Corporations Legislation Amendment (Derivative Transactions) Act 2012 (Cth)

Corporations Legislation Amendment (Derivative Transactions) Act 2012 No. 178, 2012 as amended Compilation start date: 3 January 2013 Includes amendments up to: Act No. 103, 2013 About this compilation This compilation This is a compilation of the Corporations Legislation Amendment (Derivative Transactions) Act 2012 as in force on 3 January 2013. It includes any commenced amendment affecting the legislation to that date. This compilation was prepared on 4 September 2013. The notes at the end of this compilation (the endnotes) include information about amending laws and the amendment history of each amended provision. Uncommenced amendments The effect of uncommenced amendments is not reflected in the text of the compiled law but the text of the amendments is included in the endnotes. Application, saving and transitional provisions for provisions and amendments If the operation of a provision or amendment is affected by an application, saving or transitional provision that is not included in this compilation, details are included in the endnotes. Modifications If a provision of the compiled law is affected by a modification that is in force, details are included in the endnotes. Provisions ceasing to have effect If a provision of the compiled law has expired or otherwise ceased to have effect in accordance with a provision of the law, details are included in the endnotes. Contents 1 Short title 2 Commencement 3 Schedule(s) Schedule 1—Amendments Part 1—Amendment of the Corporations Act 2001 Corporations Act 2001 Part 2—Amendment of other Acts Australian Prudential Regulation Authority Act 1998 Australian Securities and Investments Commission Act 2001 Mutual Assistance in Business Regulation Act 1992 Reserve Bank Act 1959 Endnotes Endnote 1—About the endnotes Endnote 2—Abbreviation key Endnote 3—Legislation history Endnote 4—Amendment history Endnote 5—Uncommenced amendments [none] Endnote 6—Modifications [none] Endnote 7—Misdescribed amendments [none] Endnote 8—Miscellaneous [none] An Act to amend the law relating to transactions in derivatives, and for other purposes 1 Short title This Act may be cited as the Corporations Legislation Amendment (Derivative Transactions) Act 2012. 2 Commencement (1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms. Commencement information Column 1 Column 2 Column 3 Provision(s) Commencement Date/Details 1. Sections 1 to 3 and anything in this Act not elsewhere covered by this table The day this Act receives the Royal Assent. 6 December 2012 2. Schedule 1 The 28th day after this Act receives the Royal Assent. 3 January 2013 Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act. (2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act. 3 Schedule(s) Each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms. Schedule 1—Amendments Part 1—Amendment of the Corporations Act 2001 Corporations Act 2001 1 Section 9 Insert: Australian derivative trade repository licence, when used in a provision outside Chapter 7, has the same meaning as it has in Chapter 7. 2 Section 9 Insert: derivative trade repository rules, when used in a provision outside Chapter 7, has the same meaning as it has in Chapter 7. 3 Section 9 Insert: derivative transaction rules, when used in a provision outside Chapter 7, has the same meaning as it has in Chapter 7. 4 Section 760B (after table item 5) Insert: 5A 7.5A regulation of derivative transactions and derivative trade repositories 5 Section 761A Insert: Australian derivative trade repository licence: see section 905B. 6 Section 761A Insert: clearing requirements (in relation to derivative transactions): see subsection 901A(7). 7 Section 761A Insert: derivative trade data means: (a) information about derivative transactions, or about positions relating to derivative transactions; or (b) information (including statistical data) that is created or derived from information referred to in paragraph (a). 8 Section 761A Insert: derivative trade repository means a facility to which information about derivative transactions, or about positions relating to derivative transactions, can be reported (whether or not other information or data can also be reported to the facility). 9 Section 761A Insert: derivative trade repository licensee means a person who holds an Australian derivative trade repository licence. 10 Section 761A Insert: derivative trade repository rules: see subsection 903A(1). 11 Section 761A Insert: derivative transaction means: (a) the entry into of an arrangement that is a derivative; or (b) the modification or termination of such an arrangement; or (c) the assignment, by a party to such an arrangement, of some or all of the party's rights and obligations under the arrangement; or (d) any other transaction that relates to a derivative and that is in a class of transactions prescribed by the regulations for the purpose of this paragraph. 12 Section 761A Insert: derivative transaction rules: see subsection 901A(1). 13 Section 761A Insert: execution requirements (in relation to derivative transactions): see subsection 901A(5). 14 Section 761A (definition of involved in) Omit "or CS facility licensee", substitute ", CS facility licensee or derivative trade repository licensee". 15 Section 761A Insert: licensed derivative trade repository means a derivative trade repository the operation of which is authorised by an Australian derivative trade repository licence. 16 Section 761A Insert: prescribed derivative trade repository means a facility that is (or that is in a class that is) prescribed by the regulations for the purpose of paragraph 901A(6)(b). 17 Section 761A Insert: reporting requirements (in relation to derivative transactions): see subsection 901A(6). 18 At the end of paragraph 765A(1)(l) Add: or (iv) a derivative trade repository; 19 Subsection 793B(2) Repeal the subsection, substitute: (2) However, if there is an inconsistency between the operating rules of a financial market, and any of the following other rules: (a) the market integrity rules; (b) the derivative transaction rules; (c) the derivative trade repository rules; those other rules prevail over the operating rules to the extent of the inconsistency. Note 1: If there is an inconsistency between the market integrity rules and the derivative transaction rules or the derivative trade repository rules, the market integrity rules prevail: see subsection 798H(3). Note 2: If there is an inconsistency between the derivative transaction rules and the derivative trade repository rules, the derivative transaction rules prevail: see subsection 901E(2). 20 At the end of section 798H Add: (3) If there is an inconsistency between the market integrity rules and the derivative transaction rules or the derivative trade repository rules, the market integrity rules prevail to the extent of the inconsistency. 21 Section 822B Before "The operating rules", insert "(1)". 22 At the end of section 822B, add: (2) However, if there is an inconsistency between the operating rules of a licensed CS facility and any of the following other rules: (a) the derivative transaction rules; (b) the derivative trade repository rules; those other rules prevail over the operating rules to the extent of the inconsistency. Note: If there is an inconsistency between the derivative transaction rules and the derivative trade repository rules, the derivative transaction rules prevail: see subsection 901E(2). 23 After subsection 827D(2) Insert: (2A) If there is an inconsistency between the standards and the derivative transaction rules or the derivative trade repository rules, the standards prevail to the extent of the inconsistency. 24 Section 853B Omit "or a CS facility licensee", substitute ", a CS facility licensee or a derivative trade repository licensee". 25 Subsection 853C(1) Omit "licensed financial market operator or licensed CS facility operator", substitute "market licensee, a CS facility licensee or a derivative trade repository licensee". 26 Subsection 853C(1) Omit "either", substitute "any". 27 Paragraphs 853D(2)(a) and (b) Omit "or an Australian CS facility licence", substitute ", an Australian CS facility licence or an Australian derivative trade repository licence". 28 Subsection 853F(1) Omit "or a CS licensee", substitute ", a CS facility licensee or a derivative trade repository licensee". 29 Subsection 853F(2) Omit "or CS licensee", substitute ", a CS facility licensee or a derivative trade repository licensee". 30 Section 853G Omit "or a CS facility licensee", substitute ", a CS facility licensee or a derivative trade repository licensee". 31 Paragraph 854A(1)(b) Omit "or a CS facility licensee", substitute ", a CS facility licensee or a derivative trade repository licensee". 32 After Part 7.5 Insert: Part 7.5A—Regulation of derivative transactions and derivative trade repositories Division 1—Application of Part 900A Derivatives and transactions etc. to which this Part applies (1) Unless an express contrary intention appears, this Part applies, on the basis specified in section 3, to derivatives, derivative transactions, facilities, persons, bodies and other matters located in or otherwise connected with: (a) a referring State; or (b) the Northern Territory or the Capital Territory; or (c) a place outside Australia. (2) This section does not, by implication, affect the interpretation of provisions of this Act outside this Part (except to the extent appropriate for any provisions outside this Part apply or relate to matters covered by this Part). Division 2—Regulation of derivative transactions: derivative transaction rules Subdivision A—Power to make derivative transaction rules 901A ASIC may make derivative transaction rules Power to make derivative transaction rules (1) Subject to this Division, ASIC may, by legislative instrument, make rules (derivative transaction rules) dealing with matters as permitted by this section. Note: Subdivision C deals with the process of making derivative transaction rules. Main matters that may be dealt with in derivative transaction rules (2) The derivative transaction rules may (subject to this Division) impose any of the following kinds of requirements: (a) execution requirements (see subsection (5)); (b) reporting requirements (see subsection (6)); (c) clearing requirements (see subsection (7)); (d) requirements that are incidental or related to execution requirements, reporting requirements or clearing requirements. Note: Paragraph (2)(d): the derivative transaction rules may (for example) impose requirements on the operator of a licensed derivative trade repository to facilitate compliance, by other persons, with reporting requirements. Other matters that may be dealt with in derivative transaction rules (3) The derivative transaction rules may also (subject to this Division) deal with matters incidental or related to requirements referred to in subsection (2), including any of the following: (a) specifying the classes of derivative transactions in relation to which particular requirements apply; (b) for execution requirements—specifying the licensed market or prescribed facility (or the class of licensed market or prescribed facility) on which derivative transactions in a particular class must be entered into; (c) for reporting requirements: (i) specifying the licensed derivative trade repository or prescribed derivative trade repository (or the class of licensed derivative trade repository or prescribed derivative trade repository), to which information about derivative transactions, or positions, in a particular class must be reported; and (ii) specifying the information that is required to be reported; (d) for clearing requirements: (i) specifying the licensed CS facility or prescribed facility (or the class of licensed CS facility or prescribed facility) through which derivative transactions in a particular class must be cleared; and (ii) specifying a period within which transactions must be cleared; (e) specifying the persons who are required to comply with requirements imposed by the rules; (f) the manner and form in which persons must comply with requirements imposed by the rules; (g) the circumstances in which persons are, or may be, relieved from complying with requirements in the rules that would otherwise apply to them; (h) the keeping of records, or the provision of records or other information, relating to compliance with (or determining whether there has been compliance with) the rules; (i) any other matters that the provisions of this Act provide may be dealt with in the derivative transaction rules. Note: Paragraph (e): subject to section 901D, the persons who are required to comply with requirements imposed by the rules may (for example) be: (a) persons who are parties to derivative transactions, or who are intermediaries or agents who facilitate or are otherwise involved in derivative transactions; or (b) operators of financial markets on which derivative transactions are entered into; or (c) operators of clearing and settlement facilities through which derivative transactions are cleared; or (d) operators of licensed or prescribed derivative trade repositories. Penalty amounts (4) The derivative transaction rules may specify a penalty amount for a rule. A penalty amount must not exceed 1,000 penalty units. Meaning of execution requirements (5) For the purpose of this Chapter, execution requirements are requirements for derivative transactions not to be entered into otherwise than on: (a) a licensed market, the licence for which authorises a class of financial products that includes the derivatives to which the transactions relate to be dealt with on the market; or (b) a facility that is (or that is in a class of facilities that is) prescribed by the regulations for the purpose of this paragraph in relation to a class of derivatives that includes the derivatives to which the transactions relate. Meaning of reporting requirements (6) For the purpose of this Chapter, reporting requirements are requirements for information about derivative transactions, or about positions relating to derivative transactions, to be reported to: (a) a licensed derivative trade repository, the licence for which authorises the repository to provide services in respect of a class of derivatives that includes the derivatives to which the transactions relate; or (b) a facility that is (or that is in a class of facilities that is) prescribed by the regulations for the purpose of this paragraph in relation to a class of derivatives that includes the derivatives to which the transactions relate. Meaning of clearing requirements (7) For the purpose of this Chapter, clearing requirements are requirements for derivative transactions to be cleared through: (a) a licensed CS facility, the licence for which authorises the facility to provide services in respect of a class of financial products that includes the derivatives to which the transactions relate; or (b) a facility that is (or that is in a class of facilities that is) prescribed by the regulations for the purpose of this paragraph in relation to a class of derivatives that includes the derivatives to which the transactions relate. Rules cannot generally impose requirements retrospectively (8) The derivative transaction rules: (a) cannot impose an execution requirement on a person in relation to a derivative transaction entered into before the requirement started to apply to the person; and (b) cannot impose a reporting requirement on a person in relation to a derivative transaction entered into before the requirement started to apply to the person, or in relation to a position as it was at a time before the requirement started to apply to the person; and (c) cannot impose a clearing requirement on a person in relation to a derivative transaction entered into before the requirement started to apply to the person, unless the transaction has not been cleared by the time the requirement starts to apply to the person. 901B Derivatives in relation to which rules may impose requirements Requirements can only be imposed in relation to derivatives covered by a determination under this section (1) The derivative transaction rules cannot impose execution requirements, reporting requirements, or clearing requirements, in relation to derivative transactions unless the derivatives to which the transactions relate are covered by a determination under this section that relates to requirements of that kind. Minister may determine classes of derivatives in relation to which requirements may be imposed (2) The Minister may, by legislative instrument, determine one or more classes of derivatives in relation to which execution requirements, reporting requirements, or clearing requirements, may be imposed. Note 1: Different determinations may be made in relation to the different kinds of requirements. Note 2: A class of derivatives can be described by reference to any matter, including (for example): (a) the kind of asset, rate, index or commodity to which the derivatives relate; or (b) the time when the derivatives were issued, or their date of maturity. Making determinations: matters to which the Minister has regard (3) In considering whether to make a determination under subsection (2) that would have the effect of allowing the derivative transaction rules to impose requirements of a particular kind in relation to certain derivatives, the Minister: (a) must have regard to: (i) the likely effect on the Australian economy, and on the efficiency, integrity and stability of the Australian financial system, of allowing the derivative transaction rules to impose requirements of that kind in relation to those derivatives; and (ii) the likely regulatory impact of allowing the derivative transaction rules to impose requirements of that kind in relation to those derivatives; and (iii) if those derivatives are or include commodity derivatives—the likely impact, on any Australian market or markets on which the commodities concerned may be traded, of allowing the derivative transaction rules to impose requirements of that kind in relation to those commodity derivatives; and (b) may have regard to any other matters that the Minister considers relevant. Note: Matters that the Minister may have regard to under paragraph (b) may, for example, include: (a) any relevant international standards and international commitments; and (b) matters raised in consultations under subsection (4), or in advice under subsection (6). Making determinations: obligation to consult (4) The Minister must not make a determination under subsection (2) unless the Minister has consulted ASIC, APRA and the Reserve Bank of Australia about the proposed determination. (5) A failure to consult as required by subsection (4) does not invalidate a determination. ASIC, APRA or Reserve Bank may advise Minister (6) ASIC, APRA or the Reserve Bank of Australia may (on its own initiative or at the request of the Minister): (a) consider whether a determination should be made under subsection (2) that would have the effect of allowing the derivative transaction rules to impose requirements of a particular kind in relation to certain derivatives; and (b) advise the Minister accordingly. Amendment and revocation of determinations (7) The Minister may amend or revoke a determination under subsection (2) in like manner and subject to like conditions (see subsections 33(3) and (3AA) of the Acts Interpretation Act 1901). 901C Regulations may limit the transactions in relation to which rules may impose requirements The regulations may provide that the derivative transaction rules: (a) cannot impose requirements (or certain kinds of requirements) in relation to certain classes of derivative transactions; or (b) can only impose requirements (or certain kinds of requirements) in relation to certain classes of derivative transactions in certain circumstances. Note: A class of derivative transactions can be described by reference to any matter, including (for example): (a) the derivatives to which transactions relate; or (b) the circumstances in which transactions were entered into; or (c) the time when, or place where, transactions were entered into; or (d) the parties to transactions. 901D Regulations may limit the persons on whom requirements may be imposed The regulations may provide that the derivative transaction rules: (a) cannot impose requirements (or certain kinds of requirements) on certain classes of persons; or (b) can only impose requirements (or certain kinds of requirements) on certain classes of persons in certain circumstances. Note: A class of persons may be described by reference to any matter, including (for example): (a) the volume of derivative transactions entered into by persons over a period; or (b) the characteristics or nature of persons or of their businesses; or (c) the place of residence or business of persons. Subdivision B—Compliance with derivative transaction rules 901E Obligation to comply with derivative transaction rules (1) A person must comply with provisions of the derivative transaction rules that apply to the person. Note: This section is a civil penalty provision (see section 1317E). For relief from liability to a civil penalty relating to this section, see section 1317S. (2) If there is an inconsistency between the derivative transaction rules and the derivative trade repository rules, the derivative transaction rules prevail to the extent of the inconsistency. Note 1: If there is an inconsistency between the market integrity rules and the derivative transaction rules, the market integrity rules prevail: see subsection 798H(3). Note 2: If there is an inconsistency between the standards determined under section 827D and the derivative transaction rules, the standards prevail: see subsection 827D(2A). 901F Alternatives to civil proceedings (1) The regulations may provide for a person who is alleged to have contravened section 901E to do one or more of the following as an alternative to civil proceedings: (a) pay a penalty to the Commonwealth; (b) undertake or institute remedial measures (including education programs); (c) accept sanctions other than the payment of a penalty to the Commonwealth; (d) enter into a legally enforceable undertaking. (2) The penalty payable under regulations made under paragraph (1)(a) in relation to a derivative transaction rule must not exceed one‑fifth of the penalty amount specified for the rule in the derivative transaction rules. (3) Without limiting regulations that may be made for the purpose of paragraph (1)(d), those regulations may provide for one or more of the following kinds of undertakings: (a) an undertaking to take specified action within a specified period; (b) an undertaking to refrain from taking specified action; (c) an undertaking to pay a specified amount within a specified period to the Commonwealth or to some other specified person. 901G Failure to comply with derivative transaction rules does not invalidate transaction etc. A failure, in relation to a derivative transaction, to comply with a requirement of the derivative transaction rules does not invalidate the transaction or affect any rights or obligations arising under, or relating to, the transaction. Subdivision C——The process of making of derivative transaction rules 901H Matters to which ASIC must have regard when making rules In considering whether to make a derivative transaction rule, ASIC: (a) must have regard to: (i) the likely effect of the proposed rule on the Australian economy, and on the efficiency, integrity and stability of the Australian financial system; and (ii) the likely regulatory impact of the proposed rule; and (iii) if the transactions to which the proposed rule would relate would be or include transactions relating to commodity derivatives—the likely impact of the proposed rule on any Australian market or markets on which the commodities concerned may be traded; and (b) may have regard to any other matters that ASIC considers relevant. Note: Matters that ASIC may have regard to under paragraph (b) may, for example, include: (a) any relevant international standards and international commitments; and (b) matters raised in consultations (if any) under section 901J. 901J ASIC to consult before making rules (1) ASIC must not make a derivative transaction rule unless ASIC: (a) has consulted the public about the proposed rule; and (b) has also consulted the following about the proposed rule: (i) APRA; (ii) the Reserve Bank of Australia; (iii) any other person or body as required by regulations made for the purpose of this subparagraph. Note: In some situations, consultation is not required: see section 901L. (2) Without limiting the ways in which ASIC may comply with the obligation in paragraph (1)(a) to consult the public about a proposed rule, ASIC is taken to comply with that obligation if ASIC, on its website: (a) makes the proposed rule, or a description of the content of the proposed rule, available; and (b) invites the public to comment on the proposed rule. (3) A failure to consult as required by subsection (1) does not invalidate a derivative transaction rule. 901K Ministerial consent to rules required (1) ASIC must not make a derivative transaction rule unless the Minister has consented, in writing, to the making of the rule. Note: In some situations, consent is not required: see section 901L. (2) A consent under subsection (1) is not a legislative instrument. 901L Emergency rules: consultation and consent not required (1) ASIC may make a derivative transaction rule without consulting as required by section 901J, and without the consent of the Minister as required by section 901K, if ASIC is of the opinion that it is necessary, or in the public interest, to do so in order to protect: (a) the Australian economy; or (b) the efficiency, integrity and stability of the Australian financial system. (2) However, if ASIC does so, ASIC must: (a) provide the Minister, on the following day, with a written explanation of the need for the rule; and (b) amend or revoke the rule in accordance with any written directions of the Minister. (3) A direction under paragraph (2)(b) is not a legislative instrument. 901M Amendment and revocation of derivative transaction rules (1) ASIC may amend or revoke a derivative transaction rule in like manner and subject to like conditions (see subsections 33(3) and (3AA) of the Acts Interpretation Act 1901). (2) However, the requirements of sections 901H, 901J and 901K do not apply in relation to an amendment or revocation pursuant to a direction by the Minister under paragraph 901L(2)(b). Division 3—Regulation of licensed derivative trade repositories: supervision by ASIC 902A ASIC to supervise licensed derivative trade repositories (1) ASIC has the function of supervising licensed derivative trade repositories. (2) If a licensed derivative trade repository is wholly or partly operated in a foreign country, ASIC may, to such extent as ASIC considers appropriate, perform the function of supervising the repository by satisfying itself: (a) that the regulatory regime that applies in relation to the repository in that country provides for adequate supervision of the repository; or (b) that adequate cooperative arrangements are in place with an appropriate authority of that country to ensure that the repository will be adequately supervised by that authority. Division 4—Regulation of licensed derivative trade repositories: derivative trade repository rules Subdivision A—Power to make derivative trade repository rules 903A ASIC may make derivative trade repository rules Power to make derivative trade repository rules (1) Subject to this Division, ASIC may, by legislative instrument, make rules (derivative trade repository rules) dealing with matters as permitted by this section. Note: Subdivision C deals with the process of making derivative trade repository rules. Main matters that may be dealt with in derivative trade repository rules (2) The derivative trade repository rules may (subject to this Division) deal with all or any of the following matters (including by imposing requirements for or relating to any of the following matters): (a) the manner in which licensed derivative trade repositories provide their services; (b) the handling or use of derivative trade data by licensed derivative trade repositories and their officers and employees, including the following: (i) the acceptance and retention of derivative trade data; (ii) the creation of statistical data from derivative trade data; (iii) the use and disclosure of, and provision of access to, derivative trade data (including statistical data referred to in subparagraph (ii)); (c) the governance, management and resources (including financial, technological and human resources) of licensed derivative trade repositories, including the following: (i) the handling of conflicts of interest; (ii) the monitoring and enforcement of compliance with obligations; (iii) the resources that licensed derivative trade repositories should have (including requirements relating to the experience, qualifications or fitness for office of operators and their officers and employees); (iv) the integrity and security of computer systems and other systems; (v) operational reliability; (vi) business continuity planning; (vii) the operational separation of functions; (viii) the outsourcing of functions to other entities; (d) the disclosure of conditions (including fees) on which licensed derivative trade repositories provide their services; (e) the reporting to ASIC or other regulators of matters related to licensed derivative trade repositories. Note: Paragraph (a): the rules may (for example) require licensed derivative trade repositories to provide open and non‑discriminatory access to their services. Other matters that may be dealt with in derivative trade repository rules (3) The derivative trade repository rules may also (subject to this Division) deal with matters incidental or related to matters referred to in subsection (2), including any of the following: (a) specifying the persons (being persons referred to in section 903B) who are required to comply with requirements imposed by the rules; (b) the manner and form in which persons must comply with requirements imposed by the rules; (c) the circumstances in which persons are, or may be, relieved from complying with requirements in the rules that would otherwise apply to them; (d) the keeping of records, or the provision of records or other information, relating to compliance with (or determining whether there has been compliance with) the rules; (e) any other matters that the provisions of this Act provide may be dealt with in the derivative trade repository rules. Penalty amounts (4) The derivative trade repository rules may specify a penalty amount for a rule. A penalty amount must not exceed 1,000 penalty units. Rules may provide that derivative trade data is taken to be given to ASIC in confidence (5) The derivative trade repository rules may provide, either generally or in circumstances specified in the rules, that information given to ASIC, by the operator (or an officer of the operator) of a licensed derivative trade repository, under a provision of: (a) this Part; or (b) regulations made for the purpose of this Part; or (c) the derivative transaction rules or the derivative trade repository rules; is to be taken, for the purpose of section 127 (confidentiality) of the ASIC Act