Commonwealth Numbered Regulations - Explanatory Statements

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CORPORATIONS AMENDMENT (MUTUAL RECOGNITION OF SECURITIES OFFERS) REGULATION 2014 (SLI NO 175 OF 2014)

EXPLANATORY STATEMENT

SELECT LEGISLATIVE INSTRUMENT NO. 175, 2014

Issued by authority of the Treasurer

Corporations Act 2001

Corporations Amendment (Mutual Recognition of Securities Offers) Regulation 2014

Subsection 1364(1) 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, or necessary or convenient to be prescribed, for carrying out or giving effect to the Act.

The purpose of the Corporations Amendment (Mutual Recognition of Securities Offers) Regulation 2014 (the Regulation) is to ensure the continued effectiveness of the 2006 Agreement Between the Government of Australia and the Government of New Zealand in relation to Mutual Recognition of Securities Offerings (the Mutual Recognition Agreement), in light of changes to New Zealand law.

Chapter 8 of the Act gives effect to the Mutual Recognition Agreement.  It provides that certain provisions of the Act do not apply or are modified with respect to 'recognised offers'.  The effect is to allow New Zealand issuers of debentures, shares, interests in managed investment schemes and other securities to make offers in Australia using New Zealand disclosure documents and without needing to meet other requirements of the Act (for example, licensing requirements). 

What constitutes a 'recognised offer' is prescribed in the Corporations Regulations 2001 (the Principal Regulations).  Currently, the Principal Regulations refer to offers made under the Securities Act 1978 of New Zealand.  This Act has been replaced by the Financial Market Conduct Act 2013 of New Zealand, the relevant sections of which begin to take effect from 1 December 2014.

This Regulation amends the Principal Regulations to ensure Australia's implementation of the Mutual Recognition Agreement recognises the changes to New Zealand law and the transitional provisions provided to New Zealand issuers of securities.

Details of the Regulation are set out in the Attachment.

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

No public consultation was conducted on the basis that the changes made by the Regulation are of a minor and mechanical nature and do not substantially alter the existing arrangement (see paragraph 18(2)(a) of the Legislative Instruments Act 2003).  The New Zealand Ministry of Business Employment and Innovation and the Australian Securities and Investments Commission were consulted on the changes.

No Regulation Impact Statement was prepared on the basis that the changes made by the Regulation are of a minor and mechanical nature (Office of Best Practice Regulation Matter No. 17022).  

ATTACHMENT

Details of the Corporations Amendment (Mutual Recognition of Securities Offers) Regulation 2014

Section 1 - Name of Regulation

This section provides that the name of the Regulation would be the Corporations Amendment (Mutual Recognition of Securities Offers) Regulation 2014 (the Regulation).

Section 2 - Commencement

This section provides that:

•                 sections 1 to 4 of the Regulation commence the day following registration;

•                 the provisions of Schedule 1 commence on 1 December 2014; and

•                 the provisions of Schedule 2 commence on 1 December 2016.

Section 3 - Authority

This section provides that the Regulation is made under the Corporations Act 2001 (the Act).

Section 4 - Schedule(s)

This section provides that each instrument specified in a Schedule is amended or repealed as set out in the Schedule.

Schedule 1 - Amendments commencing 1 December 2014

The elements of the Financial Markets Conduct Act 2013 of New Zealand concerning the offering and governance of financial products come into effect on 1 December 2014.  Part 5 of the Securities Act 1978 of New Zealand and the Securities (Mutual Recognition of Securities Offerings - Australia) Regulation 2008 of New Zealand (the old regime) will be repealed on 1 December 2014.

However, clause 6 of Schedule 4 of the Financial Markets Conduct Act 2013 of New Zealand will allow issuers to continue to comply with the old regime in certain circumstances until 1 December 2016.  As such, Schedule 1 amends the instruments specified to ensure they recognise securities offered under both regimes from 1 December 2014.

Item 1 amends Regulation 8.1.01 to prescribe the provisions of Subpart 6 of Part 9 of the Financial Markets Conduct Act 2013 of New Zealand and the Financial Markets Conduct Regulations 2014 of New Zealand as a prescribed foreign recognition scheme in addition to Part 5 of the Securities Act 1978 of New Zealand and Securities (Mutual Recognition of Securities Offerings - Australia) Regulation 2008 of New Zealand.

Item 2 amends Regulation 8.1.02 to add a new subparagraph under (b) to define who the 'offeror' of a managed investment scheme is for a scheme within the meaning of the Financial Markets Conduct Act 2013.

Item 3 amends Regulation 8.2.01 to provide that a prescribed offer in relation to New Zealand is an offer to which Part 2 of the Securities Act 1978 of New Zealand (in accordance with Schedule 4 to the Financial Markets Conduct Act 2013 of New Zealand) or for which a disclosure document must be prepared in accordance with the Financial Markets Conduct Act 2013 of New Zealand.

Item 4 amends the note under Regulation 8.2.01 to include reference to securities defined in the Financial Markets Conduct Act 2013 of New Zealand as well as Part 2 of the Securities Act 1978 of New Zealand.

Items 5 repeals Regulation 8.2.02(1) and substitutes Regulation 8.2.02(1) to (1C) in order to require that the prescribed warnings in an offer document refer to the legislative regime under which the securities are offered (i.e. either the Securities Act 1978 of New Zealand or the Financial Markets Conduct Act 2013 of New Zealand).

Item 6 amends item 18.1 of Schedule 10A to refer to offer documents required to accompany an offer of interests in a managed investment scheme by either the Securities Act 1978 of New Zealand and the Securities Regulations 2009 of New Zealand; or the Financial Markets Conduct Act 2013 of New Zealand and the Financial Markets Conduct Regulations 2014 of New Zealand.  This allows these offer documents to be given to Australian clients instead of a product disclosure statement in a recommendation, issue or sale situation.

Item 7 amends item 2.3 of Schedule 10AA to refer to the documents that are required to accompany an offer of interests in a managed investment scheme by either:

•                 the Securities Act 1978 of New Zealand and the Securities Regulations 2009 of New Zealand; or

•                 the Financial Markets Conduct Act 2013 of New Zealand and the Financial Markets Conduct Regulations 2014 of New Zealand.

This allows the provider of a custodial arrangement who is to acquire a financial product pursuant to an instruction from a client to give the client these offer documents instead of a product disclosure statement.

Schedule 2 - Amendments commencing 1 December 2016

From 1 December 2016, offers of securities may no longer be made under the Securities Act 1978 of New Zealand. Schedule 2 amends the instruments specified to remove all references to that Act.

Item 1 amends Regulation 8.1.01 to remove the scheme established by Part 5 of the Securities Act 1978 of New Zealand and the Securities (Mutual Recognition of Securities Offerings--Australia) Regulations 2008 of New Zealand as a prescribed foreign recognition scheme.

Item 2 amends Regulation 8.1.02 to remove the definitions of 'offeror' which applied for unit trusts established under the Unit Trusts Act 1960 of New Zealand and for schemes within the meaning of the Securities Act 1978 of New Zealand.

Item 3 amends Regulation 8.2.01 to remove the reference to Part 2 of the Securities Act 1978 of New Zealand.  This means that a prescribed offer in relation to New Zealand is only an offer of a security for which a disclosure document must be prepared in accordance with the Financial Markets Conduct Act 2013 of New Zealand.

Item 4 amends the note under Regulation 8.2.01 to remove the reference to securities defined in Part 2 of the Securities Act 1978 of New Zealand.

Item 5 repeals Regulations 8.2.02(1) to (1D) and substitutes Regulation 8.2.02(1) to require the prescribed warnings in an offer document to refer to the Financial Markets Conduct Act 2013 of New Zealand as the legislative regime under which the securities are offered.

Item 6 amends item 18.1 of Schedule 10A to refer to offer documents required to accompany an offer of interests in a managed investment scheme by just the Financial Markets Conduct Act 2013 of New Zealand and the Financial Markets Conduct Regulations 2014 of New Zealand.  This allows these offer documents to be given to Australian clients instead of a product disclosure statement in a recommendation, issue or sale situation.

Item 7 amends item 2.3 of Schedule 10AA to refer to offer documents required to accompany an offer of interests in a managed investment scheme by just the Financial Markets Conduct Act 2013 of New Zealand and the Financial Markets Conduct Regulations 2014 of New Zealand.  This allows the provider of a custodial arrangement who is to acquire a financial product pursuant to an instruction from a client to give the client these offer documents instead of a product disclosure statement.

Statement of Compatibility with Human Rights

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

Corporations Amendment (Mutual Recognition of Securities Offers) Regulation 2014

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

This Regulation makes a number of minor and mechanical amendments to the Corporations Regulations 2001 to ensure the continued effectiveness of the 2006 Agreement Between the Government of Australia and the Government of New Zealand in relation to Mutual Recognition of Securities Offerings (the Mutual Recognition Agreement), in light of changes to New Zealand law.

Under the Mutual Recognition Agreement, an issuer offering securities may extend an offer that is made in one country to investors in the other country without needing to comply with all the laws applying to securities offers in the second country.  The relevant changes to New Zealand law include the repeal of the Securities Act 1978 of New Zealand and its replacement with the Financial Market Conduct Act 2013 of New Zealand, the relevant provisions of which take effect from 1 December 2014.

In summary, the Regulation provides that:

•                 between 1 December 2014 and 1 December 2016 securities offered under either the Securities Act 1978 of New Zealand or the Financial Market Conduct Act 2013 of New Zealand that meet the requirements and conditions set out in Chapter 8 of the Corporations Act 2001 (the Act) can be offered in Australia; and

•                 from 1 December 2016 only securities offered under the Financial Market Conduct Act 2013 of New Zealand that meet the requirements and conditions set out in Chapter 8 of the Act can be offered in Australia.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms as it only makes minor and technical amendments to reflect changes to relevant law in New Zealand and does not affect the operation of the Mutual Recognition Agreement.

Conclusion

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

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