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1. Background

Date

Minister’s powers under the Corporations Act 2001

The Corporations Act 2001 (the Corporations Act) ascribes the responsible Minister powers relating to the regulation of financial markets and financial market infrastructures (FMIs) — clearing and settlement (CS) facilities and trade repositories.

Some of the matters of regulation to which these powers relate are:

  • licensing and operating rules of financial markets;
  • compensation arrangements for financial markets; and
  • licensing and operating rules of CS facilities.

These matters are hereafter collectively referred to as the regulatory matters.

Some of the powers the Minister has in respect of licensing of financial markets and CS facilities are the power to grant, impose or vary conditions on a licence and suspend or cancel a licence. The Minister also has powers to exempt or partially exempt financial markets and CS facilities from market licensing requirements and powers to exempt or partially exempt financial markets and CS facilities from compensation arrangement requirements

The Minister has also the power to disallow changes to operating rules of financial markets and CS facilities.

Under the Corporations Act, the Australian Securities and Investments Commission (ASIC) has a role in the regulatory matters, which includes providing advice to the Minister about applications for a market licence and changes to operating rules and enforcing market licensees’ compliance with their obligations.

With respect to the regulation of CS facilities, ASIC and the Reserve Bank of Australia (RBA) share regulatory responsibility, with ASIC administering license obligations and compliance obligations and the RBA overseeing other compliance obligations. Under the Corporations Act, the RBA is responsible for determining Financial Stability Standards (FSS) and assessing whether licensees have complied with the FSS and taken other necessary steps to reduce systemic risk. ASIC is responsible for ensuring that CS facilities comply with all other obligations, including for the fair and effective provision of services.

List of powers delegated to authorised ASIC officers

In accordance with section 1101J of the Corporations Act, the responsible Minister – at the time of writing, the Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP – has delegated some of the regulatory matters to authorised ASIC officers by way of an instrument (the Delegation Instrument).

The authorised ASIC officers (the delegate) are:

  1. each member of ASIC (within the meaning of section 9 of the Australian Securities and Investments Act 2001 (ASIC Act)); and
  2. each staff member (within the meaning of subsection 5(1) of the ASIC Act) who is an SES employee (within the meaning of section 34 of the Public Service Act 1999) or who holds an office or position that is at a level equivalent to that of an SES employee.

Under Parts 7.2, 7.2A, 7.3 and 7.5 of the Corporations Act, the Minister has powers relating to the licensing, operating rules and compensation arrangements of financial markets and CS facilities and ASIC supervision of licensed markets. The powers under these parts that have been delegated are outlined in Table 1.

Table 1. Delegated powers under Parts 7.2, 7.2A, 7.3 and 7.5 of the Corporations Act
Power Financial market CS facility
Licensing
Issue/revoke exemption from all or specified provisions of Part 7.2 (licensed markets) or Part 7.3 (licensed CS facilities) and vary/revoke an exemption 791C 820C
Direct audit of annual report 792F 821E
Approve change of country by foreign licensee 792H 821F
Issue/vary/revoke directions 794A 823A
Require a special report including an audited special report 794B 823B
Issue domestic licence 795B(1) 824B(1)
Issue overseas licence 795B(2) 824B(2)
Gazette the licence 795C 824C
Impose/vary/revoke conditions on licence 796A 825A
Vary licence 797A 826A
Suspend/cancel licence and vary or revoke suspension 797B
797C
797D
797E
797F
826B
826C
826D
826E
826F
Issue/revoke exemption from all or specified provisions of Part 7.2A (market supervision) and vary/revoke an exemption 798M
Operating rules
Disallow changes to operating rules 793E 822E
Compensation arrangements
Consider whether market will be covered by Division 4 of Part 7.5 of the Corporations Act 881D
Approve compensation arrangements with grant of license 882A
Approve compensation arrangements after license is granted 882B
Revoke an approval of compensation arrangements 882C
Issue directions to licensee 882D
Disallow changes to compensation rules 884B
Approve changes to compensation arrangements 884C
Assess adequacy of compensation rules and arrangements 885B
885C
885J
Disallow changes to the operating rules of the Securities Exchanges Guarantee Corporation 890H
Request a risk assessment report 892K
Issue/revoke exemption from all or specified provisions of Part 7.5 (compensation regimes) and vary/revoke an exemption 893B

Purpose of the guidelines

These guidelines set out the approach that the delegate is expected to take in exercising the delegated powers and have been issued by the Minister in conjunction with the Delegation Instrument. Therefore, these guidelines describe:

  • the matters the delegate should or must consider when exercising the delegated powers, including the appropriate timeframes for exercising the delegated powers;
  • the reporting requisite for the delegate to provide a quarterly report on both: upcoming regulatory matters which will require the exercise of the delegated powers over the next quarter, and regulatory matters for which the delegate has exercised the delegated powers over the previous quarter;
  • the procedure for allowing the Minister to ‘call up’ (request) regulatory matters for which the Minister deems that it is appropriate that he or she should exercise his or her powers instead of the delegate; and
  • other matters regarding the Minister’s rights during the delegation and vary or revoke the delegation.