it does not raise any human rights issues.

Removing ASIC from the Public Service Act 1999

3.5 Schedule 2 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

3.6 Schedule 2 amends the Australian Securities and Investments Commission Act 2001, Corporations Act 2001, Business Names Registration Act 2011 and Mutual Assistance in Business Regulation Act 1992 to allow the Australian Securities and Investments Commission to employ staff outside of the Public Service Act 1999.

Human rights implications

3.7 The amendments in Schedule 2 do not engage any of the applicable rights or freedoms.

Conclusion

3.8 Schedule 2 is compatible with human rights as it does not raise any human rights issues.