House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Jim Chalmers MP)

Chapter 3: Strengthening Australia's FMI regulatory framework - Enhancing and streamlining ASIC's licensing and supervisory powers

Outline of chapter

3.1 Schedule 2 to the Bill provides for new and enhanced regulatory powers in relation to FMI entities. Schedule 3 to the Bill transfers certain existing Ministerial powers relating to the licensing and supervision of CS facilities and financial markets to ASIC and the RBA.

3.2 Schedule 5 to the Bill makes related minor and technical amendments to the Corporations Act, ASIC Act and Insurance Act 1973.

3.3 All legislative references in this chapter are to the Corporations Act unless otherwise stated.

Context of amendments

3.4 The 2020 advice to Government concluded that regulators required additional supervisory and enforcement powers to most effectively monitor and manage the risks associated with FMI entities and promote the reliability and integrity of the markets that they support.

3.5 The 2020 advice to Government found that, currently, the Minister has operational powers that more appropriately sit with the regulators, while ASIC has powers that more appropriately sit with the RBA. Formally redistributing these powers will better distinguish the regulators' responsibilities from the strategic role of Government and align the regulators' powers with their respective mandates.

3.6 The amendments in Schedule 2 to the Bill strengthen the regulators' supervisory powers and broaden the range of enforcement tools they have available. This will give the regulators significantly more capacity to monitor the ongoing conduct of FMI entities, identify risks as they emerge, and take appropriate action to prevent those risks from escalating.

3.7 The amendments in Schedule 3 redistribute various Ministerial powers that are currently delegated by the Minister to ASIC under the Ministerial Powers (ASIC) Delegations 2021 in the primary law. CS facilities are co-regulated by ASIC and the RBA, and so the RBA has also received powers in relation to CS facility licensees.

3.8 The amendments introduced in this Bill ensure that the distribution of responsibilities is consistent with comparable regimes and international best practice.

Summary of new law

3.9 Schedules 2 and 3 to the Bill provide for the streamlining and enhancement of supervisory and licensing powers to promote financial stability and financial markets that are stable, fair, orderly and transparent.

3.10 The amendments in Schedule 2:

•

Introduce a requirement for domestic CS facility licensees to be registered under Chapter 2A of the Act;

•

ensure Ministerial approval is required for changes in control in all widely held market bodies, with such bodies being declared by ASIC; and

•

increase the threshold for the Minister needing to approve proposals to acquire from more than 15 per cent of the voting rights in a widely held market body to 20 per cent; and

•

implement a fit, proper, capable and competent standard for individuals performing certain roles or carrying out certain functions in licensed entities.

3.11 ASIC is provided with new powers to:

•

determine that a particular overseas financial market or CS facility has a material connection with Australia in order to provide certainty for all stakeholders about the scope of the Australian licensing regime;

•

request information about a financial market or CS facility operated by a body corporate related to considering if a connection with Australia is material;

•

take licensing action in a broader set of circumstances to safeguard the integrity of the licensing regime;

•

declare a financial market to be a declared financial market or a body to be a widely held market body;

•

require an expert report in relation to licensed entities;

•

make FMI banning orders against certain individuals who do not meet the fit, proper and competent standard;

•

approve proposals to acquire more than 20 per cent of the voting rights in a domestically incorporated licensee (other than a widely held market body); and

•

make rules (including emergency rules) in respect of operators of licensed CS facilities and participants in licensed CS facilities.

3.12 In addition, the amendments in Schedule 2 streamline some of ASIC's existing directions powers and remove the limit on the period during which certain directions issued by ASIC are effective.

3.13 Amendments that are primarily in Schedule 3 transfer certain supervisory and licensing powers that previously sat with the Minister (and are delegated to ASIC under the Ministerial Powers (ASIC) Delegations 2021) to ASIC, and in some circumstances, the RBA. These powers are outlined in the table below:

Transfer of the Minister's powers under Chapter 7

Comparison of key features of new law and current law

Table 3.1 Comparison of new law and current law

Detailed explanation of new law

Amendments relating only to CS facilities

Who may be granted an Australian CS facility licence

3.14 Currently, the Minister may grant Australian CS facility licences. These amendments transfer the power to grant CS facility licences to ASIC. The administrative process remains the same, where ASIC must be satisfied with the same criteria the Minister had to be satisfied under, and also have regard to the same matters in section 827A of the Act in deciding whether to grant a licence.

3.15 The amendments create a general licence condition for CS facility licences that if the licence was granted under subsection 824B(1) of the Act, the licensee must be a body corporate registered under Chapter 2A of the Act. Unless exempt, a CS facility licensee with a licence granted under subsection 824B(1) of the Act that is not registered under Chapter 2A of the Act contravenes the civil penalty provision under subsection 821A(2) of the Act.

3.16 Subsection 824B(3) of the Act, which contains the requirement that a foreign body corporate be registered under Division 2 of Part 5B.2 of the Act, is repealed and instead the requirement is retained as a general obligation in paragraph 821A(1)(e) of the Act.

3.17 The former requirement for the Minister to not grant a licence unless ASIC has notified the Minister that no disqualified individual is involved in the applicant, or 42 days have passed since the application was made and ASIC has not given a notice under 853D(2) of the Act to the applicant within that time period, is also repealed as it is redundant. It is no longer necessary as the power to grant CS facility licences has been transferred to ASIC, and ASIC will know if they have declared or propose to declare any disqualified individuals. For the same reasons, the equivalent provision under 795B(4) of the Act in relation to disqualified individuals, in the context of an Australian market licence, is also repealed. The transfer of power to grant an Australian market licence from the Minister to ASIC is discussed below in the section entitled 'Additional transferred powers'. [Schedule 2, items 1 to 12 and 127, sections 795B, 824B, subsection 821A(2) and paragraph 821A(1)(ea) of the Act]

CS facility rules

Power to make rules

3.18 The amendments provide ASIC with a power to make rules for the purposes of promoting the provision of fair and effective services by licensed CS facilities. Schedule 2 defines such rules as CS facility rules. [Schedule 2, items 62 and 65, sections 9 and 826H of the Act]

Application of the rules

3.19 The rules may impose obligations on both operators and participants of licensed CS facilities, as well as any other entities prescribed in the regulations. The application to participants reflects the key conduit for the provision of clearing and settlement to financial markets, and also of risk to the CS facility. However, the CS facility rules do not apply in relation to overseas CS facilities. [Schedule 2, item 65, section 826J of the Act]

Difference between CS services rules

3.20 The CS facility rules differ from CS services rules. CS services rules cannot impose requirements dealing with the activities, conduct and governance arrangements of CS facility licensees and associated entities, in relation to CS services, unless those services are of a type covered by a determination made by the Minister. Such a determination is intended only to be made for classes of CS services that meet certain criteria, particularly regarding the state of competition in the market for those services. CS facility rules are not constrained to the provision of certain services.

Exemption

3.21 ASIC or the Regulations may exempt a person or class of persons from all or specified provisions in Division 3A of the Act (establishing the rules), regulations made pursuant to the Division, or all of specified provisions of the CS facility rules. Exemptions by ASIC are made under the exemptions power in section 820C of the Act which is amended by the amendments in Schedule 2 (see paragraphs 3.80 to 3.86). Where there is a conflict between an exemption by the regulations and an exemption prescribed by ASIC, the exemption in the regulations prevails. [Schedule 2, items 57 and 65, sections 820C, 826T and 826U of the Act]

3.22 As the amendments empower ASIC to make CS facility rules, it is reasonable to enable ASIC to exempt persons or classes of persons from such rules. Although Division 3A of the Act establishes the rules, ASIC is responsible for their content and application. Therefore, it is well placed to determine if a person or class of persons should be exempt from their application in specific circumstances. ASIC's exemption power does not allow it to modify the effect of the legislation or the CS facility rules. It is only the ability to exclude or exempt certain persons or classes of person from its application.

3.23 The ability for the regulations to exempt or modify a specific class from the rules is consistent with sections 798L (relating to market integrity rules), 907E (relating to derivative trade repository rules) and 908EB of the Act (relating to the benchmark rules). Exemption by ASIC is consistent with the Minister and ASIC's power to provide exemptions with respect to financial markets under section 798M of the Act, derivative trade repositories under section 907D of the Act, and financial benchmark administrators under section 908EB of the Act. The exemption and modification by regulations power allows timely and efficient responses to market changes. [Schedule 2, items 65 and 67, sections 826U and 1317C of the Act]

Consultation and consent requirements

3.24 ASIC must not make a rule unless ASIC has:

•

consulted the public about the proposed rule;

•

consulted any other person or body as required by regulations; and

•

consulted the RBA. [Schedule 2, item 65, subsection 826M(1) of the Act]

3.25 Without limiting the ways in which ASIC may comply with the obligation to consult the public about the proposed rule, ASIC is taken to comply with that obligation if ASIC, on its website:

•

makes the proposed rule, or a description of the proposed rule, available; and

•

invites the public to comment on the proposed rule. [Schedule 2, item 65, subsection 826M(2) of the Act]

3.26 However, if ASIC fails to consult with the public, the RBA or any other person or body it does not invalidate the rule. This is because the CS facilities rules relate to regulating the entities that support the Australian financial system and affected entities require certainty to ensure that stability continues. Where a failure to meet procedural requirements would amount to jurisdictional error, the no invalidity provision do not prevent an entity from seeking judicial review under section 75(v) of the Constitution and section 39B of the Judiciary Act 1903. [Schedule 2, item 65, subsection 826M(3) of the Act]

3.27 ASIC must not make a rule without the Minister's consent, in writing, to the making of the rule. The RBA may provide advice to the Minister when ASIC seeks written consent from the Minister to make the rule. However, the consultation requirements and ministerial consent do not apply to variation or revocation pursuant to the Minister's direction to revoke or vary the CS facility rule due to inconsistency with other instruments. Schedule 2 clarifies that ministerial consent is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act to assist readers. [Schedule 2, item 65, section 826N of the Act]

3.28 ASIC may vary or revoke the rules in like manner and subject to like conditions (see subsections 33(3) and (3AA) of the Acts Interpretation Act 1901). But where the variation arises as a result of the direction of the Minister, consultation and ministerial consent requirements do not apply. [Schedule 2, item 65, section 826R of the Act]

Emergency CS facility rules

3.29 ASIC may make emergency rules without the consent of the Minister and without consulting the RBA, if ASIC is of the opinion that the rules are necessary, or in the public interest, to protect the Australian economy, the efficiency, integrity or stability of the Australian financial system, or the provision of fair and effective services by licensed CS facilities.

3.30 Where a rule is made in an emergency, consultation with the public or any other person or body as required by regulations is also not required. [Schedule 2, item 65, subsection 826P(1) of the Act]

3.31 Where emergency rules are made, ASIC must provide the Minister a written explanation of the need for the emergency rules the following day and comply with any direction from the Minister to vary or revoke the rule. The amendment that a direction from the Minister is not a legislative instrument is included to assist readers. [Schedule 2, item 65, subsections 826P(2), (3), (4) and (5) of the Act]

3.32 ASIC may make or vary a CS facility rule without consultation or consent if the Reserve Bank requests ASIC to make the rule or variation under subsection 849AB(1) of the Act. If ASIC does so, ASIC must provide the Minister with a copy of the request from the RBA. The minister may consider it appropriate to direct ASIC to revoke or vary the rule and ASIC must comply with that direction. A direction is not a legislative instrument and this amendment is included to assist readers. [Schedule 2, item 65, section 826PA of the Act]

Regulations may limit the rules to deal with certain matters

3.33 Regulations may prescribe limits on the extent to which the CS facility rules may deal with certain matters and the extent to which the rules may impose requirements on certain classes of persons. The environment in which CS facilities operate is susceptible to change. Prescribing the limits, certain matters and requirements in the regulations allow for timely responses to market conditions and offer flexibility and efficiency in appropriately regulating the market. [Schedule 2, item 65, section 826S of the Act]

Inconsistency between rules

3.34 In the event of any inconsistencies between the operating rules of a licensed CS facility or the operating rules of a financial market and the CS facility rules, the CS facility rules prevail over the operating rules to the extent of that inconsistency. [Schedule 2, items 63 and 64, paragraphs 793B(2)(aa) and 822B(2)(aa) of the Act]

3.35 In the event there is an inconsistency between the CS facility rules and the CS services rules, derivative transaction rules or the derivative trade repository rules, the CS facility rules prevail to the extent of the inconsistency. [Schedule 2, item 65, subsection 826K(1) of the Act]

3.36 In the event there is an inconsistency between a CS facility rule and a Financial Stability Standard, the Financial Stability Standard prevails to the extent of any inconsistency. [Schedule 2, item 66, subsection 827D(2A) of the Act]

3.37 However, if the RBA considers there is an inconsistency between a CS facility rule and a Financial Stability Standard, the RBA must refer the matter to the Minister. The Minister may, if appropriate, give ASIC a written direction to vary or revoke the CS facility rule. The amendments clarify that such a direction from the Minister is not a legislative instrument to assist readers. ASIC must comply with the direction. [Schedule 2, item 65, subsections 826K(2), (3), (4) and (5) of the Act]

3.38 As the CS facility rules are a legislative instrument, they will be subject to disallowance.

Compliance with the rules

3.39 Contravening the rules is a civil penalty under section 1317E of the Act. Relief from liability is available under section 1317S of the Act. [Schedule 2, items 65 and 68, the note to subsection 826J(1) and subsection 1317E(3) of the Act]

3.40 The regulations may allow for alternatives to civil proceedings for a person who is alleged to have failed to comply with the CS facility rules. The alternatives are limited to:

•

paying a penalty to the Commonwealth that is not more than 3,000 penalty units for individuals and 15,000 penalty units for a body corporate;

•

undertaking or instituting remedial measures (including education programs);

•

accepting sanctions other than the payment of a penalty to the Commonwealth; or

•

entering into a legally enforceable undertaking, which may include one or more of the following:

o

an undertaking to take specified action within a specified period;

o

an undertaking to refrain from taking specified action; or

o

an undertaking to pay a specified amount within a specified period to the Commonwealth or to some other specified person. [Schedule 2, item 65, section 826L of the Act]

3.41 Enforcement of CS facility operating rules is governed by section 822C of the Act. Minor amendments are made to that section to reflect the RBA's expanded role and to highlight that one or more persons or entities can apply to the Court in the event of non-compliance with or failure to enforce operating rules. A minor and technical amendment removes an erroneous and repetitive use of 'or' in the list of persons and entities who can make an application to the Court to improve readability of the Act. [Schedule 2, items 84, 85 and 86, subsection 822C(1) and paragraphs 822C(1)(a) to (c) of the Act]

3.42 The alternative to civil proceedings for noncompliance with CS facility rules by including regulation making power that enables a penalty to be set that may be a maximum of 3,000 for an individual or 15,000 penalty units for a body corporate. The explicit mention of the maximum penalty the regulations can prescribe is consistent with the Guide to Framing Commonwealth Offences.

3.43 The Guide to Framing Commonwealth Offences recommends maintaining consistency in the legislative framework with regards to penalties as much as is appropriate. Consistent with this principle, this compliance provision largely mirrors existing section 798K of the Act which applies to the enforcement of market integrity rules, section 901F of the Act which applies to enforcement of derivative transaction rules and section 903E of the Act which applies to enforcement of derivative trade repository rules. The significance of noncompliance with any of these rules and CS facility rules has the potential to adversely impact the financial system stability in Australia, which justifies the requirement for alternative compliance mechanisms in the Regulations.

3.44 The Attorney-General was consulted in relation to the inclusion of custodial penalties. Including the penalties in regulations are considered by the Federal Executive Council and are subject to disallowance by Parliament. This provides an additional layer of scrutiny and accountability. Therefore, the delegated offence in the Regulations is necessary and proportionate to the objective of ensuring compliance with the CS facility rules.

Reviewability of decisions

3.45 The following decisions are not subject to merits review:

•

a decision by ASIC to make CS facility rules, or to vary or revoke CS facility rules;

•

a decision by ASIC to do or not do anything under the regulations made for the purposes of allowing alternatives to civil proceedings;

•

a decision by the Minister to consent to the making of a CS facility rule, or to direct ASIC to vary or revoke a CS facility rule;

•

[Schedule 2, item 67, paragraphs 1317C(gccd), (gcce), (gccf) and (gccg) of the Act]

Amendments relating to financial markets and CS facilities

When is a financial market or CS facility taken to be operated in this jurisdiction

3.46 The amendments clarify the test that sets out the factors to consider when deciding whether an overseas market or CS facility falls within the Australian licensing regime, or in the words of the statute, is 'operated in this jurisdiction'. The intent of the amendments is to codify the current approach for determining whether an overseas financial market or CS facility falls within the Australian regulatory regime and therefore should be licensed as such.

3.47 Whether an overseas financial market or CS facility operates in Australia will be based on whether a body corporate is domestically incorporated under Chapter 2A of the Act or if ASIC declares that the financial market or CS facility has a material connection to Australia. [Schedule 2, items 138 and 139, sections 791D and 820D of the Act]

3.48 The amendments introduce a two-step test for ASIC to declare whether an overseas financial market or CS facility has a material connection with Australia. The first part of this test is an objective assessment of whether the market or CS facility has a connection to Australia. The second part of this test is consideration as to whether the connection to Australia is material. [Schedule 2, items 138 and 139, sections 791E and 820E of the Act]

3.49 ASIC may, by a written notice to a body corporate, request the body to give ASIC information about the financial market or CS facility within a period specified in the notice. [Schedule 2, items 138 and 139, subsections 791E(5) and 820E(4) of the Act]

3.50 ASIC can revoke a declaration if ASIC considers, having regard to the test, the financial market or CS facility does not have a connection to Australia, or if there is a connection, that the connection is not material. [Schedule 2, items 138 and 139, sections 791G and 820H of the Act]

Step 1: connection to Australia

3.51 The current licensing framework requires a financial market operator or CS facility operator to be licensed or exempt if the market or facility operates in Australia.

3.52 While prospective financial market and CS facility licensees do not need to apply for a declaration to apply for a licence, operators can determine whether they have a connection to Australia using the same respective test. In making a declaration, ASIC must consider whether a market or CS facility has a connection with Australia, which is based on the entity:

•

having operations in Australia;

•

providing a market or services in respect of Australian financial products;

•

having at least one current or expected Australian market or CS facility participant;

•

having additional kinds of connections that one or more specified kinds of financial markets or CS facilities may have with Australia, as determined by ASIC. [Schedule 2, items 138 and 139, subsections 791E(1) and (2) and 820E(1) and (2) and paragraphs 791E(4)(a) of the Act]

3.53 In addition to these common factors, there are certain kinds of connections that are specific to the type of entity. For financial markets, this additional criterion is based on targeting Australian investors. For overseas CS facilities, this is based on whether there is a relevant connection with the Australian market infrastructure, which will arise if the overseas CS facility has entered into an arrangement with an Australian market licensee, an Australian CS facility licensee or with the operator of a payments system determined by the RBA (see paragraph 3.54). [Schedule 2, items 138 and 139, paragraphs 791E(2)(e) and 820E(2)(e) of the Act]

3.54 When making the relevant determination in relation to a payment system for the purposes of the test, the RBA must have regard to whether:

•

the aggregate value of Australian dollar payments processed through the system is high relative to other payment systems;

•

the system mainly handles time-critical or high-value payments;

•

the system is used to settle payments in other CS facilities; and

•

the system is location in Australia.

3.55 Regulations may also prescribe other matters the RBA must consider in making a determination. [Schedule 2, item 139, subsections 820F(1) and (2) of the Act]

3.56 The Minister must consent in writing to the making of such a determination before it can be made. A consent is not a legislative instrument. This is included to assist readers. [Schedule 2, item 139, subsections 820G(1) and (3) of the Act]

3.57 ASIC may determine additional connections financial markets or CS facilities may have with Australia by legislative instrument.

3.58 A determination may also outline matters that show when connections are material and may determine principles for working out how the matters would apply to a financial market or CS facility. However, the Minister must consent in writing to the making of such a determination before it can be made.

3.59 A consent is not a legislative instrument. This is included to assist readers. [Schedule 2, items 138 and 139, subsections 791E(4), 820F(2), 820G(2) and (3) and section 791F of the Act]

Step 2: materiality of the connection

3.60 The second part of the test requires ASIC to consider whether the connection is material. This is a subjective test that follows the objective test of determining whether the overseas financial market or CS facility has a connection with Australia. Under the second limb of the test, ASIC must determine the materiality of the connection by reference to criteria. The criteria assist ASIC in determining if the operations of the overseas financial market or CS facility have or may have implications for the safe and effective functioning of the Australian financial system or the confident, fair and effective dealings in financial products by Australian investors.

3.61 For financial markets, ASIC may declare, after applying any principles outlined in a determinations (explained above) that an overseas financial market's connection with Australia is material if the size and extent of the current or expected aggregate activity in the market of participants in that market is material to:

•

the risk management activities of those participants (a participant includes a user that has direct access to a market or facility and that access is not reliant on an intermediary);

•

the efficient allocation of capital or liquidity to the Australian economy;

•

the provision of fair, orderly and transparent financial markets to those participants, and users, who have a connection with Australia;

•

confident and informed decision making by consumers of financial products or financial services who have a connection with Australia; or

•

any additional matters outlined in a determination. [Schedule 2, item 138, subsection 791E(3) of the Act]

3.62 For CS facilities ASIC may make a declaration that an overseas CS facility's connection is material if:

•

there is a material number of current or expected Australian participants or users of the facility;

•

the size and extent of current or expected aggregate activity of Australian participants or users of the facility is material to the risk management activities of those participants or users or to the efficient allocation of capital or liquidity to the Australian economy; or

•

the overseas CS facility's arrangement with an Australian financial market, an Australia CS facility or relevant payment systems operator is material;

•

any other matters outlined in a determination apply. [Schedule 2, item 139, subsection 820E(3) of the Act]

Referrals to the Minister

3.63 If a financial market of CS facility receives a declaration from ASIC that they have a material connection to Australia, the financial market or facility may, in writing, request that ASIC refer the declaration to the Minister. ASIC must refer the declaration immediately.

3.64 After receiving such a referral, if the Minister considers it appropriate, the Minister may direct ASIC to vary or revoke the declaration. ASIC must comply with that direction. Such a direction is not a legislative instrument, that provision is included to assist readers. [Schedule 2, items 138 and 139, subsections 791D(4), (5), (6) and (7) and 820D(3), (4), (5) and (6) of the Act]

3.65 Decisions by ASIC to declare a financial market or CS facility to have a material connection to Australia, determine connections, matters or principles are not merits reviewable. This is because a referral to the Minister is the appropriate method of review as the connection and materiality factors operator with respect to entities that are or may be systemically significant to the Australian financial system. A decision by the Minister to consent to the making of a determination is similarly not merits reviewable. [Schedule 2, items 140 and 141, paragraphs 1317C(gcaa), (gcab), (gcac), (gcca), (gccb) and (gccc)]

Declared financial markets and widely held market bodies

Declared financial markets

3.66 The current definition of prescribed financial market is repealed and replaced with a new definition of the expression declared financial market which has been added to the glossary in section 9 of the Act. [Schedule 2, items 23 and 24, section 9 of the Act]

3.67 A declared financial market is a financial market that is specified in a declaration made by ASIC.

3.68 A declaration is a legislative instrument and ASIC must not make a declaration unless the Minister has approved it in writing. A decision by ASIC to declare a financial market is not reviewable. [Schedule 2, items 25 and 26, section 9D and subsection 1317C(c) of the Act]

3.69 A declared financial market will attract the same statutory obligations as a formerly prescribed financial market. Formerly prescribed financial markets will be deemed to be declared financial markets on commencement of Schedule 2, as described further in paragraph 3.206.

3.70 Empowering ASIC to declare that a market is a declared financial market, rather than having to prescribe through regulations, will enable ASIC to more readily and efficiently declare a financial market as a declared financial market, therefore reducing the potential for delay of related licence applications or variations.

3.71 Minor amendments have also been made to change references from prescribed financial market to declared financial market in the Act, the Bankruptcy Act 1966 and the PPSA. [Schedule 2, items 27, 28 and 29, various provisions of the Act, subsection 5(1) of the Bankruptcy Act 1966 and section 49 of the PPSA]

Widely held market bodies

3.72 Widely held market bodies are subject to certain requirements with respect to ownership and voting power.

3.73 A body corporate is a widely held market body if the body is a market licensee or the holding company of such a licensee, or a CS facility licensee or the holding company of such a licensee and is specified in an ASIC declaration. [Schedule 2, item 31, subsection 850A(2) of the Act]

3.74 ASIC may declare a market licensee, CS facility licensee or a holding company of such licensee to be a widely held market body provided there is consideration of the market or CS facility with regard to:

•

the significance to the national economy of the functions performed by the financial market or CS facility;

•

the size and importance in the context of the Australian financial market or CS facility within the Australian financial services industry and relative to other operations providing a similar service or function;

•

the degree of or potential for competition between the financial market or CS facility and other already prescribed financial markets or CS facilities; and

•

any other relevant matters. [Schedule 2, item 31, subsection 850A(4) of the Act]

3.75 These declarations by ASIC are legislative instruments and are subject to disallowance by Parliament. In addition, the declaration in relation to widely held market bodies and declared financial markets may only be made if the Minister provides written approval. This ensures there is sufficient parliamentary oversight surrounding ASIC's ability to declare 'declared financial markets' and 'widely held market bodies'. [Schedule 2, items 25 and 31, section 9D, subsections 850A(1), 850A(3) and 850A(5) of the Act]

3.76 Further, the amendments remove references to bodies 'specified in regulations' and replaces it with 'specified in a declaration' in relation to widely held market bodies to reflect that widely held market bodies are only specified in declarations by ASIC. The language 'contravention of previous law' is also removed as the term is no longer in use. The provision is reframed to reflect the changes. [Schedule 2, items 32, 33 and 34, section 851I of the Act]

3.77 A decision by ASIC to declare a body corporate as a widely held market body is not reviewable. [Schedule 2, item 35, paragraph 1317C(gdaa) of the Act]

3.78 The amendments amend the definition for widely held market body in the glossary in section 9 of the Act to reference the updated provision. [Schedule 2, item 30, section 9 of the Act]

New matters to be taken into account by ASIC in respect of an overseas CS facility licence

3.79 When deciding whether to grant, suspend or cancel a licence, or impose, vary or revoke conditions on an overseas CS facility licence, ASIC must consider the adequacy of the arrangements in place relating to the governance and operation of the CS facility. ASIC must consider the adequacy of these arrangements with respect to their impact on Australian financial system stability, the fair and effective provision of the CS facility licensee's services and public confidence and integrity in Australia (note the powers to grant a licence, impose, vary or revoke conditions or suspend or cancel a licence are transferred to ASIC in Schedule 3 to the Bill – see paragraph 3.162). [Schedule 2, item 61, paragraph 827A(3)(e) of the Act]

Broadening the existing exemptions power

3.80 The exemptions power is broadened to provide certainty that an exemption could be provided to particular operators. ASIC may exempt a financial market or class of financial markets, a CS facility or class or CS facilities, or a person or class of persons from all or specified provisions of Parts 7.2 and 7.3 of the Act respectively. [Schedule 2, items 53 and 57, sections 791C and 820C of the Act]

3.81 As it does currently, an exemption may apply unconditionally or subject to specified conditions. The amendments introduce the term exemption duration to clarify that an exemption may apply for a specified period or indefinitely. [Schedule 2, items 53 and 57, subsections 791C(2) and (8) and 820C(2) and (8) of the Act]

3.82 An exemption for a particular financial market, CS facility or person is not a legislative instrument, but ASIC must publish the exemption on its website and merits review is available for an action by ASIC with respect to the exemption.

3.83 An exemption for a class of financial markets or CS facilities is a legislative instrument and therefore merits review is not available, however the instrument is subject to disallowance by the Parliament. [Schedule 2, items 53 and 57, subsections 791C(1), (5), (6), (7) and (9) and 820C(1), (5), (6), (7) and (9) of the Act]

3.84 ASIC may vary an exemption at any time to impose conditions, vary or revoke conditions, or extend or shorten the exemption duration. ASIC must however give notice and an opportunity to the affected entity or entities to make submissions. For a particular financial market, CS facility or person, a variation is not a legislative instrument but ASIC must publish the variation on its website. Merits review is available with respect to a decision in relation to a variation of this type of exemption. For a class of financial markets, CS facilities or persons, a variation must be done by legislative instrument. Merits review is not available; however the instrument is subject to disallowance by the Parliament. [Schedule 2, item 53 and 57, subsections 791C(3), (4), (5), (6), (9) and (10)and 820C(3), (4), (5), (6), (9) and (10) of the Act]

3.85 ASIC may not exempt a CS facility from complying with the Financial Stability Standards, the resolvability standards or the obligation to do all things necessary to reduce systemic risk that are practical to do. The RBA has the power to make these exemptions (see paragraphs 2.91 to 2.94). [Schedule 2, item 57, subsection 820C(11) of the Act]

3.86 Consequently, the amendments update other references to the exemption to clarify that a person can be exempt from the operation of Parts 7.2 and 7.3 of the Act. [Schedule 2, items 51, 52, 55 and 56, paragraphs 791A(1)(c) and 820A(1)(c), and subsections 791B(ca) and 820B(d) of the Act]

3.87 Section 761H of the Act operates so that a reference to 'provisions of this Part' include regulations and instruments made under the Part. This means that along with the power to exempt a person or persons from particular provisions of the primary law, ASIC can also exempt a person or persons from particular provisions of instruments made under the Parts 7.2 and 7.3 of the Act.

Amendments relating to financial markets, CS facilities, derivative trade repositories and financial benchmark administrators

Increases in voting power

Widely held market bodies

3.88 Currently for a person to hold more than 15 per cent voting power in a widely held market body:

•

for ASX Limited – the person does not need to apply for approval, rather the regulations may prescribe a higher percentage than the 15 per cent voting power limit in ASX Limited that a person can have;

•

for a widely held market body other than the ASX Limited – the person must lodge an application with ASIC where the Minister may approve that application if the Minister is satisfied that it is in the national interest.

3.89 The separate arrangements for a higher ownership in ASX Limited are repealed and aligned with the process for widely held market bodies. This means if a person seeks to exceed the voting power limit in any widely held market body including the ASX Limited, an application must be lodged with ASIC to increase the voting power and that application is subject to ministerial approval. Regulations may not prescribe a higher percentage in relation to the ASX. [Schedule 2, items 36, 37, 38 and 39, subsections 850B(1) and 851A(1) of the Act]

3.90 The voting power threshold that would trigger a need for a person to have that voting power to be approved by the Minister is increased to 20 per cent in order to be consistent with the arrangements for controlled Australian financial bodies (see below). [Schedule 2, items 45 to 50, the headings of Subdivisions A and B of Division 1 of Part 7.4, section 851A, paragraphs 850B(1)(a) and 853(b) of the Act]

3.91 The obligation to notify ASIC of certain matters in section 792B of the Act is updated so that a market or CS facility licensee that becomes aware that a person has come to have, or has ceased to have, a voting power that exceeds voting power of 20 per cent in the licensee, or holding company of the licensee, must notify ASIC. This obligation applies to all licensees, including non-widely held market bodies and foreign licensees. [Schedule 2, item 44, paragraphs 792B(5)(b) and 843D(4)(b) of the Act

ASIC approval – all other FMI domestic bodies corporate

3.92 ASIC approval is required prior to a person holding more than 20 per cent voting power in a body corporate registered under Chapter 2A of the Act that is a market licensee, a CS facility licensee, a derivative trade repository licensee or a benchmark administrator licensee or holding company (other than a widely held market body).

3.93 A number of terms are introduced to assist in approving an application to hold more than 20 per cent voting power, including a controlled Australian financial body, unacceptable control situation (in relation to a controlled Australian financial body), and passes the legitimate control test:

•

'controlled Australian financial body' is a body that is registered under Chapter 2A of the Act, is not a widely held market body, and is any of the following:

o

a market licensee;

o

a CS facility licensee;

o

a derivative trade repository licensee;

o

a benchmark administrator licensee; or

o

a holding company of the any of the above licensees.

•

An 'unacceptable control situation' exists in relation to a controlled Australian financial body and a particular person if the person's voting power in the body is more than 20 per cent or an approved higher percentage.

•

a person 'passes the legitimate control test' for having a particular percentage of voting power in a controlled Australian financial body unless it is reasonable to expect that the person's having of that percentage of voting power in the body would adversely affect the relevant licensee's ability to meet one or more of its obligations. [Schedule 2, items 40 to 42, sections 9, sections 852DA, 852DB and 852DC of the Act]

3.94 A person may apply for approval to have voting power of more than 20 per cent by lodging an application in the prescribed form with ASIC that sets out:

•

the percentage of voting power (if any) the person currently has in the body;

•

the percentage of voting power the person intends to have in the body;

•

the period the person is seeking the approval for (including whether indefinite or not); and

•

the person's reasons for making the application.

3.95 This application must be in the prescribed form. [Schedule 2, item 42, section 852DG of the Act]

3.96 If information contained in an application is incorrect or ceases to be correct after the application is made, the applicant must, as soon as practicable after the applicant becomes aware of that fact, give ASIC the correct information in writing. Failure to correct this information is an offence with a penalty of 2 years imprisonment. [Schedule 2, items 42 and 43, section 852DQ and Schedule 3 of the Act]

3.97 ASIC must give approval to an applicant if ASIC is satisfied that:

•

it is not reasonable to expect that the proposed ownership arrangement would adversely affect the body's ability to meet one or more of its obligations under the Act; and

•

the information, or updated information, provided in the application is correct.

3.98 Written notice must be provided to both the applicant and the body corporate registered under Chapter 2A of the Act, notwithstanding whether ASIC approves or refuses to approve an application. A decision by ASIC with respect to an application is subject to merits review. [Schedule 2, item 42, sections 852DC and subsections 852DH(1) and (3) of the Act]

3.99 If ASIC approves an application, the notice must specify the period that the approval is in force. The duration of the approval as specified in the notice may be indefinite. A person may apply to extend that approval by lodging an application with ASIC in the same manner as the initial application (or ASIC can extend on its own initiative). [Schedule 2, item 42, subsections 852DH(2), sections 852DJ and 852DK and subsection 852DM(4) of the Act]

3.100 ASIC has 90 days to make a decision on an application and may, by written notice given to the applicant, extend this period by up to 30 days. Approval is deemed to have been granted outside of that period. [Schedule 2, item 42, subsections 852DR(1), (2) and (4) of the Act]

3.101 ASIC may request further information about an application and may refuse to consider an application until the applicant gives ASIC the information. The time limit for ASIC's decision does not apply whilst this occurs. The time limit for ASIC's decision also does not apply if an unacceptable control situation exists at any time before ASIC decides the application. [Schedule 2, item 42, section 852DP and subsections 852DR(3) and (5) the Act]

3.102 ASIC may vary or revoke the notice of approval. In the case of a variation, ASIC may increase or decrease the percentage or duration. The variation or revocation is in force at the time specified in the notice, which must be at least 90 days after the notice is given. [Schedule 2, item 42, section 852DM and 852DN of the Act]

3.103 The notice may also specify that the approval is subject to conditions. ASIC may impose, vary or revoke conditions after approval by written notice. The power is exercisable on ASIC's own initiative or by application. [Schedule 2, item 42, section 852DL of the Act]

Contravention provisions

3.104 It is an offence for a person to acquire shares in a body corporate where acquisition would result in an unacceptable control situation. The penalty for the offence provision is 400 penalty units. [Schedule 2, items 42 and 43, section 852DD and Schedule 3 to the Act]

3.105 A person who holds an approval to increase voting power must give written notice to ASIC if they become aware that they have breached a condition to which the approval is subject. Failure to do so is an offence of 200 penalty units. [Schedule 2, items 42 and 43, subsection 852DL(6) and Schedule 3 to the Act]

3.106 The Court has the power to make remedial orders or grant injunctions where an unacceptable control situation exists. This power is intended to enforce the voting control limits for licensed bodies. The Court may only make such orders on an application by ASIC, the body, or a person that has any voting power in the body. The power to apply for an injunction under these provisions does not limit the power to apply for an injunction under section 1324 of the Act. [Schedule 2, item 42, sections 852DE and 852DF the Act]

3.107 To the extent that the Court order under 852DE would result in an acquisition of property from a person otherwise than on just terms within the meaning of section 51(xxxi) of the Constitution, the relevant provision will not have any effect. [Schedule 2, item 42, section 852DS the Act]

3.108 ASIC's ability to give anti-avoidance directions mirrors the Minister's ability to give anti-avoidance directions in section 852B of the Act. Failure to comply with such a direction is an offence of 400 penalty units. [Schedule 2, items 42 and 43, section 852DT and Schedule 3 to the Act]

FMI banning orders

Considerations in making a banning order

3.109 The defined terms of FMI banning order and FMI licensee are inserted into the dictionary for the purposes of the banning order provisions. An FMI Banning order is an order made under subsection 853H(1) of the Act. An FMI licensee is a market licensee, CS facility licensee, derivative trade repository licensee, or a benchmark administrator licensee as defined in the Act. [Schedule 2, item 134, definition of 'FMI banning order' and 'FMI licensee' in section 9 of the Act]

3.110 A core officer is a person covered by paragraphs (a) and (b) of the definition of officer, that is a director or alternate director of a corporation, or a person commonly known as a shadow director of a corporation. [Schedule 2, items 121, definition of 'core officer' in section 9 of the Act]

3.111 The amendments authorise ASIC to make a banning order against an individual if:

•

the individual becomes an insolvent under administration;

•

the individual is convicted of fraud;

•

ASIC has reason to believe that the individual is not a fit and proper person, or that the individual is not adequately trained or is not competent to perform a function of a core officer of or control a licensee;

•

ASIC has reason to believe the individual is not adequately trained or not competent to perform as a core officer or control a licensee.

•

has not complied with financial services law or ASIC has reason to believe that they are likely to contravene financial services law;

•

has been involved in the contravention of a financial services law by another individual or ASIC has reason to believe that they are likely to become involved in such a contravention; or

•

has been a core officer of one or more corporations unable to pay its debts within the last 7 years. [Schedule 2, item 135, sections 853H, 853L and 853M of the Act]

3.112 In determining whether an individual is not fit and proper, ASIC must have regard to certain matters including (but not limited to) whether the individual:

•

has ever been a core officer of an Australian market licensee, Australian CS facility licensee, Australian derivative trade repository licensee or benchmark administrator licensee that has had its licence suspended or cancelled;

•

has ever had a banning order or a disqualification order made against the person;

•

is disqualified from managing corporations;

•

has ever been insolvent under administration;

•

if the individual has been banned from engaging with a credit activity under a State or Territory law;

•

whether the individual has ever been linked to a refusal or failure to give effect to a determination made by AFCA;

•

has been convicted of an offence within the last 10 years (Part VIIC of the Crimes Act 1914 applies so ASIC cannot consider spent convictions); or

•

any other matters prescribed by regulation. [Schedule 2, item 135, section 853K of the Act]

3.113 An individual contravenes financial services law if they fail to comply with a duty imposed under the law. It does not matter if the provision imposing a duty that has not been complied with is neither an offence nor a civil penalty provision. [Schedule 2, item 135, section 853L of the Act]

Making a banning order

3.114 ASIC may make an FMI banning order that applies for a specified period or indefinitely. ASIC may specify the individual is prohibited from:

•

controlling a licensee, either alone or in concert;

•

performing any function involved in a licensee including as a manager, employee, contractor or in some other capacity; or

•

performing specified functions involved in a licensee including as a manager, employee, contractor or in some other capacity. [Schedule 2, item 135, subsections 853N(1) and (2) of the Act]

3.115 However, ASIC may expressly allow individuals to do certain actions in certain circumstances by including this in the terms of the banning order. [Schedule 2, item 135, subsection 853N(3) of the Act]

3.116 ASIC may only make a banning order against an individual after giving the individual an opportunity to appear at a hearing before ASIC that takes place in private and to make submissions to ASIC on the matter. If ASIC makes a banning order without giving the individual these opportunities, ASIC must rely on the following grounds:

•

the person is not a fit and proper person because the person has been a core officer of the entity that has had a licence suspended or cancelled; or

•

the individual has been convicted of serious fraud. [Schedule 2, item 135, section 853J of the Act]

3.117 ASIC may vary or cancel a banning order on its own initiative or on application. A variation or cancellation may occur if ASIC is satisfied there has been a change in the circumstances since the original banning order. [Schedule 2, item 135, section 853Q of the Act]

3.118 An FMI banning order, variation or cancellation takes effect when it is given to in individual. ASIC must give the individual written notice of the banning order being made, varied, or cancelled, accompanied with a statement of reasons. The notice takes effect from when it is provided to the individual. [Schedule 2, item 135, subsections 853H(2), 853R(1) and sections 853Q and 853S of the Act]

3.119 ASIC must publish a notice on its website as soon as practicable after making or varying the order. The notice must state when the order takes effect and attaching a copy of the FMI banning order. However, ASIC considers it appropriate, a summary of permissible specified acts may be published instead. [Schedule 2, item 135, subsections 853R(2), (2A) and (3) of the Act]

Contravention of banning order

3.120 An individual who is subject to a banning order must not engage in conduct that would breach the banning order.

3.121 An individual who breaches a banning order commits an offence with a penalty of 5 years imprisonment. [Schedule 2, item 137, subsection 853P(2) and Schedule 3 to the Act]

3.122 A civil penalty is also available with respect to an individual who breaches a banning order. [Schedule 2, item 136, subsections 853P(3) and 1317E(3)]

3.123 This is justified on the basis that involving banned individuals in market licensees may have detrimental effects on the stability of the financial system.

Relation to general licence obligations

3.124 It is a general licence obligation for a licensee to take all reasonable steps to ensure that no individual against whom an FMI banning order is made becomes or remains involved in a licence or does any of the things prohibited under the banning order in relation to the licensee. Regulations may prescribe any additional steps domestic CS facility licensees, market licensees, derivative trade repository licensees, or benchmark administrator licensees must take for the purposes of ensuring that each individual performing the role of a core officer of the licensee is fit, proper, capable and competent for the role. [Schedule 2, items 122 to 126 and 129 to 133, paragraphs 792(1)(ha) to (i), 821A(1)(ga) to (h), 904A(1)(ba) to (c) and 908BP(b) to (c) of the Act]

3.125 ASIC may make a declaration disqualifying individuals involved in a market licensee, CS facility licensee, derivative trade repository licensee or benchmark administrator licensee if ASIC is satisfied the individual is unfit to be involved in the licensee. ASIC must consider matters such as the individual's fame, character and integrity in deciding whether the individual is unfit. Previously, ASIC also needed to be satisfied that, because of the individual's unfitness, there was a risk that the licensee would breach its obligations under Chapter 7 of the Act. [Schedule 2, item 128, subsections 853C(2) and (3) of the Act]

Dealing with licences that are not being used

Suspending or cancelling a licence

3.126 Schedule 2 clarifies the circumstances where a licence can be suspended or cancelled. The table below provides a summary of certain grounds for which a licence may be cancelled or suspended (however, there remain other grounds under sections 797B, 826B, 905H and 908BI of the Act).

[Schedule 2, items 13 to 22, sections 797B, 826B, 905H and 908BI of the Act]

3.127 ASIC is transferred the Minister's power to immediately suspend or cancel an Australian market licence or CS facility licence, currently delegated to ASIC under the Ministerial Powers (ASIC) Delegations 2021. The transfer of power is discussed below in the section entitled 'Additional transferred powers'.

3.128 One of the new grounds in relation to overseas financial markets and CS facilities is that ASIC may suspend the licence for a specified period or cancel it if the cooperation (including information sharing) between ASIC, the RBA and the authority or authorities responsible for supervising the operation of that facility in that country has materially deteriorated or is otherwise inadequate. [Schedule 2, items 15 and 18, paragraphs 797B(d)(iii) and 826B(d)(iii) of the Act]

3.129 Including this new ground for immediate suspension or cancellation is intended to ensure appropriate oversight over licensed entities. Adequate information sharing between domestic and overseas regulators is essential to the effective functioning of Australia's licensing regime for overseas financial markets and CS facilities. Cooperation between ASIC, the RBA and the authority or authorities responsible for supervising the operation of that facility overseas minimises the potential for regulatory gaps and duplication and allows ASIC and the RBA to monitor the regulatory equivalence of an entity's home regime.

3.130 A power to suspend or cancel a licence after it has not been used for 12 months after the license was granted is included due to the risk that a body corporate could change substantially if given more time to begin operating, such that by the time it does begin operating the original grounds for granting the licence may no longer apply. It is appropriate that ASIC has the ability to deal with this circumstance. [Schedule 2, items 13, 16, 19 and 21, subsections 797B(a) to (ab), 826B(a) to (ab) and 905H(a) to (ab), and paragraphs 908BI(1)(aa) to (ab) of the Act]

3.131 If an application has been made to deregister the licensee as a company by the licensee or a liquidator of the licensee, or ASIC initiates a deregistration of the licensee company, ASIC may suspend or cancel the license. The license can be suspended immediately on application or initiation despite the 2-month notice requirement prior to deregistration taking effect. This is appropriate for FMI due to their centrality in ensuring financial market stability and function. [Schedule 2, items 14, 17, 20 and 22, subsections 797B(ca) to (cb), 826B(ca) to (cc) and 905H(ca) to (cb), and paragraphs 908BI(1)(ca) to (cb) of the Act]

Streamlining ASIC's direction powers

3.132 The amendments streamline ASIC's power to issue directions for Australian market licensees, CS facility licensees, and derivative trade repository licensees, so that a direction can be issued without advising the relevant licensee of an intention to issue a direction. [Schedule 2, items 69 to 72, subsections 794D(1), 798J, 823D(1) and 904G(1) of the Act]

3.133 The streamlined process for issuing directions enables ASIC to address issues in an efficient and timely manner. The direction may specify the licensee to undertake a particular action or direct them to refrain from undertaking a particular action.

3.134 The purposes for issuing a direction remain the same, however, the time limit to comply has been removed. This is justified on the basis that it impedes ASIC's ability to use its directions power in circumstances that may take longer than 21 days to resolve. Instead, ASIC must specify a reasonable time period on the direction that the licensee must comply with the direction. The direction will either cease at the time specified on the direction, or when ASIC revokes the direction, whichever is earlier. [Schedule 2, items 69 to 72, subsections 794D(2), 798J(2), 823D(3) and 904G(2) of the Act]

3.135 Consistent with the current directions power, Australian market licensees, CS facility licensees and derivative trade repository licensees must comply with a direction issued by ASIC. The penalty for failing to comply is the same as currently listed in Schedule 3 of the Act, being 100 penalty units for each day of noncompliance for an individual and ten times this amount for a body corporate. Where a licensee fails to comply with the direction, ASIC may apply to the Court for a Court order to compel the licensee to comply. [Schedule 2, items 69 to 72, 78 and 79, subsections 794D(3) and (4), 798J(3) and (4), 823D(4) and (5) and 904G(3) and (4) and Schedule 3 to the Act]

Referrals to the Minister

3.136 Australian market licensee, CS facility licensee and derivative trade repository licensees retain the ability to refer a direction to the Minister after ASIC issues the direction. The Minister will continue to hold the power to require ASIC to revoke or vary a direction which ASIC must comply with. [Schedule 2, items 69 to 72, sections 794DA, 798JA, 823DA and 904GA of the Act]

3.137 The Minister's request is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act. The subsection is merely included to provide clarity and assist readers.

3.138 As soon as possible after a direction has been issued, varied or revoked as a result of the Minister's request, ASIC must give notice to:

•

in the case of a market licensee: the operator of each CS facility with which the market licensee has clearing and settlement arrangements for transactions; or

•

in the case of a CS facility licensee: to the operator of each financial market with which the facility has arrangements to provide services, each issuer of financial products (if the direction relates to specified financial products) and the RBA;

•

in the case of a derivative trade repository licensee: the operator of each financial market and CS facility with which the licensed derivative trade repository licensee has arrangements to provide services relating to derivative trade data. [Schedule 2, items 69, 71 and 72, subsections 794DA(6), 823DA(6) and 904GA(6) of the Act]

3.139 The ability for a licensee to refer a direction to the Minister does not affect a licensee's obligation to comply with the direction. The licensee must continue to comply with the direction whilst the matter is referred, and the Minister is considering the request.

Merits review

3.140 A direction from the Minister for ASIC to vary or revoke a direction is not a reviewable decision. [Schedule 2, items 75 to 77, paragraphs 1317C(gcae), (gccd) and (gdcaa) of the Act]

Transferred directions power

3.141 The Minister's power to issue directions to licensees not complying with the licensee obligations is transferred to ASIC. This is to equip ASIC with the necessary enforcement powers to ensure compliance with licence obligations. ASIC may issue directions to a market licensee or a CS facility licensee where ASIC considers the licensee is either unlikely to, or is not, complying with the licensee obligations.

3.142 ASIC is directly responsible for issuing the following directions to licensees to promote compliance with the licensee obligations under Chapter 7 of the Act, including:

•

the power to issue, vary, or revoke directions with respect to financial markets under Part 7.2 of the Act; [Schedule 3, items 10 to 14, section 794A of the Act]

•

the power to issue, vary, or revoke directions based on CS facility licensees' obligations under Part 7.3 of the Act; and [Schedule 3, items 77 to 80, section 823A of the Act]

•

the power to issue directions with respect to compensation arrangements of licensed financial markets. [Schedule 3, item 141 to 143, section 882D of the Act]

3.143 Consistent with the ability for licensees to refer directions to the Minister, a market licensee that has received a direction from ASIC may request ASIC to refer the matter to the Minister. ASIC must comply with this request and comply with any requirements the Minister may make, including not making, varying or revoking the direction. [Schedule 3, items 81 and 144, subsections 823A(5) and 882D(5) of the Act]

Matters relating to ASIC and RBA directions issued to CS facility licensees

3.144 If an officer of a CS facility licensee fails to take reasonable steps to ensure the licensee is complying with a direction given by ASIC or the RBA, or complying with the obligation to give assistance with respect to an expert report, the officer is liable for an offence. The penalty is 100 penalty units for each day the officer is not taking such steps. The days need not be consecutive. [Schedule 2, items 88 and 94, section 823W and Schedule 3 of the Act]

3.145 If a body corporate is subject to the exercise of a power under Part 7.3 of the Act by the RBA or if the body corporate is a member of a group of bodies corporate subject to that exercise of power, a party to an agreement with this body corporate cannot:

•

deny an obligation or accelerate any debt under the agreement;

•

terminate or close out the agreement or any transaction relating to the agreement; or

•

enforce any security under the agreement.

3.146 This applies whether the law under which the agreement was made is Australian law or foreign law, including the law of a part of a foreign country. [Schedule 2, item 88, section 823V of the Act]

3.147 An action or proceeding does not lie against an officer, senior manager, employee, agent, body corporate or person engaged to provide services to the body corporate or related body corporate in relation to anything the person did in good faith if it was reasonable for the person to do the thing or to omit to do the thing for the purpose of:

•

complying with a direction ASIC or the RBA gave under Part 7.3 of the Act;

•

taking a measure or action specified in a direction from ASIC or the RBA under Part 7.3 of the Act; or

•

doing or refrain from doing anything in accordance with such a direction.

3.148 The evidential burden is on the person to prove that their actions were reasonable in order for the protection to apply (see section 13.3(2) of the Criminal Code 1995). [Schedule 2, item 88, section 823X of the Act]

3.149 The Court may make orders as it sees fit if on application of ASIC or the RBA or both, it appears to the Court that a person has contravened a provision of the operating rules of a licensed CS facility. [Schedule 2, items 89 and 90, paragraphs 1101B(1)(a) and (aa) of the Act]

Power to obtain reports

3.150 ASIC is empowered to obtain an expert report on specified matters in relation to FMI licensees. The RBA has a corresponding power in relation to CS facility licensees. This is to ensure that there is a mechanism for the regulators to obtain appropriate expert information from an independent source. ASIC's power to require an expert report follows the same process regardless of the type of FMI. With respect to market licensees and CS facility licensees, ASIC's power to obtain an expert report replaces the Ministerial power to require a market licensee or CS facility licensee to provide an audit report on a special report. [Schedule 2, items 87, 115, 116 and 117, sections 794BA, 823BB, 904L and 908BWA of the Act; Schedule 3, items 15, 82, 166 and 167, sections 794B, 823B and Schedule 3 to the Act]

Derivative trade repository licensee and benchmark administrator report

3.151 Where ASIC directs a derivative trade repository licensee or a benchmark administrator licensee to provide a special report, ASIC is not required to provide a copy of the report to the Minister. [Schedule 3, items 161 and 163, subsections 904H(1) and 908BV(3) of the Act]

Expert reports

3.152 ASIC may appoint, or direct a licensee to appoint, an expert to provide a report on specified matters relating to the licensee and relevant matters in fulfilling the licensee's obligations. The RBA may also appoint or direct a CS facility licensee to appoint an expert to provide such a report. Merits review is available with respect to a decision by ASIC or the RBA to appoint or direct a licensee to appoint an expert to provide a report. If the subject of a report is relevant to both ASIC and the RBA's regulatory mandates, both regulators could coordinate with respect to one report rather than each requesting a report. [Schedule 2, items 87, 115, 116 and 117, sections 794BA, 823BB, 823BC, 904L and 908BWA of the Act]

3.153 Where an expert is appointed, ASIC or the RBA must give the licensee notice that an expert is appointed and determine a fee equal to ASIC or the RBA's expenses in appointing and paying the expert to provide the report. The licensee is liable to pay the costs associated in producing the report which must be paid to ASIC or the RBA. Where ASIC or the RBA directs a licensee to appoint an expert to produce a report, the licensee is required to pay the expert directly.

3.154 An expert must have the necessary skills and qualifications to make a report on the specified matter and must be a person nominated or approved by ASIC or the RBA, in the case that a licensee is directed to appoint an expert.

3.155 The licensee required to provide the report must give assistance to the appointed person preparing an expert report as reasonably required. The obligation to comply includes providing all information, explanation and assistance reasonably necessary for the preparation and provision of the report.

3.156 If the appointed person requests the licensee to give them such information, explanation or assistance, ASIC may direct the licensee to comply with the request on a specified day.

3.157 An expert appointed by ASIC or the RBA is not liable in respect of an action or other proceeding for damages in relation to an act done or omitted to be done in good faith in performance of their task under these provisions. [Schedule 2, item 95, paragraph 246(1)(n) of the ASIC Act]

Contravention

3.158 Failure to take reasonable steps to comply is an offence with a penalty of 2 years imprisonment. [Schedule 2, items 87, 93, 115, 116, 117, 118, 119 and 120, subsections 794BA(5), 823BB(5), 823BC(5), 904L(5) and 908BW(5) and Schedule 3 to the Act]

3.159 Failure to comply with a direction to appoint a person to provide an expert report in relation to the licensee is an offence with a penalty of 2 years imprisonment. [Schedule 2, items 87, 93, 115, 118, 119 and 120, subsections 794BA(7), 823BB(7), 823BC(7), 904L(7) and 908BW(7) and Schedule 3 to the Act]

Additional transferred powers

Licensing of financial markets

3.160 ASIC has direct licensing powers relating to financial markets, including:

•

granting a domestic or overseas market licence; [Schedule 3, items 21 to 27, subsections 795B(1), (2) and (3) of the Act]

•

imposing, varying, and revoking licence conditions; [Schedule 3, items 31, 33 to 44, section 796A of the Act]

•

issuing, revoking or varying an exemption from all or specified provisions of Part 7.2, 7.2A and Part 7.3 of the Act; [Schedule 2, items 53 and 57, sections 791C and 820C of the Act; Schedule 3, items 64 to 66, section 798M of the Act]

•

varying a licence to change the name of the licensee; [Schedule 3, items 45 and 46, section 797A of the Act]

•

suspending or cancelling a licence; [Schedule 3, items 47 to 52, sections 797B and 797C of the Act]

•

varying, revoking or detailing the effect of a suspension; [Schedule 3, items 53 and 54, sections 797D and 797E of the Act]

•

approving an overseas market licensee's request to change a country of principal place of business; [Schedule 3, item 1, paragraph 792A(1)(g)(ii) of the Act]

•

approving a change of country of an overseas licensee; [Schedule 3, item 5, subsection 792H(1) of the Act]

•

requiring an audit report on the annual report of a market licensee; and [Schedule 3, items 3 and 4, section 792F of Act]

•

the requirement to consider the list of matters when deciding to grant, suspend or cancel an Australian market licence, impose, vary or revoke conditions on that licence, or disallow changes to market operating rules. [Schedule 3, items 57 to 62, section 798A of the Act]

Licensing of CS facilities

3.161 Given that ASIC and the RBA co-regulate CS facilities, the respective power of each regulator corresponds to their overall objectives and mandate. ASIC has licensing and enforcement powers to align with their objective to maintain, facilitate and improve the performance of the financial system. The RBA has powers aligning with the objective to maintain overall stability of the Australian financial system.

3.162 The following Ministerial powers with respect to CS facilities are transferred to ASIC:

•

granting a domestic or overseas CS facility licence; [Schedule 2, items 2 to 9, section 824B of the Act]

•

approving an overseas CS facility licensee's request to change a country of principal place; [Schedule 3, item 69, paragraph 821A(1)(f) of the Act]

•

approving a change of country by foreign licensee; [Schedule 3, item 73, section 821F(1) of the Act]

•

imposing, varying, and revoking licence conditions; [Schedule 3, items 94, 96 to 105, section 825A of the Act]

•

varying a licence to change the name of a licensee; [Schedule 3, items 106 and 107, section 826A of the Act]

•

suspending or cancelling a licence; [Schedule 3, items 108 to 113, sections 826B and 826C of the Act]

•

varying, revoking or detailing the effect of a suspension; [Schedule 3, items 114 and 115, sections 826D and 826E of the Act]

•

the requirement to consider the list of matters when deciding to grant, suspend or cancel a CS facility licence, impose, vary or revoke conditions on that licence, or disallow changes to the CS operating rules ; and [Schedule 3, items 118 to 123, section 827A of the Act]

•

requiring an audit report on the annual report of a CS facility licensee. [Schedule 3, items 71 and 72, section 821E of the Act]

3.163 ASIC may extend or shorten the duration of an exemption. Amendments are made to the criteria for when ASIC may make an exemption by extending it to persons or classes of persons. [Schedule 2, item 57, section 820C of the Act]

Compensation arrangements and security exchanges

3.164 Operational decisions in relation to the approval of compensation arrangements and changes to the Securities Exchange Guarantee Corporation, have been transferred to ASIC. This transfer of power increases certainty for market operators, the Securities Exchange Guarantee Corporation, and other stakeholders, whilst ensuring the timeliness and efficiency of the operation of compensation arrangements

3.165 Compensation arrangements are provided by the National Guarantee Fund for members of the Securities Exchange Guarantee Corporation, or through other compensation schemes approved by the Minister for market operators that are not members of the Securities Exchange Guarantee Corporation and which are required to have compensation arrangements. ASIC will be permanently transferred any Ministerial powers that were delegated under the Ministerial delegation, and the Minister will retain power over compensation regimes that were not delegated to ASIC.

3.166 ASIC has the following direct powers in relation to compensation arrangements:

•

considering whether a market is covered by Division 4 of Part 7.5 of the Act; [Schedule 3, items 134 and 135, section 881D of the Act]

•

approving compensation arrangements with or after a grant of a licence; [Schedule 3, items 136 to 139, section 882A and 882B of the Act]

•

revoking an approval of compensation arrangements; [Schedule 3, item 140, section 882C of the Act]

•

treat the application as approval of the compensation arrangements and consider whether the arrangements are adequate if an application contains details about the proposed compensation arrangements; [Schedule 3, item 133, section 881C of the Act]

•

approving proposed changes to compensation arrangements as set out by Division 3 of Part 7.5 of the Act, that are not required to be dealt with in the compensation rules; [Schedule 3, items 148 to 150, subsections 884C of the Act]

•

requiring compensation arrangements to be adequate; [Schedule 3, item 151, subsection 885B(1) and (2) of the Act]

•

determining the adequacy of compensation arrangements; and [Schedule 3, item 152 to 154, subsections 885C(3) and 885J(1) and (2) of the Act]

•

issuing, varying or revoking an exemption from all or part of Part 7.5 of the Act. [Schedule 3, items 157 to 159, section 893B of the Act]

3.167 ASIC may request a risk assessment report from the operator of a financial market. [Schedule 3, item 156, subsection 892K(1) of the Act]

Publication of licences

3.168 The former requirement to publish notifications of a licence on the Gazette is updated to ASIC's website to reflect ASIC's licensing powers in respect of financial markets and CS facilities.

3.169 The following licensing notifications must be published on ASIC's website:

•

varying or revoking an exemption of a financial market (including exemptions to compensation regimes under Part 7.5 of the Act); [Schedule 3, items 67 and 160, subsections 798M(5) and 893B(5) of the Act]

•

granting an Australian market licence; [Schedule 3, item 28, section 795C of the Act]

•

imposing, varying or revoking conditions of an Australian market license; [Schedule 3, item 32, subsection 796A(1) of the Act]

•

publishing a notice of suspension or cancellation; [Schedule 3, items 55 and 56, subsection 797F(1) of the Act]

•

varying or revoking of an exemption of a CS facility; [Schedule 3, item 68, subsection 820C(5) of the Act]

•

granting a CS facility licence; [Schedule 3, item 91, section 824C of the Act]

•

imposing, varying or revoking conditions of a CS facility licence; and [Schedule 3, item 95, subsection 825A(1) of the Act]

•

suspension or cancellation of a CS facility licence. [Schedule 3, items 116 and 117, subsection 826F(1) of the Act]

3.170 The amendments provide further clarity by updating the language to provide certainty that of what is included in the publication, which may include when the licence takes effect. [Schedule 2, items 54, 58 and 59, sections 795C and 824C, and paragraph 824C(b); Schedule 3, items 28, 85 and 91, sections 795C, 823C(6) and 824C of the Act]

Provision of multiple licences

3.171 ASIC may grant two or more licences in the same document provided that ASIC is satisfied the relevant licence conditions are met:

•

for a market licence, the conditions under subsection 795B(1) or (2) of the Act; or

•

for a CS facility, the conditions under subsections 824B(1), (1A) or (2) of the Act. [Schedule 3, items 29, 92, and 30, and 93, sections 795D and 824D and subsections 795E(3) and 824E(3) of the Act]

Consultation

3.172 As a result of the co-regulatory environment, consultation between ASIC and the RBA is necessary to ensure effective regulation of CS facilities.

3.173 ASIC must consult with the RBA prior to exercising powers relating to CS facilities including:

•

granting, revoking, suspending, or cancelling a CS facility licence;

•

imposing, varying or revoking conditions on a CS facility licence; and

•

disallowing a rule change, or exercising its exemptions or directions powers.

[Schedule 3, item 127, subsection 827E(1) of the Act]

3.174 Similarly, the RBA is required to consult or provide advice to ASIC prior to the exercise of any of their exemption or directions powers. [Schedule 3, item 127, subsection 827E(2) of the Act]

3.175 For any requirement for the regulators to consult each other prior to acting, the action will continue to be valid and have effect in the event a regulator fails to engage in consultation prior to exercising their powers. This aims to provide certainty among the affected entities as the decision will continue to have effect regardless of whether consultation has occurred. However, this provision does not exclude judicial review under section 75(v) of the Constitution and section 39B of the Judiciary Act 1903 where failure to meet procedural requirements would amount to jurisdictional error.

Providing advice to the Minister

3.176 Given the Minister's limited involvement in licensing and supervision of financial markets and CS facilities, there is no requirement for ASIC to continue to provide advice to the Minister with respect to:

•

lodgement of an application for an Australian market licence; [Schedule 3, items 19 and 20, subsections 795A(1) and (2) of the Act]

•

lodgement of an application for a CS facility licence; [Schedule 3, items 89 and 90, subsection 824A(1) and 824A(2) of the Act]

•

a market licensee advising it has breached a general licence obligation or is unable to meet its obligations; and [Schedule 3, item 2, subsection 792B(1) of the Act]

•

a CS facility licensee advising ASIC it has breached a general licence obligation or is unable to meet its obligations. [Schedule 3, item 70, section 821B(1) of the Act]

3.177 ASIC's ability to provide advice, information or documents to the Minister on any matter the Minister retains power over is unchanged. ASIC may continue to provide advice to the Minister on Australian market licences and CS facilities. [Schedule 3, items 63 and 124, sections 798B and 827B of the Act]

3.178 The RBA may continue to provide advice to the Minister in relation to any matter concerning CS facilities. [Schedule 3, item 124, section 827C of the Act]

Licensee compliance

3.179 ASIC may assess a licensee's compliance with their obligations under Chapter 7 of the Act. ASIC does not need to provide a copy of the assessment to the Minister for an:

•

Australian market licensee; [Schedule 3, items 16, 17 and 18, subsections 794C(3) and (6) of the Act]

•

CS facility licensee (ASIC will still need to provide a copy of the assessment to the RBA); [Schedule 3, items 83 and 84, subsections 823C(3) and (6) of the Act]

•

derivative trade repository licensee; or [Schedule 3, item 162, subsection 904J(2) of the Act]

•

benchmark administrator licensee; [Schedule 3, item 164, subsection 908BW(2) of the Act]

3.180 The RBA has similar powers to assess a CS facility licensee's compliance with the financial stability standards. The RBA is not required to provide a copy of their assessment to the Minister, however, must provide a copy of the assessment to ASIC. [Schedule 3, items 86, 87 and 88, subsections 823CA(2) and (5) of the Act]

Disqualification

3.181 The procedure for ASIC to declare that an individual is disqualified from being involved in an Australian market licensee, CS facility licensee, derivative trade repository licensee or a benchmark administrator licensee no longer involves the Minister. Therefore, amendments are made to remove the Minister's involvement where ASIC is not required to provide the following to the Minister:

•

a declaration notice; [Schedule 3, items 128 to 130, subsection 853D(3) and paragraph 853D(6)(b) of the Act]

•

a revocation of a declaration; and [Schedule 3, item 131, subsection 853E(2) of the Act]

•

a notification of a disqualified individual being involved in a licensee. [Schedule 3, item 132, section 853G of the Act]

Operating rules disallowance

3.182 ASIC is directly empowered to disallow changes to operating rules for:

•

financial markets; [Schedule 3, items 6 to 9, subsections 793E(2), (3) and (4) of the Act]

•

CS facilities, provided that ASIC consults with the RBA; [Schedule 3, items 74 to 76, subsections 822E(2), (3) and (4) of the Act]

•

compensation rules; and [Schedule 3, item 145 to 147, subsections 884B(5) to (7) of the Act]

•

Securities Exchanges Guarantee Corporation rules. [Schedule 3, item 155, subsections 890H(1) and (2) of the Act]

3.183 All other aspects of disallowing operating rules remain the same including the timeframe, notification and affected entities.

Consequential and minor amendments

3.184 The Minister's general power of delegation to ASIC under Chapter 7 of the Act is amended to exclude powers in Parts 7.2, 7.2A, 7.3, 7.3A, 7.3B, 7.4, 7.5 and 7.5A of the Act. [Schedule 3, item 165, subsection 1101J(1) of the Act]

3.185 As a result of updating the directions power to be given to a market licensee, a consequential amendment is made to ensure that Division 3 financial products are deemed to be tradable for the purposes of the prohibition against insider trading. [Schedule 2, items 73 and 74, section 1042E of the Act]

3.186 If a cash dealer communicates information to the AUSTRAC CEO about their suspicion in relation to a transaction to which the cash dealer is a part, neither of the following Acts prohibit the cash dealer from disclosing this information to an operator of a financial market exempted under section 791C of the Act from holding an Australian financial market licence:

•

Financial Transaction Reports Act 1988; and

•

Anti-Money Laundering and Counter-Terrorism Financing Act 2006 [Schedule 5, item 1, paragraphs 243D(d) and 243E(d) of the ASIC Act]

3.187 Appointed or directed experts under proposed section 823BB of the Act are protected from proceedings provided that the expert acted in good faith when fulfilling their function or power and complied with any other corporations legislation, or prescribed law of the Commonwealth, a State or a Territory. [Schedule 3, item 101, paragraph 246(1)(n) of the ASIC Act]

3.188 As a result of updates to the declared financial market, corresponding amendments have been made to the Bankruptcy Act 1966 and the PPSA. [Schedule 2, items 28 and 29, subsection 5(1) Bankruptcy Act 1966 and section 49 of the PPSA]

3.189 The amendments also make minor amendments to:

•

fix an error in the notes in sections 791B and 820B of the Act by replacing the term subsection with section; and

•

for an order for compensation arising from an offence in context of an administrator being appointed to a company, replace an outdated reference to section 5 of the Crimes Act 1914 (which no longer exists) with a reference to section 11.2 of the Criminal Code.

•

omit empty brackets in paragraphs 792A(1)(h) and 821A(1)(g) of the Act. [Schedule 5, items 2, 3, 4, 5 and 6, notes to sections 791B and 820B, paragraphs 437E(1)(a), 792A(1)(h) and 821A(1)(g)]

3.190 The amendments replace out of date references to the Financial Management and Accountability Act 1997 with references to the Public Governance, Performance and Accountability Act 2013 in the Act. [Schedule 5, item 7, subsections 883D(6), 889J(7) and 889K(6) of the Act ]

3.191 The amendments replace an out of date reference to Australian Stock exchange Limited with Australian Securities Exchange Limited in the Act and the Insurance Act 1973. [Schedule 5, items 8 and 9, paragraph 890A(3)(a) of the Act and subsection 3(1) of the Insurance Act 1973]

3.192 In line with the transfer of powers from the Minister to ASIC for imposing, varying and revoking licence conditions, the requirement for ASIC to give the Minister any application and documents lodged with ASIC has been repealed from section 825A of the Act as it is redundant. [Schedule 2, item 60]

Commencement, application, and transitional provisions

3.193 The amendments in Parts 1 to 10 and 12 to 13 of Schedule 2 commence on the seventh day after Royal Assent.

3.194 The amendments in Part 11 of Schedule 2 commence on the day after the end of the period of 6 months beginning on the day after Royal Assent.

3.195 The amendments in Part 14 of Schedule 2 commence on the later of:

•

immediately after the commencement of the amendments in Parts 1 to 10; and

•

the commencement of item 11 of Schedule 1 to the Treasury Laws Amendment (Reserve Bank Reforms) Act 2024.

3.196 The latter amendments do not commence at all if item 11 of Schedule 1 to the Treasury Laws Amendment (Reserve Bank Reforms) Act 2024 does not commence.

3.197 The amendments in Schedule 3 commence on the seventh day after Royal Assent.

3.198 The amendments in Schedule 5 commence on the day after Royal Assent.

Application and transitional provisions relating to Australian CS facility licences

3.199 Definitions for the new expressions amending schedule and commencement time for specific use in relation to the transitional provisions for the amendments made in Schedule 2 to the Bill has been added to Chapter 10 of the Act. [Schedule 2, item 142, section 1705 of the Act]

3.200 The amendments made in Part 1 of Schedule 2 to the Bill create a general licence condition for CS facility licences that if the licence was granted under subsection 824B(1) of the Act, the licensee must be a body corporate registered under Chapter 2A of the Act. Those amendments apply in relation to applications for a licence made after those amendments commence. [Schedule 2, item 142, section 1705A of the Act]

3.201 Transitional provisions provide that an application for an Australian CS facility licence, made under section 824A of the Act before the commencement of Schedule 2 to the Bill, continues to be valid notwithstanding whether the body corporate is registered under either a Chapter 2A or Division 2 of Part 5B.2 body corporate. If the licence had been granted by the Minister prior to commencement or even on or after commencement for applications already made, the licence is to be dealt with as if the licence was granted by ASIC.

3.202 Transitional provisions also apply for Australian CS facility licences in force before commencement for operating overseas CS facilities. If an application was undecided before commencement, if the Minister decides the application by granting a licence under the old Act, the licence is taken to be granted under the old Act to a body corporate as if the licence had been granted under the amended Act. If the licence granted under the old Act to a body corporate as inserted by Schedule 2 to the Bill, the licence is taken to have been granted to the body corporate as inserted by Schedule 2 to the Bill. [Schedule 2, item 142, sections 1705B, 1705C and 1705D of the Act]

3.203 The amendments do not apply in relation to a notice given by the Minister requiring a market licensee or a CS facility licensee to give ASIC a special report, if that notice was in force immediately before commencement. [Schedule 2, item 142, section 1705D of the Act]

Application provisions relating to dealing with licences that are not being used

3.204 The amendments relating to dealing with licences that are not being used apply to decisions to suspend or cancel a licence on or after the commencement of Schedule 2 to the Bill (whether an act, omission or change happens, or period of lack of use starts before, on or after that commencement). [Schedule 2, items 142, section 1705E of the Act]

Transitional provisions relating to prescribed financial markets and widely held market bodies

3.205 Financial markets prescribed by regulations are taken to be (and may be dealt with as if they were) declared financial markets. Widely held market bodies prescribed by regulations continue to be widely held market bodies after the commencement of the amendments.

3.206 However, once ASIC makes its first declaration the above-mentioned transitional provision will cease to have effect. ASIC can make an instrument declaring all currently prescribed financial markets to be declared financial markets in its first declaration instrument on the basis that they are already a declared financial market under the transitional arrangements. The transitional provision is structured in this way to achieve transparency on the face of the law so readers can easily identify declared financial markets in one place. [Schedule 2, items 142, sections 1705F and 1705H of the Act]

3.207 Schedule 2 contains a translation of references provision to update references to prescribed financial market(s) in instruments made under the Act to declared financial market(s). [Schedule 2, items 142, section 1705G of the Act]

Application and transitional provisions relating to preservation of voting power

3.208 The amendments relating to preservation of voting power apply to a person who holds a particular percentage of voting power in a widely held market body, that is declared by ASIC (not by virtue of the transitional provision in section 1706H of the Act), at a particular time on or after the commencement of Schedule 2 to the Bill. [Schedule 2, items 142, section 1705J of the Act]

3.209 An approval to hold a particular percentage of voting power in a widely held market body that was taken to be granted by the Minister because of the operation of the preservation of voting power provisions as in force immediately before the commencement of Schedule 2 to the Bill is, on or after commencement, taken to be approval granted because of the operation of the preservation of voting power provisions as amended by Schedule 2 to the Bill. [Schedule 2, items 142, section 1705K of the Act]

Transitional provisions relating to approval for control of certain Australian licensees

3.210 If, at the commencement of Part 5 of Schedule 2, a person holds more than 20 per cent voting power in a controlled Australian financial body, the person is taken to be granted an approval by ASIC to hold that percentage of voting power at that commencement. The approval comes into force at that commencement and remains in force indefinitely unless varied or revoked. ASIC is taken to have complied with its obligations under Part 7.4 of the Act for granting the approval. [Schedule 2, item 142, section 1705L of the Act]

3.211 The obligation to notify ASIC of certain matters in sections 792B and 821B of the Act are updated so that a market or CS facility licensee that becomes aware that a person has come to have, or has ceased to have, a voting power that exceeds voting power of 20 per cent in the licensee, or holding company of the licensee, must notify ASIC.

3.212 Those amendment apply in relation to changes in voting power that occur at or after commencement time. [Schedule 2, item 142, section 1705M of the Act]

Transitional provisions relating to exemptions

3.213 The exemptions power is broadened to provide certainty that an exemption could be provided to particular operators. ASIC may exempt a financial market or class of financial markets, a CS facility or class or CS facilities, or a person or class of persons from all or specified provisions of Parts 7.2 and 7.3 of the Act, respectively.

3.214 Exemptions that are given under subsections 791C(1) and 820C(1) of the Act and which are in force immediately before commencement continue to be in force and may be dealt with as if the exemption was given under subsections 791C(1) or 820C(1) of the Act as amended by Schedule 2. [Schedule 2, item 142, sections 1705N and 1705P of the Act]

Transitional provisions relating to rules

3.215 Paragraphs 793N(2)(aa) and 822B(2)(aa) of the Act provide that if there is an inconsistency between the operating rules of a licensed market or a licensed CS facility and the CS facility rules, the CS facility rules prevail to the extent of any inconsistency.

3.216 That rule applies in relation to operating rules that are in force at commencement time, whether made before, at or after commencement time. [Schedule 2, item 142, subsection 1705Q(1) of the Act]

3.217 Subsection 827D(2A) of the Act provides that if there is an inconsistency between the CS facility rules, CS services rules, derivative transaction rules and the derivative trade repository rules, and the financial stability standards, the financial stability standards prevail to the extent of any inconsistency.

3.218 That rule applies in relation to financial stability standards that are in force at commencement time, whether made before at or after commencement time. [Schedule 2, item 142, section 1705Q(2) of the Act]

Transitional provisions relating to directions

3.219 The amendments to subsections 794D(2), 798J(2), 823D(2) and 904G(2) of the Act do not apply in relation to a direction given under those subsections before commencement time. [Schedule 2, item 142, section 1705R of the Act]

3.220 The amendment to subparagraph 1101B(1)(a)(iii) of the Act does not apply in relation to an application made by ASIC under subsection 1101B(1) of the Act or an order made by the Court before commencement time. [Schedule 2, item 142, subsection 1706S(2) of the Act]

Transitional provisions relating to the transfer of ministerial power

3.221 The amendments insert a definition for amending part for the purposes of the transitional provisions for the amendments in Schedule 3. [Schedule 3, item 168, section 1706 of the Act]

3.222 An instrument or notice (under sections 794B or 823B of the Act) that is made by the Minister under a provision of the Act that has been amended by Schedule 3 to the Bill and is in force immediately before the commencement of the amendments and has effect as if it were made pursuant to the Act as amended. [Schedule 3, item 168, sections 1706A and 1706B of the Act]

3.223 If a report and recommendation to suspend or cancel a market or CS facility licence was given to the Minster under paragraphs 797C(3)(b) or 826C(3)(b) of the Act before the commencement of the amendments, and the Minister did not take action in response to that report and recommendation, the Minister must give the report and recommendation to ASIC. ASIC may deal with the report and recommendation in the same way as outlined in the amended Act. [Schedule 3, item 168, sections 1706C and 1706D of the Act]