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 7.12 - Division 2

Division 2 - Other matters

1101A Approved codes of conduct

(1) ASIC may, on application, approve codes of conduct that relate to any aspect of the activities of:

(a) financial services licensees; or

(b) authorised representatives of financial services licensees; or

(c) issuers of financial products;

being activities in relation to which ASIC has a regulatory responsibility. The approval must be in writing.

(2) ASIC may, on application, approve a variation of an approved code of conduct. The approval must be in writing.

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

(a) the code, or the code as proposed to be varied, is not inconsistent with this Act or any other law of the Commonwealth under which ASIC has regulatory responsibilities; and

(b) it is appropriate to approve the code, having regard to the following matters, and to any other matters that ASIC considers are relevant:

(i) the ability of the applicant to ensure that persons who hold out that they comply with the code will comply with the code as in force from time to time; and

(ii) the desirability of codes of conduct being harmonised to the greatest extent possible.

(4) ASIC may revoke an approval of a code of conduct:

(a) on application by the person who applied for the approval; or

(b) if ASIC is no longer satisfied as mentioned in subsection (3).

The revocation must be in writing.

1101B Power of Court to make certain orders

Court’s power to make orders in relation to certain contraventions

(1) The Court may make such order, or orders, as it thinks fit if:

(a) on the application of ASIC, it appears to the Court that a person:

(i) has contravened a provision of this Chapter, or any other law relating to dealing in financial products or providing financial services; or

(ii) has contravened a condition of an Australian market licence, Australian CS facility licence or Australian financial services licence; or

(iii) has contravened a provision of the operating rules, or the compensation rules (if any), of a licensed market or of the operating rules of a licensed CS facility; or

(iv) has contravened a condition imposed under section 918D on a declaration of a declared professional body; or

(v) has contravened a condition on an exemption from the requirement to hold an Australian market licence or an Australian CS facility licence; or

(vi) is about to do an act with respect to dealing in financial products or providing a financial service that, if done, would be such a contravention; or

(b) on the application of a market licensee, it appears to the Court that a person has contravened the operating rules, or the compensation rules (if any), of a licensed market operated by the licensee; or

(c) on the application of a CS facility licensee, it appears to the Court that a person has contravened a provision of the operating rules of a licensed CS facility operated by the licensee; or

(d) on the application of a person aggrieved by an alleged contravention by another person of a provision of the operating rules, or the compensation rules (if any), of a licensed market, it appears to the Court that:

(i) the other person did contravene the provision or condition; and

(ii) the applicant is aggrieved by the contravention.

However, the Court can only make such an order if the Court is satisfied that the order would not unfairly prejudice any person.

Note: For examples of orders the Court could make, see subsection (4).

(2) For the purposes of paragraph (1)(d), if a body corporate contravenes a provision of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the licensed market is taken to be a person aggrieved by the contravention.

(3) Subsection (2) does not limit the circumstances in which a person may be aggrieved by a contravention for the purposes of paragraph (1)(d).

Examples of orders the Court may make

(4) Without limiting subsection (1), some examples of orders the Court may make under subsection (1) include:

(a) an order restraining a person from carrying on a business, or doing an act or classes of acts, in relation to financial products or financial services, if the person has persistently contravened, or is continuing to contravene:

(i) a provision or provisions of this Chapter; or

(ii) a provision or provisions of any other law relating to dealing in financial products or providing financial services; or

(iii) a condition onan Australian market licence, Australian CS facility licence or Australian financial services licence; or

(iv) a condition imposed under section 918D on a declaration of a declared professional body; or

(v) a condition of an exemption from a requirement to hold an Australian market licence or Australian CS facility licence; or

(vi) a provision of the operating rules, or the compensation rules (if any), of a licensed market or of the operating rules of a licensed CS facility; or

(b) an order giving directions about complying with a provision of the operating rules, or the compensation rules (if any), of a licensed market or of the operating rules of a licensed CS facility to a person (or the directors of the body corporate, if the person is a body corporate) who contravened the provision; and

(c) an order requiring a person to disclose to the public or to specified persons, in accordance with the order, specified information that the person to whom the order is directed possesses or to which that person has access, if the person:

(i) contravened a provision of the operating rules of a licensed market or a condition relating to the disclosure or provision of information; or

(ii) was involved in such a contravention; and

(d) an order requiring a person to publish advertisements in accordance with the order at that person’s expense, if the person:

(i) contravened a provision of the operating rules of a licensed market, or a condition relating to the disclosure or provision of information; or

(ii) was involved in such a contravention; and

(e) an order restraining a person from acquiring, disposing of or otherwise dealing with any financial products that are specified in the order; and

(f) an order restraining a person from providing any financial services that are specified in the order; and

(g) an order appointing a receiver of property (see subsection (9)) of a financial services licensee; and

(h) an order declaring a contract relating to financial products or financial services to be void or voidable; and

(i) an order directing a person to do or refrain from doing a specified act, if that order is for the purpose of securing compliance with any other order under this section; and

(j) any ancillary order considered to be just and reasonable in consequence of the making of an order under any of the preceding provisions of this subsection.

Interim orders

(5) Before considering an application to the Court under subsection (1), the Court may make an interim order of the kind applied for to apply pending the determination of the application, if in the opinion of the Court it is desirable to do so.

(6) However, if ASIC, a market licensee or a CS facility licensee applies for an order under subsection (1), the Court must not require the applicant, or any other person, to give any undertakings as to damages as a condition of making an interim order under subsection (5).

Power to give notice of applications

(7) Before making an order under subsection (1), the Court may do either or both of the following:

(a) direct that notice of the application be given to such persons as it thinks fit;

(b) direct that notice of the application be published in such manner as it thinks fit.

Powers of receivers appointed under Court orders

(8) A person appointed by order of the Court under subsection (1) as a receiver of the property (see subsection (12)) of a financial services licensee:

(a) may require the financial services licensee to:

(i) deliver to the person any property of which the person has been appointed receiver; or

(ii) give to the person all information concerning that property that may reasonably be required; and

(b) may acquire and take possession of any property of which the person has been appointed receiver; and

(c) may deal with any property that the person has acquired, or of which the person has taken possession, in any way in which the financial services licensee might lawfully have dealt with the property; and

(d) has such other powers in respect of the property as the Court specifies in the order.

Duty to comply with order

(10) A person must not, without reasonable excuse, contravene:

(a) an order under this section; or

(b) a requirement imposed under paragraph (8)(a) or (8)(d) by a receiver appointed by order of the Court under subsection (1).

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

Power to rescind or vary order

(11) The Court may rescind or vary an order made by it under this section or suspend the operation of such an order.

(12) In this section:

compensation rules has the same meaning as in Part 7.5.

property , in relation to a financial services licensee, includes:

(a) money; or

(b) financial products; or

(c) documents of title to financial products; or

(d) other property;

entrusted to, or received on behalf of, any other person by the financial services licensee or another person in the course of, or in connection with, a financial services business carried on by the financial services licensee.

1101C Preservation and disposal of records etc.

Registers

(1) A person who is required by a provision of this Chapter to keep a register in relation to a business carried on by the person must preserve it for 5 years after the day on which the last entry was made in the register.

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

Financial records

(2) A person who is required by a provision of this Chapter to keep any financial record in relation to a business carried on by the person must preserve it for 7 years after the transactions covered by the record are completed.

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

Other records

(3) A person who is required by a provision of this Chapter or the regulations to keep any other record must preserve it for 5 years after the day on which the last entry was made in the record.

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

Exceptions

(4) Registers and records must be preserved in accordance with this section (even if the person stops carrying on the business to which they relate during the period for which they must be preserved), unless:

(a) the regulations provide that those documents, or a class to which they belong, need not be preserved; and

(b) any conditions specified in or under those regulations have been complied with.

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

1101D Destruction of records by ASIC

ASIC may destroy or otherwise dispose of any document that is lodged under, or for the purposes of, a provision of this Chapter if:

(a) ASIC is of the opinion that it is no longer necessary or desirable to retain it; and

(b) it has been in the possession of ASIC for such period as is specified in the regulations, either generally or in relation to a particular document or class of documents.

1101E Concealing etc. of books

(1) A person must not:

(a) conceal, destroy, mutilate or alter a book:

(i) relating to the business carried on by a financial services licensee or an authorised representative of such a licensee; or

(ii) required under a provision of this Chapter to be kept by a market licensee, a CS facility licensee, a financial services licensee or an authorised representative of a financial services licensee; or

(b) send such a book out of this jurisdiction.

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

(2) In any proceedings against a person for an offence based on subsection (1), it is a defence if the person did not act with intent to:

(a) defraud; or

(b) defeat the objects of this Chapter; or

(c) prevent, delay or obstruct the carrying out of an examination, investigation or audit, or the exercise of a power, under this Chapter.

Note: A defendant bears an evidential burden in relation to the matters in subsection (2). See subsection 13.3(3) of theCriminal Code.

1101F Falsification of records

(1A) A person must not engage in conduct that results in the falsification of:

(a) a book required to be kept by a provision of this Chapter; or

(b) a register or any accounting or other record referred to in section 1101C.

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

(1) If matter that is used, or intended to be used, in connection with:

(a) the keeping of a book required to be kept by a provision of this Chapter; or

(b) a register or any accounting or other record referred to in section 1101C;

is recorded or stored in an illegible form by means of a mechanical device, an electronic device or any other device, a person must not:

(c) record or store by means of that device matter that the person knows to be false in a material particular or materially misleading; or

(d) destroy, remove or falsify matter that is recorded or stored by means of that device, or has been prepared for the purpose of being recorded or stored, or for use in compiling other matter to be recorded or stored, by means of that device; or

(e) fail to record or store matter by means of that device, with intent to falsify any entry made or intended to be compiled, wholly or in part, from that matter.

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

(2) In any proceedings against a person for an offence based on subsection (1A) or (1), it is a defence if it is proved that the person acted honestly and that in all the circumstances the act or omission constituting the offence should be excused.

Note: A defendant bears an evidential burden in relation to the matters in subsection (2). See subsection 13.3(3) of theCriminal Code.

1101G Precautions against falsification of records

A person required by a provision of this Chapter to keep a book or record must take reasonable precautions for guarding against falsification of the book or record and for facilitating discovery of any falsification.

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

1101GA How Part 9.3 applies to books required to be kept by this Chapter etc.

(1) In this section:

Chapter 7 book means:

(a) a book (by whatever name it is known) that a provision of this Chapter requires to be kept; or

(b) a document lodged under, or for the purposes of, a provision of this Chapter; or

(c) a book relating to the business carried on by a financial services licensee or an authorised representative of a financial services licensee; or

(d) a register or accounting record referred to in section 1101C.

(2) Part 9.3 does not apply in relation to a Chapter 7 book except as provided in the following paragraphs:

(a) section 1303 applies to a Chapter 7 book;

(b) section 1305, and subsections 1306(5) and (6), apply to a Chapter 7 book as if references in section 1305 to a body corporate were instead references to a person;

(c) regulations made for the purposes of this paragraph may provide that other provisions of Part 9.3 apply in relation to a Chapter 7 book, or a class of Chapter 7 books, with such modifications (if any) as are specified in the regulations.

1101H Contravention of Chapter does not generally affect validity of transactions etc.

(1) Subject to subsection (2), a failure to comply with any requirement of this Chapter (including requirements in regulations made for the purposes of this Chapter) does not affect the validity or enforceability of any transaction, contract or other arrangement.

(2) Subsection (1) has effect subject to any express provision to the contrary in:

(a) this Chapter; or

(b) regulations made for the purposes of another provision of this Chapter; or

(c) regulations referred to in subsection (3).

(3) Regulations made for the purposes of this subsection may provide that a failure to comply with a specified requirement referred to in subsection (1) has a specified effect on the validity or enforceability of a transaction, contract or arrangement.

1101I Gaming and wagering laws do not affect validity of contracts relating to financial products

Despite any law of a State or Territory in this jurisdiction about gaming and wagering:

(a) a person may enter into a contract that is a financial product; and

(b) the contract is valid and enforceable.

1101J Delegation

The Minister may delegate any of the Minister’s powers under this Chapter to:

(a) ASIC; or

(b) a member of ASIC (within the meaning of section 9 of theAustralian Securities and Investments Commission Act 2001); or

(c) a staff member (within the meaning given by subsection 5(1) of that Act) who is an SES employee (within the meaning of section 34 of thePublic Service Act 1999) or who holds an office or position that is at a level equivalent to that of an SES employee.