Treasury Laws Amendment (2017 Measures No 5) Bill 2017 [2017] AUSStaCSBSD 319 (13 September 2017)

• Treasury Laws Amendment (2017 Measures No. 5) Bill 2017
• Significant matters in delegated legislation 14
• Procedural fairness19
• Immunity from civil or criminal liability20

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Treasury Laws Amendment (2017 Measures No. 5)
Bill 2017

Purpose	This bill seeks to amend the Corporations Act 2001 to: • establish a new licensing regime requiring administrators of designated significant financial benchmarks to obtain a new ‘benchmark administrator licence’ from the Australian Securities and Investments Commission (ASIC); • provide ASIC with powers to make rules imposing a regulatory framework for licensed benchmark administrators and related matters; • make manipulation of financial benchmarks a criminal offence and subject to civil penalties
Portfolio	Treasury
Introduced	House of Representatives on 7 September 2017
Scrutiny principles	Standing Order 24(1)(a)(i), (iii) and (iv)

Significant matters in delegated legislation ^[14]

1.16 This bill proposes to establish a new licensing regime for administrators of designated significant financial benchmarks. The bill provides a framework for the new regulatory regime with much of the detail to be provided for in rules (delegated legislation). Proposed Division 3 of Part 7.5B provides that the Australian Securities and Investment Commission (ASIC) will be empowered to make the financial benchmark rules and the compelled financial benchmark rules. The type of matters that could be included in such rules include significant matters, such as:

• the responsibilities of benchmark administrator licensees;

• the manner in which benchmark administrator licensees are to provide their services, including the manner and conditions (including fees) on which they provide access to financial benchmarks;

• how conflicts of interest and complaints of benchmark administrator licensees are to be handled;

• the persons who are obliged to comply with requirements imposed by the rules and the manner and form in which those persons must comply; and

• the power for ASIC to require, by written notice, an entity to provide certain data or information or to require a benchmark administrator to generate or administer a significant financial benchmark.^[15]

1.17 Most significantly, proposed section 908CF provides that a person must comply with any provisions set out in the rules that apply to the person. If a person does not comply with such provisions they will be liable to a civil penalty, and proposed section 908CO provides that the rules may specify a penalty amount for a rule of up to 5,500 penalty units ($1.155 million).

1.18 The committee's view is that significant matters, such as key details about how the financial benchmark administrator licensee scheme is to operate and the imposition of civil penalties, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this instance, the explanatory memorandum provides no justification as to why such matters are proposed to be included in delegated legislation.

1.19 The committee also notes that these significant matters are to be included in 'rules' rather than in 'regulations'. The issue of the appropriateness of providing for significant matters in legislative rules (as distinct from regulations) is discussed in the committee's First Report of 2015.^[16] In relation to this matter, the committee has noted that regulations are subject to a higher level of executive scrutiny than other instruments as regulations must be approved by the Federal Executive Council and must also be drafted by the Office of Parliamentary Counsel (OPC). Therefore, if significant matters are to be provided for in delegated legislation (rather than primary legislation) the committee considers they should at least be provided for in regulations, rather than other forms of delegated legislation which are subject to a lower level of executive scrutiny.^[17] The committee further notes that OPC's Drafting Direction 3.8 states that material covering civil penalties should be included in regulations unless there is a strong justification for prescribing it in another type of legislative instrument.^[18]

1.20 In addition, the committee notes that proposed paragraph 908CB(j) provides that the regulations may prescribe matters that may be dealt with by the rules. The committee notes it is unusual for primary legislation to provide for the making of a regulation which, in turn, provides a power to set out what matters are to be set out in rules.

1.21 The committee's view is that significant matters, such as key details about how the financial benchmark administrator licensee scheme is to operate and, in particular, the imposition of civil penalties, should be included in primary legislation unless a sound justification for the use of delegated legislation is provided. In this regard, the committee requests the Minister's detailed advice as to:

• why it is considered necessary and appropriate to leave most of the elements of this new scheme to delegated legislation; and

• if significant matters are to be included in delegated legislation, why it is appropriate to include these in rules rather than regulations, particularly in relation to the imposition of civil penalties.

Procedural fairness^[19]

1.22 Proposed section 908BI provides that ASIC may, by giving written notice to a benchmark administrator licensee, suspend or cancel the licensee's licence in certain listed circumstances. Unlike the process for suspension or cancellation under proposed section 908BJ, there is no requirement that ASIC give the licensee an opportunity to show cause why the licence should not be suspended or cancelled. The committee notes that procedural fairness generally requires that a person should be given an opportunity to present their case, before a decision is made by a statutory or administrative body that could affect their rights or interests. The explanatory memorandum does not explain why proposed section 908BI does not require ASIC to give affected licensees the right to be heard before their licence is cancelled.

1.23 The committee therefore requests the Treasurer's advice as to why proposed section 908BI does not require ASIC to give affected licensees the right to be heard before their licence is suspended or cancelled, and whether it is intended that ASIC will ensure that a hearing will be given where fairness requires one.

Immunity from civil or criminal liability^[20]

1.24 Proposed section 908CJ provides that no civil or criminal liability will arise from any action taken by a person providing information, allowing access to information or generating or administering a significant financial benchmark if the person does so in good faith in compliance with a requirement imposed by the compelled financial benchmark rules. This therefore removes any common law right to bring an action to enforce legal rights, unless it can be demonstrated that lack of good faith is shown. The committee notes that the courts have taken the position that bad faith can only be shown in very limited circumstances.

1.25 The committee expects that if a bill seeks to provide immunity from civil or criminal liability, particularly where such immunity could affect individual rights, this should be soundly justified. In this instance, the explanatory memorandum provides no explanation for this provision, merely restating the terms of the provision.^[21]

1.26 The committee requests the Treasurer's advice as to why it is considered appropriate to provide a protected person with civil and criminal immunity so that any affected persons have their right to bring an action to enforce their legal rights limited to situations where lack of good faith is shown.

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[14] Schedule 1, item 1, proposed Division 3 of Part 7.5B. The committee draws Senators' attention to this Division pursuant to principle 1(a)(iv) of the committee's terms of reference.

[15] See proposed sections 908CB, 908CC and 908CE.

[16] Senate Standing Committee for the Scrutiny of Bills, First Report of 2015, 11 February 2015, pp 21–35.

[17] See also Senate Standing Committee on Regulations and Ordinances, Delegated Legislation Monitor No. 17 of 2014, 3 December 2014, pp 6–24.

[18] Office of Parliamentary Counsel, Drafting Direction 3.8, Subordinate Instruments, July 2017, p. 3

[19] Schedule 1, item 1, proposed section 908BJ. The committee draws Senators' attention to this provision pursuant to principle 1(a)(iii) of the committee's terms of reference.

[20] Schedule 1, item 1, proposed section 908CJ. The committee draws Senators' attention to this provision pursuant to principle 1(a)(i) of the committee's terms of reference.

[21] See explanatory memorandum, p. 31.