CORPORATIONS AMENDMENT REGULATION 2012 (NO. 9) (SLI NO 267 OF 2012) EXPLANATORY STATEMENT

The Corporations Act 2001 (the Act) provides for the regulation of corporations, financial markets and products and services, including in relation to licensing, conduct, financial product advice and disclosure.

Subsection 1364(1) of the Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.

The Corporations Amendment Regulation 2012 (No. 9) (the Regulation) makes a number of amendments to the Corporations Regulations 2001 (the Principal Regulations). These amendments support the reforms in the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012 (the CGS Act).

• addition of Commonwealth Government Securities (CGS) depository interests to the definition of 'Division 3 asset' in subregulation 1.0.02(1) of the Principal Regulations; and

The Australian Securities and Investments Commission and the Australian Office of Financial Management were consulted as part of the development of the Regulations. As these amendments are purely consequential to the operation of the CGS Act, there was no public consultation in relation to the Regulation.

A statement of the Regulation's compatibility with human rights is set out in Attachment B.

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Act does not specify any conditions that need to be satisfied before the power to make the Regulation may be exercised.

ATTACHMENT A

Details of the Corporations Amendment Regulation 2012 (No. 9)

Section 1 - Name of Regulation

Section 1 provides that the name of the Regulation is the Corporations Amendment Regulation 2012 (No. 9).

Section 2 - Commencement

Section 2 provides for the Regulation to commence on the day after registration.

Section 3 - Amendment of the Corporations Regulations 2001

Section 3 provides that Schedule 1 amends the Corporations Regulations 2001 (the Principal Regulations).

Schedule 1 - Amendments

Item [1]

The Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012 (the CGS Act) facilitates trading of Commonwealth Government Securities (CGS) depository interests on financial markets accessible to retail investors. Depository interests are beneficial interests in the underlying CGS and provide the holder with the same economic rights as if they were the legal holder of the CGS. This means that all interest and principal payments flow through to the CGS depository interest holder. The use of depository interests allows existing trading systems to be used and ensures that retail investors can trade CGS in a manner similar to trading shares.

Divisions 3 and 4 of Part 7.11 of the Corporations Act 2001 contain provisions clarifying how transfers of title must occur when shares and other designated securities are traded. In order to make sure that CGS depository interests can be traded it is necessary to apply these two Divisions to CGS depository interests. This is partially achieved in item 15, paragraph 1073A(1)(da) of the CGS Act by making appropriate amendments to the list of securities in section 1073A to include CGS depository interests. This ensures that Division 3 of Part 7.11 of the Act applies.

Division 4 of Part 7.11 refers to the Principal Regulations to determine which financial products fall within its scope (section 1074A). Regulation 7.11.03 in turn states that among others, 'Division 3 securities' fall within the scope of Division 4 of Part 7.11. 'Division 3 securities' are then defined in subregulation 1.0.02(1) of the Principal Regulations as 'Division 3 assets' and 'Division 3 rights'.

The Regulation amends the definition of 'Division 3 assets' to include CGS depository interests and thereby ensure that CGS depository interests are covered by Division 4 of Part 7.11 of the Act.

Item [2]

The CGS Act requires a regulated person to give retail clients an information statement about CGS depository interests if they make a recommendation to the client to acquire a CGS depository interest. This information statement must be published on the CGS depository interest information website. Item 2 of Schedule 1 amends the Principal Regulations to prescribe the address of the CGS depository interest information website for the purposes of section 1020AH of the CGS Act.

ATTACHMENT B

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Corporations Amendment Regulation 2012 (No. 9)

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The Corporations Amendment Regulation 2012 (No. 9) (the Regulation) makes a number of amendments to the Corporations Regulations 2001. These amendments support the reforms in the Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012.

The Regulation prescribes the:

• addition of Commonwealth Government Securities (CGS) depository interests to the definition of 'Division 3 asset' in subregulation 1.0.02(1) of the Corporations Regulations 2001; and

• website address for information on CGS depository interests.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.

Commonwealth Numbered Regulations - Explanatory Statements

EXPLANATORY STATEMENT

Issued by authority of the Assistant Treasurer

Statement of Compatibility with Human Rights

Overview of the Legislative Instrument

Human rights implications

Conclusion