Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CORPORATIONS (FEES) AMENDMENT BILL 2011
EXPLANATORY MEMORANDUM
(Circulated by the authority of the Assistant Treasurer and Minister for Financial
Services and Superannuation, the Hon Bill Shorten MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Amendment of fees for financial market
supervision..................................................................... 5
Chapter 2 Regulation impact statement ......................................... 9
Index ..................................................................................................... 11
iii
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
Act Corporations (Fees) Act 2001
ASIC Australian Securities and Investments
Commission
ASX Australian Securities Exchange
Bill Corporations (Fees) Amendment Bill 2011
Chi-X Chi-X Australia Pty Ltd
Corporations Act Corporations Act 2001
Fees Regulations Corporations (Fees) Regulations 2001
1
General outline and financial impact
Outline
The Corporations (Fees) Amendment Bill 2011 (the Bill) contains
amendments regarding chargeable matters in the Corporations (Fees)
Act 2001 (the Act). The Bill enables the charging of participants (as
defined in Chapter 7 of the Corporations Act 2001 (the Corporations Act))
on licensed financial markets, in addition to the operators of licensed
financial markets (who may currently be charged under the Act), for the
purposes of supervision by the Australian Securities and Investments
Commission (ASIC).
Date of effect: The Bill commences on the day of Royal Assent. The
substantive amendments to the Act contained within Schedule 1 of the
Bill commence on the later of the day of Royal Assent, and
1 January 2012.
Proposal announced: The Government announced reforms to the
supervision of Australia's financial markets (involving the transfer of
supervision from individual market operators to ASIC) on
24 August 2009, and subsequently announced support for competition
between markets for trading in listed shares on 31 March 2010. In the
2011-12 Budget Measures, the Government committed to provide funding
to ASIC to implement the Competition for Market Services policy and
develop new market integrity rules, which would provide the necessary
regulatory framework to allow competition between markets for trading in
listed shares in Australia. This funding was approved subject to it being
fully recovered by industry fees charged by ASIC.
More specifically, the amendments will provide the legislative basis to
allow the cost recovery proposals outlined in the Consultation Paper
Proposed financial market supervision cost recovery model (and due to be
released in August), to be made in the Corporations (Fees) Regulations
2001 (the Fees Regulations).
Financial impact: Nil. The amendments will not involve any
Government expenditure.
Compliance cost impact: The Bill will enable the costs of compliance
with Part 7.2A (Supervision of financial markets) of the Corporations Act
(Part 7.2A) to be equitably distributed between market operators and
market participants. The details of the fees will be set out in the Fees
Regulations. The Bill does not increase the total compliance costs of
Part 7.2A.
3
Chapter 1
Amendment of fees for financial market
supervision
Outline of chapter
1.1 The Bill amends the list of entities which may be charged fees
for the performance by the Australian Securities and Investments
Commission (ASIC) of its functions under Part 7.2A (Supervision of
financial markets) of the Corporations Act.
Context of amendments
1.2 The amendments contained in the Bill are required to allow the
charging of fees for the performance by ASIC of its market supervision
functions under Part 7.2A of the Corporations Act as directly as possible
upon those who are the primary beneficiaries, or who had created the need
for supervision activities. Details of these proposed fees are in the
Consultation Paper Proposed financial market supervision cost recovery
model (the Consultation Paper), due to be released in August.
1.3 Currently, only market operators may be charged fees for the
performance by ASIC of its functions under Part 7.2A of the Corporations
Act. This arrangement was regarded as suitable in an environment where
the Australian Securities Exchange (ASX) and its subsidiaries were the
primary financial markets subject to ASIC's supervision.
1.4 The Government announced support for competition between
markets for trading in listed shares on 31 March 2010, with a media
release by the then Minister for Financial Services, Superannuation and
Corporate Law, the Hon Chris Bowen MP. This decision paved the way
for the potential entry of multiple market operators in Australia in
competition with ASX, which would also be subject to market supervision
by ASIC.
1.5 In the 2011-12 Budget Measures, the Government committed to
provide funding to ASIC to implement the Competition for Market
Services policy to develop new market integrity rules and to provide the
necessary regulatory framework to support competition between markets
for trading in listed shares in Australia. Funding was approved on
condition that it would be fully recovered on behalf of the Government
from industry fees.
1.6 On 29 April 2011, the Government welcomed new market
integrity rules by ASIC -- ASIC Market Integrity Rules (Competition in
5
Corporations (Fees) Amendment Bill 2011
Exchange Markets) 2011 -- to provide a framework for competition in
equity exchange markets which will come into effect on 31 October 2011.
On 4 May 2011, the Government granted a licence to Chi-X Australia Pty
Ltd (Chi-X), as the first market operator to offer an alternative venue for
trading ASX-listed shares. Subject to certain pre-conditions (including
industry readiness), Chi-X may commence trading operations with effect
from the commencement of the competition market integrity rules.
1.7 The proposed industry fee arrangements (outlined in the
Consultation Paper) seek to apply the Government's Cost Recovery
Guidelines. In line with the objectives of those Guidelines, an industry
fee based on charging both market participants and market operators,
particularly in a multi-operator environment, would allow a more efficient
and equitable allocation of the ASIC's market supervision cost burden
across industry.
1.8 To this end, the Bill amends the Act to enable fees to be charged
to Australian licensed market participants so that market supervision costs
could be recovered from across the industry in a sustainable, efficient and
market neutral way.
Summary of new law
1.9 The Bill enables participants in licensed markets, in addition to
operators of licensed markets, to be charged fees for the performance by
ASIC of its market supervision functions under part 7.2A of the
Corporations Act.
Comparison of key features of new law and current law
New law Current law
Both participants in, and operators of, Only operators of licensed markets
licensed markets may be charged fees may be charged fees under the Act,
under the Act, for the performance by for the performance by ASIC of its
ASIC of its functions under Part 7.2A functions under Part 7.2A of the
of the Corporations Act. Corporations Act.
Detailed explanation of new law
1.10 The Bill amends the Act to enable market participants, as well as
market operators, to be charged fees to recover the funding provided to
ASIC to undertake its market supervision functions under Part 7.2A of the
Corporations Act. Under the current law, only market operators may be
charged fees for this purpose. Participants are defined in Chapter 7 of the
Corporations Act, and will have the same meaning under this amendment.
6
Amendment of fees for financial market supervision
1.11 Specifically, the Bill adds to the definition of a chargeable
matter under the Act to include ASIC's performance of its functions in
relation to a participant in a licensed market under Part 7.2A of the
Corporations Act. The Bill also amends the list of entities that are liable
for a fee for a chargeable matter to include the participant in a licensed
market. [Schedule 1, Item 3 and Item 7]
1.12 This change reflects the decision of the Government to expand
the entities upon which fees can be levied for ASIC's Part 7.2A functions.
1.13 These amendments are required to allow the Government to
recover the costs incurred by ASIC in performing market supervisory
functions in a manner that places the costs as directly as possible upon the
beneficiaries of independently supervised financial markets. With the
impending introduction of competition in domestic equity markets, the
ability to directly charge market participants -- rather than solely rely on
charging market operators -- will enable the supervisory costs incurred
that are directly attributable to the supervision of market participants to be
borne by and recovered directly from market participants.
1.14 The Government will consider industry feedback in response to
the Consultation Paper before finalising the details of the proposed fees
arrangements. The details of the new fees arrangements will then be
prescribed in the Fees Regulations in due course.
Application and transitional provisions
1.15 All provisions in the Bill, apart from Schedule 1 (which contains
the amendments to the Act), will take effect on the day of Royal Assent.
Schedule 1 of the Bill will commence the later of the day the Bill receives
Royal Assent, and 1 January 2012. [Section 2]
1.16 The current fees arrangement (that is, levied on market operators
only) is expected to remain operative until the end of 2011. The current
Fees Regulations provide for ASIC to levy a fee on Chi-X in the event
that Chi-X commences operations in late 2011 (with effect from the
commencement of the competition market integrity rules on 31 October).
Hence, it is proposed that the new fees arrangements commence from
1 January 2012.
1.17 The proposed new fees arrangements that will accompany the
legislative changes in the Bill are expected to be finalised following
consideration of industry responses to the Consultation Paper. It is not
intended to take effect until the current arrangement has lapsed, that is,
from 1 January 2012.
1.18 To avoid possible retrospectivity should passage of this Bill be
delayed beyond 1 January 2012, the Bill will commence on the later of
Royal Assent and 1 January 2012.
7
Corporations (Fees) Amendment Bill 2011
Consequential amendments
1.19 The Bill makes consequential amendments to the Act to reflect
the substantive amendments to allow the charging of market participants.
These include the updating of references to sections in the Act,
appropriate changes to punctuation, and other similar changes to
accommodate the substantive amendments. [Schedule 1, Items 1, 2, 4, 5, and
6].
8
Chapter 2
Regulation Impact Statement
Exemption from Regulatory Impact Statement
2.1 Since this amendment is minor and technical in nature, a
Regulatory Impact Statement is not required (Office of Best Practice
Regulation Reference 2010/12086).
2.2 This amendment will not in itself increase the total fees being
levied for the purposes of ASIC's supervision of financial markets.
Rather, it allows fees to be levied against market participants and market
operators -- rather than only market operators.
2.3 Under current arrangements, market operators are levied the
entire fee amount, and are presumed to pass this on to the participants in
their market. The amendment allows the relevant amounts to be charged
directly to participants, without increasing the overall amounts that would
need to be recovered under a cost recovery arrangement.
2.4 This does not preclude any future decisions on appropriate fee
levels (which is prescribed in the Fees Regulations). The fee levels to be
charged to participants and operators will be subject to appropriate
industry consultation and publication of a Cost Recovery Impact
Statement prior to the commencement of the fee arrangements from
1 January 2012.
9
Index
Schedule 1: Fees and financial market supervision
Bill reference Paragraph number
Items 1, 2, 4, 5, and 6 1.19
Item 3 and Item 7 1.11
11