Corporations Act 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

Note: This Chapter applies to a CCIV in a modified form: see Division 4 of Part 8B.7 .

PART 7.3 - LICENSING OF CLEARING AND SETTLEMENT FACILITIES  

Division 1 - Requirement to be licensed  

SECTION 820A   NEED FOR A LICENCE  

820A(1)    
A person must only operate, or hold out that the person operates, a clearing and settlement facility in this jurisdiction if:


(a) the person has an Australian CS facility licence that authorises the person to operate the facility in this jurisdiction; or


(b) the facility is exempt from the operation of this Part.

Note 1: A CS facility licensee may also provide financial services incidental to the operation of the facility: see paragraph 911A(2)(d) .

Note 2: Failure to comply with this subsection is an offence: see subsection 1311(1) .


820A(2)    
For the purposes of an offence based on subsection (1), strict liability applies to paragraph (1)(b).

Note: For strict liability , see section 6.1 of the Criminal Code .


820A(3)    


A person contravenes this subsection if the person contravenes subsection (1).

Note: This subsection is a civil penalty provision (see section 1317E ).


SECTION 820B  

820B   OTHER PROHIBITIONS ON HOLDING OUT  


A person must not hold out:

(a)    that the person has an Australian CS facility licence; or

(b)    that the operation of a clearing and settlement facility by the person in this jurisdiction is authorised by an Australian CS facility licence; or

(c)    that a clearing and settlement facility is exempt from the operation of this Part;

if that is not the case.

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

SECTION 820C   EXEMPTIONS BY MINISTER  

820C(1)    
The Minister may exempt a particular clearing and settlement facility, or class of clearing and settlement facilities, from all or specified provisions of this Part. An exemption may be unconditional, or subject to conditions specified in the exemption.

Note: The provisions of this Part include regulations made for the purposes of this Part (see section 761H ).


820C(2)    
The Minister may, at any time:


(a) vary an exemption to:


(i) impose conditions, or additional conditions, on the exemption; or

(ii) vary or revoke any of the conditions on the exemption; or


(b) revoke an exemption.

820C(3)    
However, the Minister may only take action under subsection (2) after:


(a) giving notice, and an opportunity to make submissions on the proposed action, to the operator of each clearing and settlement facility known by the Minister to be covered by the exemption; and


(b) if the exemption covers a class of clearing and settlement facilities - a notice has been published on ASIC ' s website allowing a reasonable period within which the operator of each clearing and settlement facility covered by the exemption may make submissions on the proposed action, and that period has ended.

820C(4)    
If an exemption is expressed to apply in relation to a class of clearing and settlement facilities (whether or not it is also expressed to apply in relation to one or more clearing and settlement facilities otherwise than by reference to membership of a class), then the exemption, and any variation or revocation of the exemption, is a legislative instrument.

820C(5)    
If subsection (4) does not apply to an exemption, then the exemption, and any variation or revocation of the exemption, must be in writing and the Minister must publish notice of it in the Gazette.

SECTION 820D   MEANING OF OPERATED IN THIS JURISDICTION - CLEARING AND SETTLEMENT FACILITY  

820D(1)    


A clearing and settlement facility is taken to be operated in this jurisdiction if it is operated by a body corporate that is registered under Chapter 2A .

820D(2)    


Subsection (1) does not limit the circumstances in which a clearing and settlement facility is operated in this jurisdiction .

Division 2 - Regulation of CS facility licensees  

Subdivision A - Licensee ' s obligations  

SECTION 821A   GENERAL OBLIGATIONS  

821A(1)    
A CS facility licensee must:

(aa)    to the extent that it is reasonably practicable to do so:


(i) comply with standards determined under section 827D ; and

(ii) do all other things necessary to reduce systemic risk; and

(a)    to the extent that it is reasonably practicable to do so, do all things necessary to ensure that the facility ' s services are provided in a fair and effective way; and

(b)    comply with the conditions on the licence; and

(c)    have adequate arrangements (whether they involve a self-regulatory structure or the appointment of an independent person or related entity) for supervising the facility, including arrangements for:


(i) handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the facility ' s services are provided in a fair and effective way; and

(ii) enforcing compliance with the facility ' s operating rules; and

(d)    have sufficient resources (including financial, technological and human resources) to operate the facility properly and for the required supervisory arrangements to be provided; and

(e)    if the licensee is a foreign body corporate - be registered under Division 2 of Part 5B.2 ; and

(f)    if the licence was granted under subsection 824B(2) (overseas clearing and settlement facilities) - both:


(i) remain authorised to operate a clearing and settlement facility in the foreign country in which the licensee ' s principal place of business is located; and

(ii) get the Minister ' s approval under section 821F before that principal place of business becomes located in any other foreign country; and

(g)    

if the licensee, or a holding company of the licensee, is a widely held market body - take all reasonable steps to ensure that an unacceptable control situation does not exist in relation to the body; and

(h)    take all reasonable steps to ensure that no disqualified individual becomes, or remains, involved in the licensee (see Division 2 of Part 7.4 ).


821A(2)    


A person contravenes this subsection if the person contravenes paragraph (1)(aa) , (a) , (c) , (d) , (e) , (f) , (g) or (h) .

Note: This subsection is a civil penalty provision (see section 1317E ).


SECTION 821B   OBLIGATION TO NOTIFY ASIC OF CERTAIN MATTERS  

821B(1)    
A CS facility licensee must give written notice to ASIC, as soon as practicable, if it becomes aware that it may no longer be able to meet, or has breached, an obligation under section 821A . If ASIC considers it appropriate to do so, ASIC may give the Minister advice about the matter.

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


821B(2)    
A CS facility licensee must give written notice to ASIC, as soon as practicable, as required by the following paragraphs:

(a)    if the licensee provides a new class of financial service incidental to the operation of the facility, the licensee must give notice that includes details of the new class;

(b)    if the licensee takes any kind of disciplinary action against a participant in the facility, the licensee must give notice that includes:


(i) the participant ' s name; and

(ii) the reason for and nature of the action taken;

(c)    if the licensee has reason to suspect that a person has committed, is committing, or is about to commit a significant contravention of the facility ' s operating rules or this Act, the licensee must give notice that includes:


(i) the person ' s name; and

(ii) details of the contravention or impending contravention; and

(iii) the licensee ' s reasons for that belief.

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


821B(3)    
A CS facility licensee whose licence was granted under subsection 824B(2) (overseas clearing and settlement facilities) must, as soon as practicable, give written notice to ASIC if:

(a)    the licensee ceases to be authorised to operate a clearing and settlement facility in the foreign country in which the licensee ' s principal place of business is located; or

(b)    there is a significant change to the regulatory regime applying in relation to the facility in the foreign country in which the licensee ' s principal place of business is located.

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


821B(4)    
As soon as practicable after:

(a)    

a person becomes or ceases to be a director, secretary or senior manager of a CS facility licensee or of a holding company of a CS facility licensee (including when a person changes from one of those positions to another); or

(b)    a CS facility licensee becomes aware that a person has come to have, or has ceased to have, more than 15% of the voting power in the licensee or in a holding company of the licensee;

the licensee must give written notice of this to ASIC. The notice must include such other information about the matter as is prescribed by regulations made for the purposes of this subsection.

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

Note 2: To the extent that the licensee is required to give the notice and information under any other provision of this Act, the licensee may comply with this subsection by doing so. It need not provide the same information twice.


821B(6)    


A person contravenes this subsection if the person contravenes subsection (1) , (2) , (3) or (4) .

Note: This subsection is a civil penalty provision (see section 1317E ).


SECTION 821BA   OBLIGATION TO NOTIFY RESERVE BANK OF CERTAIN MATTERS  

821BA(1)    
A CS facility licensee must give written notice to the Reserve Bank of Australia (the Reserve Bank ), as soon as practicable, if:

(a)    the licensee becomes aware that it has failed to comply with standards determined under section 827D , or is likely to fail to comply with such standards; or

(b)    

the licensee becomes aware that it may no longer be able to meet, or has breached, its obligation under subparagraph 821A(1)(aa)(ii) .

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


821BA(2)    
If the Reserve Bank considers it appropriate to do so, the Reserve Bank may give the Minister advice about the matter.


SECTION 821C   OBLIGATION TO ASSIST  


ASIC

821C(1)    
A CS facility licensee must give such assistance to ASIC, or a person authorised by ASIC, as ASIC or the authorised person reasonably requests in relation to the performance of ASIC ' s functions.

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


821C(2)    
Such assistance may include showing ASIC the licensee ' s books or giving ASIC other information.

Reserve Bank

821C(3)    
A CS facility licensee must give such assistance to the Reserve Bank of Australia (the Reserve Bank ), or a person authorised by the Reserve Bank, as the Reserve Bank or the authorised person reasonably requests in relation to the performance of the Reserve Bank ' s functions under this Part.

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


821C(4)    
Such assistance may include showing the Reserve Bank the licensee ' s books or giving the Reserve Bank other information.


SECTION 821D  

821D   OBLIGATION TO GIVE ASIC ACCESS TO THE FACILITY  


A CS facility licensee must give a person authorised by ASIC such reasonable access to the facility as the person requests for any of the purposes of this Chapter.

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

SECTION 821E   ANNUAL REPORT  

821E(1)    
A CS facility licensee must, within 3 months after the end of its financial year, give ASIC an annual report on the extent to which the licensee complied with its obligations as a CS facility licensee under this Chapter.

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


821E(2)    
The licensee must ensure that the annual report is accompanied by any information and statements prescribed by regulations made for the purposes of this subsection.

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


821E(3)    
The licensee must also ensure that the annual report is accompanied by any audit report that the Minister requires under subsection (4).

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


821E(4)    
The Minister may, by giving written notice to a CS facility licensee, require the licensee to obtain an audit report on the annual report and on any information or statements accompanying it. The Minister must nominate to prepare the audit report:

(a)    ASIC; or

(b)    a specified person or body that is suitably qualified.

821E(5)    
ASIC must give the annual report and accompanying material to the Minister.


SECTION 821F   CHANGE OF COUNTRY BY FOREIGN LICENSEE  

821F(1)    
In the case of a licence granted under subsection 824B(2) , the Minister may approve the location of the licensee's principal place of business in a new country only if:

(a)    the new country is not Australia; and

(b)    the operation of the facility in that country will be subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of protection from systemic risk and the level of effectiveness and fairness of services they achieve, to the requirements and supervision to which clearing and settlement facilities are subject under this Act in relation to those matters.

821F(2)    
If, in relation to a licence granted under subsection 824B(2) , the licensee's principal place of business changes to become a place in Australia:

(a)    the licence ceases to be in force from the time of the change; and

(b)    if the licensee wishes the facility to continue to be licensed, the licensee may apply for the grant of a new licence under subsection 824B(1) ; and

(c)    the application must be assessed in accordance with Subdivision A of Division 3 , subject to such modifications (if any) of that Subdivision as are set out in regulations made for the purposes of this paragraph.

821F(3)    
An application referred to in paragraph (2)(b) may be made in advance of the change of location of the principal place of business, and a decision on the application may be made before that time. However, any licence granted pursuant to the application does not come into force until the change occurs.


Subdivision B - The facility' s operating rules and procedures  

SECTION 822A   CONTENT OF THE OPERATING RULES AND PROCEDURES  

822A(1)    


The operating rules of a licensed CS facility must deal with the matters prescribed by regulations made for the purposes of this subsection, and the matters specified in the CS services rules for the purposes of this subsection.

822A(2)    
The regulations may also prescribe matters in respect of which a licensed CS facility must have written procedures.

822A(3)    
However, subsections (1) and (2) do not apply if the licensee is also authorised to operate the facility in the foreign country in which its principal place of business is located and the licence was granted under subsection 824B(2) (overseas clearing and settlement facilities).

822A(4)    
In a subsection (3) case, ASIC may determine, by giving written notice to the licensee, matters in respect of which the licensed CS facility must have written procedures.


SECTION 822B   LEGAL EFFECT OF OPERATING RULES  

822B(1)    
The operating rules of a licensed CS facility have effect as a contract under seal:

(a)    between the licensee and each issuer of financial products in respect of which the facility provides its services; and

(b)    between the licensee and each participant in the facility; and

(c)    between each issuer of financial products in respect of which the facility provides its services and each participant in the facility; and

(d)    between a participant in the facility and each other participant in the facility;

under which each of those persons agrees to observe the operating rules to the extent that they apply to the person and to engage in conduct that the person is required by the operating rules to engage in.


822B(2)    


However, if there is an inconsistency between the operating rules of a licensed CS facility and any of the following other rules:

(a)    the derivative transaction rules;

(b)    the derivative trade repository rules;

(c)    

the client money reporting rules;

(d)    

the CS services rules;

those other rules prevail over the operating rules to the extent of the inconsistency.

Note 1: If there is an inconsistency between the derivative transaction rules and the derivative trade repository rules, the derivative transaction rules prevail: see subsection 901E(2) .

Note 2: If there is an inconsistency between the derivative transaction rules or the derivative trade repository rules and the client money reporting rules, the derivative transaction rules or the derivative trade repository rules prevail: see subsection 981M(2) .


SECTION 822C   ENFORCEMENT OF OPERATING RULES  

822C(1)    
If a person who is under an obligation to comply with or enforce any of a licensed CS facility's operating rules fails to meet that obligation, an application to the Court may be made by:

(a)    ASIC; or

(b)    the licensee; or

(c)    the operator of a financial market with which the facility has arrangements to provide services for transactions effected through the market; or

(d)    a person aggrieved by the failure.

822C(2)    
After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to:

(a)    the person against whom the order is sought; or

(b)    if that person is a body corporate - the directors of the body corporate;

about compliance with, or enforcement of, the operating rules.


SECTION 822D   CHANGING THE OPERATING RULES  


Licensed CS facilities other than subsection 824B(2) facilities

822D(1)    


As soon as practicable after a change is made to the operating rules of a licensed CS facility, other than a facility licensed under subsection 824B(2) (overseas clearing and settlement facilities), the licensee must lodge with ASIC in a prescribed form written notice of the change. The notice must:

(a)    set out the text of the change; and

(b)    specify the date on which the change was made; and

(c)    contain an explanation of the purpose of the change.


822D(2)    
If no notice is lodged with ASIC, as required by subsection (1) , within 21 days after the change is made, the change ceases to have effect at the end of that period.

Subsection 824B(2) facilities

822D(3)    


As soon as practicable after a change is made to the operating rules of a clearing and settlement facility the operation of which is licensed under subsection 824B(2) (overseas clearing and settlement facilities), the licensee must lodge with ASIC in a prescribed form written notice of the change. The notice must:

(a)    set out the text of the change; and

(b)    specify the date on which the change was made; and

(c)    contain an explanation of the purpose of the change.

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


SECTION 822E   DISALLOWANCE OF CHANGES TO OPERATING RULES  

822E(1)    
This section does not apply in respect of an Australian CS facility licence granted under subsection 824B(2) (overseas clearing and settlement facilities).

822E(2)    
As soon as practicable after receiving a notice under section 822D from a CS facility licensee, ASIC must send a copy of the notice to the Minister.

822E(3)    
Within 28 days after ASIC receives the notice from the licensee, the Minister may disallow all or a specified part of the change to the operating rules.

822E(4)    


In deciding whether to do so, the Minister must have regard to the consistency of the change with the licensee's obligations under this Part (including in particular the obligations mentioned in paragraphs 821A(1)(aa) and (a)), and the matters specified in the CS services rules for the purposes of this subsection.

Note: The Minister must also have regard to the matters in section 827A .


822E(5)    
As soon as practicable after all or a part of a change is disallowed, ASIC must give notice of the disallowance to the licensee. The change ceases to have effect, to the extent of the disallowance, when the licensee receives the notice.


Subdivision C - Powers of the Minister, ASIC and the Reserve Bank in relation to licensees  

SECTION 823A   MINISTER'S POWER TO GIVE DIRECTIONS  

823A(1)    
If the Minister considers that a CS facility licensee is not complying with its obligations as a CS facility licensee under this Chapter, the Minister may give the licensee a written direction to do specified things that the Minister believes will promote compliance by the licensee with those obligations.

823A(2)    
The licensee must comply with the direction.

823A(3)    
If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

823A(4)    
The Minister may vary or revoke a direction at any time by giving written notice to the licensee.


SECTION 823B   MINISTER'S POWER TO REQUIRE SPECIAL REPORT  

823B(1)    
The Minister may give a CS facility licensee a written notice requiring the licensee to give ASIC a special report on specified matters. ASIC must give the report to the Minister.

823B(2)    
The notice may also require the licensee to give ASIC an audit report on the special report. The Minister must nominate to prepare the report:

(a)    ASIC; or

(b)    a specified person or body that is suitably qualified.

823B(3)    
The licensee must give the special report, and audit report (if any), to ASIC within the time required by the notice.

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


SECTION 823C   ASIC ASSESSMENT OF LICENSEE ' S COMPLIANCE  

823C(1)    


ASIC may do an assessment of how well a CS facility licensee is complying with its obligations as a CS facility licensee under this Chapter (other than its obligation under paragraph 821A(1)(aa) ). In doing the assessment, ASIC may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

823C(2)    


If the CS facility licensee is prescribed by the regulations for the purpose of this subsection, ASIC must, in respect of the obligation in paragraph 821A(1)(c) , do such an assessment at least once a year.

823C(3)    
As soon as practicable after doing an assessment under this section, ASIC must give a written report on the assessment to the Minister and a copy of the written report to the Reserve Bank of Australia.


823C(4)    
If an assessment, or part of an assessment, relates to any other person ' s affairs to a material extent, ASIC may, at the person ' s request or of its own motion, give the person a copy of the written report on the assessment or the relevant part of the report.


823C(5)    
If an assessment, or part of an assessment, relates to a serious contravention of a law of the Commonwealth or of a State or Territory, ASIC may give a copy of the written report on the assessment, or the relevant part of the report, to:

(a)    the Australian Federal Police; or

(b)    

the Chief Executive Officer of the Australian Crime Commission or a member of the staff of the ACC (within the meaning of the Australian Crime Commission Act 2002 ); or

(c)    the Director of Public Prosecutions; or

(d)    an agency prescribed by regulations made for the purposes of this paragraph.


823C(6)    
Either the Minister or ASIC may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.


SECTION 823CA   RESERVE BANK ASSESSMENT OF LICENSEE ' S COMPLIANCE  

823CA(1)    


The Reserve Bank of Australia (the Reserve Bank ) may do an assessment of how well a CS facility licensee is complying with its obligation under paragraph 821A(1)(aa) . In doing the assessment, the Reserve Bank may take account of any information and reports that it thinks appropriate, including information and reports from an overseas regulatory authority.

823CA(1A)    


If the CS facility licensee is prescribed by the regulations for the purpose of this subsection, the Reserve Bank must do such an assessment at least once a year.

823CA(2)    
As soon as practicable after doing an assessment under this section, the Reserve Bank must give a written report on the assessment to the Minister and a copy of the written report to ASIC.


823CA(3)    
If an assessment, or part of an assessment, relates to any other person ' s affairs to a material extent, the Reserve Bank may, at the person ' s request or of its own motion, give the person a copy of the written report on the assessment or the relevant part of the report.


823CA(4)    
If an assessment, or part of an assessment, relates to a serious contravention of a law of the Commonwealth or of a State or Territory, the Reserve Bank may give a copy of the written report on the assessment, or the relevant part of the report, to:

(a)    the Australian Federal Police; or

(b)    

the Chief Executive Officer of the Australian Crime Commission or a member of the staff of the ACC (within the meaning of the Australian Crime Commission Act 2002 ); or

(c)    the Director of Public Prosecutions; or

(d)    an agency prescribed by regulations made for the purposes of this paragraph.


823CA(5)    
Either the Minister or the Reserve Bank may cause the written report on an assessment, or part of the report on an assessment, to be printed and published.


SECTION 823D   DIRECTIONS POWER - PROTECTING DEALINGS IN FINANCIAL PRODUCTS AND ENSURING FAIR AND EFFECTIVE PROVISION OF SERVICES BY CS FACILITIES  

823D(1)    
If ASIC:

(a)    considers that it is necessary, or in the public interest, to protect people dealing in a financial product or class of financial products; or

(b)    considers that a CS facility licensee has not done all things reasonably practicable to ensure the facility ' s services are provided in a fair and effective way;

ASIC may give the licensee written advice that it intends to give the licensee a specified direction under this section. The advice must include the reasons for ASIC ' s intention to give the direction.


823D(2)    
As soon as practicable after giving the advice to the licensee, ASIC must give notice of the advice to the operator of each financial market with which the facility has arrangements to provide services for transactions effected through the market.

823D(3)    
For the purpose of remedying the matter mentioned in subsection (1), ASIC may give the following directions to the licensee under this section:

(a)    a direction not to provide the licensee ' s services in relation to any transactions, of which the licensee receives notice after the direction takes effect, that relate to a specified financial product or class of financial products;

(b)    any other direction concerning dealings with transactions that relate to a specified financial product or class of financial products.

823D(4)    
If, after receiving ASIC ' s advice and reasons:

(a)    the licensee does not take steps that in ASIC ' s view are adequate to address the situation; and

(b)    ASIC still considers that it is appropriate to give the direction to the licensee;

ASIC may give the licensee the direction, in writing, with a statement setting out the reasons for giving the direction.


823D(5)    
The direction has effect until the earlier of the following times:

(a)    the time ASIC revokes the direction in accordance with subsection (10);

(b)    the end of the period (which may be up to 21 days) specified in the direction as the period during which the direction is effective ends.

While the direction has effect, the licensee must comply with the direction and must not provide any services contrary to it.

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


823D(6)    
If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

823D(7)    
As soon as practicable after making or varying (see subsection (9)) a direction, ASIC must:

(a)    give a copy of the direction or variation to:


(i) if the direction relates to a specified financial product - the issuer of that product; and

(ii) each of the operators mentioned in subsection (2); and

(b)    give a written report to the Minister setting out ASIC ' s reasons for making the direction or variation; and

(c)    give a copy of the report to the licensee.

823D(8)    
If, at any time after the licensee receives ASIC ' s advice under subsection (1), the licensee requests in writing that ASIC refer the matter to the Minister, ASIC must do so immediately. In that event, the Minister may, if he or she considers it appropriate, require ASIC not to make, or to revoke, the direction. ASIC must immediately comply with such a requirement.

823D(9)    
ASIC may vary a direction by giving written notice to the licensee.

823D(10)    
ASIC may revoke a direction by giving written notice to the licensee. ASIC must also give written notice of the revocation to each of the operators mentioned in subsection (2).


SECTION 823E   DIRECTIONS POWER - REDUCTION OF SYSTEMIC RISK  

823E(1)    
If ASIC considers that a CS facility licensee has not done all things reasonably practicable to reduce systemic risk in the provision of the facility's services, ASIC may give the licensee a direction, in writing, to take:

(a)    specified measures to comply with the whole or a part of a standard determined under section 827D ; or

(b)    any other action that ASIC considers will reduce systemic risk in the provision of the facility's services.

823E(2)    
The direction may deal with the time by which, or period during which, it is to be complied with. The time or period must be reasonable.

823E(3)    
The licensee must comply with the direction.

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


823E(3A)    
If the licensee fails to comply with the direction, ASIC may apply to the Court for, and the Court may make, an order that the licensee comply with the direction.

823E(4)    
ASIC may vary the direction by giving written notice to the licensee.

823E(5)    
The direction has effect until ASIC revokes it by giving written notice to the licensee.

823E(6)    
ASIC may revoke the direction if, at the time of revocation, it considers that the direction is no longer necessary or appropriate.

823E(7)    
Before giving, varying or revoking the direction, ASIC must consult the Reserve Bank of Australia. However, a failure to consult the Reserve Bank of Australia does not invalidate the direction, variation or revocation.

823E(8)    
The Reserve Bank of Australia may at any time request ASIC to make a direction under this section. However, ASIC is not required to comply with the request.


Division 3 - The Australian CS facility licence  

Subdivision A - How to get a licence  

SECTION 824A   HOW TO APPLY FOR A LICENCE  

824A(1)    


A body corporate may apply for an Australian CS facility licence by lodging with ASIC in a prescribed form an application that:

(a)    includes the information required by regulations made for the purposes of this paragraph; and

(b)    is accompanied by the documents (if any) required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10 .


824A(2)    
ASIC must, within a reasonable time, give the application to the Minister with advice about the application.


SECTION 824B   WHEN A LICENCE MAY BE GRANTED  


General

824B(1)    
The Minister may grant an applicant an Australian CS facility licence if the Minister is satisfied that:

(a)    the application was made in accordance with section 824A ; and

(b)    the applicant will comply with the obligations that will apply if the licence is granted; and

(c)    the applicant has adequate operating rules, and procedures, (see Subdivision B of Division 2 ) for the facility to ensure, as far as is reasonably practicable, that systemic risk is reduced and the facility is operated in a fair and effective way; and

(d)    the applicant has adequate arrangements (whether they involve a self-regulatory structure or the appointment of an independent person or related entity) for supervising the facility, including arrangements for:


(i) handling conflicts between the commercial interests of the licensee and the need for the licensee to reduce systemic risk and ensure that the facility's services are provided in a fair and effective way; and

(ii) enforcing compliance with the facility's operating rules; and

(e)    no unacceptable control situation (see Division 1 of Part 7.4 ) is likely to result if the licence is granted; and

(f)    no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4 ).

This subsection has effect subject to subsections (3) and (4).

Note: The Minister must also have regard to the matters in section 827A in deciding whether to grant a licence.



Alternative criteria for granting licence to overseas clearing and settlement facility

824B(2)    
If an applicant is authorised to operate a clearing and settlement facility in the foreign country in which its principal place of business is located, the Minister may grant the applicant an Australian CS facility licence authorising the applicant to operate the same facility in this jurisdiction. The Minister must be satisfied that:

(a)    the application was made in accordance with section 824A ; and

(b)    the applicant will comply with the obligations that will apply if the licence is granted; and

(c)    the operation of the facility in that country is subject to requirements and supervision that are sufficiently equivalent, in relation to the degree of protection from systemic risk and the level of effectiveness and fairness of services they achieve, to the requirements and supervision to which clearing and settlement facilities are subject under this Act in relation to those matters; and

(d)    the applicant undertakes to cooperate with ASIC and the Reserve Bank of Australia by sharing information and in other ways; and

(e)    no unacceptable control situation (see Division 1 of Part 7.4 ) is likely to result if the licence is granted; and

(f)    no disqualified individual appears to be involved in the applicant (see Division 2 of Part 7.4 ); and

(g)    any other requirements that are prescribed by regulations made for the purposes of this subsection are satisfied.

This subsection has effect subject to subsections (3) and (4).

Note: The Minister must also have regard to the matters in section 827A in deciding whether to grant a licence.



Foreign bodies

824B(3)    
If the applicant is a foreign body corporate, the Minister:

(a)    must not grant the applicant a licence unless the applicant is registered under Division 2 of Part 5B.2 ; and

(b)    may otherwise grant a licence under either subsection (1) or (2) (subject to the relevant criteria being satisfied).

Disqualified individuals

824B(4)    
The Minister must not grant the applicant a licence unless:

(a)    ASIC has notified the Minister that, as far as ASIC is aware, no disqualified individual is involved in the applicant (see Division 2 of Part 7.4 ); or

(b)    42 days have passed since the application was made and ASIC has not given a notice under subsection 853D(2) to the applicant within that 42 days.


SECTION 824C  

824C   PUBLICATION OF NOTICE OF LICENCE GRANT  


If the Minister grants an Australian CS facility licence, the Minister must publish a notice in the Gazette stating:

(a)    the name of the licensee; and

(b)    the date on which the licence was granted; and

(c)    the conditions on the licence.

SECTION 824D  

824D   MORE THAN ONE LICENCE IN THE SAME DOCUMENT  


If the Minister grants a person 2 or more of the following:

(a)    an Australian CS facility licence;

(b)    an Australian market licence;

they may be included in the same document.

SECTION 824E   MORE THAN ONE CS FACILITY COVERED BY THE SAME LICENCE  

824E(1)    
The same Australian CS facility licence may authorise the licensee to operate 2 or more clearing and settlement facilities.

824E(2)    


In that case, a reference to the clearing and settlement facility to which an Australian CS facility licence relates is taken instead to be a reference to each of those facilities severally.

824E(3)    
Before varying the conditions on an Australian CS facility licence so as to add another facility that the licensee is authorised to operate, the Minister must be satisfied of the matters listed in subsection 824B(1) or (2) (as appropriate) in relation to the facility.

824E(4)    
An Australian CS facility licence that authorises the licensee to operate 2 or more clearing and settlement facilities may be suspended or cancelled under Subdivision C in respect of one or some of those facilities only, as if the licensee held a separate licence for each of the facilities.


Subdivision B - The conditions on the licence  

SECTION 825A   THE CONDITIONS ON THE LICENCE  

825A(1)    
The Minister may, at any time:

(a)    impose conditions, or additional conditions, on an Australian CS facility licence; or

(b)    vary or revoke conditions imposed on such a licence;

by giving written notice to the licensee. The Minister must also publish a notice in the Gazette with details of the action and when it took effect.

Note: As well as the requirements in this section, the Minister must also have regard to the matters in section 827A .


825A(2)    
The Minister may do so:

(a)    on the Minister ' s own initiative, subject to subsection (3) ; or

(b)    

if the licensee lodges with ASIC in a prescribed form an application for the Minister to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.

Note: For fees in respect of lodging applications, see Part 9.10 .


825A(3)    
The Minister may only impose conditions or additional conditions, or vary the conditions, on the licence on his or her own initiative if:

(a)    he or she considers it appropriate to do so having regard to:


(i) the licensee ' s obligations as a CS facility licensee under this Chapter; and

(ii) any change in the facility ' s operations or the conditions in which the facility is operating; and

(b)    the Minister gives the licensee written notice of the proposed action and an opportunity to make a submission before it takes effect.

This subsection does not apply to the Minister imposing conditions when a licence is granted.


825A(4)    
The Minister must ensure that each Australian CS facility licence is subject to conditions that specify:

(a)    the particular facility that the licensee is authorised to operate; and

(b)    the class or classes of financial products in respect of which the facility can provide services.

825A(5)    
ASIC must give the Minister any application and documents lodged under subsection (2) .


Subdivision C - When a licence can be varied, suspended or cancelled  

SECTION 826A   VARYING LICENCES  

826A(1)    


The Minister may vary an Australian CS facility licence to take account of a change in the licensee's name if the licensee lodges with ASIC in a prescribed form an application for the variation, accompanied by the documents, if any, required by regulations made for the purposes of this subsection.

Note 1: The conditions on the licence can be varied under section 825A .

Note 2: For fees in respect of lodging applications, see Part 9.10 .


826A(2)    
The Minister must give written notice of the variation to the licensee.

826A(3)    
ASIC must give the Minister any application and documents lodged under subsection (1) .


SECTION 826B  

826B   IMMEDIATE SUSPENSION OR CANCELLATION  


The Minister may, by giving written notice to a CS facility licensee, suspend the licence for a specified period, or cancel it, if:

(a)    the licensee ceases to carry on the business of operating the facility; or

(b)    the licensee becomes a Chapter 5 body corporate; or

(c)    the licensee asks the Minister to do so; or

(d)    in the case of a licence granted under subsection 824B(2) (overseas clearing and settlement facilities):


(i) the licensee ceases to be authorised to operate a clearing and settlement facility in the foreign country in which the licensee ' s principal place of business is located; or

(ii) there is a change to the regulatory regime applying in relation to the facility to which the licence relates in the country in which the licensee ' s principal place of business is located, and, because of that change, the Minister is no longer satisfied as mentioned in paragraph 824B(2)(c) ; or

(e)    

in the case of a licensee that is a leviable entity (within the meaning of the ASIC Supervisory Cost Recovery Levy Act 2017 ) - the following have not been paid in full at least 12 months after the due date for payment:

(i) an amount of levy (if any) payable in respect of the licensee;

(ii) the amount of late payment penalty payable (if any) in relation to the levy;

(iii) the amount of shortfall penalty payable (if any) in relation to the levy.

SECTION 826C   SUSPENSION OR CANCELLATION FOLLOWING HEARING AND REPORT  

826C(1)    
If the Minister considers that a CS facility licensee has breached one or more of its obligations as a CS facility licensee under this Chapter, the Minister may give the licensee a written notice that requires the licensee to show cause, at a hearing before a specified person, why the licence should not be suspended or cancelled.

826C(2)    
The notice must specify:

(a)    the grounds on which it is proposed to suspend or cancel the licence; and

(b)    a reasonable time and place at which the hearing is to be held.

However, if the licensee consents, the person conducting the hearing may fix a different time or place.


826C(3)    
The person conducting the hearing must:

(a)    give the licensee an opportunity to be heard at the hearing; and

(b)    give the Minister:


(i) a report about the hearing; and

(ii) a recommendation about the grounds in the notice on which it is proposed to suspend or cancel the licence.

826C(4)    
After considering the report and recommendation, the Minister may:

(a)    decide to take no further action in relation to the matter and give written advice of that decision to the licensee; or

(b)    suspend the licence for a specified period, or cancel the licence, by giving written notice to the licensee.

Note: The Minister must have regard to the matters in section 827A .


SECTION 826D   EFFECT OF SUSPENSION  

826D(1)    
A person whoseAustralian CS facility licence is suspended is taken not to hold that licence while it is suspended.

826D(2)    
However, the Minister may specify in the written notice to the licensee that subsection (1) does not apply for specified purposes.


SECTION 826E  

826E   VARIATION OR REVOCATION OF SUSPENSION  


The Minister may at any time vary or revoke a suspension of an Australian CS facility licence by giving written notice to the licensee.

SECTION 826F   PUBLICATION OF NOTICE OF LICENCE SUSPENSION OR CANCELLATION  

826F(1)    
If the Minister:

(a)    suspends, or varies or revokes a suspension of, an Australian CS facility licence; or

(b)    cancels an Australian CS facility licence;

the Minister must publish a notice in the Gazette to that effect.


826F(2)    
The notice must state when the action took effect.


SECTION 826G  

826G   SUSPENSION AND CANCELLATION ONLY IN ACCORDANCE WITH THIS SUBDIVISION  


An Australian CS facility licence cannot be varied, suspended or cancelled otherwise than in accordance with this Subdivision.

Note: The conditions on the licence can be varied under section 825A .

Division 4 - Other matters  

SECTION 827A   MATTERS TO BE TAKEN INTO ACCOUNT BY THE MINISTER  

827A(1)    
The Minister must have regard to certain matters in deciding whether to:

(a)    grant an applicant an Australian CS facility licence under section 824B ; or

(b)    impose, vary or revoke conditions on such a licence under section 825A ; or

(c)    suspend or cancel such a licence under section 826C ; or

(d)    disallow a change to the operating rules of a licensed CS facility under section 822E .

827A(2)    
These are the matters the Minister must have regard to:

(a)    the structure, or proposed structure, of the facility;

(b)    the nature of the services provided, or proposed to be provided, by the facility;

(c)    the size, or proposed size, of the facility;

(d)    the nature of the financial products in respect of which the facility provides services or proposes to provide services;

(e)    the participants, or proposed participants, in the facility and whether those participants:


(i) in using the facility's services, are, or will be, providing financial services to other persons; or

(ii) use, or will use, the facility's services in respect of financial products they acquire or dispose of as retail clients or as wholesale clients; or

(iii) are, or will be, participants in a financial market, or other clearing and settlement facilities, as well;

(f)    the technology used, or proposed to be used, in the operation of the facility;

(g)    whether it would be in the public interest to take the action referred to in subsection (1);

(h)    

any relevant advice received from ASIC, the ACCC or the Reserve Bank of Australia.

The Minister may also have regard to any other matter that the Minister considers relevant.


827A(3)    
If the Minister is deciding whether to take the action mentioned in paragraph (1)(a), (b) or (c) in respect of an Australian CS facility licence granted under subsection 824B(2) (overseas clearing and settlement facilities), the Minister must also have regard to:

(a)    the criteria that the licensee or applicant satisfied to obtain an authorisation to operate the same facility in the foreign country in which their principal place of business is located; and

(b)    the obligations they must continue to satisfy to keep the authorisation; and

(c)    the level of supervision to which the facility is subject in that country; and

(d)    whether adequate arrangements exist for cooperation between ASIC, the Reserve Bank of Australia and the authority, or authorities, that are responsible for that supervision.


SECTION 827B  

827B   ASIC MAY GIVE ADVICE TO MINISTER  


ASIC may give advice to the Minister in relation to:

(a)    any matter in respect of which the Minister has a discretion under this Part; or

(b)    any other matter concerning clearing and settlement facilities.

Note: In some cases, the Minister must have regard to ASIC ' s advice: see paragraph 827A(2)(h) .

SECTION 827C  

827C   RESERVE BANK MAY GIVE ADVICE TO MINISTER  


The Reserve Bank of Australia may give advice to the Minister in relation to any matter concerning clearing and settlement facilities.

Note: In some cases, the Minister must have regard to the Reserve Bank ' s advice: see paragraph 827A(2)(h) .

SECTION 827D   RESERVE BANK MAY DETERMINE FINANCIAL STABILITY STANDARDS  

827D(1)    
The Reserve Bank of Australia (the Reserve Bank ) may, in writing, determine standards for the purposes of ensuring that CS facility licensees conduct their affairs in a way that causes or promotes overall stability in the Australian financial system.

827D(2)    
The standards are to be complied with by:

(a)    all CS facility licensees; or

(b)    a specified class of CS facility licensees, in the case of a standard that is expressed to apply only in relation to that class.

827D(2A)    


If there is an inconsistency between the standards and the CS services rules, the derivative transaction rules or the derivative trade repository rules, the standards prevail to the extent of the inconsistency.

827D(3)    
Before the Reserve Bank determines a standard, it must consult with:

(a)    the CS facility licensees that will be required to comply with the standard; and

(b)    ASIC.

827D(4)    
A standard may impose different requirements to be complied with in different situations or in respect of different activities.

827D(5)    
A standard:

(a)    comes into force:


(i) unless subparagraph (ii) applies - on the day on which the determination of the standard is made; or

(ii) if that determination specifies a later day as the day on which the standard comes into force - on the day so specified; and

(b)    continues in force until it is revoked.

827D(6)    
The Reserve Bank may vary a standard in writing. Before it does so, it must consult with:

(a)    the CS facility licensees that will be required to comply with the standard if it is varied as proposed; and

(b)    ASIC.

827D(7)    
If the Reserve Bank determines or varies a standard, it must, as soon as practicable:

(a)    cause a notice advising of the determination of the standard, or of the variation of the standard, and summarising the purpose and effect of the standard or variation, to be published in the Gazette ; and

(b)    

make the text of the notice available on the internet; and

(c)    give a copy of the standard, or of the variation, to the following:


(i) each CS facility licensee to which the standard applies;

(ii) the Minister;

(iii) ASIC.

827D(8)    
The Reserve Bank may revoke a standard in writing. Before it does so, it must consult with ASIC.

827D(9)    
If the Reserve Bank revokes a standard, it must, as soon as practicable:

(a)    cause a notice advising of the revocation of the standard to be published in the Gazette ; and

(b)    

make the text of the notice available on the internet; and

(c)    give notice of the revocation of the standard to the following:


(i) each CS facility licensee to which the standard applied;

(ii) the Minister;

(iii) ASIC.

827D(10)    
The Reserve Bank must take reasonable steps to ensure that copies of the current text of the standards are available for inspection and purchase.