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Corporations Bill 2001

Part 8.4 Conduct of futures business

   

1204   Certain representations prohibited

             (1)  A person who is the holder of a licence must not represent or imply, or knowingly permit to be represented or implied, in any manner to a person that the abilities or qualifications of the holder of the licence have in any respect been approved by ASIC.

             (2)  A statement that a person is the holder of a licence is not a contravention of this section.

1205   Undesirable advertising

             (1)  In this section:

broadcast , in relation to a statement, means broadcast the statement by wireless transmission or television or cause it to be so broadcast.

publish , in relation to a statement, means:

                     (a)  insert the statement in a newspaper or periodical or cause it to be so inserted; or

                     (b)  publicly exhibit the statement or cause it to be publicly exhibited; or

                     (c)  include the statement, or cause it to be included, in a document that, whether or not in response to a request, is sent or delivered to a person, or thrown or left upon premises in the occupation of a person.

             (2)  Where ASIC considers that, having regard to conduct that a person has engaged in, is engaging in, or proposes to engage in, it is in the public interest to do so, it may, by written order given to the person, prohibit the person from publishing or broadcasting statements about:

                     (a)  futures contracts; or

                     (b)  businesses carried on, or proposed to be carried on, by persons and involving dealing in futures contracts on behalf of other persons; or

                     (c)  futures advice businesses or proposed futures advice businesses;

unless the form and content of the statements have first been approved by ASIC.

             (3)  An order under subsection (2) must not be made unless ASIC has first given the person in relation to whom it proposes to make the order an opportunity to appear at a hearing before ASIC (being a hearing that takes place in private) and make submissions and give evidence to ASIC in relation to the matter.

             (4)  A person the subject of an order under subsection (2) must comply with the order.

             (5)  For the purposes of this section, where a statement is published or broadcast and there is also published or broadcast in relation to the statement:

                     (a)  the name or address of a person; or

                     (b)  the telephone or telex number of a person; or

                     (c)  the post office or other delivery box number of a person;

it is presumed, unless the contrary is proved, that the statement was published or broadcast by that person.

1205A   Application of sections 1206 and 1207: exempt brokers

                   Neither of sections 1206 and 1207 applies in relation to an exempt broker, except in so far as the exempt broker carries on a futures broking business as a personal representative of a dead futures broker.

1206   Issue of contract notes

             (1)  A futures broker must, in respect of a transaction, being the acquisition or disposal of a futures contract, that is entered into by the broker on behalf of another person, give as soon as practicable:

                     (a)  in a case where the transaction is not an operation by the broker on a discretionary account—to that other person; or

                     (b)  in a case where the transaction is an operation by the broker on a discretionary account—to the person, or to each person, as the case requires, who gave instructions to the broker authorising the broker to operate on the discretionary account, other than a person who agrees in the prescribed manner to waive the operation of this paragraph;

a contract note that complies with subsection (3), (4) or (5), as the case requires.

             (2)  Subsection (1) does not require a futures broker to give a contract note to a person in respect of a transaction if the person was at the time of the transaction the holder of a futures brokers licence.

             (3)  A contract note given by a futures broker under subsection (1) in respect of a transaction, being the acquisition or disposal of a futures contract (other than a futures option or an eligible exchange-traded option), must include:

                     (a)  the name or style under which the broker carries on business as a futures broker and the address of the principal place at which the broker so carries on business; and

                     (b)  the name of the person to whom the broker gives the contract note; and

                     (c)  the day on which the transaction took place; and

                     (d)  a description of the futures contract sufficient to identify the nature of the transaction, including:

                              (i)  in a case where the futures contract is a commodity agreement—a description of the commodity and a statement of the contract price; and

                             (ii)  in a case where the futures contract is an adjustment agreement:

                                        (A)  a description of the class of adjustment agreements in which the futures contract is included; and

                                        (B)  a statement of the contract price; and

                                        (C)  if the transaction is the completion of the futures contract—the value or worth (as determined in accordance with the futures contract) of the futures contract at the time of that completion; and

                            (iii)  in a case where the transaction is a liquidating trade—details of the liquidating trade and of the futures contract that is intended to be closed out following the entering into of the liquidating trade; and

                     (e)  the deposit paid or payable in respect of the transaction; and

                      (f)  the month and year for the performance or settlement of the contract; and

                     (g)  in a case where the transaction took place on a futures market of a futures exchange or of a recognised futures exchange, or on an exempt futures market—a name or abbreviation by which the futures exchange, recognised futures exchange or exempt futures market, as the case may be, is generally known; and

                     (h)  a statement of the amount of commission charged or the rate (if any) at which ASIC was charged; and

                      (j)  a statement of the amounts (if any) of all stamp duties and other duties and taxes payable in connection with the transaction.

             (4)  A contract note given by a futures broker under subsection (1) in respect of a transaction, being the acquisition or disposal of a futures option, must include:

                     (a)  the matters specified in paragraphs (3)(a), (b), (c), (g), (h) and (j); and

                     (b)  a description of the class of futures contracts in which is included the futures contract to which the futures option relates; and

                     (c)  the month and year for performance or settlement of the futures contract to which the futures option relates; and

                     (d)  the date by which the purchaser of the futures option, in order to exercise the futures option, must declare an intention to exercise the futures option; and

                     (e)  a statement of the amount of the premium; and

                      (f)  details of the price at which the purchaser of the futures option has, by virtue of the futures option, an option or Chapter 8 right to assume a bought position, or sold position, as the case requires, in relation to the futures contract to which the futures option relates.

             (5)  A contract note given by a futures broker under subsection (1) in respect of a transaction, being the acquisition or disposal of an eligible exchange-traded option (in this subsection called the option ), must include:

                     (a)  the matters specified in paragraphs (3)(a), (b), (c), (g), (h) and (j); and

                     (b)  a description of the commodity or index to which the option relates; and

                     (c)  the date by which the purchaser of the option, in order to exercise the option, must declare an intention to exercise the option; and

                     (d)  a statement of the amount of the premium; and

                     (e)  details of:

                              (i)  in a case where the option relates to a commodity—the price at which the purchaser of the option has, by virtue of the option, an option or right to purchase, or sell, as the case requires, that commodity; or

                             (ii)  in a case where the purchaser of the option has, by virtue of the option, an option or right to be paid an amount of money to be determined by reference to the amount by which a specified number is greater or less than the number of a specified index—the specified number and the manner in which that amount of money is to be determined.

             (6)  A futures broker must not include in a contract note given under subsection (1), as the name of a person with or on behalf of whom the broker has entered into the transaction, a name that the broker knows, or could reasonably be expected to know, is not a name by which that person is ordinarily known.

             (7)  For the purposes of this section, a futures contract is included in the same class of futures contracts as another futures contract if, and only if, the first-mentioned futures contract is of the same kind as the other futures contract.

1207   Futures broker to give monthly statement to client

             (1)  Where:

                     (a)  a futures broker has, at any time during a particular month, held money or property on account of a client; or

                     (b)  a futures broker has, before or during a particular month, acquired a futures contract on behalf of a client, and, as at the end of that month, the futures contract has not been disposed of;

the broker must, within 7 days after the end of that month, send to the client a written statement setting out:

                     (c)  the name or style under which the broker carries on business as a futures broker and the address of the principal place at which the broker so carries on business; and

                     (d)  the opening cash balance for that month in the client’s account; and

                     (e)  all deposits, credits, withdrawals and debits affecting the account during that month; and

                      (f)  the cash balance in the account at the end of that month; and

                     (g)  in relation to each futures contract that the broker has, before or during that month, acquired on behalf of the client and that, as at the end of that month, has not been disposed of, particulars of the futures contract, including the particulars required by virtue of paragraph 1206(3)(d), or paragraphs 1206(4)(b), (e) and (f) or (5)(b), (d) and (e), as the case requires, to be included in a contract note relating to the acquisition of the futures contract; and

                     (h)  details of each outstanding call for a deposit or margin in respect of a futures contract that the broker has acquired on behalf of the client.

             (2)  Where a futures broker has, during a particular month, authority to operate on a discretionary account, the broker must, within 7 days after the end of that month, send to the person, or to each person, as the case requires, who gave instructions to the broker authorising the broker to operate on the discretionary account a written statement setting out:

                     (a)  the name or style under which the broker carries on business as a futures broker and the address of the principal place at which the broker so carries on business; and

                     (b)  the opening cash balance for that month in the account (in this subsection called the account ) maintained by the broker in respect of the discretionary account; and

                     (c)  all deposits, credits, withdrawals and debits affecting the account during that month; and

                     (d)  the cash balance in the account at the end of that month; and

                     (e)  in relation to each futures contract:

                              (i)  that the broker has acquired before or during that month; and

                             (ii)  the acquisition of which was an operation by the broker on the discretionary account; and

                            (iii)  that, as at the end of that month, has not been disposed of;

                            particulars of the futures contract, including the particulars required by virtue of paragraph 1206(3)(d), or paragraphs 1206(4)(b), (e) and (f) or (5)(b), (d) and (e), as the case requires, to be included in a contract note relating to the acquisition of the futures contract; and

                      (f)  details of each outstanding call for a deposit or margin in respect of a futures contract that the broker has acquired on behalf of the client and the acquisition of which was an operation by the broker on the discretionary account.

1208   Dealings by futures broker on own account

             (1)  A futures broker must maintain separately from other records such records as correctly record and explain dealings in futures contracts by the broker on the broker’s own account including, but not limited to, records specifying:

                     (a)  a description of each of those dealings together with the date on which and the time at which:

                              (i)  the instructions (if any) for each of those dealings were received by the futures broker; and

                             (ii)  the instructions (if any) for each of those dealings were transmitted to the futures market on which the dealing was effected; and

                            (iii)  the dealing was effected; and

                     (b)  the source of the funds used for effecting those dealings.

             (2)  A futures broker is taken not to have maintained records in compliance with subsection (1) unless the entries in the records are made in writing in the English language or are made in such a manner as will enable them to be readily accessible and to be readily converted into writing in the English language.

             (3)  A futures broker must not knowingly take the other side of an order of a client of the broker in relation to a futures contract unless:

                     (a)  the client has consented to the broker taking the other side of the order in relation to that futures contract; or

                     (b)  in dealing in that futures contract on behalf of the client, the broker is taken, for the purposes of this Act, to be dealing in that futures contract on the broker’s own account.

             (4)  For the purposes of subsection (3), a futures broker takes the other side of an order of a client of the broker in relation to a futures contract where the broker:

                     (a)  when dealing on the broker’s own account, assumes a bought position or sold position in relation to the contract; and

                     (b)  when dealing on the instructions of the client, assumes the opposite sold position or bought position in relation to the contract.

1209   Segregation of client money and property

             (1)  In this section:

client , in relation to a futures broker, means a person on behalf of whom the broker deals, or from whom the broker accepts instructions to deal, in futures contracts, but does not include:

                     (a)  the broker; or

                     (b)  if the broker is a body corporate—a director, or an officer, of the broker; or

                     (c)  an employee of the broker; or

                     (d)  if the broker is a body corporate—a body corporate that is related to the broker; or

                     (e)  a person who is associated with, or who is a partner of, the broker; or

                      (f)  a body corporate in which the broker has, or the broker and partners of the broker together have, a controlling interest.

credit facility means a document evidencing the right of a person to obtain money on credit from another person, and, without limiting the generality of the foregoing, includes a letter of credit and a bank guarantee.

property includes credit facilities and securities.

relevant credit balance , in relation to a client of a futures broker, means the total of:

                     (a)  the amounts deposited by the broker in respect of the client in a clients’ segregated account, or clients’ segregated accounts, of the broker, less so much of those amounts as has been withdrawn from the account or accounts; and

                     (b)  the values of the items of property that:

                              (i)  have, in respect of the client, been deposited by the broker in safe custody pursuant to subsection (3); and

                             (ii)  have not been withdrawn from safe custody; and

                            (iii)  under the terms and conditions on which they were deposited with, or received by, the broker, are available to meet, or to provide security in connection with the meeting of, relevant liabilities of the client.

relevant liabilities , in relation to a client of a futures broker, means debts and liabilities of the client arising out of dealings in futures contracts effected by the broker on behalf of the client.

settling , in relation to a dealing in a futures contract, includes making delivery, or taking delivery, of a commodity to which the futures contract relates.

             (2)  For the purposes of the definition of relevant credit balance in subsection (1), the value of an item of property at a particular time is:

                     (a)  in the case of a credit facility—the amount of money that the person entitled to the right evidenced by the credit facility can, at that time or within a reasonable period after that time, obtain by virtue of that right; or

                     (b)  in any other case—the market value of the property as at the end of the last business day before that time.

             (3)  Where, in connection with:

                     (a)  dealings in futures contracts effected, whether in this jurisdiction or elsewhere or proposed to be effected, by a futures broker on behalf of a client of the broker; or

                     (b)  instructions by a client of a futures broker to deal in futures contracts, whether in this jurisdiction or elsewhere;

money or property (other than property to which section 1214 applies) is deposited with the broker by the client, or is received by the broker for, or on behalf of, the client, the broker must:

                     (c)  in the case of money—deposit the money in a clients’ segregated account of the broker maintained in this jurisdiction or in the place where the money was deposited with, or received by, the broker; or

                     (d)  in the case of property—deposit the property in safe custody, in this jurisdiction or in the place where the property was deposited with, or received by, the broker, in such a manner that the property is segregated from property other than property deposited by the broker in safe custody pursuant to this subsection;

on or before the next day after the money or property is deposited with, or received by, the broker that is a day on which the money or property can be deposited as first mentioned in paragraph (c) or (d).

             (4)  Without limiting the generality of subsection (3), where, in connection with dealings in futures contracts effected, whether in this jurisdiction or elsewhere, by a futures broker, the broker receives from a person an amount of money some or all of which is attributable to dealings in futures contracts so effected on behalf of clients of the broker, the broker must, on the next day on which the amount can be so deposited, deposit the amount in a clients’ segregated account of the broker maintained in this jurisdiction or in the place where the broker receives the amount.

          (4A)  A clients’ segregated account of a futures broker must be designated as a clients’ segregated account, unless it is maintained outside this jurisdiction and the law in force in the place where it is maintained requires it to be designated in some other way.

          (4B)  If:

                     (a)  a clients’ segregated account of a futures broker is required by subsection (4A) to be designated as a clients’ segregated account; and

                     (b)  the account is designated in a way that complies substantially, but not completely, with that requirement;

subsection (4A) is taken to be complied with in relation to the account.

             (5)  Where, pursuant to this section, a futures broker deposits money in respect of a client in a clients’ segregated account of the broker, the broker must not withdraw any of the money except for the purpose of:

                     (a)  making a payment to, or in accordance with the written direction of, a person entitled to the money; or

                     (b)  making a payment for, or in connection with, the entering into, margining, guaranteeing, securing, transferring, adjusting or settling of dealings in futures contracts effected by the broker on behalf of clients only; or

                     (c)  defraying brokerage and other proper charges incurred in respect of dealings in futures contracts effected by the broker on behalf of the client; or

                     (d)  investing it:

                              (i)  in any manner in which trustees are for the time being authorised by law to invest trust funds; or

                             (ii)  on deposit with an eligible money market dealer; or

                            (iii)  on deposit at interest with:

                                        (A)  an Australian ADI; or

                                        (B)  an approved foreign bank in relation to the broker; or

                            (iv)  on deposit with a clearing house for a futures exchange; or

                             (v)  in the purchase of cash management trust interests; or

                     (e)  paying to the broker the amount of a fee that the broker may charge, or an amount to which the broker is entitled, under an agreement with the client made under subsection (7); or

                      (f)  making a payment that is otherwise authorised by law;

or as permitted by subsection (10).

          (5A)  If, under subsection (5), a broker (the paying broker ) withdraws money from a clients’ segregated account and pays it to another broker (the receiving broker ):

                     (a)  the paying broker must ensure that the receiving broker is notified, at the same time as the payment is made or as close to that time as is practicable, of the fact that the money has been withdrawn from a clients’ segregated account of the paying broker and should be paid into a clients’ segregated account of the receiving broker; and

                     (b)  on or before the next day after the receiving broker receives the payment, the receiving broker must pay the money into a clients’ segregated account of the receiving broker.

          (5B)  A notification under paragraph (5A)(a) may be in writing or in an electronic or other form and may convey its message by express words, or by a code or some other means understood by the brokers concerned.

             (6)  A futures broker must not deal with property deposited by the broker in safe custody under subsection (3) except:

                     (a)  in accordance with the terms and conditions on which it was deposited with, or received by, the broker; or

                     (b)  for the purpose of meeting obligations incurred by the broker in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in futures contracts effected by the broker on behalf of clients only.

             (7)  A futures broker who invests as mentioned in paragraph (5)(d) money that was, in respect of a client of the broker, deposited by the broker under subsection (3):

                     (a)  may charge such fee (if any) for so investing the money; and

                     (b)  is entitled to so much (if any) of the return on the money so invested;

as the broker and the client agree in writing.

             (8)  A futures broker must not invest an amount pursuant to paragraph (5)(d) by depositing it with a person for that person to invest unless:

                     (a)  the broker:

                              (i)  has informed the person that the amount has been withdrawn from a clients’ segregated account of the broker and is money to which clients of the broker are entitled; and

                             (ii)  has obtained from the person a written statement that is signed by the person, sets out the amount and acknowledges that the broker has informed the person as mentioned in subparagraph (i); or

                     (b)  the investment is made by the broker paying the amount into an account maintained with the person in relation to which the following conditions are satisfied:

                              (i)  the account is maintained for the sole purpose of having amounts invested in it pursuant to paragraph (5)(d);

                             (ii)  the broker has informed the person that amounts paid into the account will be amounts withdrawn from a clients’ segregated account of the broker and will be moneys to which clients of the broker are entitled;

                            (iii)  the broker has obtained from the person a written statement signed by the person that acknowledges that the broker has informed the person as mentioned in subparagraph (ii).

             (9)  Where, at a particular time, the total amount of the relevant liabilities of a client of a futures broker exceeds the relevant credit balance of the client, the broker may, in respect of the client, deposit in a clients’ segregated account of the broker an amount of money not greater than the amount of the excess, and, if the broker does so, the amount so deposited is, subject to subsection (10), taken to be money to which the client is entitled.

           (10)  Where:

                     (a)  a futures broker has, in respect of a client of the broker, deposited an amount pursuant to subsection (9) in a clients’ segregated account of the broker; and

                     (b)  the relevant credit balance of the client exceeds by a particular amount the total amount of the relevant liabilities of the client;

the broker may withdraw from the account so much of the amount referred to in paragraph (a) as does not exceed the amount first referred to in paragraph (b).

           (11)  A futures broker must keep in relation to the clients’ segregated account, or clients’ segregated accounts, of the broker financial records that:

                     (a)  are separate from any other financial records of the broker; and

                     (b)  record separately in respect of each client of the broker particulars of the amounts deposited in, and the amounts withdrawn from, the account or accounts in respect of the client; and

                     (c)  record, separately from the particulars referred to in paragraph (b):

                              (i)  particulars (including particulars of withdrawals) of so much of the amounts deposited as required by subsection (4) in the account or accounts as was not attributable to dealings in futures contracts effected by the broker on behalf of clients of the broker; and

                             (ii)  particulars of all amounts deposited in the account or accounts pursuant to subsection (9); and

                            (iii)  particulars of all amounts withdrawn from the account or accounts pursuant to subsection (10).

           (12)  A futures broker must keep records that:

                     (a)  relate to deposits of property in safe custody by the broker pursuant to subsection (3); and

                     (b)  record separately in respect of each client of the broker particulars of the property deposited in respect of the client.

           (13)  Section 1213 applies, so far as it is capable of application, in relation to financial records, and other records, that are required by subsections (11) and (12), respectively, of this section to be kept by a futures broker, and so applies as if those accounting records and other records were financial records required by that section to be kept by the broker.

           (14)  Subject to subsections (15) and (16), none of the following:

                     (a)  money deposited by a futures broker pursuant to this section in a clients’ segregated account of the broker;

                     (b)  property in which money deposited by a futures broker as mentioned in paragraph (a) of this subsection has been invested pursuant to paragraph (5)(d);

                     (c)  property deposited by a futures broker in safe custody pursuant to subsection (3);

is available for the payment of a debt or liability of the broker or is liable to be attached, or taken in execution, under the order or process of a court at the instance of a person suing in respect of such a debt or liability.

           (15)  Nothing in subsection (14) affects the right of a client of a futures broker to recover money or property to which the client is entitled.

           (16)  Where a futures broker is entitled to withdraw money from a clients’ segregated account of the broker for the purpose of making a payment to the broker, subsection (14) does not apply in relation to that money.

           (17)  Where a futures broker invests money pursuant to paragraph (5)(d) by depositing it with a person for the person to invest, neither that money, nor any property in which the person invests any of that money, is available for the payment of a debt or liability of the person or is liable to be attached, or taken in execution, under the order or process of a court at the instance of a person suing in respect of such a debt or liability.

           (18)  Nothing in this section affects a claim or lien that a futures broker has, under an agreement, under an Australian law or otherwise, against or on:

                     (a)  money deposited by the broker pursuant to this section in a clients’ segregated account of the broker; or

                     (b)  property in which such money has been invested pursuant to paragraph (5)(d); or

                     (c)  property deposited by the broker in safe custody pursuant to subsection (3).

           (19)  A futures broker must not pay an amount into a client’s segregated account of the broker except as required or authorised by this section or the regulations.

1210   Futures broker to give certain information to prospective clients

                   A futures broker must, before accepting a person as a client of the broker, give to the person:

                     (a)  a document that:

                              (i)  explains the nature of futures contracts; and

                             (ii)  explains the nature of the obligations assumed by a person who instructs a futures broker to enter into a futures contract; and

                            (iii)  sets out a risk disclosure statement in the prescribed form; and

                            (iv)  sets out the specifications, and details of the essential terms, of each kind of futures contract in which the broker deals on behalf of clients; and

                     (b)  a copy of each agreement into which the broker proposes, if the broker agrees to accept instructions from the person in relation to dealings in futures contracts, to require the person to enter.