CS 15 Proposed remake of relief for offers of CHESS Depository Interests
Released 24 January 2025. Comments due 28 February 2025
We propose to remake the relief that is currently provided by Class Order [CO 14/827] Offers of CHESS Depository Interests.
[CO 14/827] is due to expire on 1 April 2025. We intend to remake the relief on the terms of the attached draft legislative instrument for a period of 5 years.
The relief is largely on the same terms as [CO 14/827]. Changes include minor revisions to the definition of 'depository interests' and the wording of the Australian financial services (AFS) licence exemption, but these are intended to improve clarity, not change the operation of the relief.
We have assessed that the class order is operating effectively and efficiently, and continues to form a necessary and useful part of the legislative framework.
Please note that ASIC has received an application for relief from Cboe Australia Pty Ltd (Cboe) to include Cboe as an 'approved financial market'. If we approve that application, we may update the definition in the legislative instrument to include Cboe.
A consultation paper was not issued for this consultation.
Providing feedback
We invite feedback on our proposal. You should send your submission to rri.consultation@asic.gov.au by 5pm AEDT on Friday 28 February 2025.
You may choose to remain anonymous or use an alias when providing feedback. However, if you do remain anonymous, we will not be able to contact you to discuss your feedback should we need to.
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Background
The ASX Clearing House Electronic Subregister System (CHESS) cannot be used for the transfer of securities if the issuing company is domiciled in a country whose laws do not recognise uncertificated holdings or electronic transfer of title. Therefore, some foreign companies listed on Australian financial markets offer CHESS Depository Interests (CDIs) over their securities to investors in Australia.
A CDI is a unit of beneficial ownership in a financial product of a foreign body, where the underlying financial product is held by a depository nominee. Currently, CHESS Depositary Nominees Pty Limited (CDN) is the only depository nominee that has been appointed in relation to CDIs over foreign securities.
Historically, there was uncertainty about how offers of CDIs over underlying foreign securities were regulated under the Corporations Act 2001 (Corporations Act), particularly given that depository interests are not defined or referred to in the Corporations Act. This resulted in different views in the market about:
- how CDIs were characterised
- which disclosure regime applied to offers of CDIs (i.e. Chapter 6D or Part 7.9 of the Corporations Act), and
- who offered and issued CDIs (i.e. the foreign company or the depository nominee).
The differing views about who issued CDIs also resulted in uncertainty about whether the foreign company was required to hold an AFS licence.
Our approach to regulating offers of CDIs involves ‘looking through’ the CDI to the underlying foreign security, so that offers of CDIs are regulated under the Corporations Act in the same way that offers of the underlying foreign securities would be regulated.
Our draft legislative instrument clarifies that it is the foreign company, and not the depository nominee, who is required to give disclosure under Chapter 6D of the Corporations Act for an offer of CDIs. It also provides relief, for the avoidance of doubt, exempting a foreign company from the requirement to hold an AFS licence for ‘arranging’ for CDN or a CDI holder (or a proposed CDI holder) to deal in CDIs.
Related links
ASIC proposes to remake relief for offers of CHESS Depository Interests (news item)
Regulatory Guide 253 Fundraising: Facilitating offers of CHESS Depository Interests (RG 253)