Commonwealth Numbered Regulations - Explanatory Statements

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CORPORATIONS AMENDMENT REGULATIONS 2002 (NO. 1) 2002 NO. 15

Statutory Rules 2002 No. 15

Issued by the Parliamentary Secretary to the Treasurer

Corporations Act 2001

Corporations Amendment Regulations 2002 (No. 1)

Section 1364 of the Corporations Act 2001 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act.

The purpose of the Regulations is to amend Corporations Regulation 7.1.03 of the Corporations Regulations 2001 to prescribe indices (for the purpose of the definition of 'option contract') which are calculated in a slightly different way than the relevant specified indices which were previously prescribed, and to prescribe further share price indices for the same purpose.

The Corporations Agreement, reached by State, Northern Territory and Commonwealth Ministers who had responsibilities in relation to corporate regulation, formed the political compact on which the national companies and securities scheme, which operated from 1 January 1991 to 14 July 2001, was based. That scheme was superseded by a new legislative scheme which commenced on 15 July 2001. The new scheme is based on Commonwealth legislation enacted with the assistance of relevant power referred by the States. It is envisaged that a new Agreement, reflecting the changed constitutional basis of the relevant law, will be signed but meanwhile the Commonwealth, States and the Northern Territory consider themselves bound by the proposed new agreement.

Both the current and proposed new Agreements require that the Commonwealth consult members of the Ministerial Council for Corporations before making amendments to the Corporations Regulations. The responsible Ministers of the States and the Northern Territory on the Ministerial Council for Corporations have been consulted about the draft regulations.

Details of the Regulations are set out in the Attachment.

The Regulations commence on gazettal.

ATTACHMENT

DETAIL OF THE PROPOSED AMENDMENT TO REGULATION 7.1.03

Background

Option contracts are regarded as securities for the purposes of section 92 of the Corporations Act 2001 where those option contracts fall within the definition of "option contract" in section 9 of the Corporations Act 2001.

Under section 9 of the Corporations Act 2001 an "option contract" includes a contract over share price indices where those share price indices have been prescribed by a regulation.

Regulation 7.1.03 sets out the indices which are prescribed for the purposes of this definition.

The proposed amendment

There are two aspects of the proposed amendments:

•       the addition of a further 22 share price indices.

-       All the prescribed indices are proposed to be moved to Schedule 8B.

•       the amendment of Regulation 7.1.03 to prescribe the slightly different calculation of share price indices.

-       The settlement values for option contracts over share price indices may be calculated using derivations, such as opening price index calculations, of the share price indices which are listed in Schedule 8B.

-       There is some uncertainty as to whether option contracts which are calculated in this way, fall within the definition of 'option contract' in section 9 of the Corporations Act 2001, since the share price indices are derivations of those listed in Schedule 8B.

-       To remove this uncertainty, it is proposed that Regulation 7.1.03 be amended to include paragraph 1(b). Regulation 7.1.03, paragraph (1)(b) provides that where share price indices which are listed in Schedule 8B are calculated using different prices (such as opening prices) those share price indices are prescribed for the purposes of the definition of option contract.