House of Representatives

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

Chapter 2 Licensing framework

Outline of chapter

2.1 A new licensing regime is established requiring administrators of designated significant financial benchmarks to obtain a new 'benchmark administrator licence' from the Australian Securities and Investments Commission (ASIC). ASIC is given the power to designate significant financial benchmarks. Licensees are subject to a number of obligations. Failure to comply with these obligations can lead to licences being suspended or cancelled.

Summary of new law

2.2 ASIC is given the power to designate significant financial benchmarks, but only if it is satisfied that at least one of the specified criteria is met. These include that the designated benchmark is systemically important in Australia or that there would be a material impact on Australian retail or wholesale investors if there was a disruption to the operation or integrity of the benchmark.

2.3 A new licensing regime is established requiring administrators of designated significant financial benchmarks to obtain a new 'benchmark administrator licence' from ASIC. ASIC may impose conditions in granting a licence. Licensees are required to comply with any conditions on the licence as well as a range of general obligations imposed in the legislation.

2.4 Failure to comply with the licence conditions or the general obligations may lead to licences being suspended or cancelled. ASIC would generally give the licensee a hearing before it suspends or cancels a licence.

Comparison of key features of new law and current law

Detailed explanation of new law

Schedule 1 - Amendments

Part 1 - Main amendments

2.5 Part 1 of Schedule 1 inserts a new Part 7.5B after Part 7.5A in the Corporations Act 2001 (the Corporations Act). Part 2 makes consequential amendments to existing provisions in the Corporations Act. Part 3 makes two minor consequential amendments to another Act affected by certain amendments in this Bill.

2.6 The new Part 7.5B carries the title 'Regulation of Financial Benchmarks' and contains the new licensing framework for designated significant financial benchmarks, as well as a power for ASIC to make two new kinds of rules; one prescribing detailed requirements relating to the operation of financial benchmarks specified in a licence and the other, conferring powers for ASIC to compel certain activity relating to significant financial benchmarks. There are offences related to the licensing framework. Two offences are created relating to the manipulation of financial benchmarks.

Division 1 - Preliminary

2.7 A simplified outline of new Part 7.5B is provided, summarising the key matters in the Part as follows:

•

Administrators of significant financial benchmarks must be licensed, while other administrators can opt-in to the licensing regime. All licensees are subject to a number of obligations.

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ASIC may make financial benchmark rules. These apply to licensees and their benchmarks.

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ASIC may make compelled financial benchmark rules. These only apply to licensed significant financial benchmarks and deal with certain critical situations such as the possible failure of a significant financial benchmark.

•

Two new offences relating to the manipulation of financial benchmarks are defined.

[Schedule 1, item 1, section 908AA]

2.8 A definition of financial benchmark is provided stating that it can be a price, estimate, rate, index or value. It must also be available to users and be calculated periodically from one or more of the following: transactions, currencies, rates, indices, bank accepted bills (BABs), negotiable certificates of deposits (NCDs) and others. Benchmarks calculated from other benchmarks are within the scope of this definition. A financial benchmark must be used for certain purposes which may include the calculation of interest or other amounts payable for a financial product, the calculation of the price or value of a financial product, and the measurement of the performance of a financial product. This definition is aligned with that provided in the Principles for Financial Benchmarks, IOSCO (IOSCO Principles). [Schedule 1, item 1, subsection 908AB(1)]

2.9 The regulations, or ASIC by written instrument, may provide that a price, estimate, rate, index or value is not a financial benchmark. The ASIC written instrument is a legislative instrument if it applies to a class of prices, estimates, rates, indices or values. Otherwise, if ASIC makes a written instrument it must be published on ASIC's website. This power is intended to provide certainty about whether something may be captured by the definition of a financial benchmark. This is different from the exemption powers in section 908EB, which may be exercised to exempt a financial benchmark from some or all provisions of this Part; for example, where the regulatory cost may outweigh the regulatory benefit.

2.10 For an ASIC written instrument that is not a legislative instrument and so is not a disallowable instrument, this is appropriate because the instrument will be reviewable under the Administrative Decisions (Judicial Review) Act 1977 (see paragraph (a) in table item 19 in subsection 6(1) of the Legislation (Exemptions and Other Matters) Regulation 2015). [Schedule 1, item 1, subsections 908AB(2) to (4)]

2.11 ASIC may declare a financial benchmark to be a significant financial benchmark if it is satisfied that one of the following is met:

•

the benchmark is systemically important to the Australian financial system; or

•

a disruption to the availability or integrity of the benchmark would cause a material risk of financial contagion or systemic instability in Australia; or

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a disruption of that kind would have a material impact on Australian retail or wholesale investors.

[Schedule 1, item 1, subsections 908AC(1) and (2)]

2.12 ASIC will take reasonable steps to consult before making a declaration, unless there are exceptional circumstances.

2.13 Two notes are included to assist readers. The first refers the reader to subsection 13(3) of the Legislation Act 2003 (the Legislation Act) for declarations by reference to a class or classes of matters. The second notes that the power to make such a declaration under section 908AC includes a power to vary or revoke it, as provided in subsection 33(3) of the Acts Interpretation Act 1901. [Schedule 1, item 1, notes 1 and 2 to subsection 908AC(2)]

2.14 ASIC may not make such a declaration unless it has obtained the Minister's consent in writing. Under table items 4 and 5 in regulation 6 of the Legislation (Exemptions and Other Matters) Regulation 2015, such ministerial consents are not legislative instruments within the meaning of subsection (8)(1) of the Legislation Act. [Schedule 1, item 1, subsections 908AC(3) and (4)]

2.15 However, ASIC may, if immediate action is required, make an emergency declaration under subsection 908AC(2) without the consent of the Minister to protect the Australian economy or the Australian financial system. However, if it does so, ASIC must write to the Minister on the following day explaining the need for its action and revoke the declaration if directed to do so by the Minister. This allows the Government to exercise ultimate oversight in case of any declarations made by ASIC under this provision. [Schedule 1, item 1, subsections 908AD(1) to (3)]

2.16 To assist readers, an explanation is included that a written direction given by the Minister under subsection 908AD(3) is not a legislative instrument. This clarification is merely declaratory of the law as such directions are not legislative instruments within the meaning of subsection (8)(1) of the Legislation Act. [Schedule 1, item 1, subsection 908AD(4)]

2.17 ASIC must, as soon as practicable, give the financial benchmark administrator written notice about the declaration of a financial benchmark as a significant financial benchmark under subsection 908AC(2), as well as any variation or revocation of this. [Schedule 1, item 1, section 908AE]

2.18 ASIC is given the function of supervising financial benchmarks that are specified in benchmark administrator licences. If such a benchmark is generated or administered overseas, ASIC may, to the extent it considers appropriate, rely on a regulator in a foreign country in exercising its regulatory functions. However, ASIC may only do so if it is satisfied that there is an adequate level of supervision of the financial benchmark based on its assessment of the regulatory regime in the foreign jurisdiction. Alternatively, ASIC must be satisfied that there are adequate cooperation arrangements in place with the foreign regulator to ensure that the benchmark is adequately supervised.

2.19 A significant number of prominent benchmark administrators are based overseas, and may be interested in entering the Australian market. The ability of ASIC to rely on the foreign regulator in supervising such entities ensures that there is no unnecessary duplication of regulatory requirements and burdens. However, such reliance by ASIC is subject to conditions that are intended to guarantee that an adequate level of regulation and supervision is maintained. [Schedule 1, item 1, section 908AF]

2.20 The requirements in new Part 7.5B apply both within and outside Australia, subject to certain restrictions imposed in section 908BB and section 908DD (paragraphs 2.25 and 4.14 provide details on those restrictions). [Schedule 1, item 1, section 908AG]

Division 2 - Licensing of financial benchmarks

Subdivision A - Requirement to be licensed

2.21 Administering a significant financial benchmark, or holding out to be doing so, requires a benchmark administrator licence covering that benchmark. [Schedule 1, item 1, paragraphs 908BA(1)(a) and (b)]

2.22 Breaching this requirement is an offence, punishable by a penalty of 500 penalty units ^[3] ($105,000), 5 years' imprisonment or both. This is a relatively severe penalty, which is proportionate in view of the extensive damage and harm that may be caused by the unsupervised operation of an important financial benchmark. [Schedule 1, item 1, subsection 908BA(1)]

2.23 Once ASIC declares a benchmark to be a significant financial benchmark, the licensing requirement, as well as the holding out prohibition, generally applies after a period of 90 days from the day after ASIC's declaration. This is intended to allow time for the benchmark administrator to apply for a licence. However, where the benchmark administrator has applied for a licence within the 90 days and the 90 days has passed, the prohibition applies from the earlier of the day after:

•

the applicant withdraws its licence application; or

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the person is notified of ASIC's decision to grant or refuse to grant the licence.

[Schedule 1, item 1, paragraph 908BA(1)(c) and subsection 908BA(2) and (3)]

2.24 Absolute liability applies to that aspect of the offence concerning whether the period referred to in the previous paragraph has ended, which is a jurisdictional element of the offence. Hence, the state of mind of the person is not relevant. This is appropriate because an ASIC declaration is a legislative instrument that is made publicly available and the benchmark administrator will also have been notified of the declaration. The decision to apply for a licence or withdraw an application is a decision of the administrator, and an ASIC decision relating to a licence application will be notified to the administrator. Therefore, the administrator will be aware of when the period started and when this will end. [Schedule 1, item 1, section 908AE. paragraph 908BA(1)(c) and subsections 908BA(2) to (4)]

2.25 Prohibitions also apply to making a number of related assertions if they are not true, such as that a person holds a benchmark administrator licence, or that a particular benchmark is or is not a significant financial benchmark. Breaches of these prohibitions attract the same penalty as for the offence of administering a significant financial benchmark without a licence. This is because the potential harm and damage that could be caused by this kind of misconduct is extensive and no less serious than the offence of administering a significant financial benchmark while being unlicensed. Holding out in this manner is an offence only if done so in Australia, as extending the offence to conduct outside Australia would not comply with Australian Government policy on extended geographical jurisdiction under domestic law. [Schedule 1, item 1, section 908BB]

Subdivision B - Granting licences

2.26 ASIC may grant a benchmark administrator licence if it is satisfied that an application has been made in accordance with the application requirements prescribed under section 908BD, that the licensee will comply with the applicable obligations and that no disqualified individual appears to be involved in the applicant. An individual may be a disqualified individual by being declared to be so by ASIC under the power provided in Division 2 of Part 7.4 of the Corporations Act, by being disqualified from managing corporations for the reasons set out in section 206B, or because they form part of the register of persons who have been disqualified from managing corporations kept by ASIC under section 1274AA. ASIC may impose conditions when it grants a licence. Note 1 to this subsection points the reader to certain other matters in section 908BO that ASIC must have regard to when considering whether to grant a licence (see paragraphs 2.45 and 2.56 for details). Note 2 to this subsection clarifies that a licence is required in the case of a significant financial benchmark, but can be granted for other benchmarks. [Schedule 1, item 1, subsection 908BC(1)]

2.27 In the case of an overseas applicant, ASIC must not grant a licence unless the applicant has registered as a foreign company as prescribed in Division 2 of Part 5B.2, which includes a requirement to have an agent in Australia. Requiring overseas applicants to have a local presence in this way is important, for example in ensuring that service of documents can be executed in Australia. [Schedule 1, item 1, subsection 908BC(2)]

2.28 A licence may also not be granted unless 42 days have passed since the application was submitted and no notice of disqualification as set out in subsection 853D(2) has been given. However, if ASIC proposes to declare a person as disqualified under section 853C, ASIC must commence the process to do so under section 853D within 42 days of receiving the application, by giving a written notice to the applicant. In such situations, ASIC can then grant the licence if ASIC decides not to make a declaration under section 853C. [Schedule 1, item 1, subsection 908BC(3)]

2.29 ASIC must notify an applicant in writing about its decision to grant a licence or not, including about any conditions imposed if a licence is granted. [Schedule 1, item 1, subsection 908BC(4)]

2.30 A benchmark administrator licence application must be lodged by a body corporate in the form prescribed or approved by ASIC. ASIC may, by written notice, request further information to be provided and may refuse to consider the application or refuse to take any further action in relation to the application if the request is not complied with. There is nothing to prevent an administrator of a benchmark that is not a significant financial benchmark from applying for a benchmark administrator licence. However, a person granted a licence for a financial benchmark that is not a significant financial benchmark will have to comply with all the relevant requirements and obligations. [Schedule 1, item 1, section 908BD]

2.31 A benchmark administrator licence may specify more than one financial benchmark. The legislation applies as if each benchmark was covered under a separate licence; for example, with regard to decisions to suspend or cancel a licence. [Schedule 1, item 1, section 908BE]

2.32 After ASIC grants a licence it must publish a notice setting out a number of prescribed details including the name of the licensee and of the financial benchmark specified in the licence, when the licence was granted and any conditions imposed. [Schedule 1, item 1, section 908BF]

Subdivision C - Conditions on licences

2.33 ASIC may at any time revoke or alter existing conditions on a licence, or impose additional conditions on a benchmark administrator licence. In doing so it must give written notice to the licensee and publish a notice setting out the details of what it has done. ASIC must have regard to certain matters set out in section 908BO before imposing, varying or revoking conditions. [Schedule 1, item 1, subsection 908BG(1)]

2.34 ASIC may impose, revoke or vary conditions on its own initiative. However, ASIC may only do so if it considers it appropriate in view of the licensee's obligations under Part 7.5B as well as under any rules imposed by ASIC (see Chapter 3 of this explanatory memorandum for details of ASIC's rule-making powers), as well as having regard to any change in the way the benchmark specified in the licence is administered. ASIC must give the licensee written notice of its proposed action and allow the licensee the opportunity to make a submission. The restrictions on ASIC taking action to impose, revoke or vary conditions on its own initiative do not apply when ASIC imposes conditions when a licence is first granted. [Schedule 1, item 1, paragraph 908BG(2)(a) and subsection 908BG(3)]

2.35 ASIC may impose, revoke or vary conditions on a licence at the request of the licensee as set out in an application in the form required by ASIC. A fee may be payable for lodging an application. [Schedule 1, item 1, paragraph 908BG(2)(b)]

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

2.36 ASIC may vary a licence if a licensee lodges an application for the variation because of a change in the licensee's name or a change in the financial benchmark specified in the licence. ASIC may also vary an existing licence to add a further specified benchmark. For a variation based on a change in the financial benchmark, or to add a further benchmark, ASIC must have regard to the matters set out in section 908BO. A fee may be payable by the licensee for lodgement of the application. [Schedule 1, item 1, section 908BH]

2.37 ASIC may by written notice suspend a licence for a specified period or cancel it if the licensee stops operating the benchmark specified in its licence, becomes insolvent under Chapter 5 of the Corporations Act or an equivalent foreign law, if the licensee asks ASIC to do so, or if the licensee is a leviable entity (within the meaning of the ASIC Supervisory Cost Recovery Levy Act 2017), any payable levy, late payment penalty, or shortfall penalty has not been paid in full at least 12 months after the due date. Before doing so ASIC must first consider anything that is required or could be required of the licensee under the compelled financial benchmark rules (see paragraph 3.9 for an explanation of those rules). Because those rules only apply to benchmark administrator licensees that operate licensed significant financial benchmarks, which are benchmarks that are systemically important to the Australian financial system or where there may be material risks or impacts if the availability or integrity of the benchmark were disrupted, it is important that ASIC considers this before it cancels or suspends a licence. [Schedule 1, item 1, section 908BI]

2.38 If ASIC considers that a licensee has breached a condition on its licence or any of its obligations under Part 7.5B or under the rules made by ASIC (see Chapter 3 for details on ASIC's rule-making powers), ASIC may give a written notice to the licensee providing it with an opportunity to explain at a hearing before a specified person why its licence should not be suspended or cancelled. The notice must state the grounds on which ASIC is proposing to act and a reasonable time and place for the hearing. A different time or place may be fixed by the person holding the hearing if the licensee consents. [Schedule 1, item 1, subsections 908BJ(1) to (3)]

2.39 To assist readers, an explanation is included that such a notice is not a legislative instrument. This does not constitute an actual exemption from the relevant provisions in the Legislation Act but is merely declaratory of the law as such notices are not legislative instruments within the meaning of subsection (8)(1) of the Legislation Act. [Schedule 1, item 1, subsection 908BJ(5)]

2.40 The person conducting the hearing must, after hearing the licensee's explanation, give ASIC a report with a recommendation concerning the grounds on which ASIC is proposing to act. After considering the report ASIC must give a written advice or notice to the licensee with its final decision, regardless of whether it decides to take no further action, suspend the licence for a specified period, or cancel it. [Schedule 1, item 1, subsections 908BJ(3) and (4)]

2.41 A person is taken not to hold a licence if that licence has been suspended, unless ASIC in its written notice (whether provided under section 908BI or paragraph 908BJ(4)(b)) states that the contrary applies for specified purposes. [Schedule 1, item 1, section 908BK]

2.42 ASIC can at any time vary or revoke the suspension of a licence by written notice to the licensee. [Schedule 1, item 1, section 908BL]

2.43 ASIC must publish a notice if it suspends or cancels a benchmark administrator licence, or varies or revokes the suspension of such a licence. The notice must state when the action took effect. [Schedule 1, item 1, section 908BM]

2.44 A benchmark administrator licence can only be varied, suspended or cancelled as set out in this Subdivision. [Schedule 1, item 1, section 908BN]

Subdivision E - Matters to which ASIC must have regard

2.45 ASIC must take a prescribed list of matters into consideration when it decides to grant a benchmark administrator licence, impose, vary or revoke conditions on such a licence, vary a licence because of a change in the financial benchmark specified in the licence, or suspend or cancel a licence. [Schedule 1, item 1, subsection 908BO(1)]

2.46 ASIC must mainly have regard to the way the benchmark is administered, its nature, purpose and the manner in which it is used, and the persons who may be reporting information to the licensee for purposes of calculating the benchmark. In the case of a foreign applicant that is authorised to administer the same or a similar benchmark in its home jurisdiction, ASIC must consider the regulatory framework in that jurisdiction, what criteria and obligations the benchmark administrator is under to obtain and maintain its authorisation, the level of supervision to which it is subject, and whether adequate cooperation arrangements exist with the supervisory authority of that jurisdiction. ASIC must also consider whether it is in the public interest to take any action as set out in subsection 908BO(1), for example, to impose conditions on a licence or suspend or cancel a licence. Finally, ASIC may consider any other matter that it believes is relevant. [Schedule 1, item 1, subsections 908BO(2) and (3)]

Subdivision F - Other obligations of licensees

2.47 A benchmark administrator licensee must comply with a number of general obligations. These include:

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complying with the licence conditions;

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registering as a foreign company under Division 2 of Part 5B.2 if the licensee is a foreign body corporate; and

•

taking all reasonable steps to ensure that no disqualified individual is involved in the operation of the benchmark covered by the licence.

A breach of these conditions may lead to suspension or cancellation of the licence under section 908BJ. A note clarifies that under section 908CF, a benchmark administrator must also comply with financial benchmark rules and compelled financial benchmark rules made under Division 3. [Schedule 1, item 1, section 908BP]

2.48 A benchmark administrator licensee must report to ASIC the following events:

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a breach of a licensee's general obligations under section 908BP;

•

if a licensee becomes aware that they may no longer be able to comply with the general obligations; and

•

specified changes in relation to certain personnel.

When reporting the event, the report must include any related information prescribed in regulations. ASIC may then consider whether further action is necessary, for example suspending or cancelling a licence. Failure to notify such matters is an offence that attracts a penalty of up to 100 penalty units ($21,000). [Schedule 1, item 1, paragraphs 908BQ(1)(a) and (c) and subparagraphs 908BQ(1)(b)(i) and (ii)]

2.49 A benchmark administrator licensee must notify ASIC of any changes to directors, secretaries or senior managers, including with respect to its holding company. The regulations may prescribe other information that must be provided in such a notification. Failure to notify ASIC and include any prescribed information is an offence. A maximum penalty of 100 penalty units ($21,000) applies. It is important that ASIC becomes aware of changes in the management of licensees, given its responsibility for enforcing the prohibition on involvement by disqualified individuals. [Schedule 1, item 1, paragraphs 908BQ(1)(a) and (c), subparagraphs 908BQ(1)(b)(iii) and (iv), and subsection 908BQ(2)]

2.50 A benchmark administrator licensee must give assistance to ASIC, Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia if any of these regulators makes a reasonable request to inspect the licensee's books or obtain other assistance relating to the performance of the regulator's function. Failure to comply with this requirement is an offence attracting a penalty of up to 100 penalty units ($21,000). [Schedule 1, item 1, section 908BR]

2.51 A financial benchmark licensee must comply with a reasonable request by ASIC to provide access to its facilities as they relate to the person's capacity as a licensee. Failure to comply with this requirement is an offence, attracting a penalty of up to 100 penalty units ($21,000). [Schedule 1, item 1, section 908BS]

Subdivision G - Directions to licensees

2.52 ASIC may give a benchmark administrator licensee a written direction if ASIC believes that the licensee is not complying with its obligations, including obligations under rules made by ASIC (see Chapter 3 of this explanatory memorandum for details of ASIC's rule-making powers). The direction may specify certain things that ASIC believes will promote compliance by the licensee with those obligations. If the licensee fails to comply with the direction, ASIC may apply to the Court for an order that the licensee comply with the direction. ASIC may vary or revoke a direction at any time by giving written notice to the licensee. To assist readers, an explanation is included that such a direction given by ASIC is not a legislative instrument. This does not constitute an actual exemption from the relevant provisions in the Legislation Act but is merely declaratory of the law as such directions are not legislative instruments within the meaning of subsection (8)(1) of the Legislation Act. [Schedule 1, item 1, section 908BT]

2.53 As soon as practicable after giving a direction or a notice of variation or revocation of a direction, ASIC must give a copy to the Minister who may then within 30 days disallow all or part of the direction or notice. In deciding whether to disallow a direction or notice the Minister must consider certain matters, such as the consistency of the direction or notice with the licensee's obligations referred to in subsection 908BT(1) (that is, the licensee's obligations to comply with Part 7.5B and rules made under this Part) and the matters set out in subsection 908BO(2) (see above paragraph 2.46). ASIC must then notify the licensee of the disallowance, which takes effect as soon as the licensee receives ASIC's notification. To assist readers, an explanation is included that a disallowance notice given by the Minister to ASIC under this provision is not a legislative instrument. This does not constitute an actual exemption from the relevant provisions in the Legislation Act but is merely declaratory of the law as such an advice or direction is not a legislative instrument within the meaning of subsection (8)(1) of the Legislation Act. [Schedule 1, item 1, section 908BU]

2.54 ASIC may give a benchmark administrator licensee a written direction to give ASIC a report on specified matters. For example, ASIC may direct a licensee to provide a report relating to how it has generated the financial benchmark over a specified period, or relating to a change in the design and methodology of the financial benchmark. The written direction must include a deadline that is reasonable in the circumstances. ASIC may give a copy of that report to the Minister. ASIC may also require the licensee to give ASIC an audit statement on the report, and must nominate a particular person or body that is suitably qualified to prepare the statement. Failure to comply is an offence, with a penalty of 100 penalty units ($21,000). To assist readers, an explanation is included that a direction given by ASIC under this provision is not a legislative instrument. This does not constitute an actual exemption from the relevant provisions in the Legislation Act but is merely declaratory of the law as such a direction is not a legislative instrument within the meaning of subsection (8)(1) of the Legislation Act. [Schedule 1, item 1, section 908BV]

Subdivision H - Other matters

2.55 ASIC may assess how well a benchmark administrator licensee is complying with its obligations, including obligations under rules made by ASIC (see Chapter 3 of this explanatory memorandum for details of ASIC's rule-making powers). In doing so, ASIC may take account of any information that it thinks is appropriate. ASIC must give a written report on the assessment to the licensee as soon as practicable after completing the assessment. ASIC may also give a copy to the Minister and any other person who appears to be materially affected by the assessment. If the assessment relates to a serious contravention of the law of the Commonwealth or a State or Territory, ASIC may also give a copy of the report, or the relevant part of the report, to the Australian Federal Police, the Chief Executive Officer or a member of staff of the Australian Crime Commission ^[4] , the Commonwealth Director of Public Prosecutions or other persons or bodies prescribed by regulation. ASIC may also publish a report, or part of the report. [Schedule 1, item 1, section 908BW]

2.56 A benchmark administrator licence may be varied, suspended or cancelled, or made subject to conditions as allowed by this Bill or later legislation. Clarification is provided that variation, suspension or cancellation of licences, or the imposition of conditions or additional conditions, do not give rise to compensation. [Schedule 1, item 1, section 908BX]

Consequential amendments

2.57 A number of key definitions are inserted into section 9, the main definitions section in the Corporations Act. These include the key definitions of benchmark administrator licence and benchmark administrator licensee. A benchmark administrator licence is a licence granted under section 908BC and a benchmark administrator licensee is defined as a person who holds such a licence. There are also definitions of financial benchmark and significant financial benchmark, which refer to the relevant sections in the Bill setting out what they designate. [Schedule 1, items 2 and 4, section 9]

2.58 A number of consequential changes are made to Division 2 of Part 7.4, which prescribes limits on involvement with certain licensees. The changes allow ASIC to declare a person who is involved in a benchmark administrator licensee to be a disqualified person. ASIC may only do so if it considers the person unfit to be so involved and giving rise to a risk that the licensee will breach its obligations. [Schedule 1, items 9 and 10, section 853B and subsection 853C(1)]

2.59 Section 853D sets out the procedure that ASIC must follow before declaring that a person involved in a relevant licensee is disqualified. Paragraphs 853D(2)(a) and (b) are amended so that ASIC must also follow that procedure when seeking to declare that a person involved in a benchmark administrator licensee to be a disqualified person. [Schedule 1, item 11, paragraphs 853D(2)(a) and (b)]

2.60 A disqualified person must not become involved in a benchmark administrator licensee. If they are already involved, the licensee must take all reasonable steps to ensure that they cease to be involved. [Schedule 1, item 12, subsections 853F(1) and (2)]

2.61 If ASIC becomes aware that an individual involved in a benchmark administrator licensee is disqualified because they are disqualified from managing a corporation under section 206B (for example, due to bankruptcy or a conviction for certain offences), or are included on the register of disqualified company directors and other officers that ASIC must keep under section 1274AA, then ASIC must notify the individual, the licensee and the Minister as soon as practicable. [Schedule 1, item 13, section 853G]

2.62 A decision by ASIC to declare a significant financial benchmark, including a decision to vary or revoke such a declaration, is made exempt from appeals to the Administrative Appeals Tribunal (AAT). The same exemption is applied to a consent by the Minister to ASIC making such a declaration and to a direction by the Minister to ASIC to revoke or amend a declaration. These exemptions are appropriate because the decisions to which they relate are based on considerations that have a direct impact on the stability and efficient functioning of the Australian financial system. Appeals by persons affected by these decisions are unlikely to take account of these public interest considerations. So allowing appeals to be made would undermine the implementation of the Government's policy and the intended functioning of the regulatory framework established in the Bill. [Schedule 1, item 23, paragraphs 1317C(gdf) and (gdg)]

2.63 A decision by the Minister under section 908BU (see paragraph 2.53 above) to disallow a written compliance direction or notice given by ASIC to a licensee under section 908BT (see paragraph 2.52 above) is made exempt from appeals to the AAT. This exemption is appropriate because ASIC's original decision is subject to merits review by the AAT. Thus, if a licensee is dissatisfied with the original direction, and remains dissatisfied after the Minister takes (or fails to take) action, they may then appeal to the AAT and obtain a merits review as to whether the direction should stand or not. [Schedule 1, item 23 , paragraph 1317C(gdh)]

Application and transitional provisions

2.64 There are no application or transitional provisions for these Divisions.