Financial Services Reform Act 2001 (122 of 2001)

Schedule 1   Financial Services and Markets

Part 1   Main amendments

Corporations Act 2001

1   Chapter 7 - Part 7.8 - Division 6

Division 6 - Financial records, statements and audit

Subdivision A - Preliminary

987A Application of Division

(1) This Division applies in relation to a financial services licensee and a financial services business carried on by the licensee, whether that business is carried on in this jurisdiction or elsewhere.

(2) This Division does not affect, and is to be taken never to have affected, the operation of Chapter 2M in relation to a company that is a financial services licensee or in relation to a financial services business that is carried on by such a company.

Subdivision B - Financial records of financial services licensees

988A Obligation to keep financial records

(1) A financial services licensee must (subject to subsection (2)):

(a) keep financial records that correctly record and explain the transactions and financial position of the financial services business carried on by the licensee; and

(b) keep those records in accordance with the requirements of this Subdivision; and

(c) comply with the requirements of this Subdivision in relation to conversion of records into the English language (see subsection 988C(2)).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) The licensee does not contravene a requirement of this Subdivision merely because some or all of the records are kept as a part of, or in conjunction with, the records relating to any other business that is carried on by the licensee.

Note: A defendant bears an evidential burden in relation to the matters in this subsection. See subsection 13.3(3) of theCriminal Code.

988B Records to be kept so that profit and loss statements and balance sheet can be prepared and audited

The records must be kept in a way that:

(a) enables true and fair profit and loss statements, and balance sheets, of the financial services business of the licensee to be prepared from time to time; and

(b) allows those statements and balance sheets to be conveniently and properly audited.

988C Language of records

(1) The records must be kept in writing in the English language, or in a manner that enables them to be readily accessible and readily converted into writing in the English language.

(2) If any of the records are not kept in writing in the English language, the licensee must, if required to convert the records concerned into writing in the English language by a person who is entitled to examine the records concerned, comply with the requirement within a reasonable time.

988D Location of records

If any of the records are kept outside this jurisdiction, the licensee must:

(a) cause to be sent to and kept at a place in this jurisdiction such particulars with respect to the business dealt with in those records as will enable true and fair profit and loss statements and balance sheets to be prepared; and

(b) if required by ASIC to produce those records at a place in this jurisdiction, comply with the requirement not later than 28 days after the requirement is made.

988E Particular categories of information to be shown in records

The records must be kept in sufficient detail to show particulars of:

(a) all money received or paid by the licensee, including money paid to, or disbursed from, an account maintained for the purposes of section 981B or 982B; and

(b) all acquisitions and disposals of financial products made by the licensee, the charges and credits arising from them, and the names of the person acquiring or disposing of each of those products; and

(c) all income received by the licenseefrom commissions, interest, and other sources, and all expenses, commissions, and interest paid by the licensee; and

(d) all the assets and liabilities (including contingent liabilities) of the licensee; and

(e) all securities or managed investment products that are the property of the licensee, showing by whom the securities or products, or the documents of title to the securities or products, are held and, if they are held by some other person, whether or not they are held as security against loans or advances; and

(f) all securities or managed investment products that are not the property of the licensee and for which the licensee or a nominee controlled by the licensee is accountable, showing:

(i) by whom, and for whom, the securities or products, or the documents of title to the securities or products, are held; and

(ii) the extent to which they are either held for safe custody or deposited with a third party as security for loans or advances made to the licensee; and

(g) such other matters (if any) as are specified in regulations made for the purposes of this paragraph.

988F Regulations may impose additional requirements

The regulations may impose additional requirements to be complied with in relation to the records including, for example, requirements for things to be contained in the records, and requirements relating to the level of detail to be shown in the records.

988G Records taken to be made with licensee’s authority

An entry in the records is, unless the contrary is proved, to be taken to have been made by, or with the authority of, the licensee.

Subdivision C - Financial statements of financial services licensees

989A Meaning of financial year

In this Subdivision:

financial year , in relation to a financial services licensee, means:

(a) if the licensee is not a body corporate - a year ending on 30 June; and

(b) if the licensee is a body corporate - a financial year of the body corporate.

989B Financial services licensee to prepare and lodge annual profit and loss statement and balance sheet

(1) A financial services licensee must, in respect of each financial year, prepare a true and fair profit and loss statement and balance sheet in accordance with this Subdivision.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1).

(2) The licensee must lodge the statement and balance sheet with ASIC in accordance with this Subdivision.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1).

(3) The licensee must, with the statement and balance sheet, lodge an auditor’s report with ASIC containing the information and matters required by the regulations.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1).

989C Requirements as to contents and applicable accounting principles

The profit and loss statement and the balance sheet must:

(a) contain the information that is required by the regulations; and

(b) be prepared in accordance with any requirements in the regulations as to the accounting principles to be used.

989D Time of lodgment

(1) Unless an extension is granted under subsection (3), the profit and loss statement and the balance sheet must be lodged before:

(a) if the licensee is not a body corporate - the day that is 2 months after the end of that financial year; or

(b) if the licensee is a body corporate - the day that is 3 months after the end of that financial year.

(2) If an extension is granted under subsection (3), the profit and loss statement and the balance sheet must be lodged before the end of the extended period.

(3) ASIC may, on application made:

(a) by a financial services licensee and the licensee’s auditor; and

(b) before the end of the period that would otherwise apply;

approve an extension of the period for lodging the profit and loss statement and balance sheet. The extension may be of the period originally applicable or the period applicable under a previous extension.

(4) An approval under subsection (3) may be given subject to such conditions (if any) as ASIC imposes.

(5) If an approval under subsection (3) is given subject to conditions, the licensee must comply with those conditions.

Subdivision D - Appointment etc. of auditors

990A Certain provisions of this Subdivision do not apply to a body corporate (other than a proprietary company) to which section 327 applies

If:

(a) a financial services licensee is a body corporate to which section 327 applies; and

(b) the licensee is not a proprietary company;

nothing in sections 990B to 990H applies to the licensee.

990B Appointment of auditor by licensee

(1) A financial services licensee must, within 1 month after beginning to hold the licence, appoint as auditor or auditors to audit the licensee’s financial statements:

(a) a person or persons; or

(b) a firm or firms; or

(c) a person or persons and a firm or firms.

Subsections (4) and (5) must be complied with in relation to the appointment.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) Within 14 days after a vacancy occurs in the office of an auditor of the licensee, if there is no surviving or continuing auditor of the licensee, the licensee must appoint:

(a) a person or persons; or

(b) a firm or firms; or

(c) a person or persons and a firm or firms;

to fill the vacancy. Subsections (4) and (5) must be complied with in relation to the appointment.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(3) While a vacancy in the office of an auditor of the licensee continues, the surviving or continuing auditor or auditors (if any) may act.

(4) The licensee must not appoint as auditor a person who, or firm that, is ineligible by virtue of regulations made for the purposes of section 990C to act as auditor of the licensee.

(5) The licensee must not appoint a person or firm as auditor of the licensee unless that person or firm has, before the appointment, consented by written notice given to the licensee to act as auditor and has not withdrawn the consent by written notice given to the licensee.

(6) The licensee must, within 14 days after an appointment of a person or firm as auditor, lodge a written notice with ASIC stating that the licensee has made the appointment and specifying the name of the person or firm.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(7) The regulations may include provisions (including provisions imposing obligations) dealing with matters related to the appointment of a firm as auditor, including, for example:

(a) taking certain members of the firm to have been appointed as auditors; and

(b) the effect of a dissolution and reconstitution of the firm; and

(c) requiring a member of the firm who retires or withdraws to continue to act as auditor in certain circumstances; and

(d) how a report, notice or other document is to be made or given.

(8) Regulations made for the purposes of subsection (7) may also include provisions modifying the effect of provisions of this Subdivision in relation to matters dealt with in those regulations.

990C When a person or firm is ineligible to act as auditor

A person or firm is ineligible to act as auditor of the licensee if regulations made for the purposes of this section provide that the person or firm is ineligible so to act.

990D Ineligible person or firm must not consent to act or disqualify themselves etc.

(1) A person or firm, while ineligible to act as auditor of the licensee, must not:

(a) consent to be appointed as auditor of the licensee; or

(b) act as auditor of the licensee; or

(c) prepare a report that an auditor of the licensee is to prepare under this Part.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) A person must not:

(a) if the person has been appointed auditor of the licensee - disqualify himself or herself, while the appointment continues, from acting as auditor of the licensee; or

(b) if the person is a member of a firm that has been appointed auditor of the licensee - disqualify the firm, while the appointment continues, from acting as auditor of the licensee.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

990E Duration of appointment of auditors

An auditor of the licensee holds office until:

(a) death; or

(b) removal in accordance with section 990F; or

(c) resignation in accordance with sections 990G and 990H; or

(d) becoming prohibited by subsection 990D(1) from acting as auditor of the licensee;

whichever occurs first.

990F Removal of auditors

The licensee:

(a) must remove an auditor of the licensee from office if the auditor becomes ineligible to act as auditor of the licensee; and

(b) may, with ASIC’s consent, remove an auditor of the licensee from office.

Note: Failure to comply with paragraph (a) is an offence (see subsection 1311(1)).

990G Resignation of auditors - requirements for resignation

(1) An auditor of the licensee may, by written notice given to the licensee, resign as auditor of the licensee if:

(a) the auditor has, by written notice given to ASIC, applied for consent to the resignation and, at or about the same time as the auditor gave notice to ASIC, gave written notice of the application to the licensee; and

(b) ASIC has consented and the auditor has received notice of ASIC’s consent.

(2) ASIC must, as soon as practicable after receiving an application from an auditor under subsection (1), notify the auditor and the licensee whether it consents to the resignation.

(3) A statement by an auditor in an application under subsection (1), or in answer to an inquiry by ASIC relating to the reasons for the application:

(a) is not admissible in evidence in any civil or criminal proceedings in a court against the auditor other than proceedings for a contravention of section 1308; and

(b) may not be made the ground of a prosecution (other than a prosecution for a contravention of section 1308), action or suit against the auditor.

(4) A certificate by ASIC that a statement was made in an application under subsection (1), or in answer to an inquiry by ASIC relating to the reasons for such an application, is conclusive evidence that the statement was so made.

990H Resignation of auditors - when resignation takes effect

The resignation of an auditor of the licensee takes effect on:

(a) if the notice of resignation specifies a date as the date the resignation is to take effect - the date so specified; or

(b) the date on which ASIC gives its consent to the resignation; or

(c) if ASIC has fixed a date as the date the resignation is to take effect - the date so fixed;

whichever last occurs.

990I Auditor’s right of access to records, information etc.

(1) An auditor of the licensee has a right of access at all reasonable times to the financial records or other records (including any register) of the licensee.

(2) An auditor of the licensee is entitled to require:

(a) from the licensee; or

(b) if the licensee is a body corporate - from any executive officer of the licensee;

such assistance and explanations as the auditor desires for the purposes of audit.

(3) The licensee, or an executive officer of the licensee if it is a body corporate, must not:

(a) refuse or fail to allow an auditor of the licensee access, in accordance with subsection (1), to financial records or other records of the licensee; or

(b) refuse or fail to give assistance, or an explanation, to an auditor of the licensee as and when required under subsection (2); or

(c) otherwise hinder, obstruct or delay an auditor of the licensee in the performance or exercise of the auditor’s duties or powers.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

990J Auditor’s fees and expenses

(1) The reasonable fees and expenses of an auditor of the licensee are payable by the licensee.

(2) The auditor may recover those fees by action against the licensee.

990K Auditor to report on certain matters

(1) If an auditor, in the performance of duties as auditor of the licensee, becomes aware of a matter referred to in subsection (2), the auditor must, within 7 days after becoming aware of the matter, lodge a written report on the matter with ASIC and send a copy of the report to the licensee, and to each licensed market (if any) and each licensed CS facility (if any) in which the licensee is a participant.

Note: Failure to comply with this section is an offence (see subsection 1311(1)).

(2) A report must be given in relation to any matter that, in the opinion of the auditor:

(a) has adversely affected, is adversely affecting or may adversely affect the ability of the licensee to meet the licensee’s obligations as a licensee; or

(b) constitutes or may constitute a contravention of:

(i) a provision of Subdivision A or B of Division 2 (or a provision of regulations made for the purposes of such a provision); or

(ii) a provision of Division 3 (or a provision of regulations made for the purposes of such a provision); or

(iii) a provision of Subdivision B or C of this Division (or a provision of regulations made for the purposes of such a provision); or

(iv) a condition of the licensee’s licence.

990L Qualified privilege for auditor etc.

(1) An auditor of the licensee has qualified privilege in respect of:

(a) a statement that the auditor makes, orally or in writing, in the course of the auditor’s duties as auditor; or

(b) the lodging of a report, or the sending of a report to the licensee, or to a licensed market or a licensed CS facility, under subsection 990K(1).

(2) A person has qualified privilege:

(a) in respect of the publishing of a document:

(i) prepared by an auditor of the licensee in the course of the auditor’s duties as auditor; or

(ii) required by or under this Chapter to be lodged with ASIC, whether or not the document has been so lodged; or

(b) in respect of the publishing of a statement made by an auditor of the licensee as mentioned in subsection (1).