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Thursday 15 December 2016

16-438MR ASIC releases new instrument for nominee and custody services and amends platforms class orders

Following public consultation, ASIC has released a new legislative instrument on nominee and custody services, replacing the class order due to expire ('sunset') on 1 April 2017. 

ASIC also released an amending instrument updating two class orders, one for investor directed portfolio services (IDPS) and one for IDPS-like schemes (together, referred to as platforms).

ASIC has replaced Class Order [CO 02/295] with the new legislative instrument ASIC Corporations (Nominee and Custody Services) Instrument 2016/1156Class Order [CO 02/295] has been repealed by ASIC Corporations (Repeal) Instrument 2016/1157.

ASIC has updated the following class orders in ASIC Corporations (Amendment) Instrument 2016/1158:

  • Class Order [CO 13/763] Investor directed portfolio services
  • Class Order [CO 13/762] Investor directed portfolio services provided through a registered managed investment scheme

We have also updated Regulatory Guide 148 Platforms that are managed investment schemes and nominee and custody services, as well as reflecting the terms of the new legislative instrument. RG 149 Nominee and custody services will be revoked.

The new nominee and custody services instrument and updates to the platforms class orders follow a public consultation released on 21 July this year. In Consultation Paper 264: Remaking ASIC class order on nominee and custody services and proposed changes to platforms policy, ASIC sought feedback on its proposals:

  • to remake the nominee and custody services class order with changes;
  • for issues or sales after 30 June 2017 - to require that retail clients of platform and nominee and custody services have access to a product issuer’s internal and external dispute resolution system when they have concerns about investments made through the platform or nominee and custody service; and
  • to update the definition of an 'IDPS' and an 'IDPS-like scheme' to clarify what is covered by these definitions.

ASIC received one non-confidential and one confidential submission. 

Submissions highlighted that the consultation version of ASIC Corporations (Nominee and Custody Services) Instrument 2016/1156 required that a nominee and custody service operator be a public company.  On balance, we have accepted that relief should be extended to a body corporate. 

Submissions also focused on the related amendments to our platforms policy and generally highlighted the requirement for an operator to ensure that there is a dispute resolution system for underlying issuers or sellers of financial products through the platform.  Key points raised and how they were addressed include:

  1. investments by wholesale or sophisticated investors may be impacted by the proposed changes - we have amended the final version of the relevant provisions to clarify that the dispute resolution requirements only apply where the operator acquires financial products for retail clients;
  2. the length of the transition period - we have amended the relevant provisions to provide that the dispute resolution requirement only applies from 1 January 2018, to allow more times for platform or a nominee and custody service operator to conduct due diligence and to make relevant system changes;
  3. balancing regulatory benefit and compliance costs - we have considered the arguments and, on balance, consider that the regulatory benefits outweigh the compliance costs; and
  4. whether any divestment would be required for existing investments - we have clarified that no divestment is required for existing investments held through a platform or a nominee and custody service.

Background

Under the Legislation Act 2003, all class orders sunset after a specified period of time (mostly ten 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.

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Last updated: 30/03/2021 09:33