Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (135 of 2020)

Schedule 1   Enforceable code provisions

Corporations Act 2001

4   Section 1101A

Repeal the section, substitute:

1101A Approved codes of conduct

Applications

(1) If an application is made to approve a code of conduct, ASIC may, by legislative instrument, approve the code of conduct.

Identifying enforceable code provisions

(2) In the approval, ASIC may identify a provision of the code of conduct as an enforceable code provision if ASIC considers that:

(a) the provision represents a commitment to a person by a subscriber to the code relating to transactions or dealings performed for, on behalf of or in relation to the person; and

(b) a breach of the provision is likely to result in significant and direct detriment to the person; and

(c) additional criteria prescribed by the regulations for the purposes of this paragraph (if any) are satisfied; and

(d) it is appropriate to identify the provision of the code as an enforceable code provision, having regard to the matters prescribed by the regulations for the purposes of this paragraph (if any).

Note: See also section 1101AD.

ASIC to be satisfied of certain matters before making approval

(3) ASIC must not approve a code of conduct unless it is satisfied that:

(a) to the extent that the code is inconsistent with this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities - the code imposes an obligation on a subscriber that is more onerous than that imposed by this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities; and

(b) each enforceable code provision:

(i) has been agreed with the applicant; and

(ii) is legally effective; and

(c) it is appropriate to approve the code, having regard to the following matters:

(i) whether the obligations of subscribers to the code are capable of being enforced;

(ii) whether the applicant has effective administrative systems for monitoring compliance with the code and making information obtained as a result of monitoring publicly available;

(iii) whether the applicant has effective administrative systems for maintaining, and making publicly available, an accurate list of subscribers to the code.

Revocation

(4) ASIC may, by legislative instrument, revoke an approval of an approved code of conduct:

(a) on application by the applicant for the approval; or

(b) if ASIC ceases to be satisfied of the matters mentioned in subsection (3); or

(c) if a review of the operation of the code is not completed by the applicant within the timeframe required by section 1101AB.

(5) Subsection (4) does not, by implication, limit the application of subsection 33(3) of the Acts Interpretation Act 1901.

1101AA Variations to approved codes of conduct

(1) If an application is made to vary an approved code of conduct, ASIC may, by legislative instrument, approve the variation.

(2) Subsections 1101A(2) and (3) apply in relation to an application under subsection (1) as if it were an application to approve a code of conduct.

1101AB Review of approved codes of conduct

(1) The applicant, in relation to an approved code of conduct, must ensure that, every 5 years, an independent review is undertaken of the operation of the approved code of conduct.

(2) A review under subsection (1) must make provision for public consultation.

(3) A review of an approved code of conduct must be completed:

(a) for the first review - before the end of the 5 year period beginning on the day the code of conduct was approved; and

(b) for a subsequent review - within 5 years after the completion of the previous review.

(4) For the purposes of this section, a review is completed when a report of the review is given to ASIC.

(5) Within 10 business days of completing a review, the applicant must publish the report of the review on its website.

1101AC Obligation to comply with enforceable code provisions

If a person holds out that they comply with an approved code of conduct, the person must not breach an enforceable code provision of the approved code of conduct.

Civil penalty: 300 penalty units.

1101AD Regulations

The regulations may:

(a) prescribe criteria of which ASIC must be satisfied before it identifies a provision of a code of conduct as an enforceable code provision; or

(b) prescribe matters to which ASIC must have regard before it identifies a provision of a code of conduct as an enforceable code provision.

Subdivision B - Mandatory codes of conduct

1101AE Mandatory codes of conduct

(1) The regulations may prescribe a code of conduct for the purposes of this Division and declare it to be a mandatory code of conduct.

(2) Regulations declaring a code of conduct a mandatory code of conduct may also:

(a) confer functions and powers on a person or body for the purposes of:

(i) monitoring compliance with the code of conduct; and

(ii) dealing with disputes or complaints arising under, or in relation to, the code of conduct; and

(iii) dealing with other associated administrative matters; or

(b) provide for and in relation to:

(i) the keeping of records by persons bound by the code of conduct; and

(ii) reporting obligations of such persons.

(3) If regulations prescribe a code of conduct, the code of conduct may prescribe pecuniary penalties not exceeding 1,000 penalty units for civil penalty provisions of the code of conduct.

(4) To avoid doubt, subsections 1317G(3) and (4) do not apply in relation to the contravention of a civil penalty provision of a mandatory code of conduct.

1101AF Obligation to comply with mandatory code of conduct

A person must not contravene a mandatory code of conduct.

Division 3 - Other matters