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Corporations (Fees) Amendment Bill 2011

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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)

 



T able 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

 

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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



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 r eforms 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. 



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 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, licensed markets may be charged fees under the Act, for the performance by ASIC of its functions under Part 7.2A of the Corporations Act.

Only operators of licensed markets may be charged fees under the Act, for the performance by ASIC of its functions under Part 7.2A of the 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. 

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. 

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].

 

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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 s upervision 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.



 

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

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