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Wednesday 19 September 2018

18-272MR ASIC remakes ‘sunsetting’ class order about group purchasing bodies and extends the relief to limited licensees

ASIC has remade Class Order [CO 08/1] Group purchasing bodies, which was due to expire on 1 October 2018. The practical effect of this is to reduce red tape and continue to exempt certain groups who purchase products to cover other people's risks from needing to hold an AFS licence and other regulatory requirements. For example, a sporting association might arrange cover for its officials and other voluntary workers but does not need to meet the same requirements as an insurance broker or financial adviser. This relieves community groups and other organisations from regulatory burdens due to the low risk of consumer harm.

The new instrument, ASIC Corporations (Group Purchasing Bodies) Instrument 2018/751, continues to provide class relief to eligible group purchasing bodies from the following requirements in the Corporations Act 2001:

  • registration of a managed investment scheme under Chapter 5C
  • Australian financial services (AFS) licensing for certain activities (dealing, providing custodial or depository services and providing certain financial product advice) relating to risk management products
  • certain other requirements in Chapter 7 relating to disclosure and other conduct.

The only substantive change to the class relief in the new instrument is that the new instrument expressly extends the class relief to holders of 'limited licences'.

A limited licence is an alternative form of AFS licence that allows the licensee to provide a range of limited financial services relevant to self-managed superannuation funds (SMSFs). It was introduced to facilitate accountants moving into the AFS licensing regime following the removal of the accountants' exemption which previously allowed recognised accountants to provide recommendations about acquiring or disposing of an interest in an SMSF without being covered by an AFS licence. The accountants’ exemption was repealed in 2016.

The availability of exemptions in [CO 08/1] is affected by whether the group purchasing body holds an AFS licence, so this change had the unintended consequence of changing the way the class relief applies for accountants purchasing group insurance products that cover their accounting customers.  The new instrument reinstates the class relief that was previously available to accountants for purchasing group insurance products.

Other changes in the instrument are for the purposes of enhanced clarity and consistency with current drafting conventions.

ASIC is extending the period of the relief given under [CO 08/1] to undertake a more detailed review of the policy settings behind the class relief to ensure it operates effectively. ASIC intends to engage with industry and other interested stakeholders through public consultation in 2019. We will also consider the need for additional targeted stakeholder consultation.

Following this review, ASIC will look to repeal Instrument 2018/751 and replace it with a framework that includes any changes that have been identified as appropriate.

We anticipate reaching a final outcome by end 2020.

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Background

Under the Legislation Act 2003, all ASIC class orders are repealed automatically, or ‘sunset’ after a period of time (mostly 10 years) unless ASIC takes action to 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.

A group purchasing body arranges or holds cover under risk management products for other persons but neither issues risk management products nor provides any financial product advice other than providing certain general information about the risk management product to persons who will be covered by the product. The group purchasing body might acquire the product itself or negotiate the terms of the risk management product with the product issuer. For example, a group purchasing body might arrange for liability and accident insurance for its members, without expressing any opinion or recommendation about the insurance.

Similarly, group purchasing bodies may arrange for insurance for persons connected with the group purchasing body other than members. For example, an employer might arrange cover for its employees, or a sporting association might arrange cover for its officials and other voluntary workers.

Editor's note:

On 3 December 2018 ASIC made a variation to ASIC Corporations (Group Purchasing Bodies) Instrument 2018/751. Section 7 of the Instrument provides that a group purchasing body cannot rely on the exemptions if ASIC has given a notice to the body stating that the body cannot rely on the exemptions and ASIC has not withdrawn the notice. The variation inserts a new section 9 into the Instrument, which provides that a decision to give such a notice and any decision not to withdraw the notice are now subject to merits review by the Administrative Appeals Tribunal.

Last updated: 20/12/2018 02:30