Corporations Regulations 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

PART 7.6 - LICENSING OF PROVIDERS OF FINANCIAL SERVICES  

REGULATION 7.6.01   NEED FOR AUSTRALIAN FINANCIAL SERVICES LICENCE: GENERAL  

7.6.01(1)    
For paragraph 911A(2)(k) of the Act, the provision of the following services is covered by an exemption from the requirement to hold an Australian financial services licence:

(a) (Repealed)

(aa) (Repealed)

(b)    dealing in a financial product by a person in the capacity of the trustee of a pooled superannuation trust in the following circumstances:

(i) the pooled superannuation trust is used for investment of the assets of a regulated superannuation fund;

(ii) the regulated superannuation fund has net assets of at least $10 million on the date that it first invests in the pooled superannuation trust;

(ba)    

a superannuation trustee service provided by the trustee of a pooled superannuation trust in the circumstances set out in paragraph (b) ;

(c)    

dealing in a financial product by a person in the capacity of the trustee of a pooled superannuation trust in the following circumstances:

(i) the pooled superannuation trust is used for investment of the assets of a regulated superannuation fund;

(ii) the regulated superannuation fund has net assets of at least $5 million, but less than $10 million, on the date that it first invests in the pooled superannuation trust (whether that date is before or after the FSR commencement);

(iii) the trustee has a reasonable expectation that the net assets of the regulated superannuation fund will equal or exceed $10 million not later than 3 months of the date on which it first invests in the pooled superannuation trust (whether that date is before or after the FSR commencement);

(ca)    

a superannuation trustee service provided by the trustee of a pooled superannuation trust in the circumstances set out in paragraph (c) ;

(d)    dealing in a financial product by a person in the capacity of the trustee of a pooled superannuation trust in circumstances in which the pooled superannuation trust is not used for the investment of the assets of a regulated superannuation fund;

(da)    

a superannuation trustee service provided by the trustee of a pooled superannuation trust in the circumstances set out in paragraph (d) ;

(db)    

dealing in a financial product by a person in the capacity of the trustee of a registrable superannuation entity in the ordinary course of operation of the registrable superannuation entity (other than a financial product that is an interest in the registrable superannuation entity);

(e)    

a financial service provided by a person ( person 1 ) in the following circumstances:

(i) the service consists only of:

(A) informing a person ( person 2 ) that a financial services licensee, or a representative of the financial services licensee, is able to provide a particular financial service, or a class of financial services; and

(B) giving person 2 information about how person 2 may contact the financial services licensee or representative;

(ii) person 1 is not a representative of the financial service licensee, or of a related body corporate of the financial services licensee;

(iii) person 1 discloses to person 2, when the service is provided:

(A) any benefits (including commission) that person 1, or an associate of person 1, may receive in respect of the service; and

(B) any benefits (including commission) that person 1, or an associate of person 1, may receive that are attributable to the service;

(iv) the disclosure mentioned in subparagraph (iii) is provided in the same form as the information mentioned in subparagraph (i);

(ea)    

a financial service provided by a person ( person 1 ) in the following circumstances:

(i) the service consists only of:

(A) informing a person ( person 2 ) that a financial services licensee, or a representative of the financial services licensee, is able to provide a particular financial service, or a class of financial services; and

(B) giving person 2 information about how person 2 may contact the financial services licensee or representative;

(ii) person 1 is a representative of the financial service [ sic ] licensee, or of a related body corporate of the financial services licensee;

(f)    a financial service provided in the following circumstances:

(i) a person ( person 1 ) is a person that is not in the jurisdiction;

(ii) person 1 arranges, on behalf of another person ( person 2 ), for a holder of an Australian financial services licence to deal in a financial product;

(iii) person 1 believes on reasonable grounds that person 2 is not in the jurisdiction;

(fa)    

a financial service is provided in the following circumstances:

(i) a person ( person 1 ) is a person that is not in the jurisdiction;

(ii) person 1 enters into an arrangement with the holder of an Australian financial services licence under which a financial product, or a beneficial interest in a financial product, is to be held on trust for, or on behalf of, another person ( person 2 );

(iii) person 1 believes on reasonable grounds that person 2 is not in the jurisdiction;

(g)    a financial service provided in the following circumstances:

(i) a person ( person 1 ) is a person that is not in the jurisdiction;

(ii) person 1 believes on reasonable grounds that another person ( person 2 ) is not in the jurisdiction;

(iii) person 1 deals on behalf of person 2 in a financial product that cannot be traded on a licensed market;

(iv) person 1 believes on reasonable grounds that each person who is a party to the dealing or any transaction to which the dealing relates is a person that is not in the jurisdiction;

(h)    

a dealing in a financial product that consists only of an employer-sponsor paying contributions on behalf of an employee into a superannuation product or RSA;

(ha) (Repealed)

(hb)    

a dealing in a financial product that consists only of an RSA provider paying the benefits of an RSA holder into a superannuation product or RSA;

(hc)    

a dealing in a financial product that consists only of an employer-sponsor arranging for the issue of a superannuation product to an employee;

(i) - (j) (Omitted)

(k)    

a financial service provided in the following circumstances:

(i) the financial service is provided in respect of a financial product by a person (who may be described as a " sub-custodian " ) under an arrangement with a financial services licensee (the master-custodian );

(ii) the master-custodian is authorised by its Australian financial services licence to provide a custodial or depository service;

(iii) a beneficial interest in the financial product is held by the master-custodian on trust for or on behalf of a client as part of providing a custodial or depository service authorised by its Australian financial services licence;

(l)    

a financial service provided by a person ( person 1 ) in the following circumstances:

(i) the financial service is provided to another person ( person 2 ) in the ordinary course of person 1 ' s business;

(ii) person 1 does not provide financial services as a significant part of person 1 ' s business;

(iii) the financial service consists only of either or both of:

(A) advising person 2 in relation to a non-cash payments facility that person 2 may use or has used to pay person 1 for goods or services; and

(B) arranging to deal in a non-cash payments facility that person 2 will use to pay person 1 for goods or services;

(iv) the goods and services do not include any financial products or financial services;

Example

A retailer might offer its customers a variety of payment methods for payment for goods and services, such as a credit card, Bpay, or direct debit.

A recommendation of a particular payment method, or the expression of an opinion about the payment methods available to the customer, should not require an Australian financial services licence.

(la)    

a financial service provided by a person ( person 1 ) to another person ( person 2 ), if:

(i) the financial service is provided in the ordinary course of person 1 ' s business; and

(ii) person 1:

(A) holds an Australian financial services licence authorising the provision of financial services other than the financial service mentioned in subparagraph (i); or

(B) does not hold an Australian financial services licence; and

(iii) the financial service consists of either or both of the following:

(A) advising person 2 in relation to a non-cash payments facility that person 2 may use, or has used, to pay person 1 for a financial product or a financial service;

(B) arranging to deal in a non-cash payments facility that person 2 will use to pay person 1 for a financial product or a financial service;

(lb)    

a financial service that is the issue of a non-cash payment facility if:

(i) it is a facility for making non-cash payments; and

(ii) under the facility, payments may be made only to the issuer of the facility or a related body corporate of the issuer;

(lc)    

an Australia Post presentment and payment processing facility known as POSTbillpay or billmanager;

(m)    

a financial service provided by a person in the following circumstances:

(i) the service consists only of either or both of:

(A) dealing in derivatives; and

(B) dealing in foreign exchange contracts;

(ii) the service does not involve the making of a market for derivatives or foreign exchange contracts;

(iii) the dealing is entered into for the purpose of managing a financial risk that arises in the ordinary course of a business;

(iv) the person does not deal in derivatives or foreign exchange contracts as a significant part of the person ' s business;

(v) the dealing is entered into on the person ' s own behalf;

Example of financial service to which paragraph (m) applies

A series of forward foreign exchange contracts entered into by a gold mining company to hedge against the risk of a fall in the price of gold.

Example of financial service to which paragraph (m) does not apply

The issue and disposal of derivatives relating to the wholesale price of electricity are not transactions to which this paragraph applies.

(ma)    

a financial service provided by a person in the following circumstances:

(i) the service consists only of 1 or more of the following:

(A) dealing in derivatives over carbon units, Australian carbon credit units or eligible international emissions units;

(B) dealing in a carbon unit, an Australian carbon credit unit or an eligible international emissions unit;

(C) dealing in foreign exchange contracts for carbon units, Australian carbon credit units or eligible international emissions units;

(ii) the service does not involve the making of a market for those derivatives, units or foreign exchange contracts;

(iii) the dealing is entered into for the purpose of managing financial risk in relation to the surrender, cancellation or relinquishment of carbon units, Australian carbon credit units or eligible international emissions units by:

(A) the person; or

(B) a related body corporate of the person; or

(C) an associated entity of the person;

Note: Section 175 of the Carbon Credits (Carbon Farming Initiative) Act 2011 deals with the relinquishment of Australian carbon credit units. Section 210 of the Clean Energy Act 2011 deals with the relinquishment of carbon units.

(iv) the person does not deal in those derivatives, units or foreign exchange contracts as the principal activity of the person ' s business;

(v) the dealing is entered into:

(A) on the person ' s own behalf; or

(B) on behalf of a related body corporate of the person; or

(C) on behalf of an associated entity of the person;

(mb)    

a financial service that a person is engaged by the Clean Energy Regulator to provide to the Clean Energy Regulator, or on behalf of the Clean Energy Regulator, that relates to the conduct of an auction of carbon units under the Clean Energy Act 2011 , other than a financial service that arises in the course of the following activities:

(i) the management of any deposit lodged to participate in an auction under the Clean Energy Act 2011 ;

(ii) direct participation in an auction under the Clean Energy Act 2011 , whether on the person ' s own behalf or on behalf of a person other than the Clean Energy Regulator;

(n)    

a financial service provided by a person ( person 1 ) to another person ( person 2 ) in the following circumstances:

(i) person 1 is not in this jurisdiction;

(ii) person 2 is in this jurisdiction;

(iii) the service consists only of dealing in a financial product or class of financial products;

(iv) a financial services licensee whose financial services licence covers the provision of the service arranges for person 1 to provide the service to person 2;

(na)    

a financial service provided by a person ( person 1 ) to another person ( person 2 ) in the following circumstances:

(i) person 1 is not in this jurisdiction;

(ii) person 2 is in this jurisdiction;

(iii) the service consists only of 1 or more of:

(A) the provision of financial product advice to person 2; and

(B) person 1 making a market; and

(C) the provision of a custodial or depositary service to person 2;

(iv) person 1 is:

(A) a related body corporate of a financial services licensee whose financial services licence covers the provision of the service; or

(B) a party to a business joint venture with a financial services licensee whose financial services licence covers the provision of the service;

(v) the financial services licensee arranges for person 1 to provide the service;

(vi) the financial service licensee ' s licence is subject to a condition requiring it to assume responsibility for the conduct of person 1 in the provision of the financial service mentioned in this paragraph;

(o)    

a financial service that is the provision of financial product advice in the following circumstances:

(i) the advice is only general advice in relation to a financial product or class of financial products;

(ii) the advice is provided by the product issuer of the financial product or class of financial products;

(iii) the advice is provided in the media;

(iv) the product issuer provides the following information:

(A) the advice has been prepared without taking account of the client ' s objectives, financial situation or needs;

(B) for that reason, the client should, before acting on the advice, consider the appropriateness of the advice, having regard to the client ' s objectives, financial situation and needs;

(C) if the advice relates to the acquisition, or possible acquisition, of a particular financial product, the client should obtain a Product Disclosure Statement relating to the product and consider the Statement before making any decision about whether to acquire the product;

(oa)    

the provision of financial product advice if the advice:

(i) is provided by an actuary in the ordinary course of providing actuarial services; and

(ii) could not reasonably be expected to be included in a document that is to be given to a retail client; and

(iii) is provided to:

(A) a wholesale client; or

(B) the Commonwealth, a State or a Territory; or

(C) an exempt public authority;

(p)    

a financial service provided by a person in the following circumstances:

(i) the financial service relates to insurance entered into, or proposed to be entered into, for the purposes of a law (including a law of a State or Territory) that relates to workers compensation;

(ii) the person is licensed to provide the service under the law of the State or Territory in which the service is provided;

Example

The activities of a licensed insurer under the Workers Compensation Act 1987 of New South Wales.

Note: A licensed insurer would require an Australian financial services licence to the extent that the licensed insurer provides a financial service in respect of a non-workers compensation product or a non-workers compensation component of a product.

(pa)    

a financial service provided to a wholesale client by a body that:

(i) is not a company; and

(ii) is established or constituted under a law of the Commonwealth or a State or Territory; and

(iii) is required under a law of the Commonwealth or a State or Territory to carry on the business of insurance or to undertake liability under a contract of insurance; and

(iv) is regulated for the provision of insurance under a law of the Commonwealth or a State or Territory;

(q)    

a financial service provided by a person in the following circumstances:

(i) the financial service consists only of the variation or disposal of a financial product by the person;

(ii) the person also issued the original product;

(iii) the person provides the financial service under the terms of the financial product;

(r)    

a financial service that is a dealing (or arranging for a dealing) in:

(i) a debenture; or

(ii) a legal or equitable right or interest in a debenture; or

(iii) an option to acquire, by way of issue or transfer, a debenture or a legal or equitable right or interest in a debenture;

by the issuer of the debenture, the legal or equitable right or interest or the option;

(s)    

the provision of financial product advice if the advice:

(i) is provided to a financial services licensee; and

(ii) is only general advice in relation to a financial product or a class of financial products; and

(iii) is advice that the financial services licensee is authorised to provide; and

(iv) is provided by:

(A) the product issuer; or

(B) a related body corporate of the product issuer;

(t)    

advising in relation to, or dealing in, a medical indemnity insurance product;

(ta)    

a financial service provided by a person in the following circumstances:

(i) the financial service is providing financial product advice in relation to a friendly society funeral product, or dealing in a friendly society funeral product;

(ii) the person is a funeral services entity, or an employee, director or other officer of a funeral services entity;

(iii) the financial service is provided in the funeral services entity ' s ordinary course of business as a funeral services entity;

(u)    

a financial service provided by a person in the following circumstances:

(i) the financial service is advice included in a document issued in connection with a takeover bid or an offer of a financial product;

(ii) the advice is an opinion on matters other than financial products and does not include advice on a financial product;

(iii) the document includes a statement that the person is not operating under an Australian financial services licence when giving the advice;

(iv) the person discloses, in the document, the information mentioned in paragraphs 947B(2) (d) and (e) of the Act;

Example

A geologist ' s report on a mining lease included in a PDS.

(v)    

a financial service provided by a person (the nominee ) in the following circumstances:

(i) the nominee holds a financial product or a beneficial interest in a financial product on trust for or on behalf of a client of a financial services licensee who is a participant in a licensed market (the participant );

(ii) the financial product:

(A) was acquired on the licensed market by the participant on behalf of the client; or

(B) is to be disposed of on the licensed market by the participant on behalf of the client;

(iii) the participant is authorised by an Australian financial services licence to provide a custodial or depository service;

(iv) the participant ' s licence is subject to a condition requiring it to assume responsibility for the conduct of the nominee in relation to the provision of a financial service mentioned in this paragraph;

(v) the nominee is a wholly-owned subsidiary of the participant;

(w)    

a financial service that is provided:

(i) by the Export Finance and Insurance Corporation established by the Export Finance and Insurance Corporation Act 1991 ; and

(ii) only to a wholesale client;

(x)    

a service in relation to a litigation funding scheme mentioned in regulation 5C.11.01 ;

(y)    a service in relation to a litigation funding arrangement mentioned in regulation 5C.11.01 ;

(z)    

a financial service provided by a person in the following circumstances:

(i) the person is:

(A) the operator of a qualifying gas trading exchange; or

(B) a participant in relation to a qualifying gas trading exchange;

(ii) the service is provided in relation to a qualifying gas exchange product traded on the qualifying gas trading exchange;

(za)    

the provision of financial product advice to a client by a financial capability service provider as part of the provision of a financial capability service in the following circumstances:

(i) the advice relates to a basic deposit product;

(ii) no fees or charges (however described) are payable by or on behalf of the client in relation to the financial capability service;

(iii) no remuneration (whether by way of commission or otherwise) is payable to, or for the benefit of, the financial capability service provider, its representatives or its associates in relation to any action by or on behalf of the client arising from the financial capability service (including the advice);

(iv) the financial capability service provider does not carry on or otherwise participate in a financial services business involving the provision of a financial service, other than a financial service of the kind to which this paragraph applies;

(v) the financial capability service provider takes all reasonable steps to ensure that none of its representatives provides or participates in the provision of a financial service, other than a financial service of the kind to which this paragraph applies;

(vi) the financial capability service provider takes all reasonable steps to ensure that each person who provides the financial capability service (including the advice) on its behalf has undertaken appropriate training to ensure that they have adequate skills and knowledge to satisfactorily provide that service (including that advice);

(zb)    

the provision of financial product advice to a client by a financial counselling agency as part of the provision of a financial counselling service if the advice:

(i) relates to a deposit product, a facility for making non-cash payments, an insurance product, an RSA or a superannuation product; or

(ii) is to the effect that the client should or may dispose of a security, a managed investment product, a financial product referred to in paragraph 764A(1)(ba) of the Act, or a debenture, stock or bond issued by a government;

and the following circumstances apply:

(iii) no fees or charges (however described) are payable by or on behalf of the client in relation to the financial counselling service, other than any fees or charges payable on behalf of the client by the Commonwealth, a State or a Territory;

(iv) no remuneration (whether by way of commission or otherwise) is payable to, or for the benefit of, the financial counselling agency, its representatives or its associates in relation to any action by or on behalf of the client arising from the financial counselling service (including the advice);

(v) the financial counselling agency does not carry on or otherwise participate in a financial services business involving the provision of a financial service, other than a financial service of the kind to which this paragraph applies or a claims handling and settling service;

(vi) the financial counselling agency takes all reasonable steps to ensure that none of its representatives provides or participates in the provision of a financial service, other than a financial service of the kind to which this paragraph applies or a claims handling and settling service;

(vii) the financial counselling agency takes all reasonable steps to ensure that each person who provides the financial counselling service (including the advice) on its behalf is a member of, or is eligible to be a member of, a financial counselling association;

(viii) the financial counselling agency takes all reasonable steps to ensure that each person who provides the financial counselling service (including the advice) on its behalf has undertaken appropriate training to ensure that they have adequate skills and knowledge to satisfactorily provide that service (including that advice).

7.6.01(2)    

If paragraph (1)(c) or (ca) applies, and the net assets of the regulated superannuation fund do not equal or exceed $10 million at the end of the 3 month period mentioned in subparagraph (1)(c)(ii) :

(a)    the trustee of the pooled superannuation trust must offer to redeem the investment of the regulated superannuation fund as soon as practicable after the end of the period; and

(b)    the regulated superannuation fund has not accepted the redemption offer within 3 months after the offer was made; and

(c)    the net assets of the regulated superannuation fund do not equal or exceed $10 million by the end of the 3 month period mentioned in paragraph (b);

the trustee of the pooled superannuation trust must apply for an Australian financial services licence.

7.6.01(3)    

Subregulation (1) is not intended to affect the determination of whether the provision of a service that is not described by that paragraph is, or is not, the provision of a financial service.

7.6.01(4)    

In relation to a regulated principal under Division 1 of Part 10.2 of the Act:

(a)    a reference in paragraph (1)(e) or (ea) to a financial services licensee includes the regulated principal; and

(b)    paragraph (a) ceases to apply at the end of the transition period in relation to the regulated principal.

7.6.01(5)    

For paragraphs (1)(b) , (ba) , (c) and (ca) , if a pooled superannuation trust is used for investment of the assets of more than 1 regulated superannuation fund:

(a)    each of the regulated superannuation funds must comply with paragraph (1)(b) or (c) ; and

(b)    it is not necessary for each of the regulated superannuation funds to comply with the same paragraph in relation to a particular pooled superannuation trust.

7.6.01(6)    

Paragraph (1)(r) ceases to have effect at the end of 2 years after the FSR commencement.

7.6.01(6A)    

Paragraph (1)(t) ceases to have effect in respect of a person advising in relation to, or dealing in, a medical indemnity insurance product, on the earlier of:

(a)    the date on which the person obtains an Australian financial services licence in respect of the product; and

(b)    11 March 2004.

7.6.01(7)    

In this regulation:

business joint venture
means a contractual agreement between 2 or more parties for the purpose of carrying on a business undertaking.

financial capability service
means a financial literacy and capacity building service provided mainly to improve the financial knowledge and skills of persons.

financial capability service provider
means a body that is funded wholly or partly by the Commonwealth to provide a financial capability service.

financial counselling agency
means a person that provides a financial counselling service.

financial counselling association
means each of the following:

(a) Financial Counselling Australia Ltd;

(b) Financial Counsellors Association of New South Wales Inc;

(c) Financial Counselling Victoria Inc;

(d) Financial Counsellors Association of Queensland Inc.;

(e) Financial Counsellors Association of Western Australia Inc;

(f) The South Australian Financial Counsellors ' Association Incorporated;

(g) Financial Counselling Tasmania Inc.;

(h) Financial Counsellors ACT.

financial counselling service
means a counselling and advocacy service provided mainly for the purposes of assisting individuals or small businesses who are in financial difficulty to resolve their problems.

friendly society funeral product
means a financial product that is an account (however described):

(a) provided by:

(i) a body that is a friendly society for the purposes of the Life Insurance Act 1995 ; or

(ii) a body that is registered or incorporated as a friendly society under a law of a State or Territory; or

(iii) a body that is permitted, by a law of a State or Territory, to assume or use the expression friendly society ; or

(iv) a body that, immediately before the date that is the transfer date for the purposes of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 , was registered or incorporated as a friendly society under a law of a State or Territory; and

(b) the sole purpose of which is to save money for the purpose of meeting the whole or a part of the expenses of and incidental to the funeral, burial or cremation of a person on the death of that person.

funeral services entity
means an entity of one of the following kinds:

(a) a body corporate;

(b) a partnership;

(c) an unincorporated body;

(d) an individual;

(e) for a trust that has only one trustee - a trustee;

(f) for a trust that has more than one trustee - the trustees together;

that carries on a business in this jurisdiction of supplying:

(g) services for the care and preparation of human bodies for burial or cremation; and

(h) services for the arrangement, supervision or conduct of a funeral, burial or cremation; and

(i) products in connection with the services mentioned in paragraphs (g) and (h).

media
means any of the following:

(a) a newspaper, magazine, journal or other periodical;

(b) a radio or television broadcasting service;

(c) an electronic service (including a service provided by the Internet) that is:

(i) operated on a commercial basis; and

(ii) similar to a newspaper, a magazine, a radio broadcast or a television broadcast.

small business
means a business with less than 100 employees.