Senate

Corporations Amendment (Asia Region Funds Passport) Bill 2018

Revised Explanatory Memorandum

(Circulated by authority of the Minister for Revenue and Financial Services, Minister for Women and Minister Assisting the Prime Minister for the Public Service, the Hon Kelly O'Dwyer MP)
This memorandum takes account of amendments made by the House of Representatives to the bill as introduced.

Chapter 9 Statement of Compatibility with Human Rights

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

Corporations Amendment (Asia Region Funds Passport) Bill 2018

9.1 This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

9.2 The Corporations Amendment (Asia Region Funds Passport) Bill 2018 (the Bill) amends the Corporations Act 2001 (the Corporations Act), the Australian Securities and Investments Commission Act 2001 (the ASIC Act) and related legislation to introduce into Australian law a multilateral framework that allows eligible collective investment schemes to be marketed across participating economies, with limited additional regulatory requirements. The multilateral framework (known as the Asia Region Funds Passport) is contained in a Memorandum of Cooperation (MOC) that has been agreed and entered into by five participating economies, including Australia.

9.3 Key aspects of the Bill include:

·
establishing a mechanism for incorporating comprehensive Passport Rules, contained in Annex 3 of the MOC, into Australian law;
·
requiring passport funds registered in Australia and their operators, as well as foreign passport funds offering interests in Australia and their operators, to comply with the Passport Rules for this jurisdiction;
·
inserting new Chapter 8A into the Corporations Act, which sets out the process for registering registered schemes as Australian passport funds, a mechanism for foreign passport funds to notify ASIC of their intention to offer interests to Australian investors, and the circumstances in which ASIC may reject such notifications;
·
amending other parts of the Corporations Act and the ASIC Act to clarify how the corporations law applies to foreign passport funds, including in relation to financial reporting, consumer protection and disclosure; and
·
introducing a range of new offences, including strict liability offences and applying extended geographical jurisdiction Category A under section 15.1 of the Criminal Code to certain new offences.

9.4 The structure of the Bill is set out below.

9.5 Key definitions. Schedule 1 to the Bill inserts a new Chapter 8A into the Corporations Act. Parts 8A.1 and 8A.2 contain a number of key definitions and set out the mechanism for incorporating the Passport Rules into Australian domestic law.

9.6 Becoming a passport fund. Parts 8A.3, 8A.4 and 8A.5 of the new Chapter set out the registration process for registered schemes to become Australian passport funds and the notification process for foreign passport funds seeking to offer interests in Australia. Part 8A.8A sets out the rules and processes governing deregistration of Australian passport funds and denotification (that is, removal of permission to offer interests in Australia) of foreign passport funds.

9.7 Notified foreign passport funds: Relationship with members and prospective members in Australia. Schedule 2 to the Bill sets out consequential amendments to the Corporations Act, generally relating to notified foreign passport funds. These include extending existing requirements applicable to other financial products and services, such as provision of annual financial reports of the fund and periodic statements of a member's investment in a fund and existing disclosure requirements. The existing penalty notice regime in the Corporations Act is extended to cover contraventions of the new strict liability offences that are introduced by the Bill.

9.8 Notified foreign passport funds: Australian regulation of a notified foreign passport fund's other activities in Australia. In addition to the regulation by Australia of the investor-facing interactions of a notified foreign passport fund, where other aspects of the corporations law are potentially relevant to the activities of such funds in Australia, they are generally given equivalent treatment to Australian MISs in amendments under Schedule 2.

9.9 Compliance and enforcement. Part 8A.6 of Schedule 1 gives ASIC additional compliance and enforcement powers for Australian passport funds and notified foreign passport funds. In addition, Schedule 2 of the Bill provides ASIC with the additional regulatory function of passport regulator under the ASIC Act; allows ASIC to accept enforceable undertakings from operators of notified foreign passport funds; and authorises certain persons to disclose confidential information held by ASIC to other passport regulators as required under the MOC.

9.10 Exemptions and modifications. Part 8A.8 of the new law grants ASIC the power, and also allows regulations to be made, to exempt entities from the provisions in Chapter 8A and the Passport Rules, or modify any such provision as it applies to an entity. Part 8A.8A provides both that regulations can be made and ASIC may declare that the corporations legislation continues to apply to funds that have been deregistered as passport funds or removed as notified foreign passport funds. This ensures members of such funds who joined on the basis that the fund was a passport fund can continue to be protected in the event the fund is deregistered or denotified. ASIC is also granted the power to exempt notified foreign passport funds, their operators and the directors of the operators from Part 2M.3 financial reporting obligations. The new law extends the existing power for the regulations to modify the operation of Chapter 2M in relation to companies, registered schemes and disclosing entities to notified foreign passport funds.

Human rights implications

9.11 The Bill engages, or may engage, the following human rights:

·
the right to privacy;
·
the right to the presumption of innocence;
·
the right to a fair and public hearing; and
·
criminal process rights.

Engagement of the right to privacy

9.12 Article 17 of the International Covenant on Civil and Political Rights (ICCPR) requires parties to the ICCPR to uphold the individual right not to have one's private, family and home life or correspondence unlawfully or arbitrarily interfered with. It also includes the right to protection by law of one's reputation. According to the Parliamentary Joint Committee on Human Rights' Guide to Human Rights, the right to privacy includes:

·
the right to respect for confidential and private information, particularly the storing, use and sharing of such information; and
·
the right to control dissemination of information about one's private life.

9.13 The Bill engages the right to privacy because it:

·
involves the collection, security, use or disclosure of information that may include personal information; and
·
regulates information held on a public register.

9.14 New section 1213K of the Bill introduces the right for a person in this jurisdiction, or an Australian member [22] , or former member of a notified foreign passport fund who either acquired an interest in the fund in Australia or is ordinarily resident in Australia, to request a copy of the register of members of the fund.

9.15 New section 1213L of the Bill introduces restrictions on the use of information obtained from the register of members of a notified foreign passport fund.

9.16 New section 1214 of the Bill provides that ASIC must establish and maintain a Register of Passport Funds or ensure that a Register of Passport Funds is established and maintained by another body. The Register will include details of Australian passport funds and notified foreign passport funds (that is, foreign passport funds that are permitted to offer interests in Australia), and may also include details of other passport funds. Records of transaction to the Register, such as lodgments of applications to become a passport fund, will be available for public search as a document.

9.17 The Privacy Act 1988 (the Privacy Act) provides for the protection of personal information, including setting out Information Privacy Principles applying to the Commonwealth public sector and National Privacy Principles applying to many private sector organisations.

9.18 The right to privacy and reputation is not an absolute right and is subject to permissible limits. The implied limitation arises inter alia as a result of the interpreting term 'arbitrary' in Article 17 of the ICCPR, which prohibits unlawful or arbitrary interferences with a person's privacy, family, home and correspondence.

Right to obtain a copy of the register of members and use of information contained on it

9.19 The Passport Rules contained in Annex 3 of the MOC require that operators of passport funds (whether Australian or foreign) have adequate internal control mechanisms, including procedures and systems, to ensure that registers of members are "duly kept".

9.20 Under new section 1213K of the Bill, a person in this jurisdiction, or an Australian member or former member of a notified foreign passport fund who either acquired an interest in the fund in Australia or is ordinarily resident in Australia, may request a copy of the fund's register of members. The information to be kept on a register of members of a notified foreign passport fund is determined by the laws and regulations of the fund's home economy, not by Australian laws and regulations. To the extent that the register of members that is required to be kept under home economy laws and regulations includes information such as members' names, postal addresses and shareholding details, then it would constitute personal information.

9.21 New section 1213K of the Bill is closely modelled on existing section 173 of the Corporations Act.

9.22 Existing subsection 173(3) provides that a person may obtain a copy of the registers of members of a registered scheme. The copy of register of members must be given to the person requesting it in the prescribed form.

9.23 New paragraphs 1213K(2)(b) and (c) of the Bill provide that a request to obtain a register of members must state the purpose for which the information obtained is intended to be used. This purpose must not be a prescribed purpose, and prescribed purposes may be set out in regulations. This replicates the existing conditions for an application to obtain a register of members of a registered scheme under subsection 173(3A), for which the prescribed purposes are set out in regulation 2C.1.03. It is envisaged that the prescribed purposes that currently apply in respect of registers of members of registered schemes will be extended by regulations to registers of members of notified foreign passport funds.

9.24 New section 1213L of the Bill sets out restrictions on the use of information obtained from a register of members of a notified foreign passport fund. The section is closely modelled on existing section 177 of the Corporations Act.

9.25 New subsection 1213L(1) of the Bill prohibits the use and disclosure of information obtained from the register to contact members. This replicates existing subsection 177(1), which prohibits the use and disclosure of information on any register kept under Chapter 2C (that is, including registers of members of registered schemes). New subsection 1213L(1) and subsection 177(1) are comparable to the requirements of the Australian Privacy Principle (APP) number 7 under the Privacy Act, which generally prohibits an organisation from using personal information about an individual for direct marketing purposes. However, the prohibitions contained new subsection 1213L(1) and subsection 177(1) are broader in scope because they deal with the sending of material in general, rather than specifically marketing material.

9.26 New subsection 1213L(2) of the Bill provides an exception to new subsection 1213L(1), in the same way as subsection 177(1A) provides an exception to subsection 177(1). The exceptions outlined in new paragraphs 1213L(2)(a) and (b) are the same as those in paragraphs 177(1A)(a) and (b) and allow actions (including the provision of information) that are relevant to a member's holding of interests recorded on the register and the exercise of rights that are attached to those interests. The ambit of these exceptions is restricted by the fact that, under the Criminal Code, a defendant wishing to rely on an exception bears the evidential burden of providing evidence that 'suggests a reasonable possibility' that the exception applies (subsection 13.3(3) of the Criminal Code).

9.27 New subsection 1213L(3) provides restrictions on the use or disclosure of information for prescribed purposes, in the same way as the existing subsection 177(1AA) does for information from any register kept under Chapter 2C. The power contained in existing subsection 177(1AA) has, to date, not been put to use. The power to prescribe additional prohibited purposes is precautionary, in case specific forms of misuse of the restricted right to contact members arise in future that need to be addressed.

9.28 These provisions aim to achieve the legitimate objective of ensuring that Australian members of notified foreign passport funds can be contacted regarding their interests in such funds, where this assists them to be informed about their interests and how they may exercise their rights in respect of those interests; for example, in relation to exercising their right to vote at a meeting of fund members. This is analogous to the existing rights and restrictions regarding access to and use of information on members' registers that apply in respect of registered schemes.

9.29 The limitations on privacy afforded by these measures can be considered rational and necessary because they essentially replicate and ensure consistency with a longstanding existing right for persons to obtain copies of registers of members of a registered scheme and achieve the same objective of facilitating contact with members of a passport fund for the purposes of providing them with information that is in their interest to have access to.

9.30 The limitations on privacy that these measures entail can be considered reasonable and proportionate because the legitimate purposes and uses of a register of members are strictly constrained and contraventions are subject to strict liability offences attracting significant penalties, thereby ensuring there is a strong incentive to comply with the law. Specifically:

·
requests for registers of members of a notified foreign passport fund must state the purpose for which the information is intended to be used;
·
the purpose must not be a prescribed purpose, and prescribed purposes may be set out in regulations;
·
the use or disclosure of information about a member of the register in contravention of the new law constitutes a strict liability offence attracting a penalty of 60 penalty units; and
·
the use or disclosure of information obtained from the register of members for any purpose prescribed by the regulations constitutes a strict liability offence attracting a penalty of 60 penalty units.

Creation and maintenance of a Register of Passport Funds containing information about passport funds

9.31 Section 7 of Annex 2 of the MOC requires that each Passport Regulator maintain a current public register containing a number of details of the passport funds and deregistered Passport Funds for which it is the Home Regulator.

9.32 Section 8 of Annex 2 of the MOC requires that each Passport Regulator take all reasonable measures to keep confidential any information provided to it by a Passport Fund or Operator of a Passport Fund on a confidential basis.

9.33 Section 7 of Annex 2 of the MOC also requires that the Part A application for registration as a passport fund be placed on the Passport Regulator's register, except for any part of it that is marked confidential. The Joint Committee of participating economy regulators that are responsible for implementing the Passport decided the Part A should be consistent for all participating economies. Part A as agreed includes some personal information.

9.34 As an Australian Privacy Principle (APP) entity under the Privacy Act, ASIC is required to maintain registers in accordance with its APP obligations, to the extent that such registers contain personal information.

9.35 New section 1214 provides that ASIC, as the home regulator, must either establish and maintain a Register of Passport Funds or ensure that a Register of Passport Funds is established and maintained by another entity. If the Register of Passport Funds is kept by ASIC, ASIC may do so in any form that ASIC considers appropriate. The Register of Passport Funds must include the prescribed details of Australian passport funds and notified foreign passport funds and of funds that have been deregistered as Australian passport funds and funds that have been denotified as notified foreign passport funds. The Register may include details of other passport funds.

9.36 The Register of Passport Funds will be a public register accessible via ASIC's website. As operators of passport funds and the funds themselves will generally be large entities, this will not generally limit the human rights of individuals. The data fields on the Register of Passport Funds maintained by ASIC will contain personal information that is collected from the application to register as an Australian passport fund or notice of intention to become a notified foreign passport fund. However, the publicly available search extracts of information contained on the Register of Passport Funds will not contain personal information.

9.37 An application to become an Australian passport fund or a notice of intention lodged by a foreign passport fund to become a notified foreign passport fund will contain personal information of the person lodging the application or notice (such as name, address, email, telephone number).

9.38 An application to become an Australian passport fund will also contain personal information about chief executive officers, directors and responsible officers (such as name, date of birth, qualifications and experience) and about officers of the fund operator, or a controlling entity and compliance committee members (such as name and date of birth). The application will be held on ASIC's systems and be available publicly via paid search.

9.39 A notice of intention lodged by a foreign passport fund will also contain personal information about directors and the local agent (such as name and date of birth). This notice of intention will be held on ASIC's systems and available publicly via a paid search.

9.40 Given operational difficulties in redacting personal information from the application to become an Australian passport fund and notice of intention to become a notified foreign passport fund, ASIC is currently considering the best way for it to comply with its APP obligations. This includes considering whether it can obtain consent from an applicant to publish any personal information.

9.41 Generally, under existing section 1274 of the Corporations Act, documents lodged with ASIC may be inspected by the public on payment of the prescribed fee. Copies or extracts may also be obtained. A person may also, within certain limits, inspect documents lodged with ASIC. Such documents may contain personal information. However, new subsections 1212(4), 1213(4) and a consequential amendment to section 1274 (subparagraph 1274(2)(a)(iab)), provides that ASIC may, by legislative instrument, determine which parts of an application to become an Australian passport fund or notice of intention to become a notified foreign passport fund are to be made available for inspection or copying. This is designed to ensure ASIC is able to protect personal information or information that is commercial-in-confidence from being accessed by members of the public.

9.42 Nonetheless, a 'record of transaction' will be created for each lodgment to the Register of Passport Funds. It is standard practice for the record of transaction to ASIC registers to include 'lodging party details' containing personal information (for example, name, address and the option for an email address).

9.43 Under existing section 1274A, ASIC may permit a person to search a prescribed register kept by ASIC under the Corporations Act. It is intended that the Register of Passport Funds be prescribed in the regulations, such that records of transaction to the Register of Passport Funds would generally be made available for public search.

9.44 These measures aim to achieve the legitimate objective of giving effect to the MOC requirement of creating and maintaining a Register of Passport Funds, so that the public can be informed about the passport funds that are able to offer interest in Australia, and extending the power ASIC already has in relation to permitting searches of registers maintained by ASIC to searches of the Register of Passport Funds.

9.45 Any limitation on privacy afforded by the right of members of the public to request records of transaction to the Register of Passport Funds is rational and necessary as it ensures consistency with existing rights for persons to obtain copies of records of transactions to registers maintained by ASIC. It would be inappropriate for the public to have less access to the Register of Passport Funds than it has to other registers maintained by ASIC.

9.46 Any limitations on privacy, to the extent they exist, can be considered reasonable and proportionate because:

·
ASIC may determine which parts of an application to become an Australian passport fund or notice of intention to become a notified foreign passport fund are to be made available for inspection or copying. This ensures that ASIC is able to ensure commercial-in-confidence and personal information is not available for inspection or copying.
·
ASIC is not under an obligation to permit a search of a prescribed register. ASIC can therefore choose not to permit a search in the event it was of the opinion that obtainment of personal information by a specific person from the records of transaction would not be in the interests of the individuals to which the personal information relates.

Engagement of the presumption of innocence

9.47 Paragraph 2 of Article 14 of the ICCPR protects the right of a person charged with a criminal offence to be presumed innocent until proven guilty according to law. The presumption of innocence is also a fundamental principle of the common law. As the Parliamentary Joint Committee on Human Rights has observed, the presumption of innocence 'imposes on the prosecution the burden of proving the charge, guarantees that no guilt can be presumed until the charge has been proved beyond reasonable doubt, ensures that the accused has the benefit of doubt, and requires that persons accused of a criminal act must be treated in accordance with this principle'. [23] The presumption of innocence generally requires the prosecution to prove each element of a criminal offence beyond reasonable doubt.

Strict liability offences

9.48 The Bill engages the presumption of innocence as several new strict liability offences are created that mean the prosecution is not required to prove fault as part of the offence; it must merely prove that a contravention took place and the only permissible defence is an erroneous belief about a material event or circumstance.

9.49 The Passport Arrangements of the MOC (paragraph 5) require that each participant conduct reasonable checks on compliance with and, where appropriate, enforce the Passport Rules, whether by administrative action, regulatory or supervisory function or other means. The MOC also provides (in Annex 1) that participants may, in addition to the Passport Rules, choose to extend laws and regulations applicable to domestic collective investment schemes to foreign passport funds offering interests in their economy. The strict liability offences created in the Bill contribute to giving effect to these aspects of the MOC.

9.50 The following subsections of the new Chapter 8A being inserted by the Bill impose strict liability offences, each attracting a penalty of 60 penalty units, which are also subject to the existing penalty notice regime in section 1313 of the Corporations Act as well as Section 15.1 of the Criminal Code (extended geographical jurisdiction Category A):

·
New subsection 1211B(4), on a person in relation to an Australian passport fund or notified foreign passport fund for non-compliance of with the Passport Rules as incorporated into Australian law;
·
New subsection 1213J(1), on the operator of a notified foreign passport fund for not providing a person with a copy of the consolidated constitution of the fund on an application by that person in accordance with the section. An equivalent obligation to provide a copy of the constitution applies to registered schemes under existing subsection 601GC(4);
·
New subsection 1213K(1), on the operator of a notified foreign passport fund for not providing a person with a copy of the register of the members of the fund on an application by that person in accordance with the section. An equivalent strict liability offence already applies in subsection 173(9A) for not providing a person with a copy of a register of members of a managed investment scheme on an application by that person in accordance with subsection 173(3);
·
New subsection 1213L(1), on a person who uses information from a register of members of a notified foreign passport fund to contact or send material to members or discloses information likely to be used for such purposes. An equivalent strict liability offence already applies in subsection 177(1B) for contravening restrictions outlined in subsection 177(1) on such use of information from a register of members of a managed investment scheme;
·
New subsection 1213L(3), on a person who uses information from a register of members of a notified foreign passport fund for a purpose prescribed in the regulations or discloses information likely to be used for such purposes. An equivalent strict liability offence already applies in subsection 177(1B) for contravening restrictions outlined in subsection 177(1AA) on such use of information from a register of members of a managed investment scheme;
·
New subsection 1213M(1), on the operator of a notified foreign passport fund for not providing Australian members of the fund with a copy of any reports that it makes available to members in its home economy without charge (unless the operator is otherwise required under the Corporations Act to lodge the report with ASIC or provide it to Australian members); and
·
New subsection 1213P(1), on the operator of a notified foreign passport fund for not lodging a copy of the register of members subsequent to a request to do so by ASIC. A strict liability offence already applies in subsection 168(1A) for not setting up and maintaining a register of members of a registered scheme (which ASIC is entitled to inspect).

9.51 New subsection 314A(9) inserted by the Bill also imposes strict liability offences on the operator of a notified foreign passport fund for:

·
failing to provide an Australian member of the fund a copy of the annual financial report and the auditor's report relating to the financial report (new subsection 314A(1));
·
not providing a notice at least once informing the member they may elect to receive a hard copy or electronic copy of the reports (new subsection 314A(3)); and
·
not providing the reports in English or in an official language of the home economy of the fund (if the member so elects) (new subsection 314A(7)).

9.52 Each of these offences carries a maximum penalty of 10 penalty units or three months imprisonment, or both. This is consistent with the existing strict liability offences that attach to the equivalent requirements for annual financial reporting to members of companies, registered schemes and disclosing entities in section 314.

9.53 An amendment to subsection 319(1A) extends an existing strict liability offence, carrying a penalty of 60 units, or one year's imprisonment, or both, so that it applies on the operator of a notified foreign passport fund for not lodging relevant financial reports with ASIC under new subsection 319(1AA). This strict liability offence already applies to a company, registered scheme or disclosing entity for not lodging relevant financial reports with ASIC under subsection 319(1).

9.54 Similar amendments are made to subsection 321(1A) and section 322 to extend existing strict liability offences, each carrying a penalty of 10 penalty units or imprisonment for three months, or both, so that they apply to a contravention of a direction from ASIC that an operator of a notified foreign passport fund to lodge financial reports and amended financial reports and directors' reports. These strict liability offences already apply in respect of contraventions of these provisions by a company, registered scheme or disclosing entity.

9.55 Presumption of innocence is not an absolute right and is subject to permissible limits, for example in a situation in which threats to the rights of the innocent are minimal in comparison to the threats to the wider public interest. However, because proof of fault is one of the fundamental protections of criminal law, strict liability should only apply where there is adequate justification and subject to specific considerations.

9.56 The strict liability offences created by the Bill pursue the legitimate objectives of enforcing the Passport Rules as well as laws applicable to notified foreign passport funds that are substantially the same as existing laws applicable to registered schemes.

9.57 The limitations on presumption of innocence afforded by these offences can be considered rational and necessary because they enhance the effectiveness of the enforcement regime in deterring unwanted conduct and replicate and ensure consistency with existing laws applicable to registered schemes.

9.58 In relation to the new strict liability offences that are introduced in new Chapter 8A, while it is recognised that such offences often sit uncomfortably with the presumption of innocence, it is also widely recognised that such offences are a legitimate tool for ensuring compliance with the law and providing a timely and effective method for dealing with infringements where it is relatively easy to determine that a contravention has occurred. The potential impact of contraventions of these provisions on the integrity of the passport arrangements and the level of protection afforded to investors in passport funds mean they are appropriate in the circumstances.

9.59 The penalties for a contravention of the strict liability offences that are introduced in new Chapter 8A comply with the Australian Government's Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers (the Guide) as:

·
the offences are not punishable by imprisonment;
·
the maximum penalty in each case is at the maximum allowable under the Guide for strict liability offences;
·
the potential harm to investors and the reputation of Australia's financial system of extensive non-compliance is such that fault should not be an element of these offence; and
·
entities subject to the requirements covered by the offences should be on notice to guard against the possibility of contraventions.

9.60 Several of the strict liability offences that are extended to operators of notified foreign passport funds by the new law do not comply with the Guide because they either exceed the maximum recommended penalty suggested by the Guide or impose a term of imprisonment. Each of these offences is an existing offence that already applies in respect of conduct by a company, registered scheme or a reporting entity. Extending these offences so that they also apply to conduct by an operator of a notified foreign passport fund is legitimate, rational and necessary because it is important that the deterrent effect in each circumstance is no less strong than it is for Australian companies, registered schemes and disclosing entities. For this reason equivalent penalties have been imposed for these offences.

Offence provisions that carry an evidential burden

9.61 An offence provision that requires a defendant to carry an evidential burden may be considered to engage the right to the presumption of innocence.

9.62 Extended geographical jurisdiction Category A as set out in section 15.1 of the Criminal Code is applied to several of the criminal offences that are introduced in the new Chapter 8A to ensure these offences are effective given the operator of a notified foreign passport fund will be located in another jurisdiction. The offences to which extended geographical jurisdiction Category A applies are:

·
a breach of the Passport Rules in this jurisdiction (new subsections 1211B(3) and (4));
·
failure by an operator of a notified foreign passport fund to provide a consolidated copy of the fund's constitution as requested by an Australian member or former member (new subsection 1213J(1));
·
failure by an operator of a notified foreign passport fund to provide a copy of the register of members upon request (new subsection 1213K(1));
·
a breach of the prohibitions on using information contained on a register to contact members (new subsections 1213L(1) and (3));
·
failure by an operator of a notified foreign passport fund to provide Australian members of the fund a copy of any reports that it makes available to members in its home economy without charge (new subsection 1213M(1)); and
·
failure by an operator of a notified foreign passport fund to lodge on request by ASIC a copy of the whole or a specified part of the register of members of the fund (new subsection 1213P(1)).

9.63 These offences apply to foreign nationals and bodies corporate if the conduct giving rise to the offences occurs in Australia. They also apply if the conduct occurs abroad, provided that a result of the conduct occurs in Australia. However, under these circumstances there is a defence available if there is no equivalent offence in the domestic law of the jurisdiction where the conduct occurs. A defendant bears an evidential burden in relation to this defence.

9.64 The imposition of an evidential burden is justified because whether there is a corresponding offence in the domestic law of the jurisdiction where the conduct occurs will generally be a matter that is peculiarly within the defendant's knowledge. Moreover, the effect of the limitation is that the defendant must merely adduce or point to evidence there is no corresponding offence. Once this is done, the prosecution must refute this beyond the balance of probability. Accordingly, the limitation is reasonable in the circumstances.

Right to a fair and public hearing

9.65 Article 14 of the ICCPR ensures that everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.

9.66 To the extent of any impact on individuals, noting that operators of passport funds will generally be bodies corporate, a number of strict liability offences contained in the new law might be considered to engage the right of a fair and public hearing because they are subject to the penalty notice in section 1313 of the Corporations Act. Under section 1313, ASIC may give a penalty notice where it has reason to believe a person has committed a prescribed offence. Eight strict liability offences are prescribed offences under the new law:

·
new subsections 1211B(1) and (2);
·
new subsection 1213J(1);
·
new subsection 1213K(1);
·
new subsections 1213L(1) and (3);
·
new subsection 1213M(1) and
·
new subsection 1213P(1).

9.67 Because these offences relate to specific operational matters of a notified foreign passport fund, minor breaches may be expected to occur with some frequency. The penalty notice framework in the Corporations Act is designed to provide an efficient way of dealing with minor breaches, as it avoids significant delays and costs associated with Court action. Importantly, payment of an amount in relation to a penalty notice is not taken to be an admission of liability regarding a contravention of the prescribed offence. For this reason, the Bill is not considered to limit the right to a fair and public hearing.

Assessment of civil penalties

9.68 Practice note 2: Offence provisions, civil penalties and human rights [24] , observes that civil penalty provisions may engage criminal process rights under Articles 14 and 15 of the ICCPR, regardless of the distinction between criminal and civil penalties in domestic law. This is because the word 'criminal' has an autonomous meaning in international human rights law. When a provision imposes a civil penalty, an assessment is therefore required as to a 'criminal' penalty for the purposes of Articles 14 and 15 of the ICCPR.

9.69 The new law creates two new civil penalty provisions that are inserted into subsection 1317E(1). The first is in respect of a contravention of new subsection 344(1A) where a person fails to take all reasonable steps to comply with, or secure compliance with, Part 2M.3 of the Corporations Act (relating to financial reporting). The second is in respect of new subsections 1211B(1) and (2) concerning breaches of the Passport Rules.

9.70 The new civil penalty provisions in the Bill should not be considered 'criminal' for the purposes of international human rights law. While the new civil penalty provisions have substantial maximum penalties, neither of the provisions carry a penalty of imprisonment and there is no sanction of imprisonment for non-payment of any penalty. The penalties are directed at persons in a specific regulatory context and have the purpose of deterring misconduct, specifically breaches of the Passport Rules and financial reporting obligations, that have severe potential consequences for investors in passport funds.

Conclusion

9.71 The Bill is compatible with human rights. It engages, or may engage, with the right to privacy and reputation, the right to the presumption of innocence, the right to a fair and public hearing and criminal process rights. However, to the extent that the Bill places limitations on these rights, these limitations can be considered legitimate, rational and necessary in light of the objectives they aim to achieve, and reasonable and proportionate in their extent.


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