Explanatory Statement

Minister for Financial Services and Superannuation

Corporations Amendment Regulation 2012 (No. 3)

Subject - Section 1364(1) of the Corporations Act 2001

Section 1364(1) of the Corporations Act 2001 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

Section 911A (2)(k) of the Act enables regulations to prescribe services that are exempt from the requirement to hold an Australian financial services (AFS) licence.

The Regulation makes a minor amendment to the Corporations Regulations 2001 (the Principal Regulations) to exempt a registered auditor that provides a cover pool monitor service from the requirement to hold an AFS licence.

The Banking Amendment (Covered Bonds) Act 2011 (the 2011 Act) established a framework for the issuance of covered bonds by Authorised Deposit-Taking Institutions (ADIs) in Australia. Section 30 of the 2011 Act requires a cover pool monitor to assess an ADI's compliance with its obligations and provide an opinion with respect to this compliance.

The intention of the 2011 Act was that auditors that provide a cover pool monitor service would not be required to hold an AFS licence if they were registered under Part 9.2 of the Act. This intention is consistent with regulation 7.1.29(3)(a) of the Principal Regulations, which exempts persons engaged in the preparation or auditing of financial reports or audit reports from the requirement to hold an AFS licence.

Following the passage of the 2011 Act, it has been suggested that registered auditors may still be required to hold an AFS licence to provide a cover pool monitor service. As such, the Regulation clarifies that an auditor who is recognised under Part 9.2 of the Act that provides a cover pool monitor service is exempt from the obligation to hold an AFS licence.

The Regulation was made after public consultation on the drafting of the 2011 Act in March 2011, as well as targeted industry consultation with cover pool monitors in January 2012.

Under the Corporations Agreement 2002 (the Agreement), the State and Territory Governments referred their constitutional powers with respect to corporations regulation to the Commonwealth. The Agreement requires the Commonwealth to consult with the Ministerial Council for Corporations before making amendments to certain provisions of the Principal Regulations. The Ministerial Council for Corporations was consulted about these amendments, and notified of the Minister's decision to dispense with the period of public exposure on the basis that the amendments were minor in nature and merely sought to restore the intended operational effect of the 2011 Act.

The Act specifies no conditions that need to be satisfied before the power to make the Regulations may be exercised.

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulations commence on the day after they are registered.

Statement of Compatibility with Human Rights

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

Corporations Amendment Regulation 2012 (No. 3)

This Legislative Instrument 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 of the Legislative Instrument

The purpose of the Legislative Instrument is to exempt a registered auditor that provides a cover pool monitor service from the requirement to hold an Australian financial services (AFS) licence.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.