ASIC has today released two consultation papers proposing to remake a number of class orders that are due to expire (‘sunset’) in 2015 and 2016.
ASIC proposes to remake these class orders without significant changes before they sunset so that their ongoing effect will be preserved without any disruption to the entities who rely on them.
Class orders on secondary services and general advice
The class orders are on:
- relief relating to general advice warnings in advertisements (Class Order [CO 05/835] General advice in advertising), due to sunset on 1 October 2015;
- relief permitting a simplified warning for oral general advice (Class Order [CO 05/1195] Simplified warning for oral general advice), due to sunset on 1 April 2016; and
- Financial Services Guide (FSG) relief for secondary services, financial services provided to a retail client via an intermediary. The relief applies to experts and persons arranging for the issue of a financial product (Class Order [CO 04/1572] Secondary Services: Financial Services Guide relief for experts and Class Order [CO 04/1573] Secondary Services: Financial Services Guide relief for arrangers acting under an intermediary authorisation). These class orders are due to sunset on 1 April 2016.
Consultation Paper 226 Remaking ASIC class orders on secondary services and general advice (CP 226) outlines the changes we are proposing to make to these class orders, including:
- updating the name, format, legislative references and definitions;
- simplifying the drafting to give greater clarity and correct minor drafting errors;
- removing obsolete paragraphs; and
- updating the class order on general advice in advertising to encompass contemporary forms of advertising.
Drafts of the proposed new class orders are attached to the consultation paper.
Submissions to CP 226 are due by Monday 9 February 2015.
Class orders facilitating offers by foreign companies
ASIC proposes to remake class orders that facilitate Australian investors participating in scrip offers on the same basis as foreign investors where adequate safeguards are in place.
The relief applies to certain rights issues, schemes of arrangement, scrip bids and small scale personal offers.
CP 225 Remaking ASIC class orders on offers of foreign securities (CP 225) outlines proposals to update these class orders with minimum amendments so that they better reflect the current law, and also make changes aimed at reducing regulatory requirements, including:
- removing requirements to lodge offer documents with ASIC for foreign rights issues;
- reducing the quotation requirement for foreign rights issues from 36 months to three months; and
- allowing offer documents to be in a foreign language (if no English version is available).
Our policy on offers of foreign securities is set out in Regulatory Guide 72 Foreign securities prospectus relief. There are no changes to this policy but we are seeking feedback on our proposal to update RG 72 to reflect changes to the class orders.
Submissions on CP 225 are due on Monday 9 February 2015.
Background to relief on class orders facilitating offers by foreign companies
The Corporations Act requires a prospectus or Product Disclosure Statement for an offer of securities or interests that is received in Australia (unless an exemption applies). ASIC has given conditional relief from these disclosure requirements where a foreign entity makes a relatively small number of offers in Australia.
The relief allows Australian investors to participate in offers that might not otherwise be extended to them because of the time and expense involved in complying with regulatory requirements in multiple jurisdictions. The relief is subject to conditions to ensure adequate safeguards are in place. For example, much of the relief applies where the foreign securities are quoted on an approved foreign market.
The relief applies to:
- rights issues where foreign company is listed on an approved foreign market and the securities are in the same class as those already held by Australian investors: [CO 00/183] Foreign rights issues
- foreign scrip takeovers where the bid class securities are quoted on an approved foreign market: [CO 09/68] Prospectus and PDS relief for foreign scrip takeovers;
- scrip schemes of arrangement where the scheme is regulated in Hong Kong, Malaysia, New Zealand, Singapore, South Africa or the United Kingdom: [CO 07/9] Prospectus relief for foreign schemes of arrangement and PDS relief for Pt 5.1 schemes and foreign schemes of arrangement;
- foreign entities making 20 or few offers in Australia in 12 months where the entity is listed on an approved foreign market: [CO 00/214] Foreign securities: listed foreign companies making 20 or fewer offers in Australia in 12 months; [CO 02/263] Foreign interests in a managed investment scheme traded on an approved foreign exchange: 20 or fewer offers in Australia in 12 months;
- advertising and other notices relating to foreign securities that is aimed at a foreign market and only incidentally published in Australia: [CO 00/178], [CO 00/179], [CO 00/180], [CO 02/144] and [CO 02/150] Foreign securities: publishing of reports and notices.
ASIC proposes to allow only a couple of related class orders to sunset having formed the view this relief is not useful or often relied on. These class orders are [CO 00/181] Foreign securities: publishing of notices and reports and [CO 00/185] Foreign securities. CP 225 asks for feedback on whether these class orders should be allowed to sunset.
Under the Legislative Instruments Act 2003, all class orders are repealed automatically or ‘sunset’ after a specified period of time (mostly 10 years) unless we take action to exempt or preserve them. This ensures that legislative instruments like class orders are kept up to date and only remain in force while they are fit for purpose and relevant.
All government organisations are responsible for considering whether the legislative instruments they have made that are due to sunset will be relevant after their sunset date.