Securities and financial services law [9th edition.] 9780409343076, 0409343072

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1st edition, An Introduction to the Securities Industries Acts, R Baxt, H A J Ford & G J Samuel, 1977. 2nd edition, An Introduction to the Securities Industry Codes, R Baxt, H A J Ford, G J Samuel & C Maxwell, 1982. 3rd edition, Stock Markets and the Securities Industry: Law and Practice, R Baxt, C Maxwell & S Bajada, 1988. Reprinted 1989 and 1990; supplement by R Baxt published 1992. 4th edition, Securities Industry Law, R Baxt, H A J Ford & A Black, 1993. 5th edition, Securities Industry Law, R Baxt, H A J Ford & A Black, 1996. 6th edition, Securities and Financial Services Law, R Baxt, A Black & P Hanrahan, 2003. Reprinted 2006. 7th edition, Securities and Financial Services Law, R Baxt, A Black & P Hanrahan, 2008. 8th edition, Securities and Financial Services Law, R Baxt, A Black & P Hanrahan, 2012. Reprinted 2015.



SECURITIES and FINANCIAL SERVICES LAW 9th edition Robert Baxt AO BA, LLB (Hons) (Syd), LLM (Harvard) Emeritus Partner, Herbert Smith Freehills Professorial Fellow, University of Melbourne

Ashley Black BA (Hons), LLB (Hons) (Syd), LLM (Hons) (Syd) Judge, Supreme Court of New South Wales

Pamela Hanrahan BA (Hons), LLB (Hons) (Melb), LLM (Hons) (CWRU), SJD (Melb) Professor and Director of Research, School of Taxation and Business Law, UNSW

LexisNexis Butterworths Australia 2017

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Baxt, R (Robert), 1938–

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Securities and financial services law. 9th edition. 9780409343069 (pbk). 9780409343076 (ebk). Includes index. Securities — Australia. Investments — Australia. Financial services industry — Law and legislation — Australia. Stock exchanges — Law and legislation — Australia. Black, Ashley; Hanrahan, Pamela F.

© 2017 Reed International Books Australia Pty Limited trading as LexisNexis. This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Gill sans and Sabon. Printed in China. Visit LexisNexis Butterworths at www.lexisnexis.com.au

Preface In this ninth edition of this book, we have again sought to provide a comprehensive and practical treatment of the regulation of financial products, financial markets and participants in the financial services industry. This is, of course, an area of significant practical importance for the Australian economy and for investors, including the many Australians who hold retirement savings in the form of superannuation. As in previous editions, an introductory chapter provides an overview of the purpose, structure and history of financial services regulation. Chapter 2 deals with the administration of the securities and financial services laws and examines the role of the Australian Securities and Investments Commission (ASIC), which has been under continuing scrutiny since the last edition. Chapters 3–6 deal with the nature of financial products and the regulation of offerings of financial products. This area is of obvious practical importance to product manufacturers, distributors and investors, and raises substantial regulatory challenges. Disclosure-based regulatory regimes have offered, and still offer, the promise of bringing risks to the attention of investors who can then take them into account. However, confidence in disclosure-based regulation has been shaken, or at least qualified, by the global financial crisis, and regulators are now seeking to engage with a more complex exercise in shaping regulation of particular products to minimise the adverse effects of investor biases. In parallel with doubts as to the effectiveness of disclosure, there have also been limited moves toward a form of merit regulation, by the product intervention power proposed by the Financial System Inquiry, also known as the Murray Inquiry (November 2014) (FSI Final Report) and in specific contexts, including the regulation of debentures issued by financial corporations. Chapters 7–9 deal with continuous disclosure and liability for defective disclosure, including an examination of securities class actions. Chapters 10–12 deal with regulation of financial markets and their participants. We trace developments since the transfer of primary responsibility for supervision of trading and related activity in the financial

markets from the Australian Securities Exchange (ASX) to ASIC, implemented by the Corporations Amendment (Financial Markets Supervision) Act 2010 (Cth). We have, in these chapters, also recognised recent developments, including a proposal to permit competition to the clearing functions of the ASX and its associated entities. We have also addressed developments in the regulation of over-the-counter derivatives since the global financial crisis and in relation to dark pools and algorithmic trading. Chapters 13–14 deal with licensing and conduct of business regulation affecting Australian financial services licensees. This edition again addresses the Future of Financial Advice Reforms, introduced following the Inquiry into Financial Products and Services in Australia (November 2009). Those reforms have, perhaps, now achieved an uneasy consensus, after a troubled exercise in law reform, and may have accelerated an existing trend to industry consolidation and integration of product manufacturers and advisory businesses. There remains a real question, recognised in these chapters, whether the present provisions dealing with commission arrangements will be sufficient to neutralise financial incentives for investment advisers to recommend inappropriate products. We have also included an examination of consumer protection in Chapter 15, which recognises the importance of retail investors in the Australian financial markets and the emphasis on consumer outcomes in the FSI Final Report. Chapters 16 and 17 deal with market misconduct and insider trading. As with previous editions, the authors have taken on different areas and responsibilities. Pamela Hanrahan has been responsible for Chapters 1–6, 8, the first part of Chapter 9, and Chapter 15. Ashley Black has been responsible for Chapters 7, 10, 13–14 and 16–17 and the second part of Chapter 9. Bob Baxt has been responsible for Chapters 11 and 12. Pamela Hanrahan and Ashley Black would like to take this opportunity to recognise the extraordinary achievement of Bob Baxt, who has now been involved with this work and its predecessors over nine editions, spanning nearly 40 years since its first edition (authored by Bob Baxt, Harold Ford and Graeme Samuel) was published in 1977. That achievement is, of course, but a small part of Bob’s wider contributions to

the study and practice of corporations and competition law, also over many years. Bob Baxt would like to acknowledge the work of Jessica Voong, Sam Hall and Taryn Wockner who worked with him at Herbert Smith Freehills in the preparation of his chapters. The authors would like to acknowledge with gratitude the support and assistance of the staff at LexisNexis Butterworths, and particularly Catherine Britton who has edited this edition.

Table of Cases References are to paragraph numbers 772 2656 Canada Inc (t/as) Swift Trade) v Financial Services Authority [2013] Ll LR 381 …. 16.13

A ABM Pastoral Co Pty Ltd, Re (1978) 3 ACLR 239 …. 2.76, 2.77 ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; 309 ALR 445; 99 ACSR 336; [2014] FCAFC 65 …. 1.28, 3.10, 3.11, 3.19, 3.37, 6.8, 8.39, 8.40, 8.45, 8.47, 13.68, 14.4, 14.10, 15.29 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 …. 8.43 Ace Custom Service Pty Ltd v Collector of Customs (1991) 3 FCR 576 …. 2.50 Adams v Eta Foods Ltd (1987) 19 FCR 93; 78 ALR 611 …. 8.28 Adler v Australian Securities and Investments Commission; Williams v Australian Securities and Investments Commission (2003) 179 FLR 1; 46 ACSR 504; 21 ACLC 1810; [2003] NSWCA 131 …. 2.88, 7.25, 9.20, 16.19, 17.41 Aequitas v Sparad No 100 Ltd (formerly Australian European Finance Corporation Ltd) (2001) 19 ACLC 1006; [2001] NSWSC 14 …. 14.9, 14.10 Airpeak Pty Ltd v Jetstream Aircraft (1997) 73 FCR 161; 144 ALR 448 …. 11.30 Alati v Kruger (1955) 94 CLR 216; [1955] HCA 64 …. 13.70 Aldred & Dept of the Treasury, Re (1994) 35 ALD 685 …. 8.49 Alfus v Pyramid Technology Corp 745 F Supp 1511 (ND Cal 1990) …. 17.42

Ali v Hartley Poynton Ltd (2002) 20 ACLC 1006; [2002] VSC 113 …. 14.6 All Class Insurance Brokers Pty Ltd (in liq), Re [2014] NSWSC 475 …. 14.69 Allen v Atalay (1993) 11 ACSR 753 …. 8.74, 11.30 — v Hyatt (1914) 30 TLR 444 …. 17.3 — v Townsend (1977) 16 ALR 301 …. 11.36 Almond Investors Ltd v Emanouel (2012) 91 ACSR 220; [2012] VSC 413 …. 6.45 Ambergate Ltd v CMA Corporation Ltd (admins apptd) (2016) 110 ACSR 642; [2016] FCA 94 …. 8.39, 8.40 Ampol Petroleum Ltd v RW Miller (Holdings) Ltd [1972] 2 NSWLR 850 …. 12.16, 12.17, 12.18 Ampolex Ltd v Perpetual Trustee Company (Canberra) Ltd (1996) 20 ACSR 649 …. 17.16 Ange v First East Auction Holdings Pty Ltd (2011) 284 ALR 638 …. 15.20 Anglo-African Merchants Ltd v Bayley [1970] 1 QB 311; [1969] 1 Lloyd’s Rep 268 …. 14.8, 14.11 Annetts v McCann (1990) 170 CLR 596 …. 2.69 Ansett, Re (1991) 9 ACLC 277 …. 4.23 Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 1 VR 637 …. 11.36 Anti-Cancer Council (Vic), Re; Ex parte State Public Services Federation (1992) 175 CLR 442 …. 4.28 ANZ Bank Ltd v Ryan (1968) 88 WN (NSW) (Pt 1) 368 …. 2.77 Aon Risk Services Australia Ltd v Lumley General Insurance Ltd (2005) 13 ANZ Ins Cas 61-652; [2005] FCA 133 …. 13.40 Apple Computer Australia Pty Ltd v Mekrizis (2003) 44 ACSR 518; [2003] NSWSC 126 …. 14.78 Apple Computer Sec Litigation Re, 886 F 2d 1109 (9th Cir 1989) …. 9.42

Ararimu Holdings Ltd, Re [1989] 3 NZLR 487 …. 14.14 Arceneaux v Merrill Lynch Pierce Fenner & Smith Inc, 767 F 2d 1498 (11th Cir 1985) …. 14.35 Argos Pty Ltd v Minister for the Environment and Sustainable Development (2014) 254 CLR 394 …. 11.27 Armstrong v Jackson [1917] 2 KB 822 …. 11.18, 14.11, 14.84 Artistic Builders Pty Ltd v Elliot & Tuthill (Mortgages) Pty Ltd (2002) 10 BPR 19,565; [2002] NSWSC 16 …. 8.74 Ashbury v Reid [1961] WAR 49 …. 9.21 Ashby v Slipper (2014) 219 FCR 322; [2015] FCAFC 15 …. 2.88 Ashton Millson Investments Ltd v Colonial Ltd (2001) 162 FLR 145; 38 ACSR 323 …. 12.24, 12.25 — v — (2003) 48 ACSR 581 …. 12.24, 12.25 — v — [2004] HCA 348 …. 12.24, 12.25 Associated World Investments Pty Ltd v Aristocrat Leisure Ltd (1997) 25 ACSR 783 …. 11.36, 11.51 Astley v Austrust Ltd (1999) 197 CLR 1; [1999] HCA 6 …. 14.5 Attorney-General (Gambia) v N’Jie [1961] AC 617; [1961] All ER 504 …. 11.27 Attorney-General (NSW) v Australian Fixed Trusts Ltd [1974] 1 NSWLR 110 …. 4.9 — v Mutual Home Loans Fund of Australia Ltd [1971] 2 NSWLR 163 …. 4.9 — v Quin (1990) 170 CLR 1; 93 ALR 1 …. 2.27 — v World Best Holdings Ltd (2005) 63 NSWLR 557; [2005] NSWCA 261 …. 14.78, 15.20, 15.21 .au Domain Administration Ltd v Domain Names Australia Pty Ltd (2004) 207 ALR 521; [2004] FCA 424 …. 14.86 Australian Broadcasting Tribunal v Bond (1990) 70 CLR 321; 94 ALR 11;

[1990] HCA 33 …. 2.26 Australian Building & Construction Commissioner v Abbott (No 4) [2011] FCA 950 …. 9.21 Australian Competition and Consumer Commission v ACN 117 372 915 Pty Ltd (in liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 …. 15.18 Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) (2009) 253 ALR 324; [2009] FCA 17 …. 14.78, 15.20 — v CG Berbatis Holdings Pty Ltd (2000) 96 FCR 491; 169 ALR 324; [2000] FCA 2 …. 14.78 — v — (2003) 214 CLR 51 …. 15.20 — v Chats House Investments Pty Ltd (1996) 142 ALR 177; 22 ACSR 539 …. 9.37 — v CLA Trading Pty Ltd [2016] FCA 377 …. 15.10, 15.18 — v Coles Supermarkets Australia Pty Ltd [2014] FCA 1405 …. 14.78 — v Fisher & Paykel Customer Services Pty Ltd [2014] FCA 1393 …. 8.10 — v 4WD Systems Pty Ltd (2003) 200 ALR 491 …. 15.20 — v Giraffe World Australia Pty Ltd (1998) 84 FCR 512; [1998] FCA 819 …. 9.34 — v Hillside (Australia New Media) Pty Ltd t/as Bet365 [2015] FCA 1007 …. 8.47 — v Lux Distributors Pty Ltd [2013] FCAFC 90 …. 14.78 — v — [2013] ATPR 42–447 …. 15.20 — v Samton Holdings Pty Ltd (2002) 117 FCR 301; [2002] FCA 62 …. 15.20 — v Simply No-Knead Franchising Pty Ltd (2000) 104 FCR 253 …. 15.20 — v South East Melbourne Cleaning Pty Ltd (in liq) [2015] FCA 25 …. 14.78 — v Telstra Corp Ltd (2004) 208 ALR 459; [2004] FCA 987 …. 8.46

— v — (2007) 244 ALR 470; [2007] FCA 1904 …. 8.46 — v Ticketek Pty Ltd [2011] FCA 1489 …. 11.2 — v TPG Internet Pty Ltd (2013) 250 CLR 640 …. 8.46 Australian Elizabethan Theatre Trust, Re (1991) 30 FCR 491 …. 14.67 Australian Institute of Marine and Power Engineers v Secretary, Dept of Transport (1986) 13 FCR 124 …. 11.27 Australian Property Custodian Holdings Ltd (in liq) (recs and mgrs apptd) (controllers apptd) (No 3), Re (2013) 93 ACSR 382; [2013] VSC 154 …. 2.53 Australian Securities and Investments Commission v ABC Fund Managers Ltd (2001) 39 ACSR 443 …. 3.22 — v ActiveSuper Pty Ltd (in liq) (2015) 235 FCR 181; 105 ACSR 116; [2015] FCA 342 …. 2.72, 2.93, 4.9, 4.17, 7.25, 8.39, 8.72, 13.2, 13.5 — v — (No 2) (2015) 106 ACSR 302; [2015] FCA 527 …. 2.93, 4.51, 13.1 — v Adler (2002) 42 ACSR 80; [2002] NSWSC 483 …. 2.91, 2.93, 13.59, 13.63, 13.64 — v Administrative Appeals Tribunal (2009) 181 FCR 130; [2009] FCAFC 185 …. 2.23 — v — (2011) 195 FCR 485; 85 ACSR 227; [2011] FCAFC 114 …. 2.18, 2.25 — v — (2010) 187 FCR 334; [2010] FCA 807 …. 13.57, 16.7 — v Arafura Equities Pty Ltd (2005) 56 ACSR 429 …. 3.22 — v Astra Resources plc (2015) 107 ACSR 323; [2015] FCA 759 …. 4.13, 4.17 — v Astra Resources Ltd (No 2) (2016) 113 ACSR 162; [2016] FCA 560 …. 4.51 — v Atlantic 3 Financial (Aust) Pty Ltd (2003) 47 ACSR 52 …. 3.22 — v — [2006] QSC 132 …. 13.2 — v Austral Timber Pty Ltd (1999) 17 ACLC 1697 …. 3.32

— v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305; 23 ACLC 929; [2005] NSWSC 267 …. 4.9, 4.21, 4.32, 6.23, 9.20, 13.24 — v Axis International Management Pty Ltd (No 5) (2011) 81 ACSR 631; [2011] FCA 60 …. 4.13, 4.14, 4.17, 4.49 — v Beekink (2007) 61 ACSR 305; [2007] FCAFC 7 …. 2.91 — v Camelot Derivatives Pty Ltd (in liq) (2012) 88 ACSR 206; [2012] FCA 414 …. 13.57 — v Cassimatis (No 8) [2016] FCA 1023 …. 2.88, 8.59, 9.26, 12.31, 14.20 — v Chase Capital Management Pty Ltd (2001) 36 ACSR 778 …. 3.22 — v Chemeq Ltd (2006) 234 ALR 511; 58 ACSR 169; [2006] FCA 936 …. 7.2, 7.23 — v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; 62 ACSR 427; [2007] FCA 963 …. 1.28, 4.23, 7.15, 13.21, 14.10, 14.11, 14.12, 14.13, 17.16, 17.21, 17.33, 17.36 — v Comcash Australasia Pty Ltd (2004) 59 ACSR 632 …. 3.22 — v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240 …. 3.22 — v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1; 224 FLR 50; [2009] QSC 58 …. 2.93, 4.17, 6.32, 8.42, 8.46, 8.49, 13.8 — v DB Management Pty Ltd (2000) 199 CLR 321; 33 ACSR 447; [2000] HCA 7 …. 2.34, 2.35 — v Donald (2003) 136 FCR 7; 48 ACSR 394; [2003] FCAFC 318 …. 2.24, 13.62 — v Drury Management Pty Ltd [2003] QSC 285 …. 3.22 — v Edensor Nominees Pty Ltd (2001) 204 CLR 559; 37 ACSR 1; [2001] HCA 1 …. 2.27, 2.28 — v Edwards (2004) 22 ACLC 1469 …. 3.22 — v Elm Financial Services Pty Ltd (2004) 186 FLR 295; 50 ACSR 406; [2004] NSWSC 859 …. 2.52, 2.70 — v — (2005) 55 ACSR 544; [2005] NSWSC 1065 …. 4.21, 6.23, 13.64

— v Emu Brewery Mezzanine Ltd (2004) 52 ACSR 168; [2004] WASC 241 …. 3.11, 3.17, 3.19 — v Enterprise Solutions 2000 Pty Ltd (1999) 33 ACSR 403; [1999] QSC 387 …. 3.19 — v — (2000) 35 ACSR 620; [2000] QCA 452 …. 3.19 — v Fortescue Metals Group Ltd (2011) 190 FCR 364; 274 ALR 731; 81 ACSR 563; [2011] FCAFC 19 …. 7.5, 7.7, 7.16, 12.31 — v — (No 5) (2009) 264 ALR 201; 76 ACSR 506; [2009] FCA 1586 …. 7.5, 7.7, 7.15, 7.16 — v Frasers Project Managers Pty Ltd [2008] FCA 541 …. 3.22 — v Fuelbanc Australia Ltd (2007) 162 FCR 174; 64 ACSR 17; [2007] FCA 960 …. 3.22, 3.45, 12.34, 12.35, 12.37 — v GDK Financial Solutions Pty Ltd (2006) 236 ALR 699; 60 ACSR 447; [2006] FCA 1415 …. 3.24 — v Great Northern Developments Pty Ltd (2010) 79 ACSR 684; [2010] NSWSC 1087 …. 3.11, 3.17, 3.21, 3.32, 4.17, 4.25, 6.32 — v Hellicar (2012) 88 ACSR 246; [2012] HCA 17 …. 2.78, 2.87, 2.90 — v Heydon Park Ltd [2005] FCA 1583 …. 16.25 — v Hutchings (2001) 38 ACSR 387; [2001] NSWSC 522 …. 3.17, 3.22 — v IIdylic Solutions Ltd; Australian Securities and Investments Commission v PJCB International Ltd (2009) 76 ACSR 129 …. 3.22 — v Intertax Holdings Pty Ltd [2006] QSC 276 …. 13.2 — v IPLUS Risk Management Pty Ltd [2006] FCA 583 …. 13.2, 13.39 — v Karl Suleman Enterprises Pty Ltd (2003) 45 ACSR 401; [2001] NSWSC 400 …. 3.32, 4.51 — v Knightsbridge Managed Funds Ltd [2001] WASC 339 …. 3.22 — v Landy DFK Securities Ltd (2002) 20 ACLC 1613 …. 3.22 — v Letten [2010] FCA 140 …. 3.22 — v Liban Net Pty Ltd (2006) 59 ACSR 571; [2006] FCA 1308 …. 13.2

— v Loiterton (2000) 101 FCR 370 …. 2.71 — v Macdonald (No 11) (2009) 230 FLR 1; 71 ACSR 368; [2009] NSWSC 287 …. 16.19, 17.41 — v — (No 12) (2009) 259 ALR 116; 73 ACSR 638; [2009] NSWSC 714 …. 7.2 — v Macro Realty Developments Pty Ltd (2016) 111 ACSR 638; [2016] FCA 292 …. 8.39, 8.72 — v Mariner Corporation Ltd (2015) 106 ACSR 343; [2015] FCA 589 …. 8.47 — v Matthews (1999) 17 ACLC 528; [1999] FCA 164 …. 13.8 — v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605; [2002] NSWSC 741 …. 2.93, 8.72, 8.73 — v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052 …. 4.21, 6.23, 8.45, 9.19, 9.21 — v McDougall (2006) 229 ALR 158; 57 ACSR 175; [2006] FCA 427 …. 3.22, 13.2, 13.64 — v McNamara (2002) 42 ACSR 488 …. 3.22 — v Mercorella (No 2) (2006) 230 ALR 598 …. 3.22 — v Mining Projects Group Ltd (2007) 164 FCR 32; 65 ACSR 264; [2007] FCA 1620 …. 2.53, 16.19, 17.41 — v Monarch FX Group Pty Ltd (2014) 103 ACSR 453; [2014] FCA 1387 …. 13.2, 13.5, 13.64 — v Mount Warren Park (Nominees) Pty Ltd (2005) 56 ACSR 43 …. 3.22 — v Murdaca (2008) 105 ALD 461; 68 ACSR 66; [2008] FCA 1399 …. 2.24 — v Narain (2008) 169 FCR 211; 247 ALR 659; 66 ACSR 688; [2008] FCAFC 120 …. 4.9, 8.39, 9.15 — v National Exchange Ltd (2005) 148 FCR 132; 56 ACSR 131; [2005] FCAFC 266 …. 1.34, 14.78, 15.15, 15.20 — v Newcrest Mining Ltd (2014) 101 ACSR 46; [2014] FCA 698 …. 7.23

— v Online Traders Advantage Incorporated (2005) 194 FLR 449; 23 ACLC 1929; [2005] QSC 324 …. 13.5, 14.22 — v Oxford Investments (Tas) Pty Ltd (2008) 169 FCR 522; [2008] FCA 980 …. 13.2, 13.5 — v Park Trent Properties Group Pty Ltd (No 3) [2015] NSWSC 1527 …. 13.2, 13.5 — v Parkes (2001) 38 ACSR 355; [2001] NSWSC 377 …. 2.93, 4.23, 8.73 — v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561; [2002] NSWSC 310 …. 2.93, 3.22, 4.9, 8.73 — v Petsas (2005) 23 ACLC 269; [2005] FCA 88 …. 17.5, 17.17, 17.30, 17.41 — v PFS Business Development Group Pty Ltd (2006) 57 ACSR 553; [2006] VSC 192 …. 3.45, 9.20, 13.2, 13.5, 13.64 — v Piggott, Wood & Baker [2006] FCA 1774 …. 3.22 — v Plymin (No 1) (2003) 175 FLR 124; 46 ACSR 126; [2003] VSC 123 …. 16.19, 17.41 — v — (No 3) (2002) 42 ACSR 670; [2002] VSC 358 …. 2.69 — v Primelife Corp Ltd (2005) 54 ACSR 536 …. 3.22 — v Rich (2009) 75 ACSR 1; [2009] NSWSC 1229 …. 2.88, 2.90 — v Richards [2013] FCAFC 89 …. 9.37 — v Risqy Ltd [2008] QSC 107 …. 3.22 — v Saxby Bridge Financial Planning Pty Ltd (2003) 133 FCR 290; 47 ACSR 649; [2003] FCAFC 244 …. 2.25, 13.18 — v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 …. 2.50, 2.52, 2.56, 2.67, 2.68, 2.70, 2.76 — v Somerville (2009) 74 ACSR 89; [2009] NSWSC 934 …. 9.20 — v Soust (2010) 183 FCR 21; 77 ACSR 98; [2010] FCA 68 …. 16.7, 16.13 — v — (No 2) (2010) 76 ACSR 1; [2010] FCA 388 …. 16.7

— v Southcorp Ltd (No 2) (2003) 130 FCR 406; 48 ACSR 187; [2003] FCA 1369 …. 7.2, 7.22 — v Stone Assets Management Pty Ltd (2012) 205 FCR 120; 90 ACSR 523; [2012] FCA 630 …. 2.93, 13.2, 13.5 — v Storm Financial Ltd (recs and mgrs apptd) (in liq) (No 2) [2011] FCA 858 …. 2.93 — v Sweeney [2001] NSWSC 114 …. 2.93, 8.73 — v Sydney Investment House Equities Pty Ltd (2008) 69 ACSR 1; [2008] NSWSC 1224 …. 8.42, 13.2 — v Takaran Pty Ltd (2002) 170 FLR 388; [2002] NSWSC 834 …. 3.22, 3.24 — v Tasman Investment Management Ltd (2006) 202 FLR 343 …. 3.22 — v Vizard (2005) 145 FCR 57; 54 ACSR 394; [2005] FCA 1037 …. 2.91, 17.17 — v West (2008) 100 SASR 496; 66 ACSR 143; [2008] SASC 111 …. 3.22, 3.31, 6.12 Australian Securities and Investments Commission, in the matter of Sino Australia Oil and Gas Ltd (in liq) v Sino Australia Oil and Gas Ltd (in liq) [2016] FCA 934 …. 8.39 Australian Securities Commission v Avram (1996) 70 FCR 481; 22 ACSR 307 …. 2.70 — v Bell (1991) 32 FCR 517; 6 ACSR 281 …. 2.74 — v Dalleagles Pty Ltd (1992) 8 ACSR 109 …. 2.51, 2.54 — v Deloitte Touche Tohmatsu (1996) 70 FCR 93; 21 ACSR 332 …. 2.94 — v Donovan (1998) 28 ACSR 583 …. 2.91 — v Graco (1991) 29 FCR 491; 5 ACSR 1 …. 2.70 — v Kippe (1996) 137 ALR 423; 20 ACSR 679 …. 13.53, 13.56 — v Kutzner (1998) 25 ACSR 723 …. 2.70, 2.76 — v Lucas (1992) 7 ACSR 676 …. 2.51, 2.52, 2.67

— v Macleod (2000) 22 WAR 255; 34 ACSR 135; [2000] WASCA 101 …. 16.22 — v Marlborough Gold Mines (1993) 177 CLR 485 …. 4.27 — v McLeod (2000) 34 ACSR 135; [2000] WASCA 101 …. 8.61 — v Mount Burgess Gold Mining Co NL (1994) 15 ACLR 714 …. 14.87 — v Multiple Sclerosis Society of Tasmania (1993) 10 ACSR 489 …. 11.36 — v Nomura International plc (1998) 89 FCR 301; 29 ACSR 473 …. 16.7, 16.12, 16.15 — v Paneth (FCA, Olney J, VG 3301/96, 11 July 1996, unreported) …. 16.29 — v Rohani (1998) 29 ACSR 106 …. 2.68 — v Zarro (1991) 32 FCR 546; 105 ALR 227; 6 ACSR 385 …. 2.51, 2.53 Australian Softwood Forests Pty Ltd v Attorney-General for NSW (1981) 148 CLR 121; 6 ACLR 45; CLC ¶40-734; [1981] HCA 49 …. 3.19, 3.22, 3.24, 3.29 Australian Stock Exchange Ltd v Hudson Securities Pty Ltd (1999) 33 ACSR 416; [1999] NSWSC 1237 …. 11.25, 11.48 — v McLachlan (2002) 43 ACSR 362 …. 11.48 Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200 …. 8.49

B Ballantyne v Raphael (1889) 15 VLR 538 …. 13.8 Bank Leumi (UK) plc v Wachner [2011] EWHC 656 (Comm) …. 14.5 Bankers Trust International plc v PT Dharmala Sakti Sejahtera [1996] CLC 518 …. 14.5 Barclay MIS Group of Companies Pty Ltd v Australian Securities and Investments Commission (2002) 125 FCR 374; [2002] FCA 1606 …. 3.46 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 …. 14.67 Barclays Bank plc v Khaira [1992] 1 WLR 623 …. 14.5

Basic Inc v Levinson 108 S Ct 978; 485 US 224 (1988) …. 17.17 — v — 485 US 224; 108 S Ct 978 (1988) …. 9.40, 9.41, 9.42, 16.3 Basis Capital Funds Management Ltd v BT Portfolio Services Ltd [2008] 219 FLR 157; 67 ACSR 297; [2008] NSWSC 766 …. 6.60, 6.64 Bateman v Newhaven Park Stud Ltd (2004) 49 ACSR 454 …. 12.25 Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 …. 14.10 Baysington Pty Ltd, Re (1988) 6 ACLC 50 …. 11.30 Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1; 33 ACSR 1; [1999] NSWCA 40 …. 14.14 — v Johnson (1993) 115 ALR 411 …. 8.52, 8.55 Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 246 ALR 361 …. 3.38 Beecher v Able 374 F Supp 341 (SDNY 2010) …. 8.49 Bell Group Ltd v Herald and Weekly Times Ltd [1985] VR 613; (1985) 9 ACLR 697 …. 11.31, 14.15, 14.16 Bendigo and Adelaide Bank Ltd v Cairncross (2011) 84 ACSR 589; [2011] NSWSC 610 …. 8.14 Berndale Securities Ltd v How Trading Pty Ltd (2010) 78 ACSR 218; [2010] VSC 216 …. 14.2, 14.10 Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321; [2003] FCAFC 232 …. 2.25 Birtchnell v Equity Trustees, Executors & Agency Ltd (1929) 42 CLR 384; [1929] HCA 24 …. 14.12, 17.36 Black v Shearson Hammill & Co 266 Cal App 2d 363 (1968) …. 17.36 Blacker v National Australia Bank Ltd [2001] ATPR ¶41-817 …. 9.22 Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1; [2011] FCAFC 24 …. 5.32 Blairgowrie Trading Ltd v Allco Finance Group Ltd (recs & mgrs apptd) (in liq) (2015) 325 ALR 539; 108 ACSR 1; [2015] FCA 811 …. 9.38

Blomley v Ryan (1956) 99 CLR 362 …. 14.78 Blunt v Park Lane Hotel Ltd [1942] 2 KB 253 …. 2.53 Bodum v DKSH Australia Pty Ltd (2011) 280 ALR 639; 92 IPR 222; [2011] FCAFC 98 …. 8.47 Bond v Australian Broadcasting Tribunal (No 2) (1988) 84 ALR 646 …. 2.69 Bond Corporation Holdings Ltd v Sulan (1990) 2 ACSR 435 …. 2.51 — v — (1990) 26 FCR 580; 3 ACSR 172 …. 2.69 Bond Corporation Pty Ltd v White Industries Ltd [1980] 2 NSWLR 351 …. 3.13 Bonds & Securities (Trading) Pty Ltd v Glomex Mines NL [1971] 1 NSWLR 879 …. 14.11 Boomalli Ltd v Hake (1982) 7 ACLR 516 …. 12.19 Borland’s Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279 …. 1.5, 3.6 Boucher v Australian Securities Commission (1996) 71 FCR 122; 22 ACSR 503 …. 13.57, 13.58 Boughey v R (1986) 161 CLR 10; 65 ALR 609; 60 ALJR 422; [1986] HCA 29 …. 7.15, 16.7 Boys v Australian Securities Commission (1997) 24 ACSR 1 …. 2.68, 2.69 — v — (1998) 152 ALR 219; 26 ACSR 464 …. 2.68, 2.69 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 …. 14.2 Braun v R (2008) 68 ACSR 539; 190 A Crim R 497; [2008] NSWCCA 269 …. 16.25 Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317; 200 ALR 607; [2003] FCAFC 153 …. 9.30 Braysich v R (2011) 243 CLR 434; 83 ACSR 1; [2011] HCA 14 …. 16.15 Breen v Williams (1996) 186 CLR 71; [1996] HCA 57 …. 14.9, 14.12, 14.13

Brereton v Australian Securities and Investments Commission [2007] FCA 651 …. 11.27 Bright v Femcare Ltd (2002) 195 ALR 574; [2002] FCAFC 243 …. 9.32, 9.33, 9.34 Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 …. 2.88, 16.19, 17.41 Brisbane Broncos Leagues Club v Alleasing Finance Australia Pty Ltd [2011] FCA 106 …. 9.32 Broadbridge v Stammers (1987) 16 FCR 296 …. 11.27 Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609 …. 4.8, 8.74, 11.30 Brolga Minerals NL v Stock Exchange of Perth Ltd (1971–73) ASLC 75007 …. 12.6, 12.7 Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 27 ACLC 712; [2009] FCA 450 …. 3.20 — v — (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 …. 3.10, 3.19, 3.20, 3.21, 3.25, 3.26, 3.27, 3.29, 3.32, 9.28 Brookfield Multiplex Ltd v The Owners Corporation Strata Plan 61288 (2014) 313 ALR 408; [2014] HCA 36 …. 14.5 Brown v Inland Revenue Commrs [1965] AC 244 …. 14.82 — v R (2006) 202 FLR 98; 58 ACSR 290; [2006] WASCA 145 …. 16.12 Brunninghausen v Glavanics (1999) 46 NSWLR 538; 32 ACSR 294; 17 ACLC 1247; [1999] NSWCA 199 …. 17.3 Bulfin v Bebarfalds Ltd (1938) 38 SR (NSW) 423 …. 8.54 Burland v Earle [1902] AC 83 …. 17.3 Burns Philp & Co Ltd & Burns v Murphy (1993) 29 NSWLR 723; 10 ACSR 244 …. 2.16 Burns Philp Trustee Co Ltd (in liq) (No 2), Re (1992) 8 ACSR 533 …. 2.16 Burton v Arcus (2006) 32 WAR 366; 57 ACSR 468; [2006] WASCA 71

…. 3.19, 3.25, 3.28, 3.31 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; 212 ALR 357; [2004] HCA 60 …. 8.45, 8.47 Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24 …. 14.2

C C & J Hazell Holdings Pty Ltd, Re (1991) 9 ACLC 802 …. 4.23 Caason Investments Pty Ltd v Cao (2015) 108 ACSR 576; [2015] FCAFC 94 …. 9.47 Cackett v Keswick [1902] 2 Ch 456 …. 5.56 Cadence Asset Management Pty Ltd v Concept Sports Ltd (2005) 55 ACSR 145; [2005] FCA 1280 …. 5.2 Caddigan v Grigg [1958] NZLR 708 …. 11.37 Cady Roberts & Co v SEC 40 SEC 907 (1961) …. 17.7, 17.17 Caines and Australian Securities and Investments Commission, Re [2012] AATA 289 …. 13.56 Cairnsmore Holdings Pty Ltd v Bearsden Holdings Pty Ltd [2007] FCA 1822 …. 13.1 Cammer v Bloom 711 F Supp 1264 (DNJ 1989) …. 9.42 Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; 257 ALR 610; 73 ACSR 1; [2009] HCA 25 …. 8.45, 8.50, 9.18 Campbell and Australian Securities and Investments Commission, Re (2001) 37 ACSR 238; [2001] AATA 205 …. 13.18, 13.57 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386; 229 ALR 58; [2006] HCA 41 …. 9.28 Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 …. 8.46, 8.47 Canada Inc (formerly t/a Swift trade Inc) and the Financial Conduct Authority (formerly the Financial Services Authority) [2013] EWCA Civ 1662 …. 16.13

Cardillo and Australian Securities and Investments Commission, Re (2000) 35 ACSR 731; 61 ALD 757; [2000] AATA 1053 …. 13.57 Cargill Inc v Hardin 406 US 932 (1972) …. 16.1 — v — 452 F 2d 1154 (8th Cir 1971) …. 16.1, 16.12 Carpenter v US 484 US 19 (1987) …. 17.7 Carragreen Currency Corporation Pty Ltd v Corporate Affairs Commission (1986) 7 NSWLR 705; 11 ACLR 298 …. 10.8 — v — (NSW) (1987) 5 ACLC 148 …. 3.19 Carras v Burns 516 F 2d 251 (4th Cir 1975) …. 14.35 Casaclang v Wealthsure Pty Ltd (2015) 107 ACSR 274; [2015] FCA 761 …. 8.59, 13.47, 13.49, 14.5 Cash Converters International Ltd v Gray (2014) 223 FCR 139; [2014] FCAFC 111 …. 9.30 Castlereagh Securities Ltd and The Companies Act (No 1), Re [1973] 1 NSWLR 624 …. 12.7 Catena v Australian Securities and Investments Commission (2011) 276 ALR 25; [2011] FCAFC 32 …. 13.57 — v — (No 2) [2010] FCA 865 …. 17.26 CECA Institute Pty Ltd v Australian Council for Private Education and Training [2010] VSC 552 …. 11.37, 12.32 Cee Bee Marine Ltd v Lombard Insurance Co Ltd (1989) 5 ANZ Ins Cas 60-890 …. 14.2 Central Rly Co of Venezuela (Directors etc) v Kisch (1867) LR 2 HL 99 …. 5.33 Centro Properties Ltd (in its capacity as a responsible entity of Centro Property Trust), Re (2011) 86 ACSR 584 …. 12.11, 12.13, 12.31, 12.34 CG Berbatis Holdings Pty Ltd v Australian Competition and Consumer Commission (2001) 185 ALR 555; ATPR 41-826; [2001] FCA 757 …. 14.78

Chan v Zacharia (1984) 154 CLR 178; [1984] HCA 36 …. 14.11, 14.13, 14.14 Chapmans Ltd v Australian Stock Exchange Ltd (1994) 51 FCR 501; 14 ACSR 726 …. 11.37, 12.14, 12.32 — v Australian Stock Exchange Ltd (1996) 67 FCR 402; 21 ACSR 295 …. 11.37 — v — (No 3) (1995) 17 ACSR 524 …. 12.7 Charlton v Baber (2003) 47 ACSR 31; 21 ACLC 1671; [2003] NSWSC 745 …. 17.3 Chequepoint Securities Ltd v Claremont Petroleum NL (1986) 11 ACLR 94 …. 8.54 Chiarella v US 445 US 222 (1980) …. 17.7, 17.30 Christopher Barker & Sons v IRC [1919] 2 KB 222 …. 14.8 Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249; 95 ALR 481 …. 4.17, 6.32 Circle Petroleum (Qld) v Greensdale (1998) 16 ACLC 1577 …. 9.26 Citicorp Australia Ltd v O’Brien (1996) 40 NSWLR 398 …. 14.5 Civic Capital Ltd and Australian Securities and Investments Commission, Re (2007) 99 ALD 658; [2007] AATA 2042 …. 2.18 Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 …. 8.56 Clarke v Great Southern Finance Pty Ltd (2010) 80 ACSR 219; [2010] VSC 473 …. 9.4 Clayton Robard Management Ltd v Siu (1988) 6 ACLC 57 …. 13.47 Cleary v Australian Co-operative Foods Ltd (No 2) (1999) 32 ACSR 701; [1999] NSWSC 991 …. 8.42, 9.15, 15.11 Clements v Bower (1990) 2 ACSR 573 …. 2.69 Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC 135 …. 8.49, 8.55 Clyde Group Inc v Minister for Primary Industries and Water (2007) 17 Tas R 85; [2007] TASSC 95 …. 11.27

CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd [2016] WASC 231 …. 2.93 Coakley and Australian Securities and Investments Commission, Re [2008] AATA 247 …. 4.21 Cock, Russell & Co v Bray, Gibb & Co (1920) Ll R 71 …. 14.2 Coco v AN Clark (Engineers) Ltd [1969] RPC 41 …. 14.82 Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; [1982] HCA 24 …. 14.2 Coleman v Myers [1972] 2 NZLR 225 …. 17.3 Collard v Australian Securities and Investments Commission (2008) 252 ALR 353; [2008] FCA 1681 …. 2.74 Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 …. 8.56 Colorado Products Pty Ltd (in prov liq), Re [2014] NSWSC 789 …. 2.93, 8.46 Comité Interprofessionnel du Vin de Champagne v Powell (2015) 330 ALR 67; [2015] FCA 1110 …. 8.47 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14 …. 14.78 Commission for Corporate Affairs (Vic) v Bracht [1989] VR 821 …. 4.23 Commissioner for Corporate Affairs v Green [1978] VR 505 …. 17.16 — v Nut Farms of Australia Pty Ltd [1980] CLC 40-642 …. 13.64 Commissioner of Police v Reid (1989) 18 ALD 439 …. 2.69 Commissioner of Taxation v Bank of Western Australia Ltd (1995) 61 FCR 407 …. 4.28 — v Hyteco Hiring Pty Ltd (1992) 39 FCR 502 …. 3.11 — v Murry (1998) 193 CLR 605; 155 ALR 67; [1998] HCA 42 …. 6.10 — v Silverton Tramway Co Ltd (1953) 88 CLR 558 …. 4.28 Committee on Direction of Fruit Marketing v Australian Postal

Commission (1980) 144 CLR 577 …. 4.28 Commonwealth Bank of Australia v Smith (1991) 42 FCR 390; 102 ALR 453 …. 5.32, 14.10, 14.13, 14.14 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Corke Instrument Engineering Pty Ltd (2005) 223 ALR 480 …. 11.36 Compaq Computer Australia Ltd v Merry (1998) 157 ALR 1 …. 9.20 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; 92 ALR 193; [1990] HCA 17 …. 8.42, 15.11 Connell v National Companies and Securities Commission (1989) 14 ACLR 765 …. 2.75 Constable v Myer (1972) 3 DCR 41 …. 14.80 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226; [1986] HCA 14 …. 14.2, 14.8, 14.16 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 …. 17.30 Corporate Affairs Commission (NSW) v Lombard Nash International Pty Ltd (1986) 11 ACLR 566 …. 8.73 — v Yuill (1991) 172 CLR 319; 4 ACSR 624 …. 2.53, 2.54 Corporation of the City of Unley v South Australia (1997) 68 SASR 511 …. 4.6 Costello v Oppenheimer & Co, 711 F 2d 1361 (7th Cir 1983) …. 14.35 Courtney v Medtel Pty Ltd (2002) 122 FCR 168; [2002] FCA 957 …. 9.37, 9.38 CPT Custodian Pty Ltd v Commr of State Revenue (2005) 224 CLR 98; [2005] HCA 53 …. 3.34 Crane Co v Westinghouse Air Brake Co 400 US 822 (1969) …. 16.2 — v — 419 F 2d 787 (2d Cir 1969) …. 16.2 Crocombe v Pine Forests of Australia Pty Ltd (2005) 219 ALR 692; [2005] NSWSC 15 …. 3.25

Cullen v Corporate Affairs Commission (NSW) (1988) 14 ACLR 789 …. 4.23 Curlex Manufacturing Pty Ltd v Carlingford General Insurance Ltd [1987] 2 Qd R 335 …. 2.50

D Dalton v AML Finance Corp Ltd (1980) Aust Sec Law Cases 76-006 …. 14.2 Daly v Sydney Stock Exchange Ltd (1986) 160 CLR 371; [1986] HCA 25 …. 11.18, 13.17, 14.9, 14.10, 14.84 Danae Investment Trust plc v McIntosh Nominees Pty Ltd (1993) 10 ACSR 1 …. 17.14 — v — (1993) 11 ACLC 1242 …. 17.14 Daniels v Anderson (1995) 37 NSWLR 438 …. 9.26 Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; 43 ACSR 189; [2002] HCA 49 …. 2.54, 2.89 Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd (2007) 164 FCR 450; 244 ALR 552; [2007] FCA 1216 …. 14.34 Dartberg Pty Ltd (as t’ee for the Pollard Children Trust) v Wealthcare Financial Planning Pty Ltd (No 2) (2009) 74 ACSR 373; [2009] FCA 934 …. 9.18 Darwalla Mining Co Pty Ltd v F Hoffman-La Roche Ltd (No 2) (2006) 236 ALR 322; [2006] FCA 1388 …. 9.37 Davies-Roe and the Companies Act, Re [1965] NSWR 767 …. 2.71 Davis v Merrill Lynch, Pierce Fenner and Smith Inc 906 F 2d 1206 (8th Cir 1990) …. 14.35 — v Pennzoil Co 264 A 2d 597 (1970) …. 16.2 Daws and Australian Securities and Investments Commission, Re (2006) 91 ALD 138; [2006] AATA 246 …. 13.62 Dawson, Re [1966] 2 NSWR 211 …. 14.14

Day v Mead [1987] 2 NZLR 443 …. 14.14 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) (2011) 281 ALR 454; 84 ACSR 527; [2011] FCA 645 …. 9.45 — v — [2012] FCAFC 28 …. 9.45 De Brett Seafood Pty Ltd v Qantas Airways Ltd (No 7) [2015] FCA 979 …. 9.37 Deloitte Ross Tohmatsu v Australian Securities Commission (1995) 54 FCR 562; 15 ACSR 652 …. 2.94 Delta Gold Ltd, Re (2001) 40 ACSR 347; [2001] FCA 1817 …. 12.7, 12.10, 12.11, 12.29, 12.39 Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608 …. 8.51, 8.55 Deputy Commissioner of Taxation v Dick (2007) 64 ACSR 61; [2007] NSWCA 190 …. 9.26 Derry v Peek (1889) 14 App Cas 337 …. 8.62 Designbuild Australia Pty Ltd v Endeavour Resources Ltd (1980) 5 ACLR 610 …. 12.18, 12.22, 12.29 Deutsche Bank AG v Unitech Global Ltd [2013] EWHC 2793; [2014] 2 All ER 268 …. 16.23 — v — [2013] EWCA Civ 1372 …. 16.23 Devereaux Holdings Pty Ltd v Pelsart Resources NL (1985) 9 ACLR 879 …. 12.19 — v — (No 2) (1985) 9 ACLR 956 …. 8.54 Digi-Tech (Australia) Ltd v Brand (2004) 62 IPR 184; ATPR ¶46-248; [2004] NSWCA 58 …. 9.45, 9.49 Ding v Sylvania Waterways Ltd (1999) 46 NSWLR 424; 150 FLR 239 …. 11.38 Director-General, Department of Health (NSW) v NSW Nurses’ Association [2011] 209 IR 49 …. 11.27 Director-General of Fair Trading v First National Bank plc [2002] 1 AC 481 …. 15.18

Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493 …. 15.18 — v Scully (2013) 303 ALR 168 …. 15.20 Director of Public Prosecutions (Cth) v JM (2012) 90 ACSR 96; [2012] VSCA 21 …. 16.7 — v — (2013) 298 ALR 615; 94 ACSR 1; [2013] HCA 30 …. 16.7 — v Hill (2012) 223 A Crim R 285; [2012] VSCA 144 …. 17.10 — v — [2015] VSC 86 …. 17.37 — v O’Reilly [2010] VSC 138 …. 17.17, 17.37 Dirks v SEC 463 US 646 (1983) …. 17.7, 17.30 Dollas-Ford and Australian Securities and Investments Commission, Re (2006) 91 ALD 747; [2006] AATA 704 …. 13.56, 13.57, 16.25 Domain Names Australia Pty Ltd v .au Domain Administration Ltd (2004) 139 FCR 215; [2004] FCAFC 247 …. 8.46 Donald v Australian Securities and Investments Commission (2000) 104 FCR 126; 35 ACSR 383; [2000] FCA 1142 …. 13.57, 16.12, 16.14 Donald and Australian Securities and Investments Commission, Re (2001) 38 ACSR 661; [2001] AATA 622 …. 13.62 Dorajay Pty Ltd v Aristocrat Leisure Ltd (2005) 147 FCR 394; [2005] FCA 1483 …. 9.33 — v — [2009] FCA 19 …. 9.37 Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 …. 2.24, 2.37 Drexel Burnham Lambert International NV v Nasr [1986] 1 Lloyd’s Rep 356 …. 14.2, 14.5 D’Souza v Royal Australian and New Zealand College of Psychiatrists (2005) 12 VR 42 …. 11.25 Dunlop v Woollahra Municipal Council [1975] 2 NSWLR 446 …. 11.36 Dunlop Olympic Ltd v Trade Practices Commission (1982) 62 FLR 145 …. 2.50

Dura Pharmaceuticals Inc v Broudo 544 US 336; 125 S Ct 1627 (2005) …. 9.43 Durkin v Pioneer Permanent Building Society Ltd [2003] FCA 419 …. 14.78

E Earglow Pty Ltd v Newcrest Mining Ltd (2015) 106 ACSR 49; [2015] FCA 328 …. 7.15, 9.38, 9.51, 9.54 East Australian Pipeline Pty Ltd v Australian Competition and Consumer Commission (2007) 233 CLR 229; 63 ACSR 404; [2007] HCA 44 …. 2.28 Edgelow v MacElwee [1918] 1 KB 205 …. 13.8 Edward Wong Finance Co Ltd v Johnson, Stokes & Master (a firm) [1984] AC 296 …. 14.6 Eighty-Second Vocation Pty Ltd v Parere Investments Pty Ltd [2005] FCA 844 …. 5.32 Ekes v Commonwealth Bank of Australia (2014) 313 ALR 665; [2014] NSWCA 336 …. 9.36 Elkind v Liggett & Myers Inc 635 F 2d 156 (2d Cir 1980) …. 17.18, 17.42 Elliott v Australian Securities and Investments Commission (2004) 10 VR 369; 185 FLR 245; 48 ACSR 621; [2004] VSCA 54 …. 16.19, 17.41 Ellison v Lutre Pty Ltd (1999) 88 FCR 116; [1999] FCA 399 …. 13.68 Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd (1987) 75 ALR 271 …. 9.22 Elsmore Resources Ltd, Re [2016] NSWSC 856 …. 5.47 Emu Brewery Mezzanine Ltd (in liq) v Australian Securities and Investments Commission (2006) 32 WAR 204; 57 ACSR 752; [2006] WASCA 105 …. 3.8, 3.22, 3.32 Endresz v Whitehouse [1998] 3 VR 461; (1997) 24 ACSR 208; 139 FLR 359 …. 16.22 Enviro Systems Renewable Resources Pty Ltd v Australian Securities and

Investments Commission (2001) 80 SASR 1; 36 ACSR 762; [2001] SASC 11 …. 3.31, 3.32 Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477; 118 ALR 392 …. 2.64 Eric Preston Pty Ltd v Euroz Securities Ltd (2010) 77 ACSR 135; [2010] FCA 97 …. 14.2, 14.6, 14.12 — v — (2011) 274 ALR 705; [2011] FCAFC 11 …. 14.2, 14.6, 14.12 Ernst & Ernst v Hochfelder 425 US 185 (1976) …. 16.1 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241; [1997] HCA 8 …. 14.5 Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 74 ALJR 339 …. 2.54 Executor Trustee Australia Ltd v Deloitte Haskins & Sells (1996) 135 FLR 314; 22 ACSR 270 …. 8.74 Exicom Pty Ltd v Futuris Corporation Ltd (1995) 123 FLR 394; 18 ACSR 404; 13 ACLC 1758 …. 17.5, 17.10, 17.13, 17.19, 17.28, 17.32

F Faberge Inc, Re 45 SEC 249 (1973) …. 17.26 FAI General Insurance Co Ltd v RAIA Insurance Brokers Ltd (1992) 108 ALR 479 …. 8.47 FAI Insurances Ltd v Pioneer Concrete Services Ltd (No 2) (1986) 10 ACLR 801 …. 12.30, 12.35, 12.36 FAI Traders Insurance Co Ltd v ANZ McCaughan Securities Ltd (1990) 3 ACSR 279 …. 14.16 Fame Decorator Industries Pty Ltd v Jeffries Industries Ltd (1988) 28 ACSR 58; 16 ACLC 1235 …. 16.2, 16.12 Famel Pty Ltd v Burswood Management Ltd (1989) 15 ACLR 572 …. 8.48, 8.49 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 …. 14.13, 17.30

Farley v Australian Securities Commission (1998) 16 ACLC 1502 …. 13.56, 13.57, 13.59 Fasold v Roberts (1997) 70 FCR 489 …. 15.11 Federal Commissioner of Taxation v Australia & New Zealand Banking Group Ltd (1979) 143 CLR 499; 23 ALR 480 …. 2.51 — v St Hubert’s Island Pty Ltd (1978) 138 CLR 210; [1978] HCA 10 …. 13.8 Felden and Australian Securities and Investments Commission (2003) 45 ACSR 111; 73 ALD 149; [2003] AATA 301 …. 13.57 Fenwick v Jeffries Industries Ltd (1995) 13 ACLC 1334 …. 16.2, 16.12 Finance Sector Union of Australia v Commonwealth Bank of Australia (1999) 89 FCR 417; [1999] FCA 59 …. 9.29 Financial Conduct Authority v Da Vinci Invest Ltd [2015] EWHC 2401 …. 10.5, 16.13 Financial Industry Complaints Service Ltd v Deakin Financial Services Pty Ltd (2006) 157 FCR 229; 60 ACSR 372; [2006] FCA 1805 …. 3.11 Findlay v Next Financial Ltd [2012] FCA 1350 …. 3.28 Fine v American Solar King Corporation 919 F 2d 290 (5th Cir 1990) …. 9.42 Fire & All Risks Insurance Co Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760 …. 12.36 Firewatch Australia Pty Ltd v Country Fire Authority (1999) 93 FCR 520; [1999] FCA 761 …. 15.11 Flavel v Giorgio (1990) 2 ACSR 568 …. 8.61 — v Roget (1990) 1 ACSR 595; 8 ACLC 237 …. 7.7, 7.12 Flexopack SA Plastics Industry v Flexopack Australia Pty Ltd [2016] FCA 235 …. 8.47 Forge v Australian Securities and Investments Commission (2004) 52 ACSR 1; [2004] NSWCA 448 …. 9.20 Forget v Baxter [1900] AC 467 …. 14.16

Forrest v Australian Securities and Investments Commission (ASIC); Fortescue Metals Group Ltd v Australian Securities and Investments Commission (2012) 247 CLR 486; 291 ALR 399; 91 ACSR 128; [2012] HCA 39 …. 7.5, 7.7, 7.15, 7.16, 7.17, 8.44, 8.47, 8.50, 12.31 Forty Two International Pty Ltd v Barnes (2014) 97 ACSR 450; [2014] FCA 85 …. 8.46 Foster and Australian Securities and Investments Commission, Re (1999) 57 ALD 779 …. 13.18 Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 …. 14.78 Fraser v Australian Securities and Investments Commission [2011] AATA 944 …. 13.16 — v NRMA Holdings Ltd (1994) 14 ACSR 656 …. 8.55 — v — (1995) 55 FCR 452; 15 ACSR 590 …. 8.36, 8.42, 8.47, 8.48, 8.52, 8.54, 8.55, 15.11 Fridrich v Bradford 429 US 1053 (1977) …. 17.42 — v — 542 F 2d 307 (6th Cir 1976) …. 17.42 Frugtniet v Australian Securities and Investments Commission [2015] AATA 128 …. 13.56 Fysh v R [2013] NSWCCA 284 …. 17.17

G G8 Communications Ltd, Re (2016) 112 ACSR 22; [2016] FCA 297 …. 5.47, 6.61 Gaiman v National Association for Mental Health [1971] Ch 317 …. 11.36, 11.37 Gambatto v WCP Ltd (1995) 16 ACSR 1 …. 11.51 Gamble v Hoffman (1997) 24 ACSR 369 …. 9.26 Gangemi v Australian Securities and Investments Commission (2003) 129 FCR 284; 45 ACSR 383; [2003] FCA 494 …. 2.73, 2.74 Gardam v George Wills & Co Ltd (1988) 82 ALR 415 …. 9.18

GE Capital Australia v Davis (2002) 180 FLR 250 …. 8.74 GE Capital Corporate Finance Group Ltd v Bankers Trust Company [1995] 2 All ER 993; [1995] 1 WLR 172 …. 2.50 Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd (2005) 54 ACSR 111; 23 ACLC 1181; [2005] NSWSC 544 …. 6.10, 6.74 General Benefits Pty Ltd v Australian Securities and Investments Commission (2001) 161 FLR 82; [2001] SASC 137 …. 2.51 General Steel Industries Inc v Commr for Railways (1964) 112 CLR 125 …. 4.28 Genocanna Nominees Pty Ltd v Thirsty Point Pty Ltd [2006] FCA 1268 …. 9.15 George v Australian Securities and Investments Commission [2014] AATA 167 …. 13.16 — v Rockett (1990) 170 CLR 104 …. 8.49 Georges v Seaborn International (Trustee), Re; Sonray Capital Markets Pty Ltd (in liq) (2012) 288 ALR 240; 87 ACSR 442; [2012] FCA 75 …. 14.69, 14.70 — v — [2012] FCAFC 140 …. 14.69 Gibson Motorsport Merchandise Pty Ltd v Forbes (2006) 149 FCR 569; [2006] FCAFC 44 …. 14.11 Giorgianni v R (1985) 156 CLR 473 …. 4.50, 8.24, 9.19, 9.20 Glavanics v Brunninghausen (1996) 19 ACSR 204; 14 ACLC 345 …. 8.42, 17.3 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82; 55 ALR 25; [1984] FCA 180 …. 8.45, 8.47, 8.59 Golden Bounty Resources NL v National Companies and Securities Commission (1990) 3 WAR 199; 3 ACSR 134; 8 ACLC 1123 …. 10.19 Golden Gate Petroleum Ltd, Re (2004) 50 ACSR 659; [2004] FCA 1119 …. 5.50

Golden Iron Resources, Re (2010) 79 ACSR 159; [2010] FCA 693 …. 5.50 Goode, Re; Ex parte Mount (1974) 24 FLR 61; 4 ALR 579 …. 14.14 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 …. 8.47 Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 75 …. 9.39, 9.52 Governments Stock and other Securities Investment Co v Christopher [1956] 1 WLR 237 …. 4.8 Graiseley Properties Ltd v Barclays Bank plc [2012] EWHC 3093 …. 16.23 Grant-Taylor v Babcock & Brown Ltd (in liq) (2015) 104 ACSR 195; [2015] FCA 149 …. 7.15, 7.16, 7.17, 9.46 — v — (2016) 330 ALR 642; [2016] FCAFC 60 …. 7.7, 7.14, 7.17 Greater West Insurance Brokers Pty Ltd, Re (2001) 39 ACSR 301; [2001] NSWSC 825 …. 14.69 Green v Daniels (1977) 13 ALR 1; [1977] HCA 18 …. 13.16 Green (as voluntary administrators of Bevillesta Pty Ltd), Re (2011) 84 ACSR 215; [2011] NSWSC 417 …. 2.18 Greenshields Inc v McDonough [1968] 1 OR 297 …. 14.16 Greenwood v Martins Bank [1932] 1 KB 371 …. 14.8 Grimaldi v Chameleon Mining NL (No 2) (2012) 200 FCR 296; [2012] FCAFC 6 …. 14.10 Grofam Pty Ltd v ANZ Banking Group Ltd (1993) 43 FCR 408 …. 2.50 Guglielmin v Trescowthick (No 2) (2005) 220 ALR 515; [2005] FCA 138 …. 9.30, 9.31, 9.34 Gupta v Australian Capital Territory [2011] ACTSC 39 …. 11.27

H Halliburton v Erica P John Fund Inc 134 S Ct 2398 (2014) …. 9.41 Hamilton v Whitehead (1988) 166 CLR 121; 82 ALR 626 …. 4.49, 9.15

Hannes v Director of Public Prosecutions (Cth) (No 2) (2006) 205 FLR 217; 60 ACSR 1; [2006] NSWCCA 373 …. 17.16, 17.17, 17.26, 17.28 Harbottle Brown & Co Pty Ltd v Halstead [1968] 3 NSWR 493 …. 11.48 Harman v Energy Research Group Australia Ltd [1986] WAR 123; (1985) 9 ACLR 897 …. 12.21 Harper v Costigan (1983) 50 ALR 665 …. 2.71 Harris v US 48 F 2d 771 (9th Cir 1931) …. 16.9 Harrison v Sandhurst Trustees Ltd [2011] FCA 541 …. 9.36 Hartman v R (2011) 87 ACSR 52; [2011] NSWCCA 261 …. 17.28, 17.37 Haslam v Money for Living (Aust) Pty Ltd (admin appt) [2007] FCA 897 …. 9.37 Hawkins v Clayton (1988) 164 CLR 539; [1998] HCA 15 …. 14.2, 14.5 Hayes and Australian Securities and Investment Commission, Re (2006) 93 ALD 494; [2006] AATA 1506 …. 13.56, 13.57 Hearn v O’Rourke (2003) 129 FCR 64; [2003] FCAFC 78 …. 8.42 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 …. 14.4 Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 …. 14.12, 14.13 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 …. 8.52, 13.70 Hewson v Sydney Stock Exchange Ltd [1968] 2 NSWR 224 …. 14.11, 14.79 Heydon v NRMA Ltd (2000) 51 NSWLR 1; 36 ACSR 462; 19 ACLC 1; [2000] NSWCA 374 …. 7.25, 8.48, 14.5 Hibblewhite v McMorine (1839) 5 M & W 462; 151 ER 195 …. 16.30 Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd (No 2) [2007] FCA 36 …. 2.96 HIH Insurance Ltd (in liq), Re [2016] NSWSC 482 …. 9.48, 9.49, 9.52 HIH Insurance Ltd (in prov liq), Re; Australian Securities and Investments

Commission v Adler (2002) 168 FLR 253; 41 ACSR 72; [2002] NSWSC 171 …. 2.88, 4.23, 9.20, 16.19, 17.41 Hill v Rose [1990] VR 129 …. 5.32 Hillhouse v Gold Copper Exploration (No 3) (1988) 14 ACLR 423 …. 11.33 Hitchens, Harrison, Woolston and Co v Jackson & Sons [1943] AC 266 …. 14.17 Hlavinka v Commodity Futures Trading Commission, 867 F 2d 1029 (7th Cir 1989) …. 14.10 Hneidi v Minister for Immigration and Citizenship (2010) 182 FCR 115; [2010] FCAFC 20 …. 2.18 Hodgkinson v Simms (1994) 117 DLR (4th) 161 …. 14.10 Hongkong Bank of Australia Ltd v Australian Securities Commission (1992) 108 ALR 70; 7 ACSR 724 …. 2.28 Hooker Investments Pty Ltd v Baring Bros Halkerston & Partners Securities Ltd (1986) 5 NSWLR 157; 10 ACLR 524 …. 17.10, 17.13, 17.19, 17.32 — v — (1986) 10 ACLR 462 …. 17.10, 17.13, 17.16, 17.32 Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216; 18 ALR 639 …. 8.48 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; [1984] HCA 64 …. 14.10, 14.12, 14.13 Houghton v Arms (2006) 225 CLR 553; [2006] HCA 69 …. 8.42, 9.15, 9.20, 15.11 Howard Smith Ltd v Ampol Petroleum Ltd [1974] 1 NSWLR 68 …. 12.16 Howarth and Australian Securities and Investments Commission, Re (2008) 101 ALD 602; 48 AAR 10; [2008] AATA 278 …. 13.56, 13.57 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 …. 9.52 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 …. 1.40,

1.56 Hudson Securities Pty Ltd v Australian Stock Exchange (2000) 35 ACSR 55 …. 11.25, 11.48 Hungier v Grace (1972) 127 CLR 210; [1972] HCA 42 …. 13.8 Hunt & Hunt Lawyers v Mitchell Morgan Nominees (2013) 296 ALR 3; [2013] HCA 10 …. 9.25 Hunt, Cox and Co v Chamberlain (1896) TLR 186 …. 14.17 Hunter v Mann [1974] QB 767; [1974] 2 All ER 414 …. 14.82 Hurley v McDonald’s Australia Pty Ltd [2000] ATPR ¶41-741 …. 14.78, 15.20 Hussein v Chung Fook Cam [1967] 3 All ER 1626 …. 2.68 Hyde v Sullivan (1956) 56 SR (NSW) 113 …. 13.8 Hydrocool Pty Ltd v Hepburn (No 4) (2011) 83 ACSR 652; [2011] FCA 495 …. 9.26

I ICAL Ltd v County NatWest Securities Australia Ltd (1988) 39 NSWLR 214; 13 ACLR 129; 6 ACLC 467 …. 5.56, 17.29 Idylic Solutions Pty Ltd, Re; Australian Securities and Investments Commission v Hobbs [2012] NSWSC 1276 …. 2.93, 6.10 — v — (2013) 93 ACSR 421; [2013] NSWSC 106 …. 2.93, 13.63, 13.64 Inabu Pty Ltd v Leighton Holdings Ltd [2014] FCA 622 …. 9.36, 9.38 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; 68 ACSR 595; [2008] NSWCA 206 …. 5.31, 5.38, 9.45, 9.49 — v — (No 6) (2007) 63 ACSR 1; [2007] NSWSC 124 …. 9.15 Integrated Financial Group Pty Ltd v Australian Securities and Investments Commission (2004) 183 FLR 8; 49 ACSR 509; [2004] WASC 75 …. 2.51 — v — (2004) 187 FLR 7; 50 ACSR 673; [2004] WASCA 213 …. 2.51

International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 248 FLR 149; 82 ACSR 517; [2011] NSWCA 50 …. 3.1, 3.36, 3.37, 3.46, 6.11, 13.68 — v — (recs and mgrs apptd) (2012) 246 CLR 455; 292 ALR 233; 86 ALJR 1289; 91 ACSR 473; [2012] HCA 45 …. 3.1, 3.36, 3.41, 3.46, 3.59, 6.11, 13.68 International Vending Machines Pty Ltd, Re [1962] NSWR 1408 …. 9.26

J James v Australia and New Zealand Banking Group Ltd (1986) 64 ALR 347 …. 8.49 James Hardie Industries NV v Australian Securities and Investments Commission (2010) 274 ALR 85; 81 ACSR 1; [2010] NSWCA 332 …. 7.3, 7.15, 7.16, 7.17, 7.22, 8.46, 8.59, 16.7, 17.18 Jameson v Professional Investment Services Pty Ltd (2009) 72 NSWLR 281; 253 ALR 515; [2009] NSWCA 28 …. 9.32 Jarra Creek Central Packing Shed Pty Ltd v Amcor Ltd [2008] FCA 575 …. 9.36 Jeffers v Australian Securities and Investments Commission (2015) 67 AAR 50; [2015] AATA 537 …. 2.23 Jetstar Airways Pty Ltd v Free [2008] VSC 539 …. 15.18 Jobbins v Capel Court Corp Ltd (1989) 91 ALR 314 …. 9.22 Joffe v R; Stromer v R (2012) 82 NSWLR 510; [2012] NSWCCA 277 …. 17.10, 17.28, 17.30, 17.37 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 …. 14.10 John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR ¶41-249 …. 9.18 Johns v Australian Securities Commission (1992) 7 ACSR 703 …. 2.40 — v Australian Securities Commission (1993) 178 CLR 408; 11 ACSR 467; [1993] HCA 56 …. 2.40, 2.68, 2.70, 2.75

— v — (No 2) (1992) 35 FCR 146; 8 ACSR 156 …. 2.40, 2.70 — v Connor (1992) 35 FCR 1; 7 ACSR 519 …. 2.70 Johnson v Minet Mathers Ltd (1990) 6 ANZ Ins Cas 60-968 …. 14.2 Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 27 …. 9.32 Johnstone v HIH Insurance Ltd [2004] FCA 190 …. 9.30, 9.33, 9.34 Jones v Canavan [1972] 2 NSWLR 236 …. 14.8, 14.12, 14.16 — v Dumbrell [1981] VR 199; (1968) 5 ACLR 417 …. 8.53 — v Leeming [1930] All ER Rep 584 …. 13.8 JP Morgan Bank v Springwell Navigation Corp [2008] EWHC 1186 (Comm) …. 14.5 Jubilee Mines NL v Riley (2009) 40 WAR 299; 253 ALR 673; 69 ACSR 659; [2009] WASCA 62 …. 7.3, 7.7, 7.12, 7.15, 7.16, 7.17, 17.18 Jungstedt and Australian Securities and Investments Commission, Re (2003) 73 ALD 105; [2003] AATA 159 …. 13.56, 13.57

K Kamay v R (2015) 109 ACSR 611; [2015] VSCA 296 …. 17.37 Karak Rubber Co Ltd v Burden (No 2) [1972] 1 WLR 602 …. 17.30 Karedis Enterprises v Antoniou (1995) 59 FCR 35 …. 9.22 Karounos v Corporate Affairs Commission (1989) 7 ACLC 567 …. 2.68 Keighley, Maxsted & Co v Durant [1901] AC 240 …. 14.8 Kelly v Willmott Forests Ltd (No 4) (2016) 112 ACSR 584; [2016] FCA 323 …. 9.37 Kenna & Brown Pty Ltd v Kenna (1999) 17 ACLC 1183 …. 9.26 Kennedy v Australian Securities and Investments Commission (2005) 142 FCR 343; 52 ACSR 301; [2005] FCAFC 32 …. 2.68, 2.70 Keynes v Rural Directions Pty Ltd (2010) 186 FCR 281; 79 ACSR 405; [2010] FACFC 100 …. 3.1, 3.37 Khoo v R [2013] NSWCCA 323 …. 17.37

King v AG Australia Holdings Ltd [2002] FCA 1560 …. 9.37 — v GIO Australia Holdings Ltd (2000) 174 ALR 715; 100 FCR 209; [2000] FCA 617 …. 9.30, 9.36 — v — (2001) 184 ALR 98; [2001] FCA 308 …. 7.25 Kioa v West (1985) 159 CLR 550 …. 2.69 Kippe v Australian Securities Commission (1997) 16 ACLC 190 …. 13.16 Kirby v Centro Properties Ltd (No 6) [2012] FCA 650 …. 9.37 Klusman and Australian Securities and Investments Commission, Re (2010) 53 AAR 375; 117 ALD 617; [2010] AATA 709 …. 13.57 Koala Hydrophonics Ltd and Australian Securities and Investments Commission, Re (2002) 40 ACSR 529; [2002] AATA 41 …. 13.18 Kotan Holdings Pty Ltd v Trade Practices Commission (1991) 102 ALR 51 …. 2.52 Krypton Nominees Pty Ltd, Re [2013] VSC 446 …. 4.19 Ku v Song (2007) 63 ACSR 661 …. 3.1 Ku-ring-gai Co-operative Building Society (No 12) Ltd, Re (1978) 36 FLR 134; 22 ALR 621 …. 8.42 Kwikasair Industries Ltd v Sydney Stock Exchange Ltd [1968] ASLR 30,701 …. 12.7

L Lake Coogee Estate Management Pty Ltd v Australian Securities and Investments Commission (2006) 60 ACSR 281 …. 3.22 Lam v Rolls Royce plc (No 3) [2015] NSWSC 83 …. 9.38 Lantern Hotel Group v Australian Securities and Investments Commission [2015] AATA 428 …. 2.18 Laventhall v General Dynamics Corp 464 US 846 (1983) …. 17.42 — v — 704 F 2d 407 (8th Cir 1983) …. 17.42 Lawloan Mortgages Pty Ltd, Re (2002) 172 FLR 241 …. 3.22

Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 …. 2.69 Leda Holding Pty Ltd v Oraka Pty Ltd (1998) ATPR ¶41-601 …. 8.56 Lefkowitz v Smith Barney, Harris Upham & Co, 809 F 2d 154 (1st Cir 1986) …. 14.10 Lehman Bros International (Europe) (in admin), Re [2009] EWHC 3228 …. 14.69 Lehman Bros International (Europe) (in admin), Re [2010] EWCA Civ 917 …. 14.69 Lehman Bros International (Europe) (in admin), Re [2012] UKSC 6; [2012] 3 All ER 1 …. 5.47, 14.69 Leib v Merrill Lynch, Pierce, Fenner & Smith Inc 461 F Supp 951 (ED Mich 1978) …. 14.10 Leveraged Equities v Goodridge (2011) 191 FCR 71; [2011] FCAFC 3 …. 15.15 Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 107 ALR 291 …. 9.18 Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2005) 55 ACSR 583; [2005] FCA 1429 …. 8.54 — v Coopers Brewery Ltd (2006) 156 FCR 1; 236 ALR 561 …. 11.38 Little River Goldfields NL v Moulds (1991) 32 FCR 456; 6 ACSR 299 …. 2.68 Litton Industries Inc v Lehman Bros Kuhn Loeb Inc 709 F Supp 438 (SDNY 1989) …. 9.54 — v — 967 F 2d 742 (2d Cir 1992) …. 9.54 Lloyd v Citicorp Australia Ltd (1986) 11 NSWLR 286 …. 14.6 Lopez v Star World Enterprises Pty Ltd [1999] FCA 104 …. 9.37 Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 …. 14.78 Loxton v Moir (1914) 18 CLR 360 …. 3.8

M MacDonald v Australian Securities and Investments Commission (2007)

73 NSWLR 612; 65 ACSR 299; [2007] NSWCA 304 …. 16.19, 17.41 Macleod v Australian Securities and Investments Commission (2002) 211 CLR 187; 191 ALR 543; [2002] HCA 37 …. 16.22 Macquarie Advisory Group Pty Ltd (rec appt’d), Re; Macquarie Advisory Group Pty Ltd (rec appt’d) v Australian Securities and Investments Commission (1999) 33 ACSR 106 …. 2.74 Macquarie Bank Ltd and Australian Securities and Investments Commission, Re (2001) 39 ACSR 508; [2001] AATA 868 …. 3.9, 3.11, 4.4, 4.28 Maghun v Richardson Securities of Canada Ltd (1986) 34 DLR (4th) 524 (Ont CA) …. 14.10 Manasseh v R (2002) 167 FLR 44; 40 ACSR 593; [2002] NSWCCA 27 …. 16.5, 16.15 Manglicmot v Commonwealth Bank Officers Superannuation Corp (2010) 239 FLR 159; [2010] NSWSC 363 …. 14.55 Mansfield v R (2012) 247 CLR 86; 293 ALR 1; 87 ALJR 20; 91 ACSR 1; [2012] HCA 49 …. 17.5, 17.16, 17.28 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 …. 9.45 Marshall’s Valve Gear Co Ltd v Manning, Wardle & Co Ltd [1909] 1 Ch 267 …. 11.26 Martin v Federal Commr of Taxation (1953) 90 CLR 470 …. 13.8 Matthews v Australian Securities and Investments Commission [2009] NSWCA 155 …. 13.2 — v SPI Electricity Pty Ltd (No 13) [2013] VSC 17 …. 9.33, 9.38 Maxwell v Dept of Trade and Industry [1974] QB 523 …. 2.69 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 …. 14.8 McCracken v Phoenix Constructions (Qld) Pty Ltd (2012) 289 ALR 710; 272 FLR 104; [2012] QCA 129 …. 2.93, 11.30 McDonald v Australian Securities Commission (1993) 30 ALD 71 …. 2.50

McLachlan v Australian Securities and Investments Commission (ASIC) (1999) 85 FCR 286; 30 ACSR 418; [1999] FCA 244 …. 13.57, 13.58 — v Australian Securities Commission (1995) 28 ACSR 473 …. 2.69 — v — (1998) 28 ACSR 473 …. 13.57 — v Australian Stock Exchange (1998) 30 ACSR 139 …. 11.48 McLaughlin v Dungowan Manly Pty Ltd (2007) 61 ACSR 335 …. 11.51 McLellan v Australian Stock Exchange Ltd (2005) 144 FCR 327; 54 ACSR 446 …. 11.32 McMullin v ICI Australia Operations Pty Ltd (No 6) (1998) 84 FCR 1 …. 9.38 McNab v Auburn Soccer Sports Club Ltd [1975] 1 NSWLR 54 …. 11.36 McWilliam’s Wines Pty Ltd v McDonald’s System of Australia Pty Ltd (1980) 33 ALR 394 …. 8.45 Meaden v Bell Potter Securities Ltd (No 6) (2013) 233 FCR 81; [2013] FCA 1176 …. 9.29 Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1; 205 ALR 402; [2003] FCAFC 289 …. 7.25 Melbourne City Investments Pty Ltd v Worley Parsons Ltd [2014] VSC 523 …. 12.26, 12.39 Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1980) 31 ALR 514 …. 2.50 Melinda Scott & Roach Graham Scott Pty Ltd, Re [2012] NSWSC 1643 …. 13.64 Mercantile Credits Ltd v Jarden Morgan Australia Ltd (1990) 1 ACSR 805 …. 14.19 Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450; [2010] FCA 472 …. 13.36 Mesenberg v Cord Industrial Recruiters (1996) 39 NSWLR 128 …. 11.30 Meth & Co (Aust) Pty Ltd v Commercial Banking Co of Sydney Ltd (1977–8) CLC 40-302 …. 14.14

MF Global Australia Ltd (in liq), Re (2012) 267 FLR 27; [2012] NSWSC 994 …. 5.47, 14.69, 14.70 Mickovski v Financial Ombudsman Service Ltd [2011] VSC 257 …. 12.32 — v — (2012) 36 VR 456 …. 12.32 Mid-America Federal Savings & Loans Association v Shearson/American Express Inc, 886 F 2d 1249 (10th Cir 1989) …. 14.10 Midland Bank Trust Co Ltd v Hett Stubbs & Kemp [1979] Ch 384 …. 14.2, 14.6 Mier v FN Management Pty Ltd (2005) 56 ACSR 93 …. 3.22 Mihara v Dean Witter & Co, 619 F 2d 814 (9th Cir 1980) …. 14.35 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 …. 8.46, 8.51, 8.52, 8.55 Minister for Immigration v Gray (1994) 50 FCR 189 …. 2.18 MIS Funding No 1 Pty Ltd v Buckley (2013) 96 ACSR 691; [2013] VSC 607 …. 4.20, 4.22 Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corporation Ltd and Australian Insurance Brokers (WA) Pty Ltd (1984) 3 ANZ Ins Cas 60-562 …. 14.2 Mobil Corp v Marathon Oil Co 669 F 2d 366 (1981) …. 16.1 Modtech Engineering Pty Ltd v GPT Management Holdings Ltd [2013] FCA 626 …. 9.37 — v — (No 2) [2013] FCA 1163 …. 9.37 Morley v Australian Securities and Investments Commission (2010) 247 FLR 140; 81 ACSR 285; [2010] NSWCA 331 …. 2.13, 2.85, 2.88, 2.90 Moss v Morgan Stanley Inc 719 F 2d 5 (2d Cir 1983) …. 17.42 Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd (2014) 102 ACSR 636; [2014] NSWSC 1503 …. 13.68 Multiplex Funds Management Ltd v P Dawson Nominees Pty Ltd (2007) 164 FCR 275; [2007] FCAFC 200 …. 9.33, 9.34

Murphy v Overton Investments (2001) 112 FCR 182; [2001] FCA 500 …. 9.22 Musumeci and Australian Securities and Investments Commission, Re (2009) 109 ALD 677; [2009] AATA 524 …. 13.56, 13.57, 16.14 Mutual Home Loans Fund of Australia Ltd v Attorney-General (NSW) (1973) 130 CLR 103; 2 ALR 241 …. 4.9 Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556; 42 ALJR 316; [1968] HCA 74 …. 14.4 — v — [1971] AC 793 …. 14.4

N Nam Bee (Aust) Pty Ltd v Corporate Affairs Commission (NSW) (1987) 12 ACLR 391; (1988) 6 ACLC 79 …. 13.53 National Australia Bank Ltd v Norman (2009) 180 FCR 243; 74 ACSR 561; [2009] FCAFC 152 …. 3.21, 3.24, 3.28 National Companies and Securities Commission v Bankers Trust Australia Ltd (1989) 24 FCR 217; 1 ACSR 330 …. 2.69, 2.73 — v Monarch Petroleum NL [1984] VR 733; (1984) 8 ACLR 785; 2 ACLC 256 …. 11.34, 14.87, 16.22, 16.28 — v News Corporation Ltd (1984) 52 ALR 417; 8 ACLR 843 …. 2.65, 2.69, 2.75 — v Sim (No 2) (1986) 11 ACLR 171 …. 2.68 National Exchange Pty Ltd v Australian Securities and Investments Commission (2004) 49 ACSR 369; 61 IPR 420; [2004] FCAFC 90 …. 8.46, 8.47 National Nominees Ltd v Agora Asset Management Pty Ltd (No 2) [2011] VSC 425 …. 14.13 Neubronner v Milken 6 F 3d 666 (9th Cir 1993) …. 17.42 Nevitts Ltd v Cooper (1988) 10 Qld Lawyer Reps 40 …. 14.16 New Cap Reinsurance Corporation Ltd v Daya (2008) 66 ACSR 95; [2008] NSWSC 64 …. 3.11, 5.39, 8.42, 15.11

New South Wales v Commonwealth (1990) 169 CLR 482; 1 ACSR 137; [1990] HCA 2 …. 1.58, 2.2 — v — (2006) 229 CLR 1; [2006] HCA 52 …. 2.2 New Zealand Netherlands Society ‘Oranje’ Inc v Kuys [1973] 2 All ER 1222; [1973] 1 WLR 1126 …. 14.12, 14.13, 17.36 New Zealand Stock Exchange v Listed Companies Association Inc [1984] 1 NZLR 699 …. 11.37 News Corporation Ltd v National Companies and Securities Commission (No 3) (1983) 8 ACLR 338; 49 ALR 719 …. 2.68 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; 21 ACSR 635; [1996] FCA 870 …. 14.12, 14.13 Niord Pty Ltd v Adelaide Petroleum NL (1990) 54 SASR 87; 2 ACSR 347 …. 11.27 Nocton v Lord Ashburton [1914] AC 932 …. 5.32, 14.14 Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 …. 14.12, 14.13 North v Marra Developments Ltd (1981) 148 CLR 42; [1981] HCA 68 …. 14.18, 14.87, 16.2, 16.12, 16.13 North & South Trust Co v Berkeley [1971] 1 All ER 980 …. 17.36 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1 …. 8.49 Norwest Holst v Dept of Trade and Industry [1978] Ch 201 …. 2.68 Norwich Fire Insurance Society Ltd v Brennans (Horsham) Pty Ltd [1981] VR 981 …. 14.8 NSW Grains Board, Re; Smith v Lawrence (2002) 171 FLR 68; [2002] NSWSC 913 …. 4.6, 4.28

O Oasis Fund Management Ltd & Royal Bank of Scotland NV [2012] NSWSC 532 …. 9.37 Ogle v Strickland (1987) 71 ALR 41 …. 11.27

Oil Basins Ltd v Bass Straight Oil Company [2012] FCA 1122 …. 12.7, 12.10, 12.39 Oliver v Commonwealth Bank of Australia (No 1) [2011] FCA 1440 …. 15.15 Option Investments (Aust) Pty Ltd v Martin [1981] VR 138 …. 14.2 O’Reilly v Commissioners of State Bank of Victoria (1983) 153 CLR 1; 46 ALR 225 …. 2.50 Orison Pty Ltd v Strategic Minerals Corporation NL (1987) 77 ALR 141; 13 ACLR 314 …. 8.42 Osborne v Australian Mutual Growth Fund Ltd [1972] 1 NSWLR 100 …. 14.18, 16.30 Osric Investments Pty Ltd v Woburn Downs Pastoral Pty Ltd (2002) 20 ACLC 1; [2001] FCA 1402 …. 3.29 O’Sullivan v Australian Securities and Investments Commission (2015) 66 AAR 296; [2015] AATA 265 …. 2.23 Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 …. 14.78

P P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 4) [2010] FCA 1029 …. 9.37, 9.42, 9.45 — v Multiplex Ltd (2007) 242 ALR 111; 25 ACLC 1192; [2007] FCA 1061 …. 9.44 Pacific Acceptance Corporation Ltd v Forsyth (1970) 92 WN (NSW) 29 …. 14.6 Paciocco v Australia and New Zealand Banking Group Ltd (2014) 309 ALR 249; [2014] FCA 35 …. 15.20, 15.21 — v — (2015) 236 FCR 199; 321 ALR 584; [2015] FCAFC 50 …. 14.78, 15.21 — v — (2016) 333 ALR 569; [2016] HCA 28 …. 14.78, 15.21 Panganiban v Australian Securities and Investments Commission (2016)

113 ACSR 452; [2016] FCA 510 …. 2.26, 2.27 Pappas v New World Oil Developments (1993) 117 ALR 304 …. 8.56 Parbery (as liquidators of Trio Capital Ltd (in liq)), Re (2012) 88 ACSR 700; [2012] NSWSC 597 …. 6.60 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; 42 ALR 1 …. 8.44, 8.45, 8.48 Parker v McKenna (1874) LR 10 Ch App 96 …. 14.11 Parry-Jones v Law Society [1969] 1 Ch 1 …. 14.82 Pathway Investments Pty Ltd v National Australia Bank Ltd (No 3) [2012] VSC 625 …. 9.37 Peil v Speiser 806 F 2d 1154 (2d Cir 1986) …. 9.40, 9.42 Peninsula Gold Pty Ltd v Sunbeam Victa Holdings Ltd (1996) 20 ACSR 553 …. 12.4, 12.8 Perdaman Chemicals and Fertilisers Pty Ltd v ICICI Bank Ltd [2013] FCA 175 …. 15.20 Pereira v Director of Public Prosecutions (1988) 82 ALR 217; 63 ALJR 1; [1988] HCA 57 …. 9.20, 13.36 Pergamon Press, Re [1971] Ch 388 …. 2.71 Permanent Trustee Australia Ltd v Dowd (1993) 11 ACSR 68 …. 2.96 Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36 …. 14.5 Perrin v Williams (2014) 284 FLR 390 …. 11.27 Perron Investments (1989) 89 ATC 4310 …. 2.71 Peters v R (1998) 192 CLR 493; 151 ALR 51 …. 16.25 Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457; [1939] ALR 124 …. 8.54 Petrusevski v Bulldogs Rugby League Club Ltd [2003] FCA 61 …. 9.33 Pharm-a-Care Laboratories Pty Ltd v Commonwealth of Australia (No 6) [2011] FCA 277 …. 9.36 Philip Morris (Aust) Ltd v Nixon (2000) 170 ALR 487; [2000] FCA 229

…. 9.30 Pico Holdings Inc v Voss [2004] VSC 263 …. 9.15 Pilmer v The Duke Group Ltd (in liq) (2001) 207 CLR 165; 38 ACSR 122; [2001] HCA 31 …. 14.14 Police and Nurses Credit Society Ltd v National Australia Bank Ltd [2005] WASCA 68 …. 11.37 Polymedica Corp Securities Litigation, Re 432 F 3d 1 (1st Cir 2005) …. 9.42 Pong Su (Ruling No 21), Re; R v Ta Song Wong (2005) 202 FLR 1; [2005] VSC 96 …. 4.50, 8.24 Pont Data Australia v ASX Operations Ltd (1990) 21 FCR 385; 93ALR 523 …. 11.2 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 …. 9.36 Porter v OAMPS (2005) 215 ALR 327 …. 8.74 Posluns v Toronto Stock Exchange (1964) 2 OR 547 …. 11.36 — v — (1964) 67 DLR (2d) 165 …. 11.36 Potts v Miller (1940) 64 CLR 282 …. 9.52 Pramoko v Grande Enterprises Ltd (2016) 108 ACSR 469 …. 8.49 Premier Pacific Pharmaceutical Industries Ltd v Australian Stock Exchange Ltd (1995) 17 ACSR 426 …. 12.9 Prestia v Aknar (1996) 40 NSWLR 165 …. 15.11 Prudential Investment Co of Australia Ltd, Re (2003) 49 ACSR 147 …. 2.35 Pyneboard Pty Ltd v Trade Practices Commission (1982) 39 ALR 565 …. 2.50

Q Qantas Airways Ltd v Cameron (1996) 66 FCR 246 …. 15.20 QBiotics Ltd, Re [2016] FCA 873 …. 5.50

Quancorp Pty Ltd v MacDonald (1999) 32 ACSR 50 …. 11.27, 12.11, 12.29 Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 …. 2.68 Queensland Power Trading Corporation and Australian Securities and Investments Commission, Re (2005) 89 ALD 346; [2005] AATA 945 …. 2.24, 2.31, 2.37, 3.55, 4.6 Quinlivan v Australian Competition and Consumer Commission (2004) 160 FCR 1; [2004] FCAFC 175 …. 9.20 Quinn & Australian Securities Commission, Re (1994) 12 ACLC 412; 19 AAR 321 …. 13.57, 13.59

R R v Adler (2005) 53 ACSR 471; 23 ACLC 590; [2005] NSWSC 274 …. 16.22 — v Board of Appeal; Ex parte Kay (1916) 22 CLR 183 …. 11.36 — v Chan (2010) 79 ACSR 189; [2010] VSC 312 …. 16.7, 16.12 — v Commissioner of Police of Northern Territory; Ex parte Edwards (1977) 32 FLR 183 …. 11.36 — v Commons (1986) 4 ACLC 551 …. 3.22 — v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 …. 2.69 — v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 …. 11.31 — v Crabbe (1985) 156 CLR 464; 58 ALR 417; [1985] HCA 22 …. 7.15 — v Curtis (No 2) [2016] NSWSC 795 …. 17.30 — v Dalzell [2011] NSWSC 454 …. 17.17 — v De Berenger (1814) 3 M&S 67; 105 ER 536 …. 16.4, 16.17 — v De Silva [2011] NSWSC 243 …. 17.28 — v Doff (2005) 54 ACSR 200; [2005] NSWCCA 119 …. 17.26, 17.37 — v Evans [1999] VSC 488 …. 14.15, 17.26

— v Farris (2015) 107 ACSR 26; [2015] WASC 251 …. 17.11 — v Firns (2001) 51 NSWLR 548; 161 FLR 294; 38 ACSR 223; [2001] NSWCCA 191 …. 7.14, 7.15, 17.25, 17.26 — v Frawley [2005] NSWSC 585 …. 17.17, 17.37 — v Ghosh [1982] QB 1053; [1982] 2 All ER 689; [1982] 3 WLR 110; (1982) 75 Cr App Rep 154 …. 16.25 — v Glynatsis (2013) 230 A Crim R 99; [2013] NSWCCA 131 …. 17.10, 17.37 — v Grunwald [1963] 1 QB 935 …. 8.68 — v Hall [2005] NSWSC 890 …. 17.17 — v Hannes (2000) 158 FLR 359; 36 ACSR 72; [2000] NSWCCA 503 …. 17.17, 17.26 — v Hartman (2010) 81 ACSR 121; [2010] NSWSC 1422 …. 17.28, 17.37 — v Hughes (2000) 202 CLR 535; 34 ACSR 92; [2000] HCA 22 …. 1.60 — v International Stock Exchange of UK and the Republic of Ireland; Ex parte Else [1993] 1 All ER 420 …. 11.37 — v Jacobson [2014] VSC 592 …. 16.3 — v Joffe; R v Stromer (2015) 106 ACSR 525; [2015] NSWSC 741 …. 17.37 — v Lloyd (1996) 19 ACSR 528 …. 16.3, 16.12 — v Loiterton (2005) 54 ACSR 728; [2005] NSWSC 905 …. 8.61, 16.22 — v M [1980] 2 NSWLR 195; (1979) 4 ACLR 610; ASLC 75-024 …. 8.61, 8.67, 16.15, 16.17 — v M R Shearer (David J, DCt (SA), No 36/98, 18 June 1998) …. 16.7 — v Mackinnon [1959] 1 QB 150 …. 8.62 — v Mansfield (2011) 251 FLR 286; 84 ACSR 389; [2011] WASCA 132 …. 17.28 — v Maurice; Ex parte Attorney-General (Northern Territory) (1987) 73

ALR 123 …. 2.69 — v McDonnell [1966] 1 All ER 193 …. 9.19 — v McQuoid [2009] 4 All ER 388; [2009] EWCA Crim 1301 …. 17.37 — v Panel on Takeovers & Mergers; Ex parte Datafin plc [1987] QB 815; [1987] 1 All ER 564 …. 11.25, 11.37, 12.32 — v Panel on Takeovers and Mergers; Ex parte Guinness plc [1989] 1 All ER 509 …. 11.37 — v Rivkin (2003) 198 ALR 400; 45 ACSR 366; [2003] NSWSC 447 …. 17.37 — v — (2004) 59 NSWLR 284; 184 FLR 365; [2004] NSWCCA 7 …. 17.11, 17.16, 17.17, 17.26, 17.28, 17.37 — v Serious Fraud Office; Ex parte Nadir (1991) 1 All ER 730 …. 2.69 — v Stephenson [2010] NSWSC 779 …. 17.17 — v Watson; Ex parte Armstrong (1976) 136 CLR 248 …. 2.69 — v Wright [1980] VR 593; (1980) 4 ACLR 931 …. 8.61, 16.22 — v Xiao [2016] NSWSC 240 …. 17.10, 17.28, 17.37 R J Elrington Nominees Pty Ltd v Corporate Affairs Commission (1989) 1 ACSR 93 …. 13.18 Radiata Forestry Development Co Pty Ltd v Evans (1977) 3 ACLR 82 …. 4.9 Redmayne Bentley Stockbrokers v Isaacs [2010] EWHC 1504 …. 14.2 Redmond Family Holdings v Gc Access Pty Ltd [2016] NSWSC 796 …. 8.10, 8.46, 8.49 Reiffel v ACN 075 839 226 Ltd (2003) 132 FCR 437; 45 ACSR 67; [2003] FCA 194 …. 8.47, 9.22, 9.26 Renmark Hotel Inc v Commr of Taxation (1949) 79 CLR 10 …. 4.28 Repco Ltd v Bartdon Pty Ltd [1981] VR 1; (1980) 4 ACLR 787 …. 11.26, 11.31, 12.17, 12.18, 12.22, 12.29 RESI Corporation v Sinclair [2002] NSWCA 123 …. 4.6

Rest-Ezi Furniture Pty Ltd v Ace Shohin (Aust) Pty Ltd (1987) 5 ACLC 10 …. 14.6 Reynolds & Co Pty Ltd v Australian Stock Exchange Ltd (2003) 174 FLR 311; 44 ACSR 612 …. 11.32 Rhoads v Prudential-Bache Securities Canada Ltd [1992] 2 WWR 630; 63 BCLR (2d) 256 …. 14.6 RhonePoulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 68 ALR 77 …. 8.52 Ricegrowers Co-operative Mills Ltd v Bannerman (1981) 38 ALR 535 …. 11.27 Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; 50 ACSR 242; [2004] HCA 42 …. 2.53, 2.89, 16.19, 17.41 Rich & Silbermann v Australian Securities and Investments Commission (2004) 220 CLR 129; 50 ACSR 242; [2004] HCA 42 …. 13.53 Richards v Macquarie Bank Ltd (No 4) [2013] FCA 438 …. 9.37 Richmond River Pty Ltd v Australian Broadcasting Tribunal (1992) 34 FCR 385 …. 2.69 Riley (as trustee of Ker Trust) v Jubilee Mines NL (2006) 59 ACSR 252; [2006] WASC 199 …. 7.12, 7.15 Riley McKay Pty Ltd v Bannerman (1977) 15 ALR 561; ATPR 17,403 …. 2.50 Risqy Ltd (No 2), Re (2008) 66 ACSR 679; [2008] QSC 139 …. 13.7 Rivkin Financial Services v Softcom Ltd (2004) 51 ACSR 486; 23 ACLC 42; [2004] FCA 1538 …. 7.16, 17.18 Roadships Logistics Ltd v Tree (2007) 64 ACSR 671; [2007] NSWSC 1084 …. 5.56 Robinson v Merrill Lynch, Pierce, Fenner and Smith Inc 337 F Supp 107 (1971) …. 14.12 Robox Nominees Pty Ltd v Bell Resources Ltd (1986) 13 ACLR 475; 4 ACLC 164 …. 11.27

Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority t/as Seqwater (No 5) [2015] NSWSC 1771 …. 9.30, 9.32 Rogers v Whitaker (1992) 175 CLR 479; [1992] HCA 58 …. 8.50, 14.5, 14.6 Romano v Merrill Lynch, Pierce Fenner & Smith Inc, 834 F 2d 523 (5th Cir 1987) …. 14.10 Roots Partnership v Lands End Inc 965 F 2d 1411 (7th Cir 1992) …. 9.42 Rosenberg v Australian Securities and Investments Commission (2010) 117 ALD 582; [2010] AATA 654 …. 13.57, 16.14 Royal Bank of Canada v Inland Revenue Commrs [1972] Ch 665 …. 3.11 Russell v The Duke of Norfolk [1949] 1 All ER 109 …. 11.36 RWG Management Ltd v Commissioner for Corporate Affairs (Vic) [1985] VR 385; (1984) 9 ACLR 739 …. 13.26 Ryan v Triguboff [1976] 1 NSWLR 588 …. 8.59, 17.16 Ryder v Osler, Wills, Bickle Ltd (1985) 16 DLR (4th) 80 …. 14.10

S Sage v Australian Securities and Investments Commission [2005] FCA 1043 …. 13.57, 13.61 Saints Gallery Pty Ltd v Plummer (1998) 80 ALR 525 …. 9.18 Samuel Holdings Pty Ltd v Securities Exchange Guarantee Corporation Ltd (2010) 80 ACSR 706; [2010] QSC 450 …. 6.11, 6.60 San Sebastian Pty Ltd v Minister Administering Environmental and Planning Assessment Act 1979 (1986) 162 CLR 340; [1986] HCA 68 …. 14.4 Santa Fe Industries, Inc v Green 430 US 462 (1977) …. 16.1 Saxby Bridge Financial Planning Pty Ltd and Australian Securities and Investments Commission, Re (2003) 46 ACSR 286; [2003] AATA 480 …. 13.18 SCF Finance Co Ltd v Masri (No 2) [1986] 1 All ER 40 …. 14.12

Schaudi v Califano, 647 F 2d 165 (6th Cir 1981) …. 14.10 Schlick v Penn-Dixie Cement Corp 507 F 2d 374 (2d Cir 1974) …. 16.2 Scott v Avery (1856) 5 HL Cas 811; 10 ER 1121 …. 11.48 — v Brown, Doering, McNab & Co [1892] 2 QB 724 …. 16.4 — v Handley [1999] FCA 404 …. 2.90 Seagar v Copydex Ltd [1967] 2 All ER 415 …. 14.82 Seagrim v Australian Securities and Investments Commission [2012] AATA 583 …. 13.56 Secured Income Real Estate (Aust) Ltd v St Martins Investment Pty Ltd (1979) 144 CLR 596; [1979] HCA 51 …. 14.2 Securities & Exchange Commission v Adler 137 F 3d 1325 (11th Cir 1998) …. 17.12 — v Capital Gains Research Bureau Inc 375 US 180 (1963) …. 16.27 — v Commonwealth Chemical Securities Inc 574 F 2d 90 (2d Cir 1978) …. 16.16 — v Lund 570 F Supp 1397 (CD Cal 1983) …. 17.29 — v MacDonald 699 F 2d 47 (1st Cir 1983) …. 17.17, 17.18 — v Materia 745 F 2d 197 (1984) …. 17.7 — v Mayhew 121 F 3d 44 (1997) …. 17.17 — v National Bankers Life Insurance Co 334 F Supp 444 (ND Tex 1971) …. 16.11 — v — 447 F 2d 920 (5th Cir. 1973) …. 16.11 — v Resch-Cassin & Co, Inc 362 F Supp 964 (SDNY 1973) …. 16.13 — v Texas Gulf Sulphur Co 394 US 976 (1969) …. 17.5, 17.7 — v — 401 F 2d 833 (1968) …. 17.5, 17.7, 17.17, 17.18, 17.26 — v Thrasher 152 F Supp 2d 291 (2001) (SDNY 2001) …. 17.17 — v Willis 825 F Supp 617 (SDNY 1993) …. 17.7 Securities Exchanges Guarantee Corporation Ltd v Aird (2001) 161 FLR

420; 38 ACSR 185; [2001] NSWSC 379 …. 10.42 Securities Exchanges Guarantee Corporation Ltd (as Trustee for National Guarantee Fund), Re [2016] NSWSC 76 …. 10.38 Selangor United Rubber Estates Ltd v Craddock (No 3) [1986] 2 All ER 1073 …. 17.30 Selig v Wealthsure Pty Ltd (2013) 94 ACSR 308; [2013] FCA 248 …. 14.5 — v — (2015) 320 ALR 47; 89 ALJR 572; 105 ACSR 552; [2015] HCA 18 …. 9.25 Senanayake v Cheng [1966] AC 63 …. 13.70 Sent v Jet Corporation of Australia Pty Ltd (1984) 2 FCR 201 …. 9.21 Shaddock v Parramatta City Council (1981) 150 CLR 225; [1981] HCA 59 …. 14.4 Shafron v Australian Securities and Investments Commission [2012] HCA 18 …. 4.23 Shapiro v Merrill Lynch, Pierce, Fenner & Smith Inc 495 F 2d 228 (2d Cir 1974) …. 17.7, 17.17, 17.42 Shapowloff v Dunn (1981) 148 CLR 72; [1981] HCA 21 …. 14.17 Shaw Stockbroking Ltd v Australian Stock Exchange Ltd (1998) 26 ACSR 702 …. 11.48 Shearson Hayden Stone Inc v Leach, 583F 2d 367 (7th Cir 1978) …. 14.10, 14.12 Sheen v Fields Pty Ltd (1984) 51 ALR 345; 58 ALJR 93 …. 8.47 Shi v Migration Agents Registration Authority (2008) 235 CLR 286; [2008] HCA 31 …. 2.24 Silver v New York Stock Exchange 373 US 341 (1963) …. 11.36 Sim v National Companies and Securities Commission (1988) 13 ACLR 191 …. 2.68 Skelton v Wood (1894) 71 LT 616 …. 14.18 Skoljarev v Australian Fisheries Management Authority (1995) 133 ALR 690 …. 2.18

— v — (1996) 41 ALD 481 …. 2.18 Slade v Shearson Hammill & Co, Inc 517 F 2d 398 (1974) …. 17.36 Smith v Anderson (1880) 15 Ch D 247 …. 13.8 — v Capewell (1979) 142 CLR 509 …. 6.10 — v Chadwick (1884) 9 App Cas 187 …. 9.39 — v Papamihail (1998) 88 FCR 80; 29 ACSR 184 …. 2.76 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 …. 9.52 Smithers v Beveridge (1994) 14 ACSR 197 …. 9.19 Solco Ltd, Re (2015) 106 ACSR 591; [2015] FCA 635 …. 5.50, 6.61 Solloway v Blumberger [1933] SCR 163 …. 14.16 — v McLaughlin [1938] AC 247; [1937] 4 All ER 328 …. 14.18, 14.73, 14.81 Somerville v Australian Securities Commission (1993) 11 ASCR 595; 11 ACLC 1132 …. 2.94 Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160; 60 ACSR 292; [2007] HCA 1 …. 8.42, 9.1 Sorby v Commonwealth (1983) 152 CLR 281 …. 2.53 Sovereign Capital Ltd and Australian Securities and Investments Commission, Re (2008) 109 ALD 398; [2008] AATA 901 …. 13.53 Spence v Crawford [1939] 3 All ER 271 …. 13.70 Sreika v Cardinal Financial Services Ltd [2000] FCA 1647 …. 9.29 Spedley Securities Ltd (in liq) v Greater Pacific Investments Pty Ltd (in liq) (1992) 30 NSWLR 185; 7 ACSR 155 …. 14.87 Spargos Mining NL v Standard Chartered Australia Ltd (No 2) (1989) 1 ACSR 314 …. 2.52 Springwell Navigation Corporation v JP Morgan Chase Bank [2010] EWCA Civ 1221 …. 14.5

Stafford v Conti Commodity Services Ltd [1981] 1 All ER 691 …. 14.6 Standard Chartered Bank v Ceylon Petroleum Corp [2011] EWHC 1785 (Comm) …. 14.5 — v — [2012] EWCA Civ 1049 …. 14.5 Standard Chartered Bank v Pakistan National Shipping Corp (Nos 2 and 4) [2003] 1 AC 959 …. 9.15 Standard Chartered Bank of Australia Ltd v Antico (No 1) (1995) 18 ACSR 1 …. 4.23 Stockbridge v Ogilvie (1993) 43 FCR 244; 10 ACSR 688 …. 2.70, 2.74 Story v National Companies and Securities Commission (1988) 13 NSWLR 661; 13 ACLR 225; 6 ACLC 560 …. 13.18, 13.53, 13.63 Stoyeff v Masu Financial Management Pty Ltd (2008) 66 ACSR 585; [2008] FCA 897 …. 6.33 Strong v Repide 213 US 419 (1909) …. 17.3 Stylis v United Medical Protection Ltd [2007] NSWCA 109 …. 11.38 Sullivan & Long Inc v Scattered Corp 47 F 3d 857 (7th Cir 1995) …. 16.1 Sumiseki Materials Co Ltd v Wambo Coal Pty Ltd (No 2) (2013) 93 ACSR 693; [2013] NSWSC 488 …. 11.51 Supercar International Holdings Ltd v Sommers (2011) 84 ACSR 466; [2011] NSWSC 336 …. 8.17 Switzerland Australia Health Fund Pty Ltd v Shaw (1988) 81 ALR 111; ATPR ¶40-866 …. 8.47 Sydney Futures Exchange Ltd v Australian Stock Exchange Ltd (1995) 56 FCR 236; 16 ACSR 148 …. 1.48, 3.6, 6.6

T Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 …. 8.59 Tadoran Pty Ltd (in liq) v NG Delaney Insurances Pty Ltd (1989) 5 ANZ Ins Cas60-900 …. 14.2 Tag Pacific Ltd v Bos Stockbroking Ltd (1989) 15 ACLR 337 …. 14.16

Tarrant v Australian Securities and Investments Commission (2013) 62 AAR 192; [2013] AATA 926 …. 14.64 — v — (2015) 104 ACSR 275; [2015] FCAFC 8 …. 13.59 Tasmanian Spastics Association, Re; Australian Securities and Investments Commission v Nandan (1997) 23 ACSR 743 …. 2.91 Tate v Williamson (1866) 2 Ch App 55 …. 5.32 Taylor v Telstra Corporation Ltd [2007] FCA 2008 …. 9.37 Tepko Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19 …. 14.4 Thomas v Powercor Australia Ltd [2011] VSC 614 …. 9.38 Thompson v Australian Securities and Investments Commission (2002) 117 FCR 159; 41 ACSR 456; [2002] FCA 512 …. 2.98, 5.57, 5.61 — v Meade (1891) 7 TLR 698 …. 14.2 Thomson v Smith Barney, Harris Upham & Co, 709 F 2d 1413 (11th Cir 1983) …. 14.35 Thornton v SEC 171 F 2d 702 (2d Cir 1948) …. 16.15 Tiernan v Blyth, Eastman, Dillon & Co, 719 F 2d 1 (1st Cir 1983) …. 14.35 Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees’ Union (1979) 27 ALR 367; 42 FLR 331; [1979] FCA 85 …. 8.47, 8.59 Timbercorp Finance Pty Ltd (in liq) v Collins [2015] VSC 461 …. 9.36 — v — [2016] VSCA 128 …. 9.36 Timor Sea Petroleum NL, Re (2000) 35 ACSR 186; [2000] VSC 337 …. 4.15, 4.27 Titan Steel Wheels Ltd v The Royal Bank of Scotland plc [2010] EWHC 211 (Comm); [2010] 2 Lloyd’s Rep 92 …. 14.5 TNT Australia Pty Ltd v Poseidon Ltd (No 2) (1989) 52 SASR 383; 15 ACLR 80 …. 12.23 TNT Skypak International (Aust) Pty Ltd v Commr of Taxation (1988) 82 ALR 175 …. 2.25

Tobin v Broadbent (1947) 75 CLR 378; [1947] HCA 46 …. 14.73 Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699 …. 15.20 Tooheys Ltd v The Minister for Business & Consumer Affairs (1981) 36 ALR 64 …. 11.27 Torkington v Magee [1902] 2 KB 427 …. 3.8 Tournier v National Provincial and Union Bank of England [1924] 1 KB 461 …. 14.82 Trade Practices Commission v Abbco Ice Works Pty Ltd (1994) 52 FCR 96 …. 2.89 — v — (1992) 109 ALR 465 …. 8.59 — v Service Station Association Ltd (1993) 44 FCR 206; 116 ALR 643 …. 8.59 — v Tubemakers of Australia Ltd (1983) 47 ALR 719 …. 9.16 Trane Co v O’Connor Securities 561 F Supp 301 (SDNY 1983) …. 16.7 Transmarket Trading Pty Ltd v Sydney Futures Exchange Ltd (2010) 188 FCR 1; 78 ACSR 507; [2010] FCA 534 …. 10.16, 11.21 Travel Compensation Fund v Tambree (2005) 224 CLR 627; [2005] HCA 69 …. 9.45 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270 …. 14.8 Trollope v The Honourable Justice Middleton (2008) 159 FCR 507 …. 11.27 Turner and Australian Securities and Investments Commission, Re [2009] AATA 417 …. 13.57 Tweed v Australian Securities and Investments Commission (2008) 47 AAR 518; [2008] AATA 514 …. 13.57

U United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA 49 …. 13.8

United States v Brown 79 F 2d 321 (2d Cir 1935) …. 16.15 — v Carpenter 791 F 2d 1024 (1986) …. 17.7 — v Chestman 112 S Ct 1759 (1992) …. 17.7 — v — 947 F 2d 551 (2d Cir 1991) …. 17.7 — v Hall 48 F Supp 2d 386 (SDNY 1999) …. 16.1 — v Mulheren 938 F 2d 364 (2d Cir 1991) …. 16.2 — v Newman 464 US 863 (1983) …. 17.7 — v — 664 F 2d 12 (1981) …. 17.7 — v — 773 F 3d 438 (2d Cir 2014) …. 17.30 — v O’Hagan 521 US 642 (1997) …. 17.7 — v Salman 792 F 3d 1087 (9th Cir 2015) …. 17.30 — v Smith 155 F 3d 1052 (9th Cir 1998) …. 17.12 — v Teicher 987 F 2d 112 (2d Cir 1993) …. 17.12 Utz v Javor [1973] 2 NSWLR 1 …. 16.30

V Vanmarc Holdings Pty Ltd v P W Jess & Associates Pty Ltd (2000) 34 ACSR 222 …. 11.30 Varcoe v Sterling (1992) 7 OR (3d) 204 …. 14.10 Vault Market Pty Ltd, Re [2014] NSWSC 1641 …. 13.39, 13.64 Verschuur v Vynotas Pty Ltd [2004] VSC 130 …. 9.37 Vetter v Lake Macquarie City Council (2001) 202 CLR 439; [2001] HCA 12 …. 2.25 Viacom International v Icahn 946 F 2d 998 (2d Cir 1991) …. 9.54 Voli v Inglewood Shire Council (1963) 110 CLR 74; [1963] HCA 15 …. 14.6 von Doussa v Owens (1982) 6 ACLR 692 …. 2.53

W W Noall & Son v Wan [1970] VR 683 …. 14.16, 14.17, 14.19 WA Pines Pty Ltd v Bannerman (1980) 30 ALR 559; [1980] FCA 79 …. 13.16 — v Hamilton (1980) CLC ¶40-654 …. 3.29 — v Registrar of Companies [1976] WAR 149; (1976) 1 ACLR 431 …. 4.9 Wade v A Home Away Pty Ltd (1980) CLC ¶40-669 …. 3.22 Waimond Pty Ltd v Byrne (1989) 18NSWLR 642 …. 14.5 Wakim, Re (1999) 198 CLR 511; 31 ACSR 99; [1999] HCA 27 …. 1.60 Waldron v Auer [1977] VR 236; (1977) 2 ACLR 514 …. 13.8, 13.64 — v MG Securities (A’asia) Ltd [1975] VR 508 …. 13.64 Walsh v Permanent Trustee Australia Ltd (1996) 21 ACSR 213 …. 2.94 Wambo Coal Pty Ltd v Sumiseki Materials Co Ltd (2014) 290 FLR 18; 101 ACSR 643 …. 11.51 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; 109 ALR 247; [1992] HCA 55 …. 9.22, 9.45 Wardley Australia Ltd, Ex parte; Ex parte Bond Corporation Holdings Ltd (1991) 9 ACLC 1565 …. 2.75 Warner v Elders Rural Finance Ltd (1992) 113 ALR 517 …. 8.52, 8.55 Warner, Re GTL Tradeup Pty Ltd (in liq) (2015) 104 ACSR 633; [2015] FCA 323 …. 14.70 Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492; [1948] 1 ALR 89 …. 2.37 Waterhouse v Waterhouse (1999) 46 NSWLR 449 …. 8.74 Watson v AWB Ltd [2007] FCA 1367 …. 9.29 — v — (No 3) (2009) 181 FCR 96; [2009] FCA 1174 …. 2.53 Wave Capital Ltd, Re (2003) 47 ACSR 418 …. 5.50

Wayde v New South Wales Rugby League (1985) 61 ALR 225 …. 11.51 Wealthsure Pty Ltd v Selig (2014) 221 FCR 1; [2014] FCAFC 64 …. 14.5 Weinberger v Inglis (No 2) [1919] AC 606 …. 11.36 Wenzel v Australian Stock Exchange Ltd (2002) 125 FCR 570; 44 ACSR 1 …. 11.29 Wepar Nominees Pty Ltd v Schofield (No 2) (2014) 99 ACSR 234; [2014] FCA 225 …. 9.37 Western Australian Turf Club v Commr of Taxation (1978) 139 CLR 288 …. 4.28 Westpac Banking Corporation v Jamieson (2014) 98 ACSR 63; [2014] QSC 32 …. 15.28 Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR ¶40-940 …. 8.49 White v Shortall (2006) 68 NSWLR 50 …. 12.34, 12.35, 12.36, 12.37 Whitlam v Australian Securities and Investments Commission (2003) 57 NSWLR 559; 46 ACSR 1; [2003] NSWCA 183 …. 2.88 Wilkinson v Feldworth (1998) 29 ACSR 642 …. 9.15, 9.19 — v Katies Fashions (Aust) Pty Ltd (1986) 67 ALR 137 …. 9.18 Williams v FAI Home Security Pty Ltd (No 4) (2000) 180 ALR 459; [2000] FCA 1925 …. 9.37 — v — (No 5) [2001] FCA 399 …. 9.38 Willmott Forests Ltd (in liq) and Willmott Finance Pty Ltd (in liq), Re (2011) 85 ACSR 71; [2011] VSC 348 …. 13.33 Wilmar Sugar Australia Ltd v Queensland Sugar Ltd [2016] FCA 20 …. 11.51 Wilson v Comtech Telecommunications Corp 648 F 2d 88 (2d Cir 1981) …. 17.42 — v MF Global UK Ltd [2011] EWHC 138 (QB) …. 14.5 — v Great American Industries Inc 855 F 2d 987 (1988) (2d Cir 1988) …. 17.17

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1; [2012] FCA 1028 …. 1.28, 3.10, 3.11, 3.30, 14.10 — v — (No 3) [2010] FCA 747 …. 9.29 Winter v Australian Securities Commission (1995) 56 FCR 107; 16 ACSR 61 …. 2.69 Winterford v Pfizer Australia Pty Ltd [2012] FCA 1199 …. 9.38 Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 111 ALR 649 …. 8.52 Wong v Silkfield Pty Ltd (1999) 199 CLR 255; [1999] HCA 48 …. 9.32 Wood v National Companies and Securities Commission (1990) 2 WAR 176; 1 ACSR 779 …. 2.73, 2.74 Woodcroft-Brown v Timbercorp Securities Ltd (2011) 253 FLR 240; 85 ACSR 354; [2011] VSC 427 …. 5.26, 5.27, 5.35, 6.6, 6.39, 6.46, 6.51, 6.53 — v — (in liq) (2013) 96 ACSR 307; [2013] VSCA 284 …. 6.6, 6.46, 6.51, 6.53, 6.54 Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd [2016] NSWCA 28 …. 13.68 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16 …. 14.4, 14.5 Woolworths Ltd v Kelly (1991) 22 NSWLR 189; 4 ACSR 431; 9 ACLC 539 …. 14.13 Wotton v State of Queensland [2009] FCA 758 …. 9.37 Wright Heaton Ltd v PDS Rural Products Pty Ltd (1982) 7 ACLR 140 …. 8.61 Wright Patton Shakespeare Capital Ltd and Australian Securities and Investments Commission, Re (2007) 99 ALD 335; [2007] AATA 2101 …. 5.55 Wright Patton Shakespeare Capital Ltd and Australian Securities and Investments Commission, Re [2008] AATA 1068 …. 6.45

Wright v SEC 112 F 2d 89 (1940) …. 16.16

Y YFFM v Australian Securities and Investments Commission [2010] AATA 340 …. 13.57 York Street Mezzanine Pty Ltd (in liq), Re (2007) 162 FCR 358; 64 ACSR 1; [2007] FCA 992 …. 3.11 Yorke v Lucas (1983) 49 ALR 672 …. 8.59 — v Lucas (1985) 158 CLR 661; 61 ALR 307 …. 8.10, 8.44, 8.48, 9.18, 9.19, 9.20

Z Zephyr Holdings Pty Ltd v Jack Chia (Aust) Ltd (1988) 14 ACLR 30 …. 12.28 Zhang v Minos Securities Pty Ltd [2008] NSWSC 689 …. 13.47 Zhang De Yong v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384 …. 9.31 Zweig v Hearst Corporation 594 F 2d 1261 (9th Cir 1979) …. 16.27 Zytan Nominees Pty Ltd v Laverton Gold NL (1988) 1 WAR 227; 14 ACLR 524 …. 12.22, 12.25, 12.29

Table of Statutes References are to paragraph numbers

Commonwealth Acts Interpretation Act 1901 …. 1.62 s 15AA …. 3.19 s 15AB …. 3.19 s 25C …. 2.52 s 34AA …. 2.16 Administrative Appeals Tribunal Act 1975 …. 2.22, 2.23, 2.24, 2.25 s 25 …. 2.22 s 27 …. 2.22 s 35 …. 2.23 s 41 …. 2.23 s 41(2) …. 2.23 s 43 …. 2.24 s 43(1) …. 2.24 Administrative Decisions (Judicial Review) Act 1977 …. 1.62, 2.26, 2.68, 2.94, 11.37, 12.14, 13.55, 13.62 s 5 …. 2.26 s 6 …. 2.26 s 7 …. 2.26 Australian Consumer Law …. 1.54, 8.3, 8.9, 8.10, 8.14, 8.35, 8.70, 8.73, 9.1, 9.5, 9.25, 15.8 s 2(2) …. 9.14 s 4 …. 8.48, 8.49

s 18 …. 5.36, 5.39, 8.3, 8.9, 8.10, 8.14, 8.15, 8.35, 8.36, 8.37, 8.41, 8.42, 8.48, 8.49, 8.54, 9.1, 9.3, 9.24 s 232 …. 8.36, 8.73 s 236 …. 8.3, 8.10, 8.11, 8.36, 8.57, 8.70, 9.1, 9.2, 9.4, 9.6, 9.14 s 236(1) …. 9.3 s 237 …. 8.11, 8.36, 8.70, 8.76 s 251 …. 8.9 Australian National Registry of Emissions Units Act 2011 …. 3.57 Australian Prudential Regulation Authority Act 1998 …. 13.26 Australian Securities and Investments Commission Act 2001 …. 1.1, 1.14, 1.33, 1.34, 1.35, 1.36, 1.38, 1.39, 2.1, 2.4, 2.6, 2.7, 2.10, 2.12, 2.13, 2.14, 2.17, 2.20, 2.22, 2.49, 2.53, 2.55, 2.67, 2.75, 2.79, 2.82, 2.83, 2.92, 2.93, 2.100, 2.103, 3.1, 3.4, 3.38, 3.39, 3.40, 3.60, 4.45, 8.3, 8.4, 8.5, 8.35, 8.40, 8.41, 8.57, 9.1, 9.17, 9.19, 9.25, 9.28, 13.53, 15.9, 15.10, 15.12, 15.13, 15.20, 15.31, 16.23 Pt 2 …. 8.10 Pt 2, Div 2 …. 1.2, 1.18, 1.32, 1.45, 2.2, 2.10, 2.13, 2.49, 2.51, 2.60, 2.81, 2.93, 3.4, 3.17, 3.39, 3.52, 3.60, 4.35, 4.45, 8.40, 8.71, 8.74, 9.5, 15.8, 15.10, 15.11, 15.13, 15.27 Pt 2, Div 2 Subdiv BA …. 4.45, 15.14, 15.18 Pt 2, Div 2, Subdiv C …. 8.75, 9.3, 15.19 Pt 2, Div 2, Subdiv D …. 8.75, 9.3, 15.22, 15.24 Pt 2, Div 2, Subdiv E …. 8.75, 15.25 Pt 2, Div 2, Subdiv G …. 8.3, 8.40, 8.70, 9.2 Pt 2, Div 2, Subdiv GA …. 8.9, 9.25 Pt 2, Div 2, Subdiv GC …. 2.60, 6.71, 15.31 Pt 3 …. 2.22, 2.54, 2.59 Pt 3, Div 1 …. 2.50 Pt 3, Div 3 …. 2.48, 2.50, 2.52, 2.53, 2.54, 2.55, 2.57, 2.67, 2.70, 2.72,

2.81, 2.95 Pt 3, Div 4 …. 2.48, 2.58 Pt 3, Div 8 …. 2.22 Pt 9 …. 2.104 Pt 14 …. 2.105 s 1(1)(c) …. 2.104 s 1(2) …. 2.14, 2.67, 4.7 s 5(1) …. 2.50, 2.51, 8.40 s 8(1A) …. 2.12 s 9 …. 2.7, 2.15 s 11 …. 2.12, 2.13 s 11(4) …. 2.13 s 12 …. 2.10 s 12A …. 2.10, 2.12, 2.13, 2.49 s 12A(6) …. 2.13 s 12BA(2) …. 8.52, 9.14 s 12BAA …. 3.2, 3.39, 3.60, 8.14 s 12BAA(1) …. 3.60 s 12BAA(2) …. 3.60 s 12BAA(3) …. 3.60 s 12BAA(4) …. 3.60 s 12BAA(5) …. 3.60 s 12BAA(6) …. 3.60 s 12BAA(7) …. 3.60 s 12BAA(7)(a) …. 3.6, 3.8, 3.51, 4.45, 15.13 s 12BAA(7)(b) …. 3.60

s 12BAA(7)(d) …. 3.60 s 12BAA(7)(e) …. 3.60 s 12BAA(7)(f) …. 3.60 s 12BAA(7)(j) …. 3.60 s 12BAA(7)(k) …. 3.38, 3.60 s 12BAA(8) …. 3.60 s 12BAB …. 3.60, 4.45, 8.14, 8.40, 15.13, 15.27 s 12BAB(1)(g) …. 8.40 s 12BAB(5) …. 8.40 s 12BAB(7) …. 4.45, 15.13 s 12BAB(8) …. 4.45, 15.13 s 12BAB(9) …. 4.45, 15.13 s 12BB …. 8.48, 8.49 s 12BB(2) …. 8.49 s 12BC …. 15.27 s 12BC(3) …. 15.27 s 12BF(1) …. 15.14 s 12BF(2) …. 15.14 s 12BF(3) …. 15.15 s 12BG …. 15.14 s 12BG(1) …. 15.17 s 12BG(1)(b) …. 15.17 s 12BG(2) …. 15.17 s 12BG(3) …. 15.17 s 12BG(4) …. 15.17 s 12BH(1) …. 15.17

s 12BI(1) …. 15.16 s 12BI(1)(a) …. 15.14 s 12BI(1)(b) …. 15.14 s 12BK …. 15.16 s 12BL …. 15.15 s 12CA …. 14.78, 15.19 ss 12CA–12CB …. 16.23 ss 12CA–12CC …. 9.3 s 12CB …. 15.19 s 12CB(1) …. 15.21 s 12CB(2)(a) …. 15.21 s 12CB(2)(b) …. 15.21 s 12CB(2)(c) …. 15.21 s 12CB(2)(d) …. 15.21 s 12CB(2)(e) …. 15.21 s 12CB(4)(b) …. 15.19 s 12CC …. 14.78, 15.19, 16.23 s 12CC(1) …. 15.21 s 12DA …. 2.81, 4.45, 5.36, 5.39, 8.3, 8.9, 8.10, 8.11, 8.14, 8.15, 8.17, 8.35, 8.36, 8.37, 8.40, 8.42, 8.44, 8.47, 8.48, 8.49, 8.54, 8.69, 8.71, 9.1, 9.25, 9.28, 9.39, 14.7, 14.35, 15.11, 15.23, 16.23 ss 12DA–12DN …. 9.3 s 12DA(1A) …. 8.14 s 12DB …. 4.45, 15.23 s 12DC …. 4.45 s 12DE …. 4.45, 15.23 s 12DF …. 4.45, 9.24, 15.23

s 12DG …. 4.45, 15.23 s 12DH …. 4.45, 15.23 s 12DI …. 4.45, 15.23 s 12DJ …. 4.45, 15.23 s 12DK …. 4.45, 15.23 s 12DM …. 4.45, 15.23 s 12EB …. 15.26 s 12EB(1) …. 15.25 s 12EB(2) …. 15.25 s 12EC …. 15.26 s 12EC(3) …. 15.26 s 12ED …. 1.28, 15.27, 15.28, 15.29 s 12ED(1) …. 14.6, 15.28 s 12ED(2) …. 14.6, 15.28 s 12GB …. 2.81 s 12GC …. 8.72 s 12GD …. 2.93, 8.36, 8.74 s 12GF …. 8.3, 8.10, 8.11, 8.36, 8.42, 8.57, 8.69, 8.70, 9.1, 9.2, 9.4, 9.6, 9.14, 9.23, 9.39 s 12GF(1) …. 9.3, 9.14 s 12GF(1B) …. 9.25 s 12GF(2) …. 9.16, 9.20 s 12GF(4)(a) …. 9.17 s 12GF(4)(b) …. 9.17 s 12GH …. 8.69, 9.16 s 12GH(1) …. 8.69 s 12GH(2)(a) …. 9.16

s 12GH(2)(b) …. 9.16 s 12GH(3) …. 8.69 s 12GH(5) …. 8.69 s 12GI(4) …. 8.9 s 12GLA …. 2.96, 8.75 s 12GLB …. 2.96 s 12GLC …. 15.31, 15.32 s 12GLC(1) …. 15.33 s 12GLC(2) …. 15.33 s 12GLC(3) …. 15.33 s 12GM …. 2.95, 8.42, 8.76 s 12GN …. 2.96 s 12GND …. 15.14 s 12GNA …. 8.9 s 12GY …. 2.60, 15.34 s 12GYA …. 15.35 s 12GYB …. 15.35 s 12GYB(1) …. 15.35 s 12GYB(3) …. 2.60 s 13 …. 2.12, 2.48, 2.53, 2.68 s 13(1) …. 2.67 s 13(2) …. 2.67 s 13(3) …. 2.67 s 13(6) …. 2.67 s 14 …. 2.10, 2.67 s 19 …. 2.53, 2.70

ss 19–27 …. 2.53 s 19(2) …. 2.70, 2.76 s 19(2)(a) …. 2.70, 2.73 s 19(2)(b) …. 2.70 s 19(3) …. 2.70 s 19(3)(b) …. 2.70 s 21 …. 2.71 s 21(3) …. 2.53, 2.70 s 22 …. 2.53, 2.73 s 22(1) …. 2.71, 2.74 s 22(2) …. 2.71 s 23(1) …. 2.70, 2.74 s 24 …. 2.53 s 24(1) …. 2.75 s 24(2)(b) …. 2.75 s 25(1) …. 2.75 s 25(2) …. 2.75 s 28 …. 2.49, 2.50 s 28(c) …. 2.50 s 29 …. 2.48, 2.49 s 29(2A) …. 2.49 s 30 …. 2.50, 2.52 s 30(1) …. 2.51 s 30(2) …. 2.51 s 30A …. 2.50 s 31 …. 2.50, 2.51

s 31(1) …. 2.52 s 31(1)(g)–(m) …. 2.51 s 32A …. 2.50, 2.51, 2.52 s 32A(c)–(d) …. 2.51 s 33 …. 2.50, 2.51, 2.52 s 34 …. 2.52 s 35 …. 2.50, 2.55 s 36 …. 2.50, 2.55 s 36A …. 2.50, 2.55 s 37 …. 2.56 s 37(9) …. 2.57 s 37(10) …. 2.56 s 41 …. 2.58 s 43 …. 2.58 s 43(3) …. 2.58 s 47 …. 2.58 s 48 …. 2.58 s 49 …. 2.75, 2.77 s 49(3) …. 2.77 s 49(4) …. 2.77 s 50 …. 2.75, 2.94 s 50(c)–(d) …. 2.94 s 51 …. 2.65 s 58 …. 2.64 s 59(2) …. 2.65 s 63(1) …. 2.53, 2.71

s 63(3) …. 2.49, 2.71, 2.77 s 65(3) …. 2.53, 13.53, 13.58 s 68 …. 2.57, 2.59, 2.64, 2.70, 2.72 s 68(1) …. 2.53, 2.72, 2.76 s 68(2) …. 2.53, 2.72 s 68(2)–(3) …. 2.57 s 68(3) …. 2.53, 2.57, 2.72 s 69 …. 2.53, 2.54, 2.64 s 70 …. 2.77 s 84 …. 2.50 s 87 …. 2.50 s 92 …. 2.53 s 93AA …. 2.100, 7.27 s 95 …. 2.15 s 102 …. 2.16 s 102(1) …. 2.16 s 102(4) …. 2.16 s 127(1) …. 2.40 s 127(2) …. 2.40 s 127(4) …. 2.40 s 147 …. 2.7 s 172 …. 2.7 s 203 …. 2.7 s 232 …. 2.50 s 235A …. 2.7 s 236B …. 2.7

s 236F …. 2.7 s 243 …. 2.105 s 244 …. 2.22 s 792D …. 2.61 s 792E …. 2.61 s 821C …. 2.61 s 821D …. 2.61 s 904D …. 2.61 s 904E …. 2.61 s 912E …. 2.61 Australian Securities and Investments Commission Regulations 2001 …. 2.52 reg 2B …. 3.38, 3.60 reg 4 Form 1 …. 2.70 reg 5 …. 2.52 Australian Securities Commission Act 1989 …. 1.58, 1.59 s 8 …. 2.12 Banking Act 1959 …. 3.11, 4.28, 13.37, 13.54 Bankruptcy Act 1966 …. 14.69 Pt IV, Div 2 …. 13.52 Pt IV, Div 3 …. 13.52 Business Names Registration Act 2011 …. 2.13 Business Names Registration (Transitional and Consequential Provisions) Act 2011 …. 2.13 Carbon Credits (Carbon Farming Initiative) Act 2011 …. 3.57 Commission Act 2001 …. 2.1 Commonwealth Government Securities Legislation Amendment (Retail

Trading) Act 2012 …. 3.16 Commonwealth Inscribed Stock Act 1911 …. 3.16 Commonwealth of Australia Constitution Act 1901 s 51(xiii) …. 3.11 Companies Act 1862 s 16 …. 1.5 Competition and Consumer Act 2010 …. 1.4, 1.54, 2.54, 4.45, 8.37, 9.4, 11.2, 11.35, 15.10 Pt VIA …. 9.25 Pt XI, Div 2 …. 3.60 s 4D …. 11.35, 11.51 s 6 …. 8.38 s 45(2) …. 11.51 s 45D …. 11.35 s 46 …. 11.2 s 50 …. 11.35 s 75B …. 8.59 s 131 …. 3.60, 8.10, 8.14, 8.37, 8.41 s 131A …. 3.60 s 131A(1) …. 3.60 s 137B …. 9.25 Conciliation and Arbitration Act 1904 …. 11.31 s 141 …. 11.31 Constitution …. 1.60 s 51 …. 4.5 s 51(xiii) …. 4.28 s 51(xx) …. 1.58, 2.2

s 51(xxix) …. 4.5 s 51(xxxvii) …. 1.61, 2.2, 2.3 s 75(iii) …. 2.27 s 75(v) …. 2.27, 2.28 s 852A …. 10.36 Sch 2 …. 8.3, 9.1 Corporate Law Economic Reform Program Act 1999 …. 1.47, 1.48, 4.1, 4.6, 5.2, 5.7, 8.26 Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9 Act) …. 7.2, 7.26, 11.57, 13.21 Corporations Act 1989 s 17(1A) …. 4.6 s 18(2) …. 4.6 Corporations Act 2001 …. 1.1, 1.14, 1.25, 1.26, 1.27, 1.29, 1.33, 1.38, 1.52, 1.55, 1.61, 1.62, 2.1, 2.4, 2.6, 2.10, 2.12, 2.13, 2.17, 2.19, 2.22, 2.23, 2.31, 2.37, 2.41, 2.42, 2.47, 2.49, 2.50, 2.58, 2.62, 2.63, 2.75, 2.77, 2.79, 2.81, 2.82, 2.83, 2.85, 2.92, 2.93, 3.1, 3.3, 3.4, 3.7, 3.9, 3.36, 3.38, 3.40, 3.46, 4.1, 4.3, 4.4, 4.5, 4.15, 4.23, 4.27, 4.29, 4.31, 4.35, 4.45, 4.48, 5.3, 5.24, 5.26, 5.36, 5.37, 5.50, 5.56, 5.57, 6.6, 6.17, 6.29, 6.30, 6.35, 6.37, 6.42, 6.75, 7.2, 7.15, 8.2, 8.3, 8.4, 8.5, 8.14, 8.16, 8.35, 8.57, 8.71, 8.73, 9.1, 9.4, 9.5, 9.17, 9.19, 9.20, 9.25, 9.26, 9.28, 11.2, 11.6, 11.7, 11.9, 11.17, 11.22, 11.26, 11.30, 11.31, 11.36, 11.37, 11.38, 11.39, 11.42, 11.45, 11.51, 11.53, 11.56, 11.57, 12.1, 12.10, 12.17, 12.30, 12.37, 13.2, 13.8, 13.10, 13.17, 13.20, 13.25, 13.28, 13.37, 13.38, 13.49, 13.50, 13.52, 13.53, 13.57, 13.63, 13.64, 13.65, 13.72, 14.53, 14.56, 14.77, 14.82, 14.86, 15.13, 16.12, 16.15, 16.20, 16.23, 16.29, 17.25, 17.30, 17.36 Ch 2A …. 10.11, 10.25 Chs 2A–5C …. 1.3 Ch 2E …. 4.33 Ch 2L …. 3.10, 3.12, 4.2, 4.25, 4.31, 4.34, 5.22

Ch 2M …. 1.19, 4.29, 4.33, 5.13, 6.30, 14.75 Ch 5C …. 1.1, 2.95, 3.17, 3.20, 3.21, 3.33, 3.35, 6.4, 8.75, 8.76, 9.28, 14.84 Ch 6 …. 1.1, 1.47, 1.59, 2.37, 2.96, 3.12, 4.27, 4.34, 6.29, 6.64 Ch 6CA …. 6.29, 7.1, 7.2, 7.19, 8.2, 8.75, 8.76 Chs 6–6CA …. 3.3, 3.5, 3.14, 3.15, 3.17 Chs 6–6D …. 3.39 Ch 6A …. 1.1, 1.47, 2.96, 3.55 Ch 6B …. 1.1, 1.47, 2.96 Ch 6C …. 1.1, 1.47, 2.96 Ch 6CA …. 1.1, 1.3, 1.15, 1.19, 1.39, 2.13, 2.95 Ch 6D …. 1.1, 1.3, 1.15, 1.16, 1.18, 1.39, 1.47, 2.13, 2.95, 2.98, 3.2, 3.3, 3.5, 3.9, 3.10, 3.14, 3.15, 3.46, 3.51, 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.22, 4.23, 4.24, 4.25, 4.27, 4.28, 4.32, 4.33, 4.34, 4.35, 4.49, 4.51, 5.2, 5.55, 5.59, 6.1, 6.2, 6.5, 6.6, 6.7, 6.8, 6.9, 6.16, 6.46, 7.2, 8.2, 8.3, 8.6, 8.7, 8.8, 8.9, 8.14, 8.15, 8.16, 8.19, 8.24, 8.31, 8.54, 8.75, 8.76, 9.1, 9.7, 9.8 Ch 7 …. 1.1, 1.2, 1.3, 1.20, 1.21, 1.26, 1.27, 1.39, 1.50, 1.59, 2.34, 2.36, 2.37, 2.96, 3.1, 3.3, 3.4, 3.5, 3.14, 3.15, 3.17, 3.35, 3.36, 3.37, 3.39, 3.40, 3.41, 3.42, 3.44, 3.47, 3.51, 3.52, 3.55, 3.59, 3.60, 4.4, 4.38, 4.45, 6.1, 6.2, 6.6, 6.7, 6.8, 6.9, 6.11, 6.24, 6.75, 7.2, 8.10, 8.40, 8.49, 8.61, 8.62, 8.72, 10.11, 10.12, 10.19, 10.20, 10.25, 10.32, 10.34, 10.36, 11.6, 11.33, 11.48, 11.53, 13.8, 13.12, 13.13, 13.16, 13.35, 13.40, 13.53, 13.56, 13.64, 13.72, 14.84, 14.87, 15.13, 16.6, 16.10, 16.18, 16.22, 17.21, 17.29, 17.37 Ch 8 …. 1.48, 1.50, 3.40 Pt 1.1 …. 6.29 Pt 1.1A …. 6.29 Pt 1.2, Div 2 …. 14.31, 14.33 Pt 1.2, Div 3 …. 13.8

Pt 1.2A …. 1.15, 1.19, 3.3, 3.5, 3.14, 3.15, 3.17, 4.25, 5.14, 6.50 Pt 2, Div 2 …. 2.48 Pt 2.4 …. 4.50 Pt 2.5 …. 8.62 Pt 2B.7 …. 4.33 Pt 2F.1 …. 12.28 Pt 2F.1A …. 11.31, 11.51 Pt 2M.3 …. 7.2 Pt 3, Div 1 …. 2.62 Pt 3, Sch 10BA …. 6.37 Pt 3.2 …. 14.84 Pt 5.1 …. 3.12, 4.27, 4.34 Pt 5.3A …. 4.27 Pt 5.7 …. 11.21 Pt 5.8 …. 11.21 Pt 5.8.2 …. 11.21 Pt 5.10 …. 11.21 Pt 6.7 …. 17.13 Pt 6D.2 …. 4.1, 4.2, 4.3, 4.6, 4.8, 4.10, 4.11, 4.12, 4.13, 4.16, 4.17, 4.18, 4.19, 4.20, 4.22, 4.23, 4.24, 4.26, 4.27, 4.28, 4.29, 4.30, 4.31, 4.35, 4.36, 4.37, 5.1, 5.2, 5.10, 5.13, 5.30, 5.40, 5.57, 6.30, 6.31, 6.71, 8.1, 8.15, 8.35 Pt 6D.2, Div 2 …. 1.16, 4.3, 4.10 Pt 6D.2, Div 3 …. 1.16, 4.3 Pt 6D.2, Div 4 …. 1.16, 5.4, 5.9 Pt 6D.2, Div 5 …. 1.16 Pt 6D.3 …. 1.16, 4.46, 4.48, 4.49, 8.15

Pt 6D.3, Div 1 …. 1.16 Pt 6D.4 …. 2.19 Pt 7.1, Div 2, s 761G(7) …. 6.17 Pt 7.1, Div 2, s 761GA …. 6.17 Pt 7.1, Div 3 …. 3.2, 3.39, 3.42, 3.60, 8.38 Pt 7.1, Div 3, Subdiv B …. 3.48, 3.58, 3.59 Pt 7.1, Div 4 …. 8.38 Pt 7.2 …. 1.21, 1.22, 10.1, 10.2, 10.6, 10.12, 10.18, 10.22, 10.23, 10.46, 11.9 Pts 7.2–7.5 …. 1.21 Pt 7.2, Div 3 …. 1.22, 13.67 Pt 7.2, Div 3, Subdiv C …. 2.13 Pt 7.2, Div 4 …. 1.22 Pt 7.2A …. 1.22 Pt 7.3 …. 1.21, 1.23, 10.1, 10.24, 10.25, 10.46 Pt 7.3, Div 2 …. 1.23 Pt 7.3, Div 2, Subdiv C …. 2.13 Pt 7.3, Div 3 …. 1.23 Pt 7.4 …. 1.21, 10.1, 10.36, 11.39 Pt 7.4, Div 1 …. 1.24, 10.17, 10.30, 10.36 Pt 7.4, Div1, Subdiv B …. 10.36 Pt 7.4, Div 2 …. 10.36 Pt 7.5 …. 1.21, 1.22, 10.1, 10.14, 10.17, 10.37, 10.42 Pt 7.5, Div 2 …. 10.37 Pt 7.5, Div 3 …. 1.22, 10.37, 10.38, 10.39, 10.42 Pt 7.5, Divs 3–6 …. 1.25 Pt 7.5, Div 4 …. 10.37, 10.39, 10.40, 10.41

Pt 7.5, Div 5 …. 10.42 Pt 7.5A …. 1.21, 1.25, 2.9, 10.44 Pt 7.5A, Div 2 …. 1.25, 10.45 Pt 7.5A, Div 3 …. 10.46 Pt 7.5A, Div 4 …. 10.46 Pt 7.5A, Div 5 …. 10.46 Pt 7.5A, Div 5, Subdiv A …. 2.45 Pt 7.5A, Div 6 …. 10.46 Pt 7.6 …. 2.13, 6.17, 8.54, 13.1, 13.64 Pts 7.6–7.9 …. 6.17, 6.35 Pt 7.6, Div 3 …. 1.27 Pt 7.6, Div 4 …. 1.27, 2.101 Pt 7.6, Div 5 …. 1.27, 13.40 Pt 7.6, Div 6 …. 1.27, 13.39, 13.40, 13.41, 13.47, 13.49 Pt 7.6, Div 8 …. 1.27, 2.102, 13.16, 13.40, 13.53, 13.65 Pt 7.6, Div 9 …. 13.65 Pt 7.6, Div 10 …. 13.66 Pt 7.6 Div 11 …. 1.27, 13.67, 13.68 Pt 7.6, Div 11, Subdiv B …. 13.67, 13.68 Pt 7.7 …. 1.29, 6.17, 8.3, 9.1, 13.49, 13.64, 14.1, 14.20, 14.21, 14.37, 14.38, 14.39, 14.40, 14.41, 14.42, 14.45, 14.47, 14.48 Pt 7.7, Div 7 …. 14.39 Pt 7.7A …. 1.30, 13.64, 14.63 Pt 7.7A, Div 2 …. 14.54 Pt 7.7A, Div 4, Subdiv B …. 14.64 Pt 7.8 …. 1.30, 6.4, 6.17, 13.64, 14.1, 14.20, 14.66, 14.70 Pt 7.8, Div 2 …. 1.30, 11.20, 14.65, 14.72

Pt 7.8, Div 2, Subdiv A …. 14.66, 14.67, 14.70 Pt 7.8, Div 2, Subdiv B …. 14.66, 14.71 Pt 7.8, Div 3 …. 1.30, 14.65, 14.73 Pt 7.8, Div 4 …. 14.74 Pt 7.8, Div 5 …. 1.30 Pt 7.8, Div 6 …. 1.30, 2.46, 14.75 Pt 7.8, Div 6, Subdiv B …. 14.76 Pt 7.8, Div 6, Subdiv C …. 14.76 Pt 7.8, Div 6, Subdiv D …. 14.76, 14.77 Pt 7.8, Div 7 …. 1.30 Pt 7.9 …. 1.15, 1.17, 1.18, 1.30, 2.13, 2.98, 3.46, 4.1, 4.3, 4.4, 5.6, 5.10, 6.1, 6.2, 6.4, 6.5, 6.6, 6.7, 6.10, 6.11, 6.12, 6.17, 6.26, 6.36, 6.39, 6.40, 6.41, 7.2, 8.1, 8.2, 8.3, 8.6, 8.7, 8.8, 8.9, 8.12, 8.14, 8.31, 8.32, 8.35, 9.1, 14.22, 14.36 Pt 7.9, Div 2 …. 1.17, 3.33, 6.3, 6.12, 6.42 Pt 7.9, Div 2, Subdiv B …. 6.50 Pt 7.9, Div 2, Subdiv C …. 1.17 Pt 7.9, Div 2, Subdiv D …. 6.42, 6.65 Pt 7.9, Div 3 …. 1.17 Pt 7.9, Div 3A …. 6.37 Pt 7.9, Div 4 …. 1.17 Pt 7.9, Div 4, Subdiv 4.2A …. 6.57 Pt 7.9, Div 5 …. 1.17, 6.64 Pt 7.9, Div 5A …. 6.5, 6.10 Pt 7.9, Div 6 …. 1.17, 6.5 Pt 7.9, Div 7 …. 1.17, 8.6, 8.31 Pt 7.9, Div 7, Subdiv A …. 8.31, 8.32

Pt 7.10 …. 1.18, 1.32, 1.37, 2.13, 2.95, 4.35, 4.43, 8.1, 8.3, 8.12, 8.39, 8.40, 8.69, 8.75, 8.76, 9.1, 9.5, 13.49 Pt 7.10, Div 2A …. 8.9, 9.25 Pt 7.10, Div 3 …. 1.38, 11.20, 17.1, 17.8, 17.9, 17.10, 17.11, 17.12, 17.13, 17.14, 17.17, 17.18, 17.19, 17.21, 17.22, 17.24, 17.26, 17.27, 17.28, 17.30, 17.32, 17.33, 17.36, 17.37, 17.39, 17.43, 17.44, 17.45, 17.46, 17.47, 17.48, 17.50 Pt 7.11 …. 1.47, 1.59, 3.1, 3.5, 3.17, 4.1 Pt 7.11, Div 4 …. 10.22 Pt 7.12 …. 1.47, 1.59, 4.1 Pt 7.12, Div 1 …. 2.43, 2.44 Pt 9.4 …. 4.51 Pt 9.4A …. 2.22, 2.99 Pt 9.4AA …. 7.26 Pt 9.4B …. 2.79, 2.85, 2.87, 2.99, 7.22, 7.26, 17.41 Pt 9.5 …. 8.3, 8.70, 9.2 Pt 9.12 …. 6.38 Pt 10.2 …. 4.4 Div 2, Subdiv 2 …. 6.57 s 3(3) …. 4.5 s 5 …. 4.5, 11.24 s 5(4) …. 4.5 s 5A(1) …. 3.55, 4.6 s 5A(3) …. 4.6, 4.28 s 5A(4) …. 3.55 s 9 …. 2.50, 3.1, 3.2, 3.7, 3.8, 3.10, 3.11, 3.13, 3.17, 3.18, 3.20, 3.21, 3.24, 3.28, 3.32, 3.36, 3.38, 4.22, 4.23, 4.28, 5.4, 5.13, 6.17, 6.24,

6.55, 7.13, 8.17, 8.19, 8.38, 9.7, 9.9, 9.14, 11.45, 13.33, 13.52, 14.86, 17.16, 17.21 s 9(a) …. 3.23 s 9(a)(i) …. 3.25 s 9(a)(ii) …. 3.25, 3.26, 3.28 s 9A …. 3.51, 4.29 s 11 …. 16.15 s 10 …. 11.17 s 11.2 …. 4.50 s 11.2(1) …. 4.50 s 11.2(2) …. 4.50 s 11.2(3) …. 4.50 s 11.2(5) …. 4.50 s 13 …. 14.79 s 13(c) …. 14.31, 14.33 s 14 …. 11.34 s 14(3) …. 11.34 s 15 …. 14.31, 14.33, 16.15 s 15(1)(a) …. 16.15 s 15(1)(c) …. 16.15 s 15(2) …. 16.15 s 18 …. 13.8 s 19 …. 6.10, 13.8 s 20 …. 13.8 s 21(3) …. 13.8 s 21(3)(e) …. 13.8 s 50 …. 3.11

s 50AA …. 4.12 s 51 …. 2.62 s 52 …. 2.63, 9.11, 14.64 s 52(1) …. 8.36 s 53 …. 2.50 s 66A …. 4.28, 6.29 s 79 …. 8.11, 8.13, 9.19, 9.20, 13.57 s 79(a) …. 9.19, 9.20 s 79(c) …. 9.19, 9.20 s 79(d) …. 9.19 s 82 …. 4.22, 6.24, 8.38 s 86 …. 2.51 s 92 …. 3.2 s 92(1) …. 3.13, 3.36, 3.55 s 92(2) …. 3.13 s 92(3) …. 3.3, 3.5, 3.13, 3.14, 3.15, 3.39 s 92(3)(a) …. 3.15 s 92(3)(b) …. 3.15 s 92(3)(c) …. 3.15 s 92(3)(d) …. 3.15 s 92(3)(d)(iii) …. 3.13 s 92(4) …. 3.3, 3.5, 3.13, 3.14, 3.15, 3.39, 6.7 s 111AC(1) …. 7.13 s 111AD …. 7.13 ss 111AE–111AJ …. 7.13 s 111AE(1) …. 7.13

s 111AE(2)–(3) …. 7.13 s 111AF …. 7.13 s 111AFA …. 7.13 s 111AG …. 7.13 s 111AI …. 4.25 s 111AJ(1) …. 7.13 s 111AS …. 5.13 s 111AT …. 5.13 s 111AV …. 5.13 s 113 …. 4.2, 4.33 s 113(1) …. 4.33 s 113(3) …. 4.33 s 113(4) …. 4.33 s 113(5) …. 4.33 s 115(2) …. 3.32 s 124 …. 12.11 s 124(1)(b) …. 3.8 s 140 …. 11.31, 11.38 s 140(1) …. 1.5, 11.38 s 165 …. 4.33 s 180(1) …. 12.31 s 182 …. 9.20 s 189 …. 8.28 s 206B …. 1.24, 10.36 s 206E …. 4.51 s 208 …. 9.20

s 209(2) …. 9.20 s 232 …. 11.51 s 236 …. 11.26 s 237 …. 11.26 s 254A(1)(a) …. 4.26 s 254E …. 5.50 s 260 …. 11.51 s 260D …. 9.20 s 283AA …. 4.2, 4.25, 4.34 s 283AA(3) …. 4.34 s 283AB …. 4.34 s 283AC …. 4.34 s 283BH …. 5.22 s 283BH(2) …. 5.22 s 283BH(3) …. 5.22 s 283DA …. 2.47 s 286 …. 2.49 s 311 …. 2.47 s 320 …. 11.51 s 340 …. 5.13 s 341 …. 5.13 s 351(1) …. 5.45 s 411(1) …. 4.27, 4.34 s 411(1A) …. 4.27, 4.34 s 422 …. 2.47 s 426 …. 2.47

s 438D …. 2.47 s 439A(3) …. 4.27 s 442E …. 2.47 s 445F(2) …. 4.27 s 533 …. 2.47 s 535 …. 2.47 s 601AH …. 11.27 s 601ED …. 3.22, 3.33, 12.37 s 601ED(1) …. 3.21, 3.33, 3.35 s 601ED(1)(a) …. 3.52 s 601ED(1)(b) …. 3.52 s 601ED(1)(c) …. 3.52 s 601ED(2) …. 3.33, 3.35 s 601ED(3) …. 3.33 s 601ED(5) …. 3.21 s 601FA …. 6.74 s 601FB(1) …. 6.15 s 601FC(1)(c) …. 14.55 s 601HG …. 2.47 s 601JC …. 2.47 s 601JE …. 2.47 s 601KA …. 6.64 s 601QA …. 3.33 s 602 …. 2.37 s 636 …. 4.27 s 655A …. 2.37

s 657C …. 2.62 s 657G …. 2.62 s 670A …. 5.36, 8.35 s 670B …. 8.70 s 670B(2) …. 9.22 s 673 …. 2.37 s 674 …. 1.19, 2.85, 2.99, 4.29, 5.13, 6.30, 7.3, 7.14, 7.15, 7.19, 7.20, 7.21, 7.22, 7.24, 7.27, 9.28 s 674(1) …. 7.13 s 674(2) …. 2.99, 7.13, 7.19, 7.22, 7.24, 7.25, 7.26 s 674(2)(c) …. 7.15 s 674(2A) …. 7.25 s 674(2B) …. 7.25 s 674(3) …. 7.13 s 675 …. 1.19, 2.85, 2.99, 7.18 s 675(2) …. 2.99, 7.19, 7.26 s 676 …. 7.14 s 676(2)(a) …. 7.14 s 676(2)(b) …. 7.14 s 676(2)(b)(i) …. 7.14 s 676(3) …. 7.14 s 677 …. 7.7, 7.15, 7.17 s 678 …. 7.19 s 700 …. 2.98, 3.2, 3.3, 3.5, 3.39, 4.4, 4.43 s 700(1) …. 4.6, 6.7 s 700(2) …. 4.9 s 700(3) …. 4.9, 4.32, 4.49, 8.24, 9.8, 9.11

s 700(4) …. 4.5 s 702 …. 4.4, 6.12 s 703(3) …. 4.27 s 704 …. 1.16 s 705 …. 2.98, 4.1, 5.2 s 706 …. 4.3, 4.8, 4.10, 4.11, 4.13, 4.17, 5.2 ss 706–707 …. 4.34 s 707 …. 4.3, 4.8, 4.10, 4.16, 4.17, 4.30, 5.2, 9.8 s 707(1) …. 4.8 s 707(2) …. 4.8, 4.10, 4.12, 4.16, 5.45 s 707(3) …. 4.8, 4.10, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.27, 4.30, 4.32, 5.10, 5.45 s 707(3)(b) …. 4.14 s 707(3)(b)(i) …. 4.30 s 707(4) …. 4.14 s 707(4)(b) …. 4.14 s 707(5) …. 4.8, 4.10, 4.16, 4.18, 4.30, 5.10, 5.45 s 707(5)(c)(i) …. 4.30 s 707(6) …. 4.16 s 708 …. 4.8, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.20, 4.27, 5.1, 13.33 s 708(1) …. 4.18, 4.35, 4.36, 6.32, 8.42 s 708(1)–(7) …. 4.18 s 708(2) …. 4.18, 4.30 s 708(3) …. 4.18 s 708(4) …. 4.18, 5.4 s 708(5) …. 4.18

s 708(7) …. 4.18 s 708(8) …. 4.41, 4.43 s 708(8)(a) …. 4.19 s 708(8)(b) …. 4.19 s 708(8)(c) …. 4.20 s 708(8)(d) …. 4.20 s 708(9) …. 4.19 s 708(9B) …. 4.20 s 708(9C) …. 4.20 s 708(10) …. 4.9, 4.21, 4.41, 4.43 s 708(10)(a) …. 4.21 s 708(10)(b) …. 4.21 s 708(11) …. 4.41, 4.43 s 708(11)(a) …. 4.22 s 708(11)(b) …. 4.20, 4.22 s 708(12) …. 4.23 s 708(12)(a) …. 4.23 s 708(12)(b) …. 4.23 s 708(13)(a) …. 4.24 s 708(13)(b) …. 4.24 s 708(14) …. 4.25, 4.34 s 708(14A) …. 4.25 s 708(15) …. 4.26 s 708(16) …. 4.26 s 708(17) …. 4.15, 4.27 s 708(17A) …. 4.27

s 708(18) …. 4.27 s 708(19) …. 4.28 s 708(20) …. 4.28 s 708(21) …. 4.6, 4.28 s 708A …. 5.1, 5.13, 6.31 s 708AA …. 4.8, 4.10, 4.11, 4.17, 4.29, 5.1, 5.13, 6.30 s 708AA(2) …. 4.29, 4.30 s 708AA(3) …. 4.29 s 708AA(7) …. 4.29 s 708AA(9) …. 4.29 s 708A …. 4.8, 4.10, 4.13, 4.15, 4.17, 4.30, 4.34 s 709 …. 5.1, 5.2 s 709(1) …. 5.4, 5.5 s 709(1A)–(1C) …. 5.6 s 709(2) …. 5.7, 5.26 s 709(3) …. 5.26 s 709(4) …. 5.3, 5.8, 5.27 s 709(5) …. 5.8, 5.27 s 710 …. 1.16, 5.2, 5.3, 5.5, 5.9, 5.10, 5.13, 5.14, 5.16, 5.35, 5.36, 5.40, 5.52 ss 710–713 …. 5.25 ss 710–714 …. 8.20, 8.21 ss 710–715 …. 8.30 ss 710–716 …. 5.1 s 710(1) …. 5.10, 5.14, 6.53 s 710(1)(a) …. 5.10, 5.11 s 710(1)(b) …. 5.10, 5.11, 5.12

s 710(2) …. 5.12, 6.52 s 710(3) …. 5.11, 5.12, 5.35, 5.38, 6.52 s 711 …. 5.2, 5.3, 5.5, 5.9, 5.16, 5.40, 5.52, 9.10 s 711(1) …. 5.17 s 711(2) …. 5.18 s 711(3) …. 5.18 s 711(4) …. 5.18 s 711(5) …. 5.16, 5.19 s 711(6) …. 5.16, 5.20, 5.51 s 711(7) …. 5.16, 5.21, 5.45 s 712 …. 5.2, 5.3, 5.5, 5.24, 5.40, 5.52 s 712(3) …. 5.24 s 712(4) …. 5.24 s 712(5) …. 5.24 s 713 …. 5.2, 5.3, 5.5, 5.9, 5.10, 5.13, 5.15, 5.40, 5.52, 7.27 s 713(1) …. 5.14 s 713(2) …. 5.13, 5.14, 5.15 s 713(3) …. 5.13, 5.14 s 713(4) …. 5.13, 5.14 s 713(5) …. 5.13, 5.15 s 713(6) …. 5.13 s 713A …. 3.16, 5.6 ss 713A–713E …. 5.3 s 713A(2)–(20) …. 5.6 s 713A(2)–(20) …. 5.6 s 713A(13) …. 5.6

s 713A(21)–(23) …. 5.6 s 713A(24)–(27) …. 5.6 s 713B …. 5.6 s 713C …. 5.2, 5.6, 5.25 s 713D …. 5.2, 5.6, 5.25 s 713E …. 5.2 s 714 …. 5.2, 5.3, 5.26, 5.40, 5.52 s 714(1)(e) …. 5.45 s 714(2) …. 5.26 s 715 …. 5.2, 5.3, 5.27, 5.40, 5.52, 8.20, 8.21 s 715(1)(f) …. 5.45 s 715(1)(i) …. 5.27 s 715(2) …. 5.27 s 715(3) …. 5.27, 5.51 s 715A …. 5.1, 5.9, 5.26, 5.27, 5.55, 5.58 s 715A(1) …. 5.28 s 716 …. 5.12, 5.40, 9.10 s 716(1) …. 5.16, 5.20, 5.26, 5.27 s 717 …. 5.2, 5.40 s 718 …. 5.1, 5.2, 5.40, 5.42, 8.17 s 719 …. 5.1, 5.40, 5.52, 5.53, 5.56, 8.21 s 719(2) …. 5.54 s 719(3) …. 5.54 s 719(4) …. 5.55 s 719(5) …. 5.55 s 720 …. 5.45, 9.9, 9.10

s 721 …. 5.1, 5.2, 5.26, 5.40 s 721(2) …. 5.46 s 722 …. 5.1, 5.40, 5.47, 6.60 s 722(2) …. 5.47 s 723 …. 5.1, 5.40, 5.48 s 723(1) …. 5.46, 5.48, 8.18 s 723(2) …. 5.49, 6.62 s 723(3) …. 5.19, 5.47, 5.50, 6.61, 12.6 s 723(3)(c) …. 5.50 s 723(3)(d) …. 5.50 s 724 …. 5.1, 5.40, 5.49, 5.52, 5.57 s 724(1) …. 5.56 s 724(1)(b) …. 5.50 s 724(2) …. 5.47, 5.50, 5.56 s 724(3) …. 5.56 s 725 …. 5.1, 5.20, 5.48 s 725(1A) …. 5.51 s 725(3) …. 5.51 s 726 …. 4.1, 4.2, 4.32, 4.46, 4.47, 4.48 s 727 …. 4.1, 4.2, 4.46, 4.47, 4.48, 4.51, 5.2, 5.40 s 727(1) …. 4.48, 4.49, 5.1, 5.42, 8.18 s 727(2) …. 4.48, 5.1, 5.46 s 727(3) …. 4.48, 5.1, 5.40, 5.44 s 727(4) …. 4.48 s 728 …. 2.98, 4.44, 4.46, 4.51, 5.1, 5.2, 5.36, 5.40, 5.53, 5.58, 8.1, 8.6, 8.10, 8.14, 8.15, 8.16, 8.17, 8.18, 8.19, 8.24, 9.7, 9.28 s 728(1) …. 5.36, 5.52, 8.6, 8.15, 8.16, 8.22, 8.23, 8.24, 8.25, 8.26,

8.28, 8.30, 9.3, 9.7, 9.8, 9.9, 9.11, 9.12 s 728(1)(a) …. 8.19, 8.26, 8.29 s 728(1)(b) …. 8.20, 8.26, 8.29 s 728(1)(c) …. 8.21, 8.30 s 728(2) …. 5.36, 8.19 s 728(3) …. 5.36, 5.52, 8.6, 8.7, 8.8, 8.16, 8.22, 8.24, 8.25, 8.28, 8.30 s 729 …. 5.2, 5.12, 5.38, 5.40, 5.52, 8.6, 8.7, 8.8, 8.15, 8.16, 8.22, 8.24, 8.25, 8.26, 8.28, 8.29, 8.30, 8.70, 9.2, 9.3, 9.4, 9.5, 9.6, 9.7, 9.9, 9.10, 9.12, 9.24, 9.47 s 729(1) …. 5.36, 5.37, 8.16, 8.25, 9.3, 9.7, 9.9, 9.47 s 729(3) …. 5.40, 9.22 s 730 …. 5.40, 5.52, 8.30 s 730(7) …. 5.59 s 731 …. 5.2, 5.40, 8.8, 8.8, 8.25, 8.26, 8.30, 9.24, 14.42 ss 731–733 …. 8.15, 8.16, 8.25 s 732 …. 5.2, 5.40, 8.8, 8.8, 8.25, 8.27, 8.30 s 732(1) …. 9.24 s 732(2) …. 9.24 s 733 …. 5.2, 5.40, 8.8, 8.8 s 733(1) …. 8.25, 8.28, 9.24 s 733(3) …. 8.25, 8.28, 8.29, 9.9, 9.24 s 733(4) …. 8.25, 8.30, 9.24 s 734 …. 4.2, 4.35, 4.46, 4.47, 6.70 s 734(1) …. 4.18, 4.35, 4.36, 4.41, 4.48 s 734(2) …. 4.35, 4.37, 4.38, 4.39, 4.40, 4.41, 4.42, 4.48 s 734(2B) …. 4.35, 4.48 s 734(2)(b)(ii) …. 4.37

s 734(3) …. 4.37 s 734(4) …. 4.35, 4.37, 4.39, 4.40 s 734(5) …. 4.35, 4.37, 4.38, 5.1, 5.59 s 734(5)(a) …. 4.38 s 734(5)(b) …. 4.38 s 734(6) …. 4.35, 4.37, 4.38, 5.1, 5.59 s 734(7) …. 4.35, 4.37, 4.39, 4.42, 6.71 s 734(7)(a) …. 4.42 s 734(7)(b) …. 4.42 s 734(7)(c) …. 4.42 s 734(7)(d) …. 4.42 s 734(7)(e) …. 4.42 s 734(8) …. 4.35 s 734(9) …. 4.35, 4.37, 4.39, 4.41 s 735 …. 9.10 s 735(1) …. 9.9 s 736 …. 4.2, 4.46, 4.47, 4.48, 5.40, 14.86 s 736(1) …. 4.43, 4.48, 14.86 s 736(1B) …. 4.43, 4.48 s 736(2) …. 4.43, 14.86 s 737 …. 5.40 s 738 …. 4.43, 5.40, 14.86 s 739 …. 2.98, 4.40, 5.1, 5.57, 5.61 s 739(1) …. 2.98, 5.57, 5.61 s 739(1)(a) …. 5.58 s 739(1)(b) …. 5.58

s 739(1)(c) …. 5.59 s 739(1A) …. 5.60, 5.61 s 739(1A)(b) …. 5.59 s 739(1B) …. 5.59 s 739(2) …. 2.63, 2.98, 5.60 s 739(3) …. 2.98, 5.61 s 739(4) …. 5.61 s 739(5) …. 5.57 s 739(6) …. 5.59 s 741 …. 2.31, 3.9, 4.5, 4.7 s 741(1) …. 5.13 s 760A …. 1.50, 2.37, 13.56 s 761 …. 11.29 s 761A …. 1.15, 3.1, 3.2, 3.3, 3.5, 3.16, 3.41, 3.51, 6.5, 6.10, 8.38, 10.11, 10.18, 10.31, 10.45, 11.8, 13.3, 13.43, 17.10 s 761A(c) …. 6.5, 6.7 s 761A(d) …. 6.7 s 761A(e) …. 3.51 s 761B …. 3.43, 6.11 s 761C …. 13.8 s 761D …. 3.36, 3.37, 3.53, 17.10 s 761D(1) …. 3.36, 3.37 s 761D(2) …. 3.36 s 761D(3) …. 3.36, 3.37 s 761D(3)(a) …. 3.37 s 761D(3)(a)–(d) …. 3.37 s 761D(3)(b) …. 17.10

s 761D(3)(c) …. 3.37, 6.8 s 761D(4) …. 3.36, 3.37 s 761E …. 3.47, 6.15, 6.74 s 761E(2) …. 6.15 s 761E(4) …. 3.47, 6.15 s 761E(5) …. 6.15, 6.33 s 761E(6) …. 6.15 s 761EA …. 3.2, 3.59 s 761EA(2)(a) …. 3.38 s 761EA(2)(b)(i) …. 3.38 s 761EA(2)(b)(ii) …. 3.38 s 761EA(2)(c) …. 3.38 s 761EA(2)(d) …. 3.38 s 761EA(2)(e) …. 3.38 s 761EA(3) …. 3.38 s 761F …. 13.16 s 761G …. 3.2, 6.17, 10.37, 13.30, 13.33, 14.21, 14.29, 14.36, 14.54, 14.60, 14.86 s 761G(4) …. 6.18, 13.33 s 761G(4A) …. 6.18, 6.25, 13.33 s 761G(5) …. 6.17, 13.30, 13.31 s 761G(6) …. 6.17, 13.30, 13.32 s 761G(6A) …. 13.30 s 761G(7) …. 13.30, 13.33 s 761G(7)(a) …. 6.20 s 761G(7)(a)–(d) …. 6.18 s 761G(7)(b) …. 6.21

s 761G(7)(c) …. 6.22, 13.33 s 761G(7)(c)(i)–(ii) …. 13.33 s 761G(7)(ca) …. 6.22, 13.33 s 761G(7)(d) …. 6.24, 13.33 s 761G(7A) …. 6.22 s 761G(7A)–(7B) …. 13.33 s 761G(7B) …. 6.22 s 761G(9) …. 13.33 s 761G(10) …. 13.33 s 761G(11) …. 6.17 s 761G(12) …. 6.17, 6.21, 13.31, 13.33 s 761GA …. 6.17, 6.18, 6.23, 13.30, 13.33 s 762B …. 3.42, 6.11 s 763A …. 3.42, 3.47, 3.48 s 763A(1) …. 3.43, 3.60 s 763A(1)(b) …. 3.46, 3.48 s 763A(2) …. 3.43, 3.60 s 763A(3) …. 3.43, 3.60 s 763B …. 3.1, 3.44, 3.45, 3.60, 6.2 s 763B(b) …. 3.45 s 763C …. 3.1, 3.46, 3.48, 3.60, 6.2, 6.11, 13.68 s 763D …. 3.1, 3.47, 3.60, 6.2, 14.22 s 763D(2) …. 3.60 s 763D(2)(a)(i) …. 3.47 s 763D(2)(a)(ii) …. 3.47 s 763D(2)(b) …. 3.47

s 763E …. 3.41, 3.42, 3.43, 3.48, 3.49, 3.60, 6.11 s 763E(1)(b) …. 6.11 s 763E(2) …. 3.48 s 763E(2)(b) …. 6.11 s 764(1)(b) …. 6.10 s 764(1)(c) …. 3.53 s 764(1)(d)–(i) …. 3.54 s 764(1)(j) …. 3.55 s 764A …. 3.41, 3.42, 3.43, 3.46, 3.49, 3.50, 6.11 s 764A(1) …. 3.60 s 764A(1)(a) …. 3.6, 3.8, 3.37, 3.51, 4.44, 6.8, 8.38 s 764A(1)(b) …. 3.3, 3.52, 3.60 s 764A(1)(ba) …. 3.35, 3.52, 3.60, 10.23 s 764A(1)(c) …. 3.37, 6.8 s 764A(1)(d) …. 3.60 s 764A(1)(e) …. 3.60 s 764A(1)(f) …. 3.60 s 764A(1)(g) …. 3.60 s 764A(1)(k) …. 3.56, 3.60 s 764A(1)(ka) …. 3.57 s 764A(1)(kb) …. 3.57 s 765(1)(y) …. 3.47 s 765A …. 3.37, 3.41, 3.58, 13.68, 17.10 s 765A(1) …. 3.60 s 765A(1)(h) …. 3.38, 3.46, 3.47, 3.59, 3.60, 17.10 s 765A(2) …. 3.41, 3.58

s 766(4) …. 6.74 s 766A …. 1.27, 13.3, 13.5, 13.7 s 766A(1) …. 8.38 s 766A(1)(a) …. 13.4 s 766A(3) …. 13.3 s 766B …. 6.75, 13.3, 14.54 s 766B(1) …. 13.5 s 766B(1A) …. 6.75, 13.6 s 766B(3) …. 1.29, 14.22, 14.29, 14.60 s 766B(4) …. 1.29, 14.22 s 766B(5) …. 13.6 s 766B(6) …. 13.6 s 766B(7) …. 13. s 766C …. 6.74, 8.38 ss 766C–766D …. 13.3 s 766C(2) …. 8.38 s 766C(3) …. 8.38 ss 766C(3A)–766C(6) …. 8.40 s 766C(1) …. 13.7 s 766C(2) …. 13.7 s 766C(3) …. 13.7 s 766C(4) …. 4.45, 8.38, 15.13 s 766C(5) …. 1.20, 8.38 s 766C(6) …. 8.38 s 766D …. 16.6 s 766E …. 13.3

s 767A …. 1.22 s 767A(1) …. 10.7, 10.9, 11.6, 16.6, 17.10, 17.29 s 767A(2) …. 8.61, 11.6, 16.6, 16.10, 16.18, 16.22, 17.29 s 767A(2)(a) …. 10.12, 16.6 s 767A(2)(b)–(d) …. 10.12 s 768A …. 10.23 s 768A(1) …. 1.23, 10.23 s 768A(2) …. 10.23 s 769(2) …. 11.29 s 769A …. 8.62 s 769B …. 8.69, 9.7, 9.16, 16.8, 16.14, 17.21, 17.22 s 769B(1)(c) …. 8.69 s 769B(1)(a) …. 9.16 s 769B(1)(b) …. 9.16 s 769B(3) …. 8.69 s 769B(5)(a) …. 9.17 s 769B(5)(b) …. 9.17 s 769B(6) …. 8.69 s 769B(10) …. 8.52 s 769C …. 8.48, 8.49 s 777 …. 11.24, 11.27, 11.28 s 777(1) …. 11.29 s 791A …. 10.6, 10.11, 11.6 s 791B …. 10.6 s 791C …. 2.8, 10.12 s 791D(1) …. 10.11

s 791D(2) …. 10.11 s 791EA(2) …. 6.57 s 792A …. 10.13, 10.14, 10.15, 10.19, 11.9, 11.21, 11.40 s 792A(a) …. 10.16, 10.21, 11.8, 11.9 s 792A(b) …. 10.16 s 792A(c) …. 10.17 s 792A(d) …. 10.17 s 792A(e) …. 10.17, 10.38 s 792A(h) …. 10.17 s 792A(i) …. 10.17 s 792B …. 2.43, 10.14, 10.17 s 792C …. 2.48, 10.17 s 792D …. 10.17 s 792E …. 10.17 s 792F …. 10.17 s 792G …. 10.17 s 792I …. 10.17 s 793A …. 1.22, 11.8, 11.40 s 793A(1) …. 11.40 s 793A(1)–(2) …. 10.18 s 793A(3) …. 10.18 s 793A(4) …. 10.18 s 793B …. 10.18, 11.5, 11.24, 11.29, 11.31, 11.32 s 793B(1) …. 11.24 s 793B(2) …. 11.24 s 793B(2)–(3) …. 10.18

s 793C …. 10.18, 11.5, 11.24, 11.25, 11.26, 11.28, 11.29, 11.31, 11.33, 11.36, 12.2, 12.3, 12.8, 12.12, 12.16, 12.17, 12.19, 12.21, 12.22, 12.24, 12.26, 12.31, 12.33, 12.34, 12.35, 12.36 s 793C(1) …. 11.24 s 793C(2) …. 11.24, 12.10 s 793C(5) …. 11.28 s 793C(6) …. 11.28 s 793D …. 11.9 s 793E …. 2.8, 10.18 s 793E(3) …. 10.14 s 793E(4) …. 11.9 s 794A …. 2.8 s 794A(1) …. 10.19 s 794A(2) …. 10.19 s 794A(3) …. 10.19 s 794B …. 2.8 s 794D …. 10.19 s 794D(1) …. 10.19 s 794D(2) …. 10.19, 17.29 s 794D(3) …. 10.19 s 794D(4) …. 10.19 s 794D(6) …. 10.19 s 794E …. 10.19 s 795A …. 11.6 s 795A(1) …. 10.13 s 795B …. 2.8, 10.13, 10.18, 11.6, 11.26, 11.40 s 795B(1) …. 10.13

s 795B(1)(a)–(d) …. 11.40 s 795B(1)(c) …. 11.8 s 795B(1)(h) …. 11.6 s 795B(2) …. 10.13, 10.14, 10.18, 10.21, 10.37, 11.6, 11.24 s 795C …. 11.6 s 795D …. 10.10 s 796A …. 2.8, 10.20 s 796A(1) …. 10.20 s 796A(3) …. 10.20 s 796A(4) …. 10.20 ss 797B–797C …. 10.20 s 797B(d) …. 10.14 s 797C …. 2.8 s 797G …. 10.20 s 798A …. 11.9 s 798A(1) …. 10.13, 10.18 s 798A(2) …. 10.13 s 798A(2)(g) …. 11.26 s 798C …. 10.21 s 798C(2) …. 10.21 s 798C(3) …. 10.21 s 798C(4) …. 10.21 s 798C(7) …. 10.21 s 798E(1) …. 10.21 s 798E(2) …. 10.21 s 798F …. 11.7

s 798G …. 1.22, 2.9, 2.17, 2.22 s 798G(1) …. 11.7 s 798G(2) …. 11.7 s 798G(3) …. 2.9, 11.7 s 798G(4) …. 2.9, 11.7 s 798G(5) …. 11.7 s 798H …. 2.85, 11.7 s 798H(1) …. 11.7 s 798J …. 2.9 s 798J(5) …. 2.9 s 798K …. 2.22 s 820A …. 10.24 s 820B …. 10.24 s 820C …. 10.25 s 820D …. 10.25 s 820D(2) …. 10.25 s 821A …. 10.28 s 821A(aa) …. 10.29 s 821A(a) …. 10.29 s 821A(b) …. 10.30 s 821A(c) …. 10.30 s 821A(d) …. 10.30 s 821A(e)–(f) …. 10.30 s 821A(g)–(h) …. 10.30 s 821B …. 2.44, 10.30 s 821B(3) …. 10.27

s 821BA …. 10.30 s 821C …. 2.48, 10.30 s 821D …. 10.30 s 821D(3) …. 10.27 s 821E …. 10.30 s 821F …. 10.27 s 822A …. 1.23 s 822A(1)–(2) …. 10.31 s 822B …. 10.31 s 822C …. 10.31 s 822D–822E …. 10.31 s 822E …. 2.8, 10.31 s 823A(1) …. 10.32 s 823A(2)–(3) …. 10.32 s 823D(1) …. 10.32 s 823D(3) …. 10.32 s 823D(4) …. 10.32 s 823D(5) …. 10.32 s 823D(5)–(6) …. 10.32 s 823D(8) …. 10.32 s 823E …. 10.32 s 824A(1) …. 10.26 s 824A(2) …. 10.26 s 824B …. 2.8, 10.26 s 824B(1) …. 10.26 s 824B(2) …. 10.27, 10.30, 10.31

s 825A …. 2.8, 10.33, 10.34 s 825A(1) …. 10.34 s 825A(3) …. 10.34 s 825A(4) …. 10.34 ss 826B–826C …. 10.33, 10.35 s 826B(d) …. 10.27 s 826C …. 2.8, 10.35 s 826G …. 10.35 s 827A(1) …. 10.31, 10.34 s 827A(1)–(2) …. 10.26, 10.35 s 827A(2) …. 10.26 s 827D …. 10.29 s 849 …. 13.18, 14.33 s 850 …. 14.33 s 850B …. 10.36 s 850B(a) …. 11.39 s 850C …. 10.36 s 850D …. 10.36 s 850E …. 10.36 s 851 …. 13.18 ss 851B–851D …. 10.36 s 851F …. 10.36 s 852B …. 10.36 s 853A …. 10.36 ss 853A–853G …. 11.6 s 853B …. 11.6

s 853C …. 1.24, 10.36, 11.6 s 853C(2) …. 10.36 s 853C(3) …. 10.36 s 853D …. 10.36 s 853F …. 10.36 s 880A …. 10.37 s 881A …. 10.17, 10.37, 10.38 s 881B …. 10.13 s 881D(2) …. 10.13 s 882A(1) …. 10.38 s 882A(2) …. 10.13 s 883A …. 10.38 s 883B(1) …. 10.38 s 883B(2) …. 10.38 s 883B(3) …. 10.38 s 885B …. 10.38 ss 885B–885I …. 10.38 s 885C …. 10.38 s 885D …. 10.38 s 885E …. 10.38 s 887A …. 10.40 ss 888A–888E …. 10.40 s 888C …. 10.40 s 888D …. 10.40 s 888E …. 10.40 s 888H …. 10.41

s 888H(1) …. 10.41 s 888H(2) …. 10.41 s 888H(3) …. 10.41 s 889A …. 1.22 s 890A …. 1.22 s 892D …. 10.42 s 892E(1) …. 10.42 s 892E(2) …. 10.42 s 892F …. 10.42 s 892F(1) …. 10.42 s 892F(2) …. 10.42 s 900A …. 10.44 s 901A …. 2.17 ss 901A–901B …. 10.45 s 901B …. 2.9 s 901E …. 2.85, 10.45 s 901F …. 2.22 s 901G …. 10.45 s 901H …. 10.45 s 901K …. 2.9, 2.22, 10.45 s 901L …. 2.9, 10.45 s 902A …. 10.46 s 903A …. 2.22 s 903D …. 2.85 s 903E …. 2.22 s 903J …. 2.9

s 904A …. 10.46 s 904B …. 10.46 ss 904C–904E …. 10.46 s 904D …. 2.48 s 904F …. 2.8, 10.46 s 904G …. 10.46 s 905C …. 2.8 s 907D …. 2.31, 2.32, 2.36 s 911(2A)–(2E) …. 14.66 s 911A …. 1.27, 6.74, 13.2, 13.8, 13.13, 13.14 s 911A(1) …. 2.37, 13.2 s 911A(2) …. 13.9, 13.10, 13.37 s 911A(2)(a) …. 13.10 s 911A(2)(b) …. 13.10 s 911A(2)(ba) …. 13.10 s 911A(2)(c) …. 13.10 s 911A(2)(d) …. 10.10, 10.24, 13.10 s 911A(2)(ea) …. 13.10 s 911A(2)(ea)–(ec) …. 13.10 s 911A(2)(eb) …. 13.10 s 911A(2)(ec) …. 13.10 s 911A(2)(ed)–(eg) …. 13.10 s 911A(2)(f) …. 13.10 s 911A(2)(g) …. 13.10 s 911A(2)(h) …. 13.10 s 911A(2)(i)–(l) …. 13.10

s 911A(2)(j) …. 6.13 s 911A(2)(l) …. 2.19, 2.31 s 911A(2A)–(2E) …. 13.14 s 911A(3) …. 13.10 s 911A(4) …. 13.10 s 911B …. 1.27, 13.12, 13.37 s 911B(1) …. 13.12 s 911B(1)(a) …. 13.37 s 911B(1)(b) …. 13.37 s 911B(1)(c) …. 13.12, 13.37 s 911B(1)(d) …. 13.37 s 911B(1)(e) …. 13.37 s 911B(3) …. 13.12 s 911C …. 13.48 s 911C(a) …. 13.39 s 911C(b) …. 13.39 s 911C(c)–(d) …. 13.39 s 911D …. 13.14 s 911D(1) …. 13.13 s 911D(2) …. 13.13 s 912A …. 13.16, 13.23, 13.36, 13.53, 13.57, 13.58, 16.23 s 912A(1)(a) …. 13.16, 14.55 s 912A(1)(aa) …. 13.21, 13.22, 14.13 s 912A(1)(b) …. 13.24 s 912A(1)(b)–(c) …. 13.24 s 912A(1)(ca) …. 13.25

s 912A(1)(d) …. 13.26 s 912A(1)(e) …. 13.27 s 912A(1)(f) …. 13.27 s 912A(1)(g) …. 6.47, 13.28, 13.34 s 912A(1)(h) …. 13.28 s 912A(1)(j) …. 13.28 s 912A(2) …. 13.28, 13.34 s 912A(2)(a) …. 13.34 s 912A(2)(b) …. 13.34 s 912B …. 13.36 s 912B(1) …. 13.35 s 912B(2) …. 13.35 s 912B(3) …. 13.35 s 912C …. 2.48, 2.59, 13.36 s 912C(1) …. 13.36 s 912C(2) …. 13.36 s 912C(3) …. 13.36 s 912D …. 2.46, 13.36 s 912D(1)(b) …. 13.36 s 912D(1B) …. 13.36 s 912D(2) …. 13.36 s 912E …. 2.48 s 912E(1) …. 13.36 s 912E(2) …. 13.36 s 913A …. 13.16 s 913A(a) …. 13.16

s 913A(b) …. 13.16 s 913B …. 13.16 s 913B(1)(a) …. 13.16 s 913B(1)(b) …. 13.16 s 913B(1)(c) …. 13.16 s 913B(1)(ca) …. 13.16 s 913B(1)(d) s 913B(2) …. 13.16, 13.53 s 913B(2)–(4) …. 13.16 s 913B(3) …. 13.16, 13.53 s 913B(3)(b) …. 13.16 s 913B(4) …. 13.16 s 913B(5) …. 2.63, 13.16 s 913C …. 13.16 s 914A(1) …. 13.37 s 914A(3) …. 13.37 s 914A(4) …. 13.37 s 914A(5)(a)–(b) …. 13.37 s 914A(5A) …. 13.37 s 914A(6)–(7) …. 13.37 s 914A(8) …. 13.37 s 915A …. 2.101, 13.51 s 915A–915G …. 13.51 s 915B …. 2.101, 13.53, 13.58 s 915B(1) …. 13.52 s 915B(2) …. 13.52

s 915B(3)(a) …. 13.52 s 915B(3)(c)–(d) …. 13.52 s 915B(4) …. 13.52 s 915C …. 2.23, 2.63, 2.101, 13.53 s 915C(1)(a)–(aa) …. 13.53 s 915C(1)(b) …. 13.53 s 915C(1)(c)–(d) …. 13.53 s 915C(2) …. 13.53 s 915C(4) …. 2.63, 13.53, 13.54 s 915E …. 13.53 s 915F(1) …. 13.53 s 915F(2) …. 13.53 s 915G …. 13.53 s 915H …. 13.53 s 915I(1)(a) …. 13.54 s 915I(1)(b) …. 13.54 s 915I(2) …. 13.54 s 915I(3) …. 13.54 s 916A(1)–(2) …. 13.40 s 916A(3) …. 13.40 s 916A(4) …. 13.40 s 916B …. 13.41, 13.44 s 916B(4)–(5) …. 13.41 s 916B(5A) …. 13.41 s 916B(6) …. 13.41 s 916B(7) …. 13.41

s 916B(8) …. 13.41 s 916C(1) …. 13.42 s 916C(2) …. 13.42 s 916C(3) …. 13.42 s 916D(1) …. 13.43 s 916D(2)–(2A) …. 13.43 s 916D(3) …. 13.43 s 916E(1) …. 13.43 s 916E(2) …. 13.43 s 916F …. 2.46, 13.44, 13.65 s 916F(1)–(2) …. 13.44 s 916F(1A) …. 13.44 s 916F(3) …. 13.44 s 916F(4) …. 13.44 s 916G …. 13.45 s 916G(1) …. 13.45 s 916G(2) …. 13.45 s 916G(5) …. 13.45 s 917A(1) …. 13.47 s 917A(2) …. 13.47 s 917A(3) …. 13.47 s 917B …. 13.47 ss 917B–917E …. 13.49 s 917C …. 14.49 s 917C(2) …. 13.48 s 917C(3)–(4) …. 13.48

s 917C(3)(c) …. 13.47 s 917C(3)(c)(i) …. 13.48 s 917C(3)(c)(ii) …. 13.48 s 917C(3)(d) …. 13.48 s 917C(3)(e) …. 13.48 s 917C(4) …. 13.48 s 917D …. 13.48, 14.49 s 917E …. 13.47 s 917F …. 14.49 s 917F(1)–(2) …. 13.49 s 917F(3) …. 13.49 s 917F(4) …. 13.47, 13.49 s 917F(5) …. 13.49 s 917F(6) …. 13.49 s 917F(7) …. 13.49 s 920A …. 2.23 s 920A–920F …. 13.56, 16.14 s 920A(1) …. 13.57 s 920A(1)(a)–(ba) …. 13.57 s 920A(1)(bb)–(c) …. 13.57 s 920A(1)(d) …. 13.57 s 920A(1)(da)–(f) …. 13.57 s 920A(1)(e) …. 13.57 s 920A(1)(g)–(h) …. 13.57 s 920A(1) …. 13.57 s 920A(1A) …. 13.57

s 920A(2) …. 2.102, 13.58 s 920A(3) …. 13.58 s 920B(1) …. 13.56 s 920B(2) …. 13.59 s 920B(3) …. 13.56, 13.60 s 920B(i) …. 2.102 s 920C …. 13.56 s 920C(1) …. 13.56 s 920C(2) …. 13.56 s 920D(1)–(2) …. 13.60 s 920F …. 2.102 s 920F(1) …. 13.59 s 920F(2) …. 13.60 s 921A …. 13.63 s 921A(1)–(2) …. 13.63 s 921A(4) …. 13.63 s 922A …. 13.27, 13.65 s 922B(1)–(2) …. 13.65 ss 922C–922P …. 13.65 s 923A(2) …. 13.66 s 923B …. 13.66, 14.25 s 923B(1) …. 13.66 s 923B(3)(a) …. 13.66 s 923B(3)(b) …. 13.66 s 923B(3)(c)–(e) …. 13.66 s 924A …. 13.67

s 925A …. 13.2, 13.68, 13.71 s 925A(1) …. 13.68 s 925A(2) …. 13.68 s 925A(3) …. 13.68 s 925A(4) …. 13.68, 13.71 s 925A(5) …. 13.68 s 925B …. 13.68, 13.70, 13.71 s 925C …. 13.69, 13.71 s 925C(4) …. 13.69 s 925D …. 13.70 s 925E …. 13.71 s 925F …. 13.71 s 925G …. 13.71 s 925H …. 13.71 s 925I …. 13.70 s 926A …. 2.31, 2.32, 2.36 s 926B …. 6.17 s 926B(1)(c) …. 13.33 s 940B …. 14.21 s 940C …. 14.21 s 941A …. 14.21 s 941B …. 14.21 s 941C …. 14.22 s 941C(1) …. 14.22 s 941C(2) …. 14.22 s 941C(3) …. 14.22

s 941C(4) …. 14.22 s 941C(6) …. 14.22 s 941C(7) …. 14.22 s 941C(8) …. 14.22 s 941D(1) …. 14.23 s 941D(2) …. 14.23 s 941D(3) …. 14.23 s 941D(4) …. 14.23 s 941E …. 14.24 s 941F …. 14.24 s 942(f) …. 14.23 s 942(g) …. 14.23 s 942(i) …. 14.23 s 942B …. 14.25 ss 942B–942C …. 13.18, 14.13 s 942B(2)(a) …. 14.22 s 942B(2)(a)–(b) …. 14.25 s 942B(2)(c) …. 14.25 s 942B(2)(d) …. 14.25 s 942B(2)(e) …. 14.22, 14.23, 14.25 s 942B(2)(e)–(f) …. 13.18 s 942B(2)(f) …. 14.22, 14.23, 14.25 s 942B(2)(g) …. 14.25 s 942B(2)(h) …. 14.22, 14.25 s 942B(2)(i) …. 14.23, 14.25 s 942B(2)(j) …. 14.25

s 942B(2)(k) …. 14.25 s 942B(3) …. 14.25 s 942B(5) …. 14.25 s 942B(6) …. 14.25 s 942B(8) …. 14.25 s 942C …. 14.26 s 942C(2)(a) …. 14.22 s 942C(2)(c) …. 14.22, 14.26 s 942C(2)(f) …. 14.22, 14.26 s 942C(2)(f)–(g) …. 13.18 s 942C(2)(g) …. 14.22, 14.26 s 942C(2)(i) …. 14.22 s 942E …. 14.27 s 943A(1) …. 14.28 s 943A(2) …. 14.28 s 943D …. 14.28 s 943E …. 14.28 s 943F …. 14.28 s 945A …. 14.54 s 945B …. 14.58 s 946A …. 14.30 s 946A(1) …. 14.30 s 946A(2) …. 14.30 s 946AA …. 14.31 ss 946AA–946B …. 14.31 s 946B(1) …. 14.25, 14.31

s 946B(3) …. 14.31 s 946B(3A) …. 14.31 s 946B(5) …. 14.31 s 946B(6) …. 14.31 s 946B(7) …. 14.31 s 946C(1) …. 14.32 s 946C(2) …. 14.32 s 946C(3) …. 14.32 s 947B …. 13.20, 14.31, 14.33 ss 947B–947C …. 14.13 s 947B(2)(a) …. 14.33 s 947B(2)(b) …. 14.33 s 947B(2)(c) …. 14.33 s 947B(2)(d) …. 14.33 s 947B(2)(d)–(e) …. 14.31, 14.32 s 947B(2)(e) …. 14.33 s 947B(2)(g) …. 14.33 s 947B(3) …. 14.33 s 947B(5) …. 14.33 s 947C …. 13.20, 14.31, 14.34 s 947C(2)(d) …. 14.34 s 947C(2)(e) …. 14.34 s 947C(2)(e)–(f) …. 14.31, 14.32 s 947C(2)(f) …. 14.34 s 947C(3) …. 14.34 s 947D …. 14.32, 14.33

s 947D(1) …. 14.35 s 947D(2)(a) …. 14.35 s 947D(2)(b)–(c) …. 14.35 s 947D(3) …. 14.35 s 949A …. 14.22, 14.36, 14.48, 14.49 s 949A(2) …. 14.29, 14.36 s 949A(3) …. 14.36 s 949A(4) …. 14.36 s 949A(5) …. 14.36 s 949B …. 14.48, 14.49 s 951A …. 14.37 s 951B …. 2.19, 2.31, 2.36 s 951B(1) …. 14.38 s 951B(2) …. 2.36 s 951B(3) …. 14.38 s 951C …. 6.17 s 951C(1)(c) …. 13.33 s 952B …. 14.41, 14.48 s 952C(1) …. 14.40 s 952C(3) …. 14.40 s 952C(4) …. 14.40 s 952D(1) …. 14.41, 14.41, 14.42 s 952D(1)–(2) …. 14.41 s 952D(2) …. 14.41 s 952E(1) …. 14.42 s 952E(2) …. 14.42

s 952E(3) …. 14.42 s 952E(4) …. 14.42 s 952E(5) …. 14.42 s 952E(6) …. 14.42 s 952F …. 14.44 s 952F(2) …. 14.43 s 952F(3) …. 14.43 s 952F(4) …. 14.43 s 952G …. 14.44 s 952G(2) …. 14.44 s 952G(3) …. 14.44 s 952G(4) …. 14.44 s 952G(5) …. 14.44 s 952G(6) …. 14.44 s 952G(7) …. 14.44 s 952G(8)–(10) …. 14.44 s 952H …. 14.45 ss 952I–952J …. 14.46 s 952K …. 14.46 s 952L …. 14.46 s 952M …. 14.46 s 953A …. 8.3, 8.10, 8.35, 9.1 s 953A(1) …. 14.48 s 953B …. 14.47, 14.48, 14.49, 14.50 s 953B(2) …. 14.49, 14.51, 14.52 s 953B(3) …. 14.49

s 953B(3)–(3A) …. 14.49 s 953B(3)(a) …. 14.49 s 953B(3)(b) …. 14.49 s 953B(3A) …. 14.49 s 953B(4) …. 14.49 s 953B(5) …. 14.51 s 953B(6) …. 14.51 s 953C(1) …. 14.52 s 953C(2) …. 14.52 s 960A …. 14.54 s 960B …. 14.54, 14.59 s 961 …. 14.54 s 961B …. 14.35, 14.58 s 961B(1) …. 14.55, 14.56 s 961B(2) …. 14.56 s 961B(2)(a) …. 14.56 s 961B(2)(a)–(f) …. 14.56 s 961B(2)(b) …. 14.56 s 961B(2)(c) …. 14.56 s 961B(2)(d) …. 14.56 s 961B(2)(e) …. 14.56 s 961B(2)(f) …. 14.56 s 961B(2)(g) …. 14.56 s 961B(3)–(4) …. 14.57 s 961C …. 14.56 s 961E …. 14.56

s 961G …. 14.56, 14.58 s 961H …. 14.33, 14.58 s 961J …. 14.56, 14.59 s 961K …. 2.85, 14.59 s 961L …. 14.59 s 961Q …. 2.85, 14.59 s 962A …. 14.60 s 962A(3) …. 14.60 s 962A(4)–(5) …. 14.60 s 962CA …. 14.62 s 962E(1) …. 14.60 s 962E(2) …. 14.60 s 962F …. 14.61, 14.62 s 962G …. 14.61 s 962H …. 14.61 s 962J …. 14.61 ss 962K–962L …. 14.62 s 962K(1) …. 14.62 s 962K(2) …. 14.62 s 962L …. 14.62 s 962L(1) …. 14.62 ss 962M–962N …. 14.62 s 962P …. 2.85, 14.63 s 962S …. 2.85 s 963A …. 14.64 ss 963A–963D …. 14.64

ss 963B–963E …. 14.64 s 963B(1)(d)(ii) …. 14.64 s 963B(1)(e) …. 14.64 s 963C(e)(ii) …. 14.64 s 963E …. 2.85, 14.64 s 963F …. 2.85, 14.64 s 963G …. 2.85 ss 963G–963H …. 14.64 s 963J …. 2.85, 14.64 s 963K …. 2.85, 14.64 s 963L …. 14.64 s 964 …. 14.64 s 964A …. 2.85, 14.64 s 964D …. 2.85 ss 964D–964E …. 14.64 s 964E …. 2.85 s 964F …. 14.64 s 964G …. 14.64 s 965 …. 2.85, 14.63 s 981A(1) …. 14.66 s 981A(2) …. 14.66 s 981A(3) …. 14.66 s 981B …. 14.67, 14.68, 14.69, 14.70, 14.72, 14.76 s 981B(1)(a) …. 14.67 s 981B(1)(b) …. 14.67 s 981B(1)(c) …. 14.67

s 981B(1)(c)–(d) …. 14.67 s 981B(2) …. 14.67 s 981C …. 14.67, 14.68 s 981D …. 14.69 s 981E …. 14.70 s 981F …. 14.70 s 981G …. 14.70 s 981H(1) …. 14.70 s 981H(3) …. 14.70 s 982A(1) …. 14.71 s 982A(2) …. 14.71 s 982B …. 14.71, 14.72, 14.76 s 982B(1) …. 14.71 s 982B(2) …. 14.71 s 982C …. 14.71 s 982C(1) …. 14.71 s 982C(2) …. 14.71 s 982D …. 14.71 s 983A …. 2.96, 14.72 ss 983A–983E …. 14.72 s 983A(2) …. 14.72 s 983A(3) …. 14.72 s 983B …. 14.72 s 983C …. 14.72 s 983D …. 14.72 s 983E(1) …. 14.72

s 983E(1)(c) …. 14.13 s 983E(2) …. 14.72 s 984B …. 14.73 s 984B(1) …. 14.73 s 984B(2) …. 14.73 s 985B(1) …. 14.74 s 985B(2) …. 14.74 s 985B(3) …. 14.74 s 985C(2) …. 14.74 s 985E …. 2.85 s 985H …. 2.85 s 985J …. 2.85 s 985K …. 2.85 s 985L …. 2.85 s 985M …. 2.85 s 987A(2) …. 14.75 s 988A(1) …. 14.76 s 988B …. 14.76 s 988E …. 14.76 s 989B …. 14.76 s 989D …. 14.76 s 990A …. 14.77 ss 990B–990H …. 14.77 s 990B(6) …. 14.77 s 990B(1)–(2) …. 14.77 s 990C …. 14.77

s 990F …. 14.77 s 990G …. 14.77 s 990I …. 14.77 s 990J …. 14.77 s 990K …. 2.47 s 990K(1) …. 14.77 s 990K(2) …. 14.77 s 990L …. 2.47 s 991A …. 1.34, 4.45, 14.78 s 991A(1) …. 14.78 s 991A(2) …. 14.78 s 991A(3) …. 14.78 s 991B …. 14.79 s 991B(1) …. 14.79 s 991B(2) …. 11.21, 14.79 s 991B(3) …. 14.79 s 991C(a) …. 14.80 s 991C(b) …. 14.81 s 991C(c) …. 14.82 s 991D …. 14.83 s 991E …. 11.18, 14.84 s 991E(1) …. 11.18, 14.84 s 991E(1)(d) …. 11.18 s 991E(3) …. 14.84 s 991E(4) …. 14.84 s 991E(5) …. 14.84

s 991E(6) …. 14.84 s 991E(7) …. 14.84 s 991F …. 14.85 s 991F(1) …. 14.85 s 991F(2) …. 14.85 s 991F(3) …. 14.85 s 991F(4) …. 14.85 s 992A …. 6.4, 6.72, 14.86 s 992A(1) …. 6.72, 14.86 s 992A(3) …. 6.72, 14.86 s 992A(3A) …. 14.86 s 992A(3A)–(3B) …. 14.86 s 992A(4) …. 14.86 s 992AA …. 6.4, 6.72, 14.86 s 992AA(2) …. 14.86 s 992B …. 2.19, 2.31, 2.36, 14.86 s 992B(2) …. 2.36 s 992C …. 6.17 s 992C(1)(c) …. 13.33 s 995 …. 8.36, 8.44 s 996 …. 8.19 s 997 …. 16.7 s 997(7) …. 16.9 s 998 …. 16.12 s 998(1) …. 16.12, 16.15 s 998(5) …. 16.15

s 998(3) …. 16.12, 16.15 s 999 …. 8.60 s 1000 …. 8.64, 8.66 s 1002A …. 17.10, 17.16 s 1002B(2)(a) …. 17.25 s 1002G …. 17.10, 17.13, 17.16, 17.25, 17.26, 17.28, 17.30, 17.32 s 1008 …. 8.29 s 1008(4) …. 8.29 s 1009 …. 8.29 s 1009(3) …. 8.29 s 1010A …. 1.17, 6.2, 6.3, 6.5 s 1010B …. 1.17, 6.5, 6.27 s 1010B(1) …. 6.10 s 1010B(2) …. 6.10 s 1011 …. 8.26 s 1011A …. 6.26 s 1011A(1) …. 6.26 s 1011A(2) …. 6.26 s 1011B …. 6.13, 6.33 s 1012(8A) …. 6.29 s 1012A …. 6.12, 6.14, 6.15, 6.26, 6.27, 6.34, 8.14 s 1012B …. 6.12, 6.15, 6.26, 6.27, 6.34 s 1012B(3)(a)(i) …. 6.15 s 1012B(3)(a)(ii) …. 6.15 s 1012B(3)(a)(iii) …. 6.15 s 1012B(4) …. 6.15

s 1012B(6) …. 6.31 s 1012B(8) …. 6.31 s 1012C …. 6.12, 6.16, 6.26, 6.27, 6.34, 6.53, 6.68 s 1012C(6) …. 6.16 s 1012C(8) …. 6.16 s 1012C(9) …. 6.16 s 1012D …. 6.12, 6.27, 6.28, 6.29 s 1012D–1012G …. 6.12 s 1012D(1) …. 6.13, 6.15, 6.29 s 1012D(2B) …. 6.29 s 1012D(3) …. 6.29 s 1012D(5) …. 6.29, 6.31 s 1012D(6) …. 6.29 s 1012D(7) …. 6.29 s 1012D(8) …. 6.31 s 1012D(9A) …. 6.29 s 1012D(9B) …. 6.29 s 1012D(9J) …. 6.29 s 1012D(10) …. 6.29 s 1012DAA …. 6.27, 6.28, 6.30 s 1012DAA(2) …. 6.30 s 1012DAA(2)(f) …. 6.30 s 1012DAA(3) …. 6.30 s 1012DAA(7) …. 6.30 s 1012DAA(9) …. 6.30 s 1012DA …. 6.12, 6.27, 6.28, 6.31

s 1012DA(2) …. 6.31 s 1012DA(6)(c)(i) …. 6.31 s 1012DA(8)(d)(i) …. 6.31 s 1012E …. 6.12, 6.27, 6.28, 6.32, 6.69, 8.6 s 1012E(2) …. 6.67 s 1012E(5) …. 6.32 s 1012E(8) …. 6.32 s 1012E(9) …. 6.32 s 1012F …. 6.12, 6.27 s 1012G …. 6.12, 6.27, 6.34, 6.45, 8.31 s 1012IA …. 14.64 s 1012J …. 6.42 s 1012K …. 6.11 s 1013A …. 6.13, 6.33, 8.31 s 1013A(3) …. 6.33 s 1013A(3A) …. 6.33 s 1013B …. 6.42, 6.45, 8.32, 9.4 s 1013C …. 6.42, 8.32, 9.4 s 1013C(1) …. 6.56, 6.57 s 1013C(1)(b) …. 6.42 s 1013C(2) …. 6.45, 6.51, 6.52, 6.53 s 1013C(2)(b) …. 6.53 s 1013C(3) …. 5.28, 6.42 s 1013D …. 6.42, 6.45, 6.46, 6.51, 6.53, 6.54, 6.56, 6.57 s 1013D(1)(a) …. 6.45 s 1013D(1)(b) …. 6.45

s 1013D(1)(c) …. 6.45, 6.46, 6.51 s 1013D(1)(d) …. 6.45 s 1013D(1)(e) …. 6.45 s 1013D(1)(f) …. 6.45 s 1013D(1)(g) …. 6.45, 6.47 s 1013D(1)(h) …. 6.45 s 1013D(1)(i) …. 6.45, 6.48 s 1013D(1)(j) …. 6.45 s 1013D(1)(k) …. 6.45 s 1013D(1)(l) …. 6.45, 6.49 s 1013D(1)(m) …. 6.45 s 1013D(2A) …. 6.45, 6.49 s 1013D(4) …. 6.49 s 1013E …. 6.42, 6.51, 6.53, 6.54, 6.56, 6.57 s 1013F …. 6.29, 6.42, 6.45, 6.51, 6.52, 6.54 s 1013F(2)(f) …. 6.54 s 1013FA …. 6.42, 6.45, 6.51, 6.55 s 1013FA(3) …. 6.55 s 1013G …. 6.42, 8.32, 9.4 s 1013H …. 6.42, 6.50 s 1013I …. 6.42, 6.50 s 1013J …. 6.42, 6.50 s 1013K …. 6.42, 6.50, 6.53 s 1013L …. 6.35, 6.56, 6.57 s 1014E …. 6.12, 6.27, 8.32, 9.4 s 1014I …. 8.10, 8.12

s 1015B …. 6.38, 6.42, 6.58 s 1015C …. 6.35, 8.33 s 1015D …. 6.58 s 1015D(3) …. 6.56, 6.57 s 1015E …. 6.35 s 1016A …. 6.34, 6.59 s 1016B …. 6.58 s 1016C …. 6.61 s 1016D …. 6.61 s 1016E …. 6.61 s 1016E(2) …. 6.61, 6.62 s 1017A …. 6.3, 6.66, 8.31 s 1017B …. 6.3, 6.29 ss 1017BA–1017BE …. 6.3 s 1017C …. 6.3, 6.29 s 1017D …. 6.3, 6.29, 6.64 s 1017D(8) …. 6.29 s 1017DA …. 6.3 s 1017E …. 6.3, 6.60, 6.61 s 1017E(2A) …. 6.60 s 1017E(2C) …. 6.60 s 1017E(3) …. 6.60 s 1017E(4) …. 6.60 s 1017F …. 6.3, 6.5, 11.19, 6.63 s 1017F(2) …. 6.63 s 1017F(4) …. 6.63

s 1017F(5A) …. 6.63 s 1017F(5B) …. 6.63 s 1017F(8) …. 6.63 s 1017G …. 6.3, 6.47, 6.67 s 1017H(1) …. 6.37 s 1017H(2) …. 6.37 s 1018A …. 6.3, 6.68, 6.70 s 1018A(1) …. 6.67, 6.68, 6.70, 6.71 s 1018A(2) …. 6.67, 6.68, 6.70, 6.71 s 1018A(3) …. 6.71 s 1018A(4) …. 6.70, 6.71 s 1018A(5) …. 6.68 s 1018A(6) …. 6.68 s 1018B …. 6.3, 6.68, 6.69 s 1019A …. 6.3, 6.48 s 1019A(1)(a) …. 6.64 s 1019B …. 6.3, 6.64, 14.32 ss 1019C–1019K …. 6.4 s 1020A …. 6.4 ss 1020AB–1020AF …. 16.31 s 1020B …. 6.4, 16.31 s 1020B(1) …. 16.31 s 1020B(2) …. 16.31 s 1020B(3)(a) …. 16.31 s 1020B(3)(b) …. 16.31 s 1020B(4) …. 16.31

s 1020C …. 6.4 s 1020D …. 6.4 s 1020E …. 2.98 s 1020E(11) …. 6.67 s 1020F …. 2.19, 2.31, 2.36, 6.4 s 1020F(3) …. 2.36 s 1020G …. 6.4, 6.17 s 1020G(1)(c) …. 13.33 s 1021B(1) …. 8.32 s 1021C …. 8.31 s 1021D …. 8.6, 8.7, 8.31, 8.32, 8.33 s 1021D(1)(c)(i) …. 8.33 s 1021D(1)(c)(ii) …. 8.33 s 1021D(2)(c) …. 8.33 s 1021D(3) …. 8.33 s 1021E …. 8.7, 8.31, 8.32, 8.33 s 1021E(1) …. 8.34 s 1021E(2) …. 8.34 s 1021E(3) …. 8.33 s 1021E(4) …. 6.53, 8.33, 8.34 s 1021E(5) …. 8.33 s 1021F …. 8.31 s 1021FA …. 8.31 s 1021FB …. 8.31 s 1021G …. 8.31 s 1021H …. 8.31, 8.32

s 1021I …. 8.31 s 1021J …. 8.31 s 1021K …. 8.31 s 1021L …. 8.31 s 1021M …. 8.31 s 1021N …. 8.31 s 1021O …. 8.31 s 1021P …. 8.31 s 1022 …. 8.54 s 1022A …. 8.1, 8.10, 8.14, 8.35, 8.70, 9.2 s 1022A(1) …. 6.67 s 1022A(1)(a)–(c) …. 9.4 s 1022A(1)(c) …. 8.31 s 1022B …. 8.7, 9.4, 9.5, 9.6, 9.13 s 1022B(1)(a) …. 9.4 s 1022B(1)(aa) …. 9.4 s 1022B(1)(ab) …. 9.4 s 1022B(1)(ac) …. 9.4 s 1022B(1)(b) …. 9.4 s 1022B(1)(c) …. 8.6, 8.8, 8.34, 9.3, 9.4, 9.24 s 1022B(1)(c)(i) …. 9.13 s 1022B(1)(c)(ii) …. 9.13 s 1022B(1)(d) …. 9.4 s 1022B(1)(e) …. 9.4 s 1022B(2) …. 8.6, 8.8, 9.13, 9.24 s 1022B(2)(c) …. 9.3

s 1022B(2)(d) …. 9.3 s 1022B(3)–(5) …. 9.3, 9.13 s 1022B(3)(b)(i) …. 9.13 s 1022B(3)(b)(ii) …. 9.13 s 1022B(5) …. 9.13 s 1022B(7) …. 6.53, 8.8, 8.34, 9.24 s 1030 …. 4.14 s 1041A …. 2.85, 4.44, 16.3, 16.5, 16.6, 16.7, 16.8, 16.9, 16.12, 16.18, 16.20, 16.23 ss 1041A–1041D …. 8.64, 16.20, 16.19, 16.20 ss 1041A–1041G …. 16.28 s 1041B …. 2.85, 4.44, 11.21, 16.10, 16.11, 16.12, 16.13, 16.14, 16.18, 16.20, 17.34 s 1101B(1) …. 11.33, 16.13, 16.15 s 1041B(1A) …. 16.14, 16.15 s 1101B(2) …. 11.33 s 1041B(2)(a) …. 11.21, 16.15 s 1041B(2)(b) …. 16.16 s 1041B(3) …. 16.15 s 1041B(4) …. 16.15 s 1041C …. 2.85, 4.44, 16.17, 16.17, 16.18, 16.20 s 1041C(1) …. 16.17 s 1041C(2) …. 16.17 s 1041D …. 2.85, 4.44, 16.18, 16.20 s 1041E …. 4.44, 8.12, 8.13, 8.58, 8.59, 8.60, 8.61, 8.62, 8.63, 8.69, 9.3, 9.25, 13.47, 16.7, 16.17, 16.18, 16.20, 16.21, 16.22, 16.27 ss 1041E–1041G …. 16.26

ss 1041E–1041H …. 9.26, 16.27 ss 1041E–1041I …. 16.21 s 1041E(1) …. 8.12, 8.62 s 1041E(1)(a) …. 8.62 s 1041E(1)(b)(i) …. 8.62 s 1041E(1)(b)(ii) …. 8.62 s 1041E(1)(b)(iii) …. 8.62 s 1041E(1)(c) …. 8.62 s 1041E(2) …. 8.62 s 1041E(3) …. 8.62 s 1041F …. 4.44, 8.12, 8.13, 8.69, 8.58, 8.64, 8.65, 8.66, 9.3, 16.21, 16.24, 16.27 s 1041F(1) …. 8.12 s 1041F(1)(a) …. 8.67 s 1041F(1)(a)–(b) …. 16.24 s 1041F(1)(c) …. 16.24 s 1041G …. 4.44, 8.12, 8.13, 8.58, 8.69, 9.3, 16.21, 16.25, 16.27 s 1041G(1) …. 8.12 s 1041H …. 2.81, 4.44, 5.36, 8.3, 8.9, 8.10, 8.11, 8.14, 8.17, 8.31, 8.32, 8.35, 8.36, 8.37, 8.38, 8.42, 8.44, 8.47, 8.48, 8.49, 8.54, 9.1, 9.3, 9.4, 9.6, 9.15, 9.25, 9.28, 9.28, 9.39, 13.50, 14.7, 14.35, 16.21, 16.23, 16.27 s 1041H(1) …. 8.39 s 1041H(2) …. 8.38 s 1041H(3) …. 8.14 s 1041I …. 4.44, 8.3, 8.11, 8.12, 8.13, 8.36, 8.42, 8.57, 8.58, 8.60, 8.63, 8.69, 8.70, 9.1, 9.2, 9.14, 9.20, 9.23, 9.24, 9.26, 9.39, 16.27 s 1041I(1) …. 9.3, 9.20, 9.26, 16.27

s 1041I(1B) …. 9.25 s 1041I(4) …. 16.27 s 1041IH …. 8.9, 8.10, 8.14, 8.15, 8.38 s 1041IH(1) …. 8.38 s 1041K …. 8.10, 8.14 s 1042A …. 17.8, 17.9, 17.10, 17.16, 17.17, 17.19, 17.29 s 1042B …. 17.14 s 1042C …. 7.14, 17.8, 17.48 s 1042C(1)(a) …. 17.24, 17.25 s 1042C(1)(b) …. 17.24, 17.26 s 1042C(1)(b)(i) …. 17.24 s 1042C(1)(b)(ii) …. 17.26 s 1042C(1)(c) …. 17.24, 17.27 s 1042D …. 17.8, 17.17, 17.27 s 1042E …. 17.29 s 1042F …. 17.28 s 1042G …. 17.21 s 1042G(1) …. 17.21 s 1042G(1)(a) …. 17.16, 17.21 s 1042G(1)(b) …. 17.21 s 1042G(1)(c) …. 17.21 s 1042G(1)(d) …. 17.21 s 1042G(2) …. 17.21 s 1042H …. 17.33 s 1042H(1) …. 17.22 s 1042H(1)(a) …. 17.22

s 1042H(1)(b) …. 17.22 s 1042H(1)(c) …. 17.22 s 1042H(1)(d) …. 17.22 s 1042H(2) …. 17.22 s 1043A …. 1.38, 2.85, 17.9, 17.10, 17.11, 17.12, 17.13, 17.14, 17.17, 17.18, 17.21, 17.24, 17.25, 17.27, 17.28, 17.30, 17.32, 17.33, 17.41, 17.42, 17.50 s 1043A(1) …. 17.9, 17.13, 17.21, 17.22, 17.27, 17.28, 17.29, 17.30, 17.31, 17.32, 17.33, 17.34, 17.35, 17.36, 17.37, 17.38, 17.39, 17.40, 17.41, 17.42, 17.43, 17.48 s 1043A(1)(c) …. 17.28, 17.33, 17.41 s 1043A(1)(d) …. 17.28, 17.30, 17.33, 17.41 s 1043A(2) …. 17.27, 17.29, 17.30, 17.32, 17.37, 17.38, 17.39, 17.41, 17.42, 17.48 s 1043A(3) …. 17.37 s 1043B …. 17.31, 17.38, 17.41 s 1043C …. 17.10, 17.38, 17.41 s 1043C(1)(a)–(b) …. 17.32 s 1043C(1)(c) …. 17.32 s 1043C(2)(a) …. 17.32 s 1043C(2)(b) …. 17.32 s 1043D …. 17.38, 17.41 s 1043E …. 17.38, 17.41 s 1043F …. 17.21, 17.33, 17.36, 17.38, 17.41 ss 1043F–1043G …. 17.8 s 1043G …. 17.22, 17.33, 17.38, 17.41 s 1043G(1) …. 17.22 s 1043G(2) …. 17.22, 17.33

s 1043H …. 17.28, 17.34, 17.38, 17.41 ss 1043H–1043J …. 17.36 s 1043I …. 17.34, 17.35, 17.41 ss 1043I–1043J …. 17.8, 17.38 s 1043J …. 17.34, 17.35, 17.41 s 1043K …. 11.20, 17.8, 17.36, 17.38, 17.41 s 1043L …. 17.43, 17.44, 17.48 s 1043L(1) …. 17.43 s 1043L(2) …. 17.49 s 1043L(3) …. 17.40, 17.45, 17.46, 17.47 s 1043L(4) …. 17.46, 17.47 s 1043L(5) …. 17.47, 17.49 s 1043L(5)(a) …. 17.47 s 1043L(5)(b) …. 17.47 s 1043L(6) …. 17.44, 17.47 s 1043L(7) …. 17.48 s 1043L(8)–(9) …. 17.49 s 1043M …. 17.41, 17.48 s 1043M(1) …. 17.38, 17.41 s 1043M(2)(a) …. 17.39 s 1043M(2)(b) …. 17.21, 17.22, 17.32, 17.40 s 1043M(3)(a) …. 17.39 s 1043M(3)(b) …. 17.40 s 1043N …. 17.32, 17.39, 17.40, 17.41 s 1043O …. 17.50 s 1044A …. 8.9, 8.64

s 1044B …. 8.9 s 1075A …. 2.19, 2.31, 2.36 s 1077(a) …. 4.43 s 1078(1) …. 4.43 s 1082 …. 4.43 s 1101A …. 2.22 s 1101B …. 2.96, 4.51, 8.72, 10.18, 10.31, 11.7, 11.28, 11.29, 11.33, 11.34, 12.12, 12.16, 12.31, 12.34, 12.35, 12.36, 12.37, 12.38, 13.28, 13.64, 13.72, 14.87, 16.28, 16.31 s 1101B(1)(a) …. 12.35 s 1101B(1)(b) …. 12.35 s 1101B(1)(d) …. 12.10 s 1101B(4) …. 11.33, 12.38 s 1101B(4)(a) …. 11.33, 13.64 s 1101B(4)(b) …. 11.33 s 1101B(4)(c) …. 11.33 s 1101B(4)(d) …. 11.33 s 1101B(4)(e) …. 11.33 s 1101B(4)(e)–(f) …. 13.64 s 1101B(4)(f) …. 11.33 s 1101B(4)(g) …. 11.33, 13.64 s 1101B(4)(h) …. 11.33, 13.64 s 1101B(4)(i) …. 11.33 s 1101B(4)(i)–(j) …. 13.64 s 1101B(4)(j) …. 11.33 s 1101B(7) …. 11.33 s 1101B(8) …. 13.64

s 1101B(11) …. 11.33 s 1101B(12) …. 13.64 s 1114 …. 11.33 s 1260(1)(b) …. 16.12 s 1274AA …. 1.24, 10.36 s 1289 …. 2.47 s 1308A …. 16.15 s 1311 …. 2.81, 8.60, 8.63, 8.64, 16.8, 16.14 s 1311(1) …. 6.70, 7.19, 8.12, 17.37 s 1312 …. 4.47, 8.22, 8.63, 8.64, 14.21, 14.30, 16.31 s 1313 …. 2.83 s 1313A …. 16.20 s 1314 …. 8.22 s 1316 …. 8.22 s 1317 …. 2.77 s 1317B …. 13.55, 13.62, 2.22 s 1317C …. 2.22 s 1317C(gcb) …. 2.22 s 1317C(gd) …. 2.22 s 1317C(gda) …. 2.22 s 1317D(3) …. 2.22 s 1317DAB …. 2.99, 7.26 s 1317DAC …. 2.22, 7.26 s 1317DAD …. 7.26 s 1317DAF(4)–(5) …. 7.26 s 1317DAF(5) …. 2.99

s 1317DAG …. 2.99 s 1317DAH …. 7.26 s 1317DAI …. 2.22 s 1317DAJ(1)–(2) …. 7.26 s 1317E …. 2.85, 2.86, 11.7, 17.41 s 1317E(1) …. 14.63, 17.41 s 1317E(1)–(2) …. 7.22, 16.19, 17.41 s 1317F …. 7.22, 16.18, 16.19, 16.20, 17.41 s 1317G …. 2.91, 7.25, 17.41 s 1317G(1) …. 2.91 s 1317G(1A) …. 16.19 s 1317G(1A)–(1B) …. 7.22, 17.41 s 1317G(1C)–(1D) …. 11.7 s 1317G(1E) …. 14.63 s 1317GA …. 14.61, 14.62, 14.63 s 1317HA …. 7.24, 7.25, 9.39, 9.46, 16.19, 17.41, 17.42, 17.43, 17.44, 17.45, 17.46, 17.47 s 1317HA(1) …. 17.42 s 1317HA(1)–(2) …. 16.19 s 1317HA(2) …. 17.42 s 1317HB …. 11.7 s 1317HB(3)–(4) …. 11.7 s 1317J …. 2.86 s 1317J(1) …. 17.41 s 1317J(3A) …. 16.19 s 1317K …. 16.19, 17.41 s 1317L …. 2.87, 7.24, 16.19, 17.41

s 1317M …. 2.85 s 1317N …. 2.85 s 1317N(1) …. 16.19, 17.41 s 1317N(2) …. 16.19, 17.41 s 1317P …. 2.85 s 1317R(1)(a) …. 2.77, 2.78 s 1317R(1)(b) …. 2.77, 2.78 s 1317R(5) …. 2.78 s 1317S …. 7.24, 9.26, 16.14, 16.15, 16.27 s 1318 …. 9.26 s 1318(4) …. 9.26 s 1322 …. 5.50, 6.61, 12.10 s 1322(4) …. 5.50 s 1323 …. 2.50, 2.56, 2.96 s 1324 …. 2.93, 8.36, 8.47, 8.60, 8.71, 8.72, 8.73, 8.74, 10.36, 12.37, 11.30, 13.64, 13.72, 14.87, 16.29, 16.31 s 1324(1) …. 2.93, 8.71, 8.73, 8.74, 12.37, 16.29 s 1324(2) …. 2.93, 8.71 s 1324(4) …. 8.73, 16.29 s 1324(8) …. 8.73 s 1324(10) …. 2.93, 8.74 s 1324A …. 7.21 s 1324B …. 2.96, 4.51, 7.21, 8.75, 11.7 s 1325 …. 7.27, 8.36, 8.42, 8.60, 8.76, 9.46, 11.7 s 1325(1) …. 4.51 s 1325(2) …. 2.95, 8.76 s 1325(5) …. 8.76

s 1325A …. 2.22, 2.96 s 1325B …. 2.22 s 1325C …. 2.22 s 1330 …. 2.75, 2.96 s 1332 …. 2.87 s 1349 …. 13.53, 13.58 s 1349(4)–(5) …. 2.57, 2.73 Sch 3 …. 8.64, 16.14, 17.37 Corporations Agreement 2002 …. 2.5 Corporations Amendment (Financial Advice Measures) Act 2016 …. 14.64 Corporations Amendment (Financial Market Supervision) Act 2010 …. 10.3, 10.17, 12.1 Corporations Amendment (Further Future of Financial Advice Measures) Act 2012 …. 13.20, 14.53 Corporations Amendment (Future of Financial Advice) Act 2012 …. 14.53 Corporations Amendment (No 1) Act 2010 …. 2.55, 16.14 Corporations Amendment (No 5) Regulations 2010 …. 6.37, 6.56 Corporations Amendment (Register of Relevant Providers) Regulation 2015 Corporations Amendment Regulation 2012 (No 10) …. 14.64 Corporations Amendment Regulation 2013 (No 3) …. 13.4 Corporations Amendment Regulations 2005 (No 5) …. 13.33, 14.66 Corporations Amendment (Short Selling) Act 2008 …. 16.30 Corporations Amendment (Simple Corporate Bonds and Other Measures) Act 2014 …. 3.16 Corporations Legislation Amendment Act 1991 …. 17.1, 17.13, 17.30 Corporations Legislation Amendment Regulations (No 2) 2011 …. 6.56

Corporations Legislation Amendment (Derivative Transactions) Act 2012 …. 10.44 Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 …. 1.50, 13.33, 14.31 Corporations Regulations 2001 …. 3.4, 5.6, 6.41, 6.42, 6.56, 6.57, 16.31 Pt 7.9 …. 6.7, 16.31 Pt 7.9, Div 2 …. 6.42 Pt 7.9, Div 2A …. 6.7, 6.42 Pt 7.9, Div 2B …. 6.42 Pt 7.9, Div 2C …. 6.41 Pt 7.9, Div 3 …. 6.60 Pt 7.9, Div 4 …. 6.1, 6.42 Pt 7.9, Div 4, Subdiv 4.2C …. 6.56 Pt 7.9, Div 4A …. 6.42 Pt 7.9, Div 5A …. 6.60 Pt 7.9, Div 5B …. 6.63 Pt 7.9, Div 6 …. 6.63 Div 7.2A.1 …. 11.7 Div 7.2A.2 …. 11.7 reg 1.0.02 …. 3.1, 4.4, 6.7, 6.56 reg 1.0.20 …. 6.20 reg 5C.11.01 …. 3.32, 9.28 reg 5C.11.01(1)(b) …. 3.32 reg 5C.11.01(1)(c) …. 3.32 reg 5C.11.01(1)(d) …. 3.32 reg 5C.11.05A …. 3.33 reg 6CA.1.01 …. 7.18

reg 6D.2.01 …. 4.4 reg 6D.2.02 …. 4.24 reg 6D.2.03 …. 4.20 reg 6D.2.04 …. 5.25 reg 6D.2.05 …. 5.25 reg 6D.2.06 …. 5.25 reg 6D.5.01 …. 4.4, 6.7 reg 6D.5.02 …. 4.20 reg 7.1.04 …. 3.36 reg 7.1.04D …. 6.15, 6.33, 6.74 regs 7.1.05–7.1.05H …. 3.58, 3.60 reg 7.1.06 …. 3.38, 3.47, 3.60, 17.10 reg 7.1.06(1) …. 3.59 reg 7.1.06(2)(a) …. 3.59 reg 7.1.06(3)(a) …. 3.59 reg 7.1.06(3)(b)(i) …. 3.59 reg 7.1.07 …. 3.46 reg 7.1.07A …. 3.46 reg 7.1.07F …. 3.47 reg 7.1.07G …. 3.47 reg 7.1.08 …. 3.47 reg 7.1.09 …. 1.23, 10.23 regs 7.1.11–7.1.17 …. 6.17 regs 7.1.11–7.1.28 …. 6.17 reg 7.1.17B …. 6.20 reg 7.1.18 …. 6.20

regs 7.1.18–7.1.27 …. 13.33 reg 7.1.19 …. 6.20 reg 7.1.22 …. 6.20 reg 7.1.22A …. 6.20 reg 7.1.26 …. 6.20 reg 7.1.28 …. 6.22 reg 7.1.29 …. 13.4 regs 7.1.29–7.1.33H …. 13.4 reg 7.1.29A …. 13.4 reg 7.1.30 …. 13.4 reg 7.1.30–7.1.33B …. 13.4 reg 7.1.31 …. 13.4 reg 7.1.32 …. 13.4 reg 7.1.33 …. 13.4 reg 7.1.33A …. 13.4 reg 7.1.33B …. 13.4 reg 7.2.07 …. 1.22, 10.18, 11.40 reg 7.2.08 …. 10.18 regs 7.2.11–7.2.12 …. 10.13 reg 7.3.05 …. 1.23, 10.31 reg 7.3.06 …. 10.31 reg 7.3.10 …. 10.26 reg 7.3.11 …. 10.26 reg 7.4.01 …. 1.24, 10.36 regs 7.5.24–7.5.71 …. 10.40 regs 7.5.72–7.5.81 …. 10.40

reg 7.5.80 …. 10.40 reg 7.6.01 …. 9.28 reg 7.6.01(1)(e) …. 13.11 reg 7.6.01(1)(ea) …. 13.11 reg 7.6.01(1)(f) …. 13.11 reg 7.6.01(1)(g) …. 13.11 reg 7.6.01(1)(m) …. 13.11 reg 7.6.01(1)(n) …. 13.14 reg 7.6.01(1)(o) …. 6.75 reg 7.6.01(1)(s) …. 6.75 reg 7.6.01B …. 13.10 reg 7.6.02(1)–(2) …. 13.34 reg 7.6.02(3)–(4) …. 13.34 reg 7.6.02AAA …. 13.35 reg 7.6.02AAA(1) …. 13.35 reg 7.6.02AAA(3) …. 13.35 reg 7.6.02AB …. 6.17, 6.22, 13.33 regs 7.6.02AB–7.6.02AF …. 6.17 reg 7.6.02AC …. 6.17, 6.22, 13.33 reg 7.6.02AD …. 6.17, 6.25, 13.33 reg 7.6.02AE …. 6.17, 6.24 reg 7.6.02AF …. 6.17, 6.22 reg 7.6.02AG …. 13.14 reg 7.6.03 …. 13.16 reg 7.6.04 …. 2.46, 13.37 reg 7.6.04(1)(a) …. 13.26

reg 7.6.04(1)(b) …. 13.27, 13.65 reg 7.6.04(1)(c) …. 13.65 reg 7.6.04(1)(d) …. 13.27 reg 7.6.04(1)(e) …. 13.46 reg 7.6.04(1)(f) …. 13.46 reg 7.6.04(1)(g) …. 13.46 reg 7.6.04(1)(h) …. 13.46 reg 7.6.05 …. 13.27 reg 7.6.08(1) …. 13.41 reg 7.7.02 …. 14.22 reg 7.7.02(2) …. 14.22 reg 7.7.03 …. 14.25 regs 7.7.03A–7.7.04 …. 14.25 reg 7.7.09(1) …. 14.31 reg 7.7.09(3) …. 14.31 reg 7.7.10 …. 14.31 reg 7.7.11 …. 14.33 reg 7.7.14 …. 14.36 regs 7.7A.05–7.7A.07 …. 14.57 regs 7.7A.12–7.7A.12D …. 14.64 reg 7.7A.12D …. 14.64 reg 7.7A.12E …. 14.64 reg 7.7A.12EA …. 14.64 regs 7.7A.12F–7.7A.12I …. 14.64 reg 7.8.01 …. 14.67 reg 7.8.02(1) …. 14.68

reg 7.8.02(2)–(5) …. 14.68 reg 7.8.02(6) …. 14.68 reg 7.8.02(7) …. 14.68 reg 7.8.03 …. 14.69 reg 7.8.03(4) …. 14.69 reg 7.8.03(5) …. 14.69 reg 7.8.03(6) …. 14.69 reg 7.8.03(6)(a)–(c) …. 14.69 reg 7.8.03(6)(c) …. 14.69 reg 7.8.03(6)(d) …. 14.69 reg 7.8.03(7) …. 14.69 regs 7.8.04–7.8.05 …. 14.70 reg 7.8.06 …. 14.70 reg 7.8.07 …. 14.73 reg 7.8.07(8) …. 14.73 reg 7.8.07(9) …. 14.73 reg 7.8.08 …. 14.74 reg 7.8.11 …. 14.76 reg 7.8.13 …. 14.76 reg 7.8.16 …. 14.77 reg 7.8.17 …. 11.21, 14.79 reg 7.8.18 …. 14.79, 14.80 reg 7.8.18(1) …. 11.21, 14.80, 14.81 reg 7.8.18(2) …. 14.80 reg 7.8.18(3) …. 11.21, 14.80 reg 7.8.18(4) …. 11.21, 14.80, 14.81, 14.85

reg 7.8.18(5) …. 14.82 reg 7.8.19 …. 14.83 reg 7.8.20(1) …. 14.84 reg 7.8.20(2) …. 14.84 reg 7.8.20(3) …. 14.84 reg 7.8.20(4) …. 14.84 reg 7.8.20(5) …. 14.84 reg 7.8.21(1) …. 14.85 reg 7.8.21(2) …. 14.85 reg 7.8.21A …. 6.72, 14.86 reg 7.8.22 …. 6.72 reg 7.8.22A …. 6.72 reg 7.8.23 …. 6.72 reg 7.8.24 …. 6.72, 14.86 reg 7.8.25 …. 6.72 reg 7.9.02A …. 6.35 reg 7.9.02B …. 6.35 reg 7.9.07A …. 6.15, 6.33 reg 7.9.07B …. 6.45 reg 7.9.07D …. 6.12, 6.27 reg 7.9.07E …. 6.12, 6.27, 6.29 reg 7.9.07F …. 6.12, 6.27 reg 7.9.07FA …. 6.12, 6.27 reg 7.9.07FB …. 6.12, 6.26, 6.27, 6.29 reg 7.9.07J …. 6.33 reg 7.9.08 …. 6.60

reg 7.9.08A …. 6.60 reg 7.9.11E …. 6.57 reg 7.9.11X …. 6.57 reg 7.9.14C …. 6.49 reg 7.9.15A …. 6.45 reg 7.9.15B …. 6.45 reg 7.9.15C …. 6.45 reg 7.9.15DA …. 6.36, 6.58 reg 7.9.15DB …. 6.58 reg 7.9.15DC …. 6.58 reg 7.9.15H …. 6.34 reg 7.9.16A …. 6.32 reg 7.9.16N …. 6.45 reg 7.9.61AA …. 6.37 reg 7.9.61D …. 6.63 reg 7.9.62 …. 6.63 reg 7.9.63A …. 6.63 regs 7.9.63B–7.9.63G …. 6.63 reg 7.9.64 …. 6.64 regs 7.9.64A–7.9.70 …. 6.64 reg 7.9.98 …. 14.66 reg 7.9.100 …. 16.31 reg 7.11.01 …. 3.1 reg 7.18(1) …. 14.80 reg 12.8.03 …. 4.4 Sch 10A, Pt 5A …. 6.57

Sch 10A, Pt 5C …. 6.56 Sch 10BA …. 6.37 Sch 10C …. 6.57 Sch 10E …. 6.56 Crimes Act 1914 …. 1.62 Pt 1AA …. 2.55 Criminal Code Act 1995 …. 1.62, 2.82, 4.48, 7.19, 7.20, 8.23, 16.14, 16.15 Pt 2.5 …. 7.20 s 2.1 …. 2.82, 4.48 s 3.1(a) …. 4.48 s 3.2 …. 7.19, 16.14, 16.15 s 5.2 …. 8.23, 16.14 s 5.2(1) …. 4.48 s 5.4 …. 16.14 s 5.6 …. 7.19 s 5.6(1) …. 4.48, 8.23 s 6.1 …. 14.21, 14.30, 14.40 s 6.1(1)(a) …. 4.48 s 6.1(1)(b) …. 4.48 s 9.2 …. 4.48 s 11.2 …. 7.20, 8.13, 8.24, 8.32 s 11.2(1) …. 8.7, 8.24 s 11.2(2) …. 8.24 s 11.2(3) …. 8.24 s 11.2(4) …. 8.24 s 11.2(5) …. 8.24

s 11.2(6) …. 8.24 s 12.3 …. 7.20 s 13.3(a) …. 8.34 Sch, Pt 2.4 …. 9.19 Sch, s 11.2 …. 9.19 Director of Public Prosecutions Act 1983 …. 2.84 Evidence Act 1995 s 118 …. 2.53 s 119 …. 2.53 s 140 …. 16.19, 17.41 s 140(1) …. 2.88 Fair Work (Registered Organisations) Act 2009 s 164 …. 11.31 Federal Court of Australia Act 1976 Pt IVA …. 9.29, 9.30, 9.33, 9.34, 9.38 s 33C …. 9.29, 9.34 s 33C(1)(a) …. 9.30 s 33H …. 9.33 s 33J …. 9.36 s 33L …. 9.34 s 33M …. 9.34 s 33N …. 9.33, 9.34 s 33P …. 9.34 s 33V …. 9.37 s 33X …. 9.36 s 33X(4) …. 9.37

s 33Y …. 9.36 s 33ZB …. 9.36 s 33ZF …. 9.38 Financial Corporations Act 1974 …. 4.22, 6.24, 13.33 Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 …. 2.100 Financial Sector Reform (Amendments and Transitional Provisions) Act (No 1) 1999 …. 3.6 Financial Sector (Shareholdings) Act 1998 …. 10.36 Financial Services Reform Act 2001 …. 1.2, 1.45, 1.48, 1.50, 2.31, 3.36, 4.4, 4.14, 4.15, 6.6, 6.9, 6.40, 7.2, 9.26, 11.6, 11.33, 16.15, 17.1 s 793B …. 11.39 Financial Services Reform Amendment Act 2003 …. 2.31, 2.36 Freedom of Information Act 1982 …. 1.62, 2.30 s 11 …. 2.30 Futures Industry Act 1986 …. 1.43 Income Tax Assessment Act 1936 s 264 …. 2.51 Insurance Act 1973 …. 13.10 Insurance Contracts Act 1984 …. 2.13 Judiciary Act 1903 …. 11.37, 12.14 s 39A …. 2.27 s 39B …. 2.27, 2.94 s 44 …. 2.27 Legislative Instruments Act 2003 …. 2.32, 11.7 s 13(1)(a) …. 2.52 Life Insurance Act 1995 …. 2.13, 3.32, 4.28

s 16B …. 3.32 Managed Investments Act 1998 …. 3.17 National Consumer Credit Protection Act 2009 …. 2.13 National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 …. 2.13 Ombudsman Act 1976 …. 2.29 Payment Systems (Regulation) Act 1998 …. 3.47 Privacy Act 1988 …. 1.62 s 14 …. 2.30 Public Governance, Performance and Accountability Act 2013 …. 2.12 Retirement Savings Accounts Act 1997 …. 2.13, 3.54, 13.32 Securities Industry Act 1980 s 1278 …. 17.1 Securities Industry Act 1981 …. 1.57 Superannuation Guarantee (Administration) Act 1992 …. 14.20, 14.53 Superannuation Industry (Supervision) Act 1993 …. 2.13, 6.24, 13.10, 13.32, 13.33, 14.64 s 52(2)(c) …. 14.55 Superannuation (Resolution of Complaints) Act 1993 …. 2.13, 3.32, 4.22 Tax Agent Services Act 2009 …. 13.6 Telecommunications (Interception and Access) Act 1979 …. 16.8, 16.14, 16.17, 16.18, 17.37 Trade Practices Act 1974 …. 1.4, 1.32, 1.45, 1.54, 3.40, 8.46, 9.1, 11.2, 11.51 s 51A …. 8.49 s 52 …. 8.42, 8.44, 8.46, 8.49, 8.52, 9.15, 9.20, 15.11 s 52(1) …. 9.20

s 53(a) …. 9.18 s 75B …. 9.19 s 82 …. 8.42, 9.4 s 84(1) …. 8.69 s 87B …. 2.100 s 96(3)(b) …. 8.59 s 155 …. 2.54 Workplace Relations Act 1996 …. 3.54

National Scheme Legislation Corporations Act 1989 …. 1.58, 1.59 s 82 …. 1.59 Corporations Law …. 12.9, 12.11 s 777 …. 12.8, 12.11, 12.24, 12.29 ss 1001A–1001D …. 7.2 s 1031(7) …. 12.9 s 1094 …. 12.24 s 1114 …. 14.87 Corporate Law Reform Act 1994 …. 7.2 Fair Trading Act 1987 s 42 …. 15.11

Uniform Companies Act Uniform Companies Act 1961–62 …. 1.40, 1.55, 1.56

Co-Operative Scheme Legislation Companies Act 1981 …. 1.57 Companies Code 1981 …. 1.59

Securities Industry Code s 78 …. 11.51 s 128 …. 17.10, 17.13, 17.14, 17.19, 17.29, 17.32

Australian Capital Territory Fair Trading (Australian Consumer Law) Act 1992 …. 8.10 s 11 …. 8.10

New South Wales Civil Liability Act 2002 …. 9.25 Civil Procedure Act 2005 Pt 10 …. 9.29 s 157 …. 9.29 s 161 …. 9.33 s 162 …. 9.36 s 164 …. 9.34 s 165 …. 9.34 s 166 …. 9.34 s 166(1)(d) …. 9.34 s 166(2) …. 9.33 s 167 …. 9.34 s 173 …. 9.37 s 175 …. 9.36 s 175(4) …. 9.37 s 176 …. 9.36 s 179 …. 9.36 s 183 …. 9.38

Companies (Acquisition of Shares) Act 1981 …. 1.57 Companies (Amendment) Act 1971 …. 1.42 Companies (NSW) Code Pt VII …. 2.54 s 537 …. 13.18 Corporations Law 1990 s 1002 …. 17.1 Evidence Act 1995 s 140 …. 16.19, 17.41 Fair Trading Act 1987 Pt 3 …. 8.10 s 32 …. 8.10 Futures Market Act 1979 …. 1.43 Futures Market (Amendment) Act 1982 …. 1.43 Grain Marketing Act 1991 s 5(2) …. 4.6 Securities Act 1970 s 70 …. 14.18, 16.12 s 75A …. 17.1, 17.16 Securities Industry Act 1970 …. 1.41 s 4 …. 8.59 s 58(1)(b) …. 14.9 s 70 …. 14.18, 16.12 s 73 …. 8.60, 8.61, 8.67 Securities Industry Act 1975 …. 1.41 s 31 …. 12.30

s 42 …. 12.30, 12.35 s 42(1) …. 12.35 s 42(2) …. 12.35 s 97(1)(b) …. 14.9 s 112 …. 17.1 Securities Industry (NSW) Code 1981 s 14 …. 12.35, 12.36 s 14(1) …. 12.35 s 42 …. 12.19, 12.30, 12.36 s 124 …. 16.12

Northern Territory Consumer Affairs and Fair Trading Act Pt 4 …. 8.10 s 31 …. 8.10

Queensland Fair Trading Act 1989 Pt 3 …. 8.10 s 4A …. 8.10 s 94 …. 8.60

South Australia Fair Trading Act 1987 Pt 3 …. 8.10 s 18 …. 8.10 Securities Industry (SA) Code s 42 …. 11.27

s 42(2) …. 12.23 s 60(1)(b) …. 13.18

Tasmania Australian Consumer Law (Tasmania) Act 2010 …. 8.10 s 10 …. 8.10 Evidence Act 2001 s 140 …. 16.19, 17.41 Judicial Review Act 2000 …. 11.27

Victoria Companies Act 1896 s 47 …. 1.40 Companies Code (Vic) s 320 …. 12.28 Corporations (Commonwealth Powers) Act 2001 …. 2.4 s 1(2) …. 2.4 Evidence Act 2008 s 140 …. 16.19, 17.41 Fair Trading Act 1999 Pt 2 …. 8.10 s 13 …. 8.10 Mining Companies Act 1871 …. 1.40 Securities Industry (Victoria) Code s 14 …. 16.28 Securities Industry Act 1975 …. 8.61, 13.8 s 31 …. 12.17, 12.18, 12.30

s 32 …. 13.8 Supreme Court Act 1986 Pt 4A …. 9.29 s 33C …. 9.29 s 33H …. 9.33 s 33J …. 9.36 s 33L …. 9.34 s 33M …. 9.34 s 33N …. 9.34 s 33P …. 9.34 s 33V …. 9.37 s 33X …. 9.36 s 33X(4) …. 9.37 s 33Y …. 9.36 s 33ZB …. 9.36 s 33ZF …. 9.38 s 33ZG …. 9.38

Western Australia Companies Act 1961 s 44 …. 12.6 Companies Code …. 11.30 s 12 …. 11.30 s 537 …. 11.30 Companies (Cooperative) Act 1943 Pt VI …. 3.32 Corporations (Western Australia) Act 1990 …. 1.60

Fair Trading Act 2010 …. 8.10 s 24 …. 8.10 Securities Industry (WA) Code …. 11.30 s 42 …. 11.27, 12.21

United Kingdom Bubble Act 1720 (6 Geo 1, c 18) …. 1.40 s 18 …. 1.40 Companies Act 1862 …. 1.40 Criminal Justice Act 1983 s 52 …. 17.37 Joint Stock Companies Act 1844 (7 & 8 Vict, c 110) …. 5.2 Financial Services and Markets Act 2000 …. 16.23 s 91 …. 16.23 s 118(5) …. 16.13 s 118(6) …. 16.17 Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2015 …. 16.23 Prevention of Fraud (Investments) Act 1958 s 13 …. 8.64, 8.68

United States of America 15 USC 77k …. 8.26 15 USC 78u-4(e)(1) …. 9.54 Cal Corp Code s 24150 …. 1.40 Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 …. 10.43

Glass-Steagall Act 1933 …. 1.40 Insider Trading and Securities Fraud Enforcement Act 1988 s 20A …. 17.42 Investment Advisers Act 1940 s 206 …. 16.27 Private Securities Litigation Reform Act 1995 …. 9.35, 9.54 s 101 …. 9.54 Securities Act 1933 …. 1.40 §11 …. 8.49 §11(c) …. 8.26 §11(3)(A) …. 8.26 §12(2) …. 8.26 Securities Exchange Act 1934 …. 1.40 s 9(a)(1)(B)–(C) …. 16.16 s 10(b) …. 16.1, 16.11, 16.16, 17.7, 17.12 r 10b-5 …. 14.36, 16.27 s 11A …. 10.16 s 14(e) …. 16.1 s 19(c) …. 11.9 s 19(g) …. 11.26

ASIC Market Integrity Rules ASIC Market Integrity Rules (ASX Market) Pt 3.6 …. 17.36

Abbreviations AAT AAT Act ACCC ACL ADI ADJR Act AFS licence APRA ASC ASIC ASIC Act ASX CA CAMAC CASAC CCA CCLSR CDI CDPP CIS CLERP CLERP Act CLERP Bill CLERP 9 Act CS facility FATA

Administrative Appeals Tribunal Administrative Appeals Tribunal Act 1975 (Cth) Australian Competition and Consumer Commission Australian Consumer Law Authorised deposit-taking institution Administrative Decisions (Judicial Review) Act 1977 (Cth) Australian financial services licence Australian Prudential Regulation Authority Australian Securities Commission Australian Securities and Investments Commission Australian Securities and Investments Commission Act 2001 (Cth) Australian Securities Exchange Limited Corporations Act 2001 (Cth) Corporations and Markets Advisory Committee Companies and Securities Advisory Committee Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)) Centre for Corporate Law and Securities Regulation, The University of Melbourne CHESS Depository Interest Commonwealth Director for Public Prosecutions Collective investment scheme Corporate Law Economic Reform Program Corporate Law Economic Reform Program Act 1999 (Cth) Corporate Law Economic Reform Program Bill 1998 Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) Clearing and settlement facility Foreign Acquisitions and Takeovers Act 1975 (Cth)

FCT FIRB FOI Act FSG FSI FSR Act FSR Bill GFC GN IOSCO ISC LR MDP MIR NCSC NGF OTC PDS PJC RG SEC SEGC SFSG SoA TPA UCA

Federal Commissioner of Taxation Foreign Investment Review Board Freedom of Information Act 1982 (Cth) Financial Services Guide Financial System Inquiry Financial Services Reform Act 2001 (Cth) Financial Services Reform Bill Global Financial Crisis Takeovers Panel Guidance Note International Organization of Securities Commissions Insurance and Superannuation Commission Listing Rule (of the ASX) Market Disciplinary Panel Market Integrity Rules National Companies and Securities Commission National Guarantee Fund Over the counter Product Disclosure Statement Parliamentary Joint Committee on Corporations and Financial Services ASIC Regulatory Guide Securities and Exchange Commission, United States of America Securities Exchange Guarantee Corporation Supplementary Financial Services Guide Statement of Advice Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)) Uniform Companies Acts (passed by Australian states 1961– 1962)

Contents Preface Table of Cases Table of Statutes Abbreviations

PART 1

INTRODUCTION

CHAPTER 1

REGULATING SECURITIES AND MARKETS

CHAPTER 2

ADMINISTRATION OF THE SECURITIES AND FINANCIAL SERVICES LAWS

CHAPTER 3

DEFINING FINANCIAL PRODUCTS

PART 2

ISSUERS

CHAPTER 4

REGULATION OF SECURITIES OFFERINGS

CHAPTER 5

CONDUCTING A REGULATED SECURITIES OFFER

CHAPTER 6

OFFERING MANAGED INVESTMENTS, DERIVATIVES AND OTHER FINANCIAL PRODUCTS

CHAPTER 7

CONTINUOUS DISCLOSURE

CHAPTER 8

LIABILITY FOR DEFECTIVE DISCLOSURE

CHAPTER 9

INVESTOR CLAIMS FOR DEFECTIVE DISCLOSURE

PART 3

MARKETS

CHAPTER 10

MARKET INFRASTRUCTURE PROVIDERS

CHAPTER 11

OVERVIEW OF REGULATION OF THE SECURITIES MARKETS AND THE REGULATION OF MARKET PARTICIPANTS

CHAPTER 12

ENFORCEABILITY OF THE ASX LISTING RULES

PART 4

INTERMEDIARIES

CHAPTER 13

AUSTRALIAN FINANCIAL SERVICES LICENSING

CHAPTER 14

FINANCIAL SERVICES LICENSEES AND THEIR CLIENTS

CHAPTER 15

CONSUMER PROTECTION

PART 5

MARKET CONDUCT

CHAPTER 16

MARKET MISCONDUCT, PROHIBITED CONDUCT AND SHORT SELLING

CHAPTER 17

INSIDER TRADING

Index

[page 1]

Part 1 Introduction

[page 3]

Chapter 1 REGULATING SECURITIES and MARKETS Introduction Why Regulate Securities and Financial Product Markets? Need for specialist regulation Underlying principles Current Regulatory Framework Institutional arrangements Regulating issuers Regulating market infrastructure Regulating intermediaries Market conduct regulation Evolution of the Current Framework Early developments in substantive regulation Second wave of reform: Wallis Inquiry, CLERP and FSR Third wave of reform: post-GFC Transition to a National Regulatory System Position until 1980 Corporations Law scheme 1991 Failure of the Corporations Law scheme Corporations Act 2001 (Cth)

1.1 1.4 1.6 1.8 1.13 1.14 1.15 1.21 1.26 1.32 1.39 1.40 1.44 1.51 1.55 1.56 1.58 1.60 1.61

INTRODUCTION 1.1 This book is primarily about the regulation of Australian securities markets and of the various entities (issuers, intermediaries, market operators, traders and investors) involved in those markets. The securities markets are an important subset of the broader financial

markets, through which those with capital to invest are matched by the market to those who [page 4] require capital for productive purposes.1 This matching occurs through the creation and issue of financial instruments, the distribution of those instruments to investors through the primary market, and the creation of liquidity through the resale of those instruments in the secondary market. The particular focus of this book is on financial instruments created and issued by commercial or financial sector entities, that are acquired primarily for investment (as distinct from risk management) purposes and that are customarily traded through established exchanges. Most obviously, this includes traditional ‘securities’ — that is, shares and debentures — issued by companies and listed for quotation by the Australian Securities Exchange (ASX), the main securities exchange in Australia. It also includes some other financial instruments that have or may have these characteristics but are not securities in this traditional sense; most notably, listed managed investments,2 hybrid instruments, and certain instruments classified by law as derivatives (such as options and warrants). While the focus is on securities markets, elements of the regulatory framework discussed in the book apply to other financial markets as well. In addition to exchange traded markets in securities and derivatives, these include primary markets in unlisted instruments and over-the-counter (OTC) markets in government and semi-government bonds, corporate debt, foreign exchange, carbon products, and derivatives such as currency options, forward rate agreements, interest rate options and interest rate swaps. These include what are commonly referred to as ‘FICC’ markets — that is, fixed interest, currency and commodities markets. In common with all other mature market-based economies, Australia has in place an extensive and detailed legal and regulatory framework within which the creation, distribution and trading of financial instruments takes place. This framework both facilitates and regulates these activities. It facilitates the operation of markets by providing the legal infrastructure

within which private parties contract with each other in those markets. It regulates the operation of markets by various means, including by licensing market operators and intermediaries, imposing (proscriptive and prescriptive) conduct rules on entities dealing in the market, and mandating disclosure of certain information to the market. [page 5] The main purpose of securities and markets regulation in Australia is not to eliminate risk associated with the performance of individual investments or with the viability of individual market participants. Rather, its role has been described as being ‘to promote market confidence and to ensure the development of a transparent and well-informed securities market where every participant has equal access to information and participates on a level playing field’.3 The Australian system begins with the basic premise that all types of investment products should be freely available to both retail and wholesale investors. Where government intervenes in the market through regulation it is primarily in the areas of conduct and disclosure. Regulation expressly prohibits various forms of market misconduct (including dishonest, misleading or deceptive conduct, market manipulation and insider trading). In both wholesale and retail markets, market operators are required to be licensed, as are securities intermediaries (including brokers, dealers, advisers and collective investment scheme (CIS) operators). Intermediaries that provide financial services to retail clients are subject to an additional layer of consumer protection and mandatory disclosure requirements. Entities offering financial products (including securities) to retail investors are subject to mandatory pre-sale disclosure requirements and are required to keep markets informed through compliance with continuous disclosure requirements. The cornerstones of the Australian legal and regulatory framework are the Corporations Act 2001 (Cth) (Corporations Act) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act). The Corporations Act contains both Australia’s company law and its financial markets law. As the principal company law statute, the Corporations Act

provides for the formation, governance and termination of companies and registered managed investment schemes. As the financial markets statute, the Corporations Act also includes the laws relating to takeovers (Chs 6, 6A and 6B); information about ownership of listed entities (Ch 6C); continuous disclosure (Ch 6CA); fundraising (Ch 6D); and financial services and markets (Ch 7). The ASIC Act provides for the formation and operation of the Australian Securities and Investments Commission (ASIC), the Commonwealth regulatory agency that acts both as registrar of companies and as the consumer protection and market integrity regulator in the areas of company law, securities law, takeovers and financial markets. The ASIC Act also includes the unconscionable conduct and consumer protection provisions that apply to the financial sector generally. These statutes are supplemented by the relevant general law, the (formal and informal) regulatory requirements imposed by ASIC in the exercise of its various regulatory functions, and the ‘self-regulatory’ requirements imposed by the ASX and other market operators on market participants and by participants on themselves. 1.2 In most jurisdictions, it is customary to refer to the subject matter covered in this book under the general heading ‘securities regulation’. While this is (largely) appropriate in the Australian context also, it is nevertheless important to recognise [page 6] that many of the matters discussed in this book extend and apply beyond the boundaries of traditional understandings of securities regulation. This is so because of two unique features of the Australian model of financial sector regulation. The first is the so-called ‘twin peaks’ regulatory structure (adopted in 1998) which splits responsibility for financial sector regulation between two separate agencies: ASIC (consumer protection and market integrity) and the Australian Prudential Regulation Authority (APRA) (prudential regulation). The twin peaks model is discussed in Chapter 2 below; its effect is that ASIC is not just a securities regulator

but also regulates other financial markets and other aspects of the financial sector. The second is the functional approach to regulation taken by the Financial Services Reform Act 2001 (Cth) (FSR Act), which repealed the predecessor securities industry and futures industry laws and enacted what is now Ch 7 of the Corporations Act. The FSR Act is discussed in 1.50 below. The intention of the FSR Act was to regulate by reference to the function of the financial arrangement in question, rather than its institutional or legal form. The FSR Act set out to create ‘a single licensing regime for financial sales, advice and dealings in relation to financial products [and] consistent and comparable financial product disclosure’: see [1.3] of the Explanatory Memorandum to the Financial Services Reform Bill. Under this functional approach, securities are seen as one category of ‘financial products’ as defined, of which there are many others. Accordingly, many parts of the securities laws contained in Ch 7 of the Corporations Act and Pt 2 Div 2 of the ASIC Act also extend and apply to other financial products (including other forms of listed and unlisted financial investments, and financial arrangements used for risk management) not traditionally thought of as being properly or naturally the subject of securities regulation. 1.3 That said, the content and organisation of this book reflect the traditional concerns and coverage of securities regulation. Part I is introductory in nature and describes the conceptual underpinnings of securities and markets regulation, the constitutional foundation and governmental administration of Australia’s securities and financial services laws, and the scope of regulation. Part II focuses on the regulation of issuers: that is, the commercial and financial sector entities that create and issue instruments into the primary markets. Here a crucial but not absolute distinction is drawn between those aspects of law that apply to issuers qua issuers and that are thought of as part of securities regulation, and those that apply to issuers as operating entities and that are thought of as part of company law and corporate governance. The former, in particular Chs 6CA (continuous disclosure), 6D (offers of securities) and 7 (offers of financial products other than securities) of the Corporations Act, are dealt with in this book, while the latter, in particular Chs 2A–5C of the Corporations Act, are not.4

Part III deals with the law and regulation of market operators, including most notably the ASX and its various subsidiaries, which between them operate the [page 7] ASX’s primary, secondary and derivative market services and provide clearing and settlement (CS) facilities for those and other markets. Part IV looks at market intermediaries, and in particular at the licensed financial services providers who act as brokers, dealers or advisers in the securities markets. Part V deals with aspects of the regulation of markets for securities and other financial products. It includes a discussion of Australian consumer protection law as it applies to transactions in relation to financial products and services. It also considers the regulation of the conduct of traders in secondary markets, including prohibitions on various forms of market misconduct and manipulation, and insider trading.

WHY REGULATE SECURITIES AND FINANCIAL PRODUCT MARKETS? 1.4 Why regulate securities and markets separately? Australia has in place robust business integrity laws, including in the Competition and Consumer Act 2010 (Cth) (CCA) (formerly the Trade Practices Act 1974 (Cth) (TPA)), that operate to regulate commercial activities on an economy-wide basis. These laws include conduct regulation (such as criminal sanctions for fraud and prohibitions on anti-competitive behaviour) and disclosure regulation (such as general prohibitions on false and misleading statements contained in fair trading laws).5 Given that these laws are already in place, what is it about securities markets that justify special regulatory arrangements, not only in Australia but all around the world? 1.5 In earlier editions of this book, the authors discussed the need for securities regulation as arising from the impalpable nature of securities themselves. Financial instruments of the kind traded on financial markets

are a form of intangible property: what the law classifies as a thing (or chose) in action. What the holder of the instrument acquires is not a piece of tangible property (like an oil painting, for example) or something that is used or consumed, but rather a set of future rights or entitlements under the terms of the instrument itself that are delivered over time. The value of the instrument at any given time is the present value of the future benefits to be conferred on the holder — generally in the form of income or capital distributions from a commercial or financial enterprise. A share in a registered company is a good example of the impalpable nature of a security. As a matter of law, a share is treated as a chose in action because it is a set of claims owned by a shareholder against the company that issued the share: the claims relate to dividends, voting, return of capital and other matters. The classic description of a share is that of Farwell J in Borland’s Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279 at 288: A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with s 16 of the Companies Act 1862 [see now Corporations Act s 140(1)]. The contract contained in the articles of

[page 8] association is one of the original incidents of the share. A share is not a sum of money settled … but is an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of a more or less amount.

The merits of the intangible claim, such as a share, cannot be assessed by inspection, as with land or goods. The impalpable nature of securities and other financial instruments, and their character as property consisting of future entitlements, are thought to create particular impediments to the effective functioning of the market for those instruments that do not arise in the market for tangible goods. The law responds to these perceived impediments by imposing special requirements and conditions on the various entities (issuers, intermediaries, market operators and traders) involved in securities and related markets, both primary and secondary.

Need for specialist regulation 1.6 In 1996, the Financial System Inquiry chaired by Mr Stan Wallis (Wallis Inquiry) was asked by the Commonwealth Government to consider whether integrity and disclosure regulation of financial markets should be left to general economy-wide arrangements, or required more sophisticated or focused regulation. The Wallis Inquiry was established by the Treasurer in 1996 to consider the effect of deregulation of the financial system after the Campbell Committee and Martin Review in the early 1980s.6 Among other things, it was asked to make recommendations ‘on the nature of the regulatory arrangements that will best ensure an efficient, responsive, competitive and flexible financial system to underpin stronger economic performance, consistent with financial stability, prudence, integrity and fairness’.7 The Wallis Inquiry concluded that specialist regulation of financial markets in general, and securities markets in particular, was justified in two areas: financial market integrity and retail consumer protection. In relation to financial market integrity, the members of the Wallis Inquiry reported that: Market integrity regulation aims to promote confidence in the efficiency and fairness of markets. It seeks to ensure that markets are sound, orderly and

[page 9] transparent. Financial market prices can be sensitive to information, and this raises the potential for misuse of information. For this reason, regulators around the world impose specific disclosure requirements (such as prospectus rules) and conduct rules (such as prohibitions on insider trading) on financial market participants. The complexity of financial products and markets, their intrinsic risks — including those due to limited information — and the detailed knowledge required to deliver efficient regulation in this area argue strongly for continued specialised regulatory arrangements.8

The Wallis Inquiry also concluded that there was a case for specialist regulation to protect retail consumers of financial products and financial services, aimed at ensuring that consumers have adequate information, are treated fairly and have adequate avenues for redress. The key (but not examined) justification advanced by the Wallis Inquiry for retail consumer protection is the complexity of financial products. The members of the Wallis Inquiry observed that:

First, the complexity of financial products increases the probability that financially unsophisticated consumers can misunderstand or be misled about the nature of financial promises, particularly their obligations and risks. This, combined with the potential consequences of dishonour, has led most countries to establish a disclosure regime for financial products that is considerably more intense than disclosure rules for most nonfinancial products. Secondly, financial complexity also increases the incidence of misunderstanding and dispute. Given this, and the high cost of litigation, a number of countries have imposed specific regulation of financial sales and advice and established low-cost industry complaints schemes or tribunals for resolving disputes.9

1.7 In 2014 the second Financial System Inquiry (Murray Inquiry), chaired by Mr David Murray, revisited the need for specialist regulation of the financial sector, including securities markets. Its starting point for examining the role of government in the financial system was the philosophy of regulation set out by the Wallis Inquiry.10 The Murray Inquiry considered that: Insights provided by academic research and practical experience since [the Wallis Inquiry] have advanced the Inquiry’s understanding of the financial system. Critically, their new understanding has reduced the Inquiry’s confidence in the inherent efficiency and stability of financial markets and increased its understanding of the financial system as a complex, adaptive network.11

The Murray Inquiry concluded that the financial system requires sectorspecific regulation for two reasons: 1.

More so than in other sectors, the financial system has the ability to create or amplify economic shocks because of its use of leverage, its complexity and its interconnectedness with the rest of the economy. [page 10]

2.

The significant harm to consumers that may result from complex financial decisions, or from dishonest or predatory practices, requires specialist regulation to promote fair treatment.12

The Murray Inquiry emphasised the need for a financial system that ‘operates in an efficient and resilient manner and treats participants fairly’.13 Efficiency relates to the capacity of the financial system to allocate ‘scarce financial and other resources for the greatest possible

benefit’ to the economy, and encompasses operational efficiency, allocative efficiency and dynamic efficiency. Resilience ‘refers to the financial system’s capacity to adjust to both the normal business cycle and a severe economic shock’. Fair treatment ‘occurs where participants act with integrity, honesty, transparency and non-discrimination’. This requires financial firms to: … place a high degree of importance on treating customers fairly. This includes providing consumers with clear information about risks; competent, good-quality financial advice that takes account of their circumstances; and access to timely and low-cost alternative dispute resolution and an effective judicial system.14

Within this framework, the Murray Inquiry set out the following general principles for policy makers in financial regulation:15 Determining when to intervene Intervention should be considered where it would improve the efficiency, resilience or fairness of the financial system, but only introduced if its benefit is judged to outweigh the costs to the economy as a whole. Unless there is a clear public interest, policy makers should give competitive markets the opportunity to adjust to market signals and allow established legal remedies to be enforced rather than pre-emptively regulating. Delivering efficiency Policy makers should seek to remove distortions to the efficient allocation of funds and risks in the economy, and reduce unnecessary regulatory burdens. Policy makers should seek to encourage competition by removing unnecessary barriers to domestic and international competition. Policy settings should seek to encourage innovation by being technologically and competitively neutral in design. Delivering resilience Private sector risk-taking should be supported, allowing both success and failure. Policy makers should seek to prevent a build-up of systemic risk. They should have systems in place to manage failing financial institutions in an orderly

[page 11] manner that protects the financial system’s critical functions and maintains financial stability while minimising risk to taxpayers. Delivering fair treatment Consumers should generally bear responsibility for their financial decisions, but should

be able to expect financial products and services to perform in the way they are led to believe they will. Policy makers should be aware of, and design regulatory frameworks that take into account, behavioural biases.

Underlying principles 1.8 Modern securities regulation has evolved to respond to perceived impediments to the effective functioning of securities markets. Underlying its concerns and design are three broad principles, each of which is subject to varying degrees of contestation by lawyers, regulatory theorists and economists: neoclassical, institutional and behavioural. The first principle is that interlocking goals of investor protection, market efficiency and systemic stability are important in the context of financial markets. The second principle is that these goals are most likely to be realised when participants in markets act with integrity and there is adequate disclosure to facilitate the making of informed judgments in that market (that is, that integrity and adequate disclosure are necessary if not sufficient conditions for achieving the goals of investor protection, market efficiency and systemic stability). The third principle is that market integrity and adequate disclosure would not be achieved without regulatory intervention, for reasons of market failure.

Goals of securities regulation 1.9 The triple goals of investor protection, market efficiency and systemic stability have been identified by the International Organization of Securities Commissions (IOSCO) as the three key objectives of securities regulation. IOSCO is a multilateral forum for standard-setting and cooperation between national securities regulators; its published views represent the high-level consensus position of over 100 regulatory agencies which between them regulate more than 90% of global securities markets. IOSCO’s Objectives and Principles of Securities Regulation (IOSCO Principles) were published in 1998 and revised in 2003 and again in 2010. The IOSCO Principles identify as the three key objectives of securities regulation: 1.

protecting investors;

2.

ensuring that markets are fair, efficient and transparent; and

3.

reducing systemic risk.

To achieve these objectives, IOSCO adopts 38 Principles that set out, at a high level, how national regulatory regimes should be arranged to achieved these objectives. The Principles relate to nine areas, or categories, of securities regulation: 1.

the regulator;

2.

self-regulation; [page 12]

3.

enforcement of securities regulation;

4.

co-operation in regulation;

5.

issuers;

6.

auditors, credit rating agencies and other service providers;

7.

collective investment schemes;

8.

market intermediaries; and

9.

secondary markets.

1.10 Where the broad objectives of securities regulation articulated by IOSCO are not met, markets may fail to fulfil their economic function of allocating resources and risk efficiently, and opportunities for (socially harmful) abuse and exploitation of individuals arise. Accordingly, there is both an economic and a social cost to market failure, and securities regulation in Australia has long reflected these dual concerns. Reporting to the Commonwealth Parliament in the wake of the so-called ‘Poseidon boom’16 of the late 1960s, the Rae Committee argued that there was ‘cause for concern and for legislative action’ in relation to the securities markets ‘on the grounds of fairness and commercial morality, and in the interests of economic efficiency’.17 The dual concerns expressed by the Rae Committee reflect public

interest theories of regulation that are based on two hypotheses. The first is ‘the hypothesis of market failure calling for corrective action on the part of the state due to its detrimental effects on social welfare’. The second is: … the ‘benevolence hypothesis’ according to which legislators, regulators and administrators are disinterested maximisers of social welfare, and any costs imposed by regulation on the economy are thought to be associated entirely with achieving some welldefined social objective.18

In recent years various critiques of these hypotheses have emerged, most notably among law and economics scholars who have developed various economic theories of regulation that challenge the belief that market failure gives rise to problems in markets that can be fixed by government intervention: see below.

Integrity and information 1.11 The second broad principle underlying most types of securities regulation is that the broad goals of investor protection, market efficiency and systemic stability identified above cannot be achieved unless two conditions exist in securities markets. The first condition is that participants in securities markets (both primary and secondary) act with integrity. The second condition is that participants have available to them sufficient information to make informed judgments about the products and services offered into that market. This principle is stated by the Wallis Inquiry as [page 13] being that ‘financial markets cannot function effectively unless participants act with integrity and there is adequate disclosure to facilitate informed judgements’.19 This basic premise explains the emphasis on the twin pillars of conduct regulation and mandatory disclosure in modern securities regulation. More recently, the assumption that investors will make economically rational choices based on full information has been challenged by behavioural economics, and insights from this area have become

increasingly influential on regulators both in Australia and the United Kingdom. For example, in its Strategic Outlooks for 2014–15, ASIC signalled its intention to explore insights from behavioural economics and conduct consumer testing to improve understanding of how investors and financial consumers perceive risk and make choices. The impact of behavioural economics on financial regulation is discussed in Chapter 15.

Case for regulation 1.12 The third broad principle underlying securities regulation is that, for reasons of market failure, integrity and adequate disclosure will not occur in securities markets without regulatory intervention by government. While it is generally (but not universally) accepted that, for markets to function efficiently, participants must act with integrity and there must be adequate disclosure to facilitate informed judgments, there is less consensus on how these two conditions are best achieved. In particular, there is an ongoing debate about whether regulation is necessary to achieve the adequate level of integrity and disclosure in securities markets, or whether that is better achieved through other means (for example, market forces or private law enforcement mechanisms). Among those who accept the need for regulation, there is vigorous debate about the form that regulation should take. First, there is a choice to be made between explicit governmental regulation (in the form of primary legislation made by the parliament, subordinate legislation made by the Executive, and policies and standards promulgated by regulatory agencies) and other forms, such as self-regulation, quasi-regulation and co-regulation. Where governmental regulation is proposed, there are further choices to be made as to the appropriate type and intensity of regulatory intervention. Welfare economics takes the view that regulation is necessary: … where there is a monopoly and potential abuse of market power; where there is incomplete information or there are information asymmetries between buyers and sellers; where goods or services are ‘public goods’; and where there are impacts (externalities or spillovers) on third parties that are not reflected in market prices.20

The prevailing view of policy-makers is that the last three types of market failure exist to a significant degree in financial markets.21

Information asymmetries exist between issuers and their insiders (such as directors), and investors. Information [page 14] and public confidence in capital markets are ‘public goods’, for which no individual investor has adequate incentive to pay, but which benefit all investors. Misallocation of resources through capital markets produces externalities in the form of, say, missed opportunities for economic growth, or losses that diminish investors’ ability to provide for their own retirement and place demands on public resources. Securities regulation is often explained and analysed in economic terms as a more or less efficient response to these (and other) perceived instances of market failure. Indeed, in the last two decades economic analysis has become the predominant epistemological framework for academic study of securities regulation.

CURRENT REGULATORY FRAMEWORK 1.13 This part provides a broad overview of the pattern of financial markets and investment products regulation in Australia today. Regulation has been described as taking four basic forms: 1.

regulation of markets: which includes provisions governing the establishment of markets and provisions governing misconduct, such as the prohibition against insider trading;

2.

regulation of CS facilities: which includes requirements for both the initial approval and ongoing operation of CS facilities, such as satisfactory provisions for the transfer, registration and settlement of transactions;

3.

regulation of intermediaries: including initial licensing criteria as well as ongoing business conduct requirements such as disclosure of benefits and conflicts of interest; and

4.

regulation of the disclosure of product information: requirements on product issuers and promoters to supply potential investors with sufficient information to permit investors to make informed

decisions.22 In the areas the subject of this book, regulation focuses primarily on the activities of four main constituencies of the market — issuers, intermediaries, market operators and traders.

Institutional arrangements 1.14 Like government generally, financial services regulation in Australia exhibits three main functions: the making of law, administration of that law and resolution of disputes under that law. The law is found mainly in the Corporations Act; in the ASIC Act; and in regulations made under those Acts. Administration of the legislation is the responsibility of the Commonwealth Treasurer and ASIC. The resolution of disputes is confided to the Federal Court and the Supreme Courts of the states and the Northern Territory, with other courts having some powers to apply the securities legislation. In addition, private exchanges have a role to play in regulating market participants. [page 15] The main body of substantive law about securities and markets is in the Corporations Act. However, the Corporations Act does not operate as a code, and a full understanding of securities law in Australia calls for acquaintance with not only the Corporations Act and judicial decisions interpreting it but also with the general law governing contracts, trusts, torts and the interpretation of statutes. The current Corporations Act (which is a Commonwealth Act applying of its own force throughout Australia) commenced on 15 July 2001, replacing predecessor state-based legislation. The move from state-based to Commonwealth regulation of securities and markets is explained in 1.55–1.62 below. The Australian system regulates both wholesale and retail markets, but imposes additional (mostly disclosure-related) requirements on issuers, intermediaries and market operators who deal with retail clients. The distinction between wholesale and retail markets is not only made by

reference to the type of product or service being offered (as is the case in some other jurisdictions). Instead it depends on the nature of the person to whom the financial product or service is being offered. As a general rule, a person is treated as a retail participant unless they fall into one of the express categories of wholesale participants provided for in the Corporations Act. Speaking broadly, a person is treated as wholesale where the value of the product or service acquired exceeds a set amount (generally $500,000), is acquired for use in connection with a business that is not a small business, or is acquired by a sophisticated or professional investor as defined. Professional investors for this purpose include financial services licensees, bodies regulated by APRA such as banks and insurance companies, listed companies and their related bodies corporate, and institutional and private investors with at least $10 million funds under management.23

Regulating issuers 1.15 Among other things, the securities laws impose requirements and restrictions on issuing entities in relation to the offer and issue of securities and other financial products. ‘Financial product’ is broadly defined and, subject to certain express carve-outs, includes any facility through which, or through the acquisition of which, a person makes a financial investment. This includes all types of financial instruments traded on the various securities markets, including securities, interests in managed investment schemes and derivatives. The issuing entities that are subject to these requirements include ordinary commercial and trading companies that issue shares and debentures to fund their operations, as well as financial sector entities (such as investment banks, investment companies, fund managers and superannuation trustees) that create different types of investment vehicles and structures and issue other forms of interests in them. The main regulatory requirements imposed on issuers relate to disclosure. In the case of financial sector entities, these mandatory disclosure requirements may operate in addition to licensing and other requirements that apply to them as financial services providers: see Chapter 13 below.

[page 16] In terms of structure, the regulatory system as it applies to issuers is bifurcated. Entities that issue securities as defined in Corporations Act s 761A are subject to the disclosure and related requirements in Ch 6D of the Corporations Act. For this purpose, securities includes shares and debentures, as well as options and rights to acquire shares or debentures by way of issue. Entities that issue other types of financial products, such as derivatives, warrants, interests in managed investment schemes and structured products, are subject to the disclosure and related requirements in Pt 7.9 of the Corporations Act. In both cases, the mandatory disclosure requirements apply where the financial instruments in question are offered (directly or indirectly) for issue to retail investors. In addition to statutory controls on the conduct of such offers, issuers of both categories of financial instruments may be subject to ongoing continuous disclosure requirements under Corporations Act Ch 6CA, if they are ‘disclosing entities’ as defined in Corporations Act Pt 1.2A.

Offering securities 1.16 Chapter 6D of the Corporations Act, entitled ‘Fundraising’, regulates the offer of company securities to retail investors. Part 6D.2 Div 2 sets out when an offer of securities ‘needs disclosure to investors’: Corporations Act s 704. In broad terms, an offer of securities for issue needs disclosure to investors unless it comes within one of the recognised statutory exemptions, which include small scale private offers and offers made to sophisticated investors, professional investors or persons associated with the issuer. An offer of securities for sale will need disclosure to investors (unless exempt) if it amounts to an indirect issue of the securities, or a direct or indirect off-market sale by a person who controls the issuer. Where an offer needs disclosure to investors under Pt 6D.2 Div 2, then depending on the circumstances of the offer that disclosure will take the form of a prospectus, a short form prospectus, a profile statement or an offer information statement: Corporations Act Pt 6D.2 Div 3. The nature and extent of the disclosure required in each type of document is

prescribed by Pt 6D.2 Div 4. The main form of disclosure document (used, for example, in connection with an initial public offering, or IPO) is the full prospectus. In addition to certain specific mandatory disclosures (for example, dealing with the nature and extent of any interests those involved in the offer have in the offer), the prospectus must include ‘all the information that investors and their professional advisers would reasonably require to make an informed assessment of’, among other things, the rights and liabilities attaching to the securities offered, and the assets and liabilities, financial position and performance, profits and losses and prospects of the issuer: Corporations Act s 710. However, this information must be included only to the extent it is reasonable for investors and their professional advisers to expect to find the information in the prospectus (which may exclude, for example, information about trade secrets) and only if the issuer, its directors or its named underwriter or advisers knew the information or ought reasonably to have obtained it by making enquiries (for example, through a structured ‘due diligence’ process). Further, the information must be worded and presented in a clear, concise and effective manner. Part 6D.2 Div 5 controls the procedure for offering securities by way of a regulated offer. Various steps are involved. They include preparing the required disclosure [page 17] document; lodging the document with ASIC; making the offer by distribution of the disclosure document attached to the application form; curing any defects in the disclosure document that arise during the offer period through supplementary disclosure; holding application money on trust until the offer is completed; and issuing the securities. Controls on advertising the offer and on securities hawking are imposed by Pt 6D.3 Div 1. More broadly, Pt 6D.3 contains the (numerous) prohibitions, liabilities and remedies that the law imposes in connection with regulated offers. Importantly, these include provisions imposing criminal and civil liability on issuers and their directors in connection with non-complying offers and defects in the disclosure documents provided to investors.

The laws regulating offers of securities are discussed in Chapters 4 and 5.

Offering other financial products 1.17 Part 7.9 of the Corporations Act, entitled ‘Financial Product Disclosure and Other Provisions Relating to Issue, Sale and Purchase of Financial Products’, regulates the offer of financial products other than securities. Along with a vast array of financial products not covered in this book — such as bank deposits, superannuation products and risk insurance products — this category includes the listed managed investments, derivatives and structured products listed for quotation on the ASX. Part 7.9 applies in relation to financial products issued or to be issued in the course of a business of issuing financial products, and does not apply in relation to debentures, stocks or bonds issued or proposed to be issued by a government: Corporations Act ss 1010A and 1010B. Part 7.9 Div 2 contains a mandatory disclosure requirement that applies in connection with certain offers of financial products for issue or sale. As with the securities laws, the disclosure obligation is only triggered in connection with offers of financial products for sale where the sale amounts to an indirect issue or a direct or indirect off-market sale by a controller. In these cases, and where financial products are offered for issue, the offeror may be required to prepare and provide a disclosure document in the form of a Product Disclosure Statement (PDS). However, a PDS is only required if the recipient of the offer is a ‘retail client’ as defined. Even where the offerees include retail clients, the offer may be exempted from the PDS requirements under one of the numerous statutory exemptions, for example, for rights issues or for small scale private offers of interests in managed investment schemes. The requirements relating to the preparation and content of PDSs are contained in Pt 7.9 Div 2 Subdiv C of the Corporations Act. Special (truncated) content requirements apply for PDSs for particular financial products, such as interests in ‘simple’ managed investment schemes as defined. For other financial products the legislation prescribes the disclosure of particular matters, including risks associated with acquiring the product, along with a general requirement to include ‘any other

information that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire the product’. Information need only be included to the extent that it is ‘reasonable for a person considering, as a retail client, whether to acquire the product to expect to find the information’ in the PDS, and if it is actually known to certain people (including the [page 18] issuer and its advisers) named in the legislation. Unlike prospectuses, PDSs are not required to be lodged with ASIC, unless they relate to listed managed investments. Part 7.9 Div 2 also includes arrangements for updating or correcting disclosure during the course of the offer through the issue of supplementary PDSs, and contains certain procedural requirements related to different types of offers. Some issuers of financial products are subject to ongoing disclosure obligations under Pt 7.9 Div 3 of the Corporations Act. Part 7.9 Div 4 imposes restrictions on advertising that apply in connection with offers, while Div 5 puts in place a ‘cooling-off’ period for certain products. Division 6 is entitled ‘Miscellaneous’ and includes restrictions on short selling. Division 7 contains the enforcement provisions which (among other things) impose civil liability on the issuer for defective disclosure. The disclosure requirements for offers of financial products are discussed in Chapter 6.

Wholesale offers 1.18 Generally speaking, the mandatory disclosure obligations in Ch 6D (for securities) and Pt 7.9 (for other financial products) of the Corporations Act do not apply where the offer is restricted to the wholesale market. However, this is not to say that such offers are wholly unregulated. General prohibitions on engaging in misleading or deceptive conduct or other forms of market misconduct may apply under Pt 7.10 of the Corporations Act and Pt 2 Div 2 of the ASIC Act. In such circumstances, the issuer is not under a positive obligation to make

disclosure but, if it does, it must ensure that its disclosure is accurate and complete. In particular, it must ensure that it does not engage in ‘halftruths’, or remain deliberately silent in circumstances giving rise to a reasonable expectation that silence would be broken if a particular state of affairs existed. The liability of issuers for defective disclosure in connection with wholesale offers is discussed in Chapter 8.

Continuous disclosure 1.19 Issuers of securities and other financial products may also be subject to continuous disclosure requirements, if they are ‘disclosing entities’ as that expression is defined in Pt 1.2A of the Corporations Act. A disclosing entity is an entity that has issued ED (enhanced disclosure) securities. In broad terms this includes listed companies and managed investment schemes; unlisted companies and managed investment schemes that have conducted regulated offers with the result that they have 100 or more shareholders or interest holders in the relevant class; and debenture issuers. The significance of being a disclosing entity is that the issuer must comply with the continuous disclosure requirements in s 674 (for listed entities) or s 675 (for unlisted entities) and must prepare financial statements and reports required under Ch 2M of the Corporations Act half-yearly as well as annually. In return, the prospectus or PDS requirements are modified to reduce the level of disclosure required in connection with a further issue of securities or interests. Entities subject to the continuous disclosure requirements are obliged by Ch 6CA of the Corporations Act to disclose information about specified events or matters [page 19] to the market operator (for listed entities) or ASIC (for unlisted entities) as they arise. In the case of entities listed on the ASX, the disclosure obligation is contained in s 674 and is an obligation to notify the ASX of information in accordance with ASX Listing Rule 3.1. The Listing Rule

provides that ‘once an entity is or becomes aware of information concerning it that a reasonable person would expect to have a material effect on the price or value of its securities, it must immediately tell ASX that information’. However, the entity is not required to disclose the information if three conditions are met. The first is that a reasonable person would not expect the information to be disclosed; the second is that the information is confidential and the ASX has not formed the view that the information has ceased to be confidential; and the third is that the information is exempt in character. Information is exempt in character if any one or more of the following applies: it would be a breach of law to disclose the information; the information concerns an incomplete proposal or negotiation; the information comprises matters of supposition or is insufficiently definite to warrant disclosure; the information is generated for the internal management purposes of the entity; or the information is a trade secret: ASX Listing Rule 3.1A. The disclosure obligation on unlisted disclosing entities arises under s 675 when the entity becomes aware of information that is not generally available and that a reasonable person would expect, if it were generally available, to have a material effect on the price or value of ED securities of the entity. Continuous disclosure is examined in Chapter 7.

Issuer licensing 1.20 Among other things, Ch 7 of the Corporations Act creates a licensing regime for financial intermediaries: see 1.26 below. In most cases, a person who carries on a business of providing financial services (as defined) must hold an Australian financial services licence (AFS licence) issued by ASIC authorising it to provide those services. A person is treated as providing a financial service if, among other things, they deal in a financial product (including a security), and the statutory definition of ‘dealing’ includes issuing such a product. Despite this, a company that issues securities in itself is not usually required to hold an AFS licence in order to conduct the issue (although it may be required to hold an AFS licence if it engages in other regulated conduct in relation to the offer, such as providing financial product advice). This is because, with one important exception, the definition of

‘dealing’ expressly excludes any transaction entered into by a body corporate that relates only to its own securities. The exception is for what might be described as ‘investment companies’ — that is, companies that carry on a business of investment in securities, interests in land or other investments and that in the course of carrying on that business invest funds subscribed by the public made on terms that the funds subscribed would be invested in this way: Corporations Act s 766C(5). These investment companies may be required to hold an AFS licence in certain circumstances. Issuers of other types of financial products may be required to hold an AFS licence. For example, the operator of a registered managed investment scheme (known as the [page 20] ‘responsible entity’) must hold such a licence. The licensing requirement is discussed in Chapter 13 below.

Regulating market infrastructure 1.21 The second important part of the regulatory framework for securities and markets is the regulation of operators of financial markets, and of operators of CS facilities. Prior to commencement of Ch 7 of the Corporations Act in 2002, different types of financial markets, and different CS facilities, had been differently regulated. Chapter 7 adopts a more consistent regulatory framework across both exchange-based and OTC markets, and between markets in different types of financial instruments. The market regulation regime is contained in Pts 7.2–7.5 of the Corporations Act. Part 7.2 provides for licensing of financial market operators; Pt 7.3 provides for licensing of CS facility operators; Pt 7.4 prohibits ‘unacceptable control situations’ and the involvement of disqualified individuals in licensees; and Pt 7.5 establishes compensation

regimes for licensed markets through which participants provide services to retail clients. Part 7.5A of the Corporations Act deals with the regulation of derivative transactions and derivative trade repositories. The rules reflect the commitments made at the Group of 20 (G20) Summit in 2009 to (i) reporting of transaction information relating to OTC derivatives to trade repositories that maintain a database of those transactions; (ii) clearing of standardised OTC derivatives through central counterparties; and (iii) execution of standardised OTC derivatives on exchanges or electronic trading platforms, where appropriate. The objectives of these reforms included enhancing transparency of transaction information available to regulators and the public, promoting financial stability and supporting the detection and prevention of market abuse.

Financial market operators 1.22 Operators of financial markets must be licensed by the Commonwealth Treasurer under Pt 7.2 of the Corporations Act, and must comply with the general and specific obligations imposed on the holder of an Australian market licence under the Act. A financial market is a facility through which ‘offers to acquire or dispose of financial products are regularly made or accepted’, or through which ‘offers or invitations are regularly made to acquire or dispose of financial products that are intended to result or may reasonably be expected to result, directly or indirectly, in the making of offers to acquire or dispose of financial products, or the acceptance of such offers’: see Corporations Act s 767A and ASIC Regulatory Guide 172 — Australian Market Licences: Australian Operators, March 2002. Certain conduct is expressly excluded from the definition of operating a financial market, including ‘a person making or accepting offers or invitations to acquire or dispose of financial products on the person’s own behalf, or on behalf of one party to the transaction only’, and the conduct of treasury operations between related bodies corporate. [page 21]

The responsibility for licensing markets rests with the Commonwealth Treasurer, a power that is exercised on the advice of ASIC.24 Market licensees are subject to a number of statutory obligations contained in Pt 7.2 Div 3 of the Corporations Act. Among other things a licensee must, to the extent that it is reasonably practicable to do so, do all things necessary to ensure that the market is a fair, orderly and transparent market. It must have adequate arrangements for operating the market, including arrangements for handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure that the market is fair, orderly and transparent, and for monitoring and enforcing compliance with the market’s operating rules. It must have sufficient financial, technological and human resources to operate the market properly. It is also required to notify ASIC of certain events and matters as they arise, and to assist ASIC in the exercise of its regulatory functions. The market’s operating rules must deal with certain prescribed matters, including access to the market, eligibility criteria and ongoing requirements for participants, arrangements for market disruption, terms of financial products and trading, listing of entities (where appropriate), and the resolution of disputes between participants: Corporations Act s 793A and Corporations Regulations reg 7.2.07. Importantly, Pt 7.2 Div 3 allows for the operating rules to be enforced by ASIC, the market operator, the operator of the market’s CS facility, and any person aggrieved by a failure to comply with the rules. Changes to the rules must be notified to ASIC, and the Minister has power to disallow changes to an Australian market’s operating rules within 28 days of the notification. Part 7.2 Div 4 of the Corporations Act sets out the criteria for granting a market licence, and allows the Treasurer to impose conditions on the licence. A licence may be varied, suspended or cancelled in certain circumstances. The legislation also includes special arrangements for dealing with situations where the market operator itself or a related body corporate is listed on the market it operates. Supervision of the markets is the responsibility of ASIC, under Pt 7.2A of the Corporations Act.25 Pursuant to s 798G, ASIC makes market integrity rules that deal with the activities or conduct of licensed markets, of persons in relation to licensed markets, and of persons in relation to

financial products traded on financial markets. Market operators and participants must comply with those rules, and ASIC is responsible for the real-time monitoring of that compliance. If the financial market is one through which participants provide financial services to retail clients, the market must have in place approved compensation arrangements under Pt 7.5 of the Corporations Act. For financial markets operated by members of the Securities Exchange Guarantee Corporation nominated under Corporations Act s 890A, the National Guarantee Fund established under s 889A of the Act is the applicable compensation arrangements. For other market operators, ‘approved compensation arrangements’ under Pt 7.5 Div 3 are permitted. [page 22]

Clearing and settlement facility operators 1.23 Part 7.3 of the Corporations Act regulates the operation of a CS facility in the jurisdiction. A CS facility is ‘a facility that provides a regular mechanism for the parties to transactions relating to financial products to meet obligations to each other that arise from entering into the transactions’ and are of a kind prescribed by regulations: Corporations Act s 768A(1). The prescribed obligations are obligations arising from contracts to transfer securities, interests in registered and wholesale managed investment schemes, derivatives, government bonds, foreign exchange contracts, debentures or repurchase agreements: Corporations Regulations reg 7.1.09. Examples given in the legislation of CS facilities include ‘a facility that provides a regular mechanism for stockbrokers to pay for the shares they buy and to be paid for the shares they sell, and for records of those transactions to be processed to facilitate registration of the new ownership of the shares’ and ‘a facility that provides a regular mechanism for registering trade in derivatives on a futures market and that enables the calculation of payments that market participants owe by way of margins’. Certain conduct is expressly excluded from the definition of operating a CS facility, including an authorised deposit-taking institution (ADI) acting in the ordinary course of its banking business, and a person acting on their own behalf or on behalf of one party to a transaction only.

The operator of a CS facility must hold a CS facility licence issued by the Commonwealth Treasurer.26 The arrangements for licensing are set out in Pt 7.3 Div 3, including for the grant of a licence, the imposition of licence conditions, and variation, suspension and cancellation of licences. In recognition of the importance of the efficient functioning of CS facilities to the stability of the financial system as a whole, special powers to assess compliance, make reports and give directions are conferred on the Minister, ASIC and the Reserve Bank of Australia by Pt 7.3 Div 2 of the Corporations Act. A CS facility licensee must comply with various statutory obligations contained in Pt 7.3 Div 2 of the Corporations Act. Among other things a licensee must, to the extent that it is reasonably practicable to do so, comply with applicable standards and do things necessary to reduce systemic risk and ensure that the facility’s services are provided in a fair and effective way. It must have adequate arrangements for supervising the facility, including arrangements for handling conflicts between the commercial interests of the licensee and the need for the licensee to ensure the facility’s services are provided in a fair and efficient way, and for enforcing compliance with the facility’s operating rules. It must have sufficient financial, technological and human resources to operate the facility properly and to provide the required supervisory arrangements. It is also required to notify ASIC and the Reserve Bank of certain events and matters as they arise, and to assist ASIC and the Reserve Bank in the exercise of their respective regulatory functions. The facility’s operating rules must deal with certain prescribed matters, including the terms on which the CS services are provided, matters relating to risk, access [page 23] to the facility, rules for participants, and the handling of defaults: Corporations Act s 822A and Corporations Regulations reg 7.3.05. Part 7.3 Div 2 allows for the operating rules to be enforced by ASIC, the facility operator, the operator of the financial market that utilises the facility, and any person aggrieved by a failure to comply with the rules. Changes to the

rules must be notified to ASIC, and the Minister has power to disallow changes to a facility’s operating rules within 28 days of the notification.

Limits on involvement with licensees 1.24 In addition to requiring operators of financial markets and CS facilities to be licensed, the regulatory system imposes restrictions on who can exercise control over those licensees. The restrictions are twofold. First, an ‘unacceptable control situation’ is not permitted in relation to a licensee named in reg 7.4.01 of the Corporations Regulations as a ‘widely held market body’, which includes the ASX. Generally speaking, an unacceptable control situation exists in relation to a widely held market body if a person’s voting power in that body exceeds 15%. This effect of Pt 7.4 Div 1 is that acquiring a voting stake in a widely held market body that exceeds 15% requires the approval of the Minister. Second, involvement in a licensee by a disqualified person is not allowed. An individual is disqualified if ASIC has made a declaration to that effect under s 853C, the individual is disqualified from managing a corporation under s 206B, or if the individual is on the register of disqualified officers maintained by ASIC under s 1274AA. Such a person is not permitted to act as a director, secretary or senior manager of a licensee or the holding company of a licensee, or to hold more than 15% of the total voting power in the licensee or its holding company.

Derivative transactions and derivative trade repositories 1.25 Part 7.5A of the Corporations Act deals with derivatives transactions and derivative trade repositories. Under Div 2, ASIC is empowered to make rules dealing with, among other matters, execution requirements, reporting requirements, and clearing requirements relating to derivative transactions in derivatives covered by a Ministerial determination made under the Act. Under Divs 3–6, ASIC is given the function of supervising licensed derivative trade repositories. The regulation of market infrastructure providers is discussed in Chapters 10–12.

Regulating intermediaries 1.26 The third important part of the securities and markets regulatory framework is the regulation of financial services providers under Ch 7 of the Corporations Act. Some issuers of financial products (particularly fund management companies and investment banks) are treated as financial services providers and are therefore subject to the licensing and conduct requirements contained in the Act: see 1.19 above. These requirements also apply to those firms and individuals who operate as ‘intermediaries’ in the markets, including (in particular) brokers, dealers and advisers. As at 30 June 2015, there were 5918 financial services businesses licensed [page 24] by ASIC.27 However, not all financial services licensees are market intermediaries, as the licensing regime also covers (among others) the insurance and superannuation industries.

Licensing requirement 1.27 The pattern of Ch 7 is to require that those carrying on a business of providing financial services in the jurisdiction be licensed by ASIC to do so, unless one of the express statutory exceptions to the licensing requirement applies: Corporations Act s 911A. This is so regardless of whether the services are provided to wholesale or retail clients, or both. A person provides a financial service if they provide financial product advice, deal in a financial product, make a market for a financial product, operate a registered managed investment scheme, or provide a custodial or depository service: Corporations Act s 766A. A person who provides a financial service on behalf of a principal engaged in such a business must be properly authorised on behalf of the principal to do so: Corporations Act s 911B. The licensing regime is established under Pt 7.6 Div 4 of the Corporations Act, and administered by ASIC. Different classes of licence are issued, depending on the particular financial services to be provided. Applicants for a licence must meet the various licensing criteria set down

by ASIC, and licences are issued subject to various conditions. Use of expressions such as ‘stockbroker’, ‘sharebroker’ or ‘futures broker’ is permitted only if expressly authorised under the licence. ASIC has power to vary, suspend or cancel a licence in certain circumstances. Failure to hold a licence when one is required is a criminal offence. Also, agreements with unlicensed persons relating to the provision of financial services can be unenforceable in certain circumstances, under Pt 7.6 Div 11 of the Act. AFS licensees are subject to a number of general statutory obligations under Corporations Act Pt 7.6 Div 3. These include obligations to do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; to have in place adequate arrangements for the management of conflicts of interest; and to maintain the resources and competence to provide the services. A licensee must comply with the licence conditions and the financial services laws, and take reasonable steps to ensure that its representatives do so also. If its clients include retail clients it must have an internal dispute resolution system and be a member of an external dispute resolution scheme that meets statutory requirements, and put in place appropriate compensation arrangements. A licensee is also subject to various information requirements, under which it is required to report certain matters to ASIC. Divisions 5 and 6 of Pt 7.6 regulate licensees’ (internal and external) representatives, including through allowing representatives external to a licensee to be appointed as ‘authorised representatives’ to provide financial services on its behalf. Licensees are made responsible for any conduct of their representatives that relates to the provision of a financial service, on which a client could reasonably be expected to [page 25] rely and did in fact rely. Where a person is a representative of more than one licensee, that responsibility is allocated between the licensees in the manner set out in the Act. ASIC and the courts have power to ban or disqualify persons from providing financial services, under Pt 7.6 Div 8 of the Act.

General law obligations of intermediaries 1.28 The relationship between financial intermediaries (such as brokers and advisers) and their clients is governed by established general law principles. The relationship is founded in contract, supplemented by various duties and obligations arising out of the specific nature of the relationship between the client and the intermediary. For example, brokers are subject to general law obligations to act in accordance with instructions and to undertake transactions at the best possible price. Where the intermediary acts as the client’s agent, the law of agency applies. Financial intermediaries may, depending on the circumstances, owe fiduciary duties to their clients.28 Where this is so the intermediary is not permitted to act in situations where there is a real sensible possibility that its personal interests or duty to another person may conflict with its duty to the client, or to profit from its position, without the informed consent of the client. An intermediary will also owe to its client a duty to use reasonable care and skill in the discharge of its functions. The extent of its duty depends upon the extent of responsibility assumed by the intermediary and of the client’s reliance. For example, the duty of a broker may be to execute instructions with reasonable care and skill, but will not necessarily extend to an obligation to warn or advise the client in relation to the trade. The intermediary’s general law duty of care is supplemented, in the case of contracts for the supply of financial services to ‘consumers’ as defined, by an implied warranty that the services will be rendered with due care and skill contained in ASIC Act s 12ED.

Financial services disclosure 1.29 AFS licensees that provide financial services to retail clients (as defined) are subject to certain mandatory disclosure requirements under Pt 7.7 of the Corporations Act. Depending on the nature of the service and the circumstances in which it is provided, the licensee or its representative may be required to give the client a Financial Services Guide (FSG) that contains certain prescribed information about the licensee or representative, the nature of the service to be provided, and the basis on

which the licensee or representative is to be remunerated for the provision of the service. [page 26] Additional disclosure requirements apply where the financial service in question is financial product advice provided to a retail client. The Corporations Act distinguishes between general advice and personal advice: Corporations Act s 766B(3) and (4). Where general advice is provided to a retail client, a ‘general advice warning’ may be required. Additional disclosure in the form of a Statement of Advice may also be required.

Conduct rules 1.30 Parts 7.7A and 7.8 of the Corporations Act contains a number of conduct and other rules that apply to AFS licensees and their representatives. The Future of Financial Advice (FoFA) rules, contained in Div 2, apply in relation to the provision of personal financial product advice to retail clients, and include obligations relating to the provision of the advice, including obligations to act in the best interests of the client, to give appropriate advice, to warn the client if advice is given on the basis of incomplete information, and to give priority to the client’s interests in the event of a conflict. They also include restrictions on various forms of conflicted remuneration, including the payment of commissions by product issuers to providers in certain circumstances. Divisions 2 and 3 of Pt 7.8 prescribe how moneys and other property received from clients are to be held and dealt with. Divisions 5 and 6 impose reporting requirements on licensees, including obligations to keep financial records, prepare financial statements and appoint auditors. Division 7 contains ‘other rules about conduct’, including a prohibition on licensees engaging in unconscionable conduct, and a requirement on licensees dealing on licensed markets to give priority to client orders, to deal through the market, to keep records of dealing instructions, and to disclose if they are acting as principal in dealings with non-licensees. It also restricts a licensee from jointly acquiring a financial product with, or

providing credit to, an employee. Part 7.9 contains a generalised restriction, not limited in its application to licensees, on securities hawking.

Exchange operating rules 1.31 Financial intermediaries that act (either on their own behalf or on behalf of clients) in licensed markets are bound, as a matter of contract, by the operating rules of the market. For example, in the case of the ASX, the operating rules that apply to affiliates and participating organisations include the ASX Operating Rules, ASX Clear Operating Rules, ASX Settlement Operating Rules and ASX 24 Operating Rules.29 The operating rules provide for the admission (and expulsion) of participants, and impose detailed and specific obligations on them in relation to their on-exchange trading activities. The laws governing intermediaries are discussed in Chapters 13 and 14. [page 27]

Market conduct regulation 1.32 The fourth important part of the regulatory framework is market conduct regulation. This is regulation directed at how investors and others conduct themselves in markets and in relation to financial products and financial services. Provisions of general application, contained in Pt 2 Div 2 of the ASIC Act and Pt 7.10 of the Corporations Act, operate to impose minimum standards of conduct on those involved in financial markets, that function to protect the individual market participants as well as the integrity of those markets overall. The unconscionable conduct and consumer protection provisions in Pt 2 Div 2 of the ASIC Act were introduced into the predecessor legislation following the recommendations of the Wallis Inquiry in 1998: see 1.45 below. The Wallis Inquiry had recommended that responsibility for consumer protection in relation to the financial sector be transferred from the Australian Competition and Consumer Commission (ACCC), which had exercised that function under the then TPA, to ASIC. Accordingly, Pt

2 Div 2 of the ASIC Act was enacted to mirror the corresponding provisions of the TPA, which continue to apply to the rest of the economy and remain under the administration of the ACCC. Part 7.10 of the Corporations Act proscribes various types of conduct in relation to financial markets, financial products and financial services. This includes market manipulation, false trading, the making of false representations, dishonest conduct, and misleading or deceptive conduct. It also prohibits insider trading: that is, trading or tipping on the basis of non-public information that, if it were public, would reasonably be expected to have a material effect on the price or value of particular securities and other financial instruments.

Dishonest, misleading or deceptive conduct 1.33 The regulatory framework contains a number of rules of general application that prohibit dishonest, misleading or deceptive conduct in relation to financial products and financial services. A person is prohibited by the ASIC Act from engaging, in trade or commerce, in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. The Corporations Act prohibits conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. Breach of the prohibitions on misleading or deceptive conduct gives rise to civil liability. The Corporations Act also expressly prohibits a person, in the course of carrying on a financial services business in Australia, from engaging in dishonest conduct in relation to a financial product or financial service.

Unconscionable conduct 1.34 The ASIC Act prohibits a person, in trade or commerce, from engaging in certain unconscionable conduct in relation to financial services. Unconscionable conduct has been held, on its ordinary and natural interpretation, to mean ‘doing [page 28]

what should not be done in good conscience’.30 The purpose of these provisions is to protect vulnerable people from predatory behaviour. There is a separate prohibition on unconscionable conduct that applies specifically to AFS licensees, in Corporations Act s 991A.

Consumer protection 1.35 The ASIC Act also contains various consumer protection provisions that relate to the way in which financial products and services are marketed. The Act prohibits false advertising and certain other undesirable selling practices, such as bait advertising and referral selling. It also implies warranties as to reasonable care and fitness for purpose into contracts for the provision of financial services, and limits the extent to which providers can contract out of, or limit their liability in respect of, the Act.

Unfair contract terms 1.36 Provisions introduced into the ASIC Act in 2010 render void any unfair term included in a contract that is a standard form consumer contract, where that contract is either a financial product, or contract for the supply or possible supply, of services that are financial services. Unfairness is a statutory concept and the legislation provides a list of examples of unfair terms; however, the regime will not operate to make void terms that define the main subject matter of the contract or set the upfront price.

Market misconduct 1.37 Part 7.10 of the Corporations Act prohibits, among other things, various forms of market misconduct: that is, conduct that might impact on the free and transparent operation of financial markets. Several sections are directed at the integrity of trading in financial products on a financial market operated in Australia. Conduct that is prohibited in relation to financial products traded on financial markets includes market manipulation (that is, engaging in transactions that have or are likely to have the effect of creating or maintaining an artificial price for such trading), as well as acts or omissions that have or are likely to have the effect of creating a false or misleading appearance of active trading or a

false or misleading appearance with respect to the market or price, and fictitious or artificial trading that results either in a price being maintained, inflated or depressed, or in fluctuations in price. In addition, the legislation prohibits the circulation or dissemination for gain of any statement or information to the effect that the price for trading in financial products on a financial market operated in this jurisdiction will, or is likely to, rise or fall, or be maintained, because of an act that contravenes the misconduct provisions. Part 7.10 also includes provisions that apply to dealings in financial products generally (that is, not just on financial markets). The first applies where a person makes a statement, or disseminates information, that is false in a material particular or is materially misleading if the information or statement is likely to induce people [page 29] to apply for financial products or to dispose of or acquire financial products, or to have the effect of increasing, reducing, maintaining or stabilising the price for trading in financial products on a financial market. Such conduct contravenes the law if, when the person makes the statement or disseminates the information, they do not care whether the statement or information is true or false, or they know, or ought reasonably to have known, that the statement or information is false in a material particular or is materially misleading. The second makes it illegal to induce someone to deal in financial products by making or publishing a statement, promise or forecast if the person knows, or is reckless as to whether, the statement is misleading, false or deceptive; by a dishonest concealment of material facts; or by recording or storing information that the person knows to be false or misleading in a mechanical, electronic or other device.

Insider trading 1.38 Insider trading is prohibited by Pt 7.10 Div 3 of the Corporations Act. In broad terms, Corporations Act s 1043A prohibits two types of conduct by persons in possession of inside information — trading and tipping. Information is ‘inside information’ for this purpose if it is not

generally available, and if a reasonable person would expect the information (if it were generally available) to have a material effect on the price or value of particular financial instruments of a kind covered by the law. Financial instruments covered by the insider trading law include securities, derivatives, interests in managed investment schemes, government bonds and any other financial products able to be traded on a financial market. The prohibitions in s 1043A apply whenever someone is in possession of insider information, and knows (or ought reasonably to know) both that the information is not generally available and that it is price sensitive. This is so regardless of how the person came into possession of that information, and whether or not the person is an ‘insider’ in the ordinary sense (that is, a person with an antecedent connection to the entity to which the information relates). While a person is in this position, the person must not (whether as principal or agent) trade in or procure another person to trade in the relevant financial instrument. This is known as the trading offence. The law also prohibits the person from communicating information relating to financial products that can be traded on a financial market to another person whom they know or ought to know will trade on the information. This is known as the tipping offence. The legislation contains various carve-outs and exceptions, and specifies that certain conduct does not contravene the prohibitions. This includes trading that occurs within firms where those in possession of the inside information are separated from the trader by a ‘Chinese wall’, or information barrier. The conduct regulation provisions of the Corporations Act and the ASIC Act are discussed in Chapters 15, 16 and 17. [page 30]

EVOLUTION OF THE CURRENT FRAMEWORK 1.39 The previous part explains, in broad terms, the current regulatory

framework for securities and financial markets in Australia. The relevant laws have been substantially amended and expanded in recent years, with the result that almost all of the legislative provisions discussed in this book were enacted after 1998. The unconscionable conduct and consumer protection provisions in the ASIC Act commenced in 1999, and the unfair contracts provisions in 2010. The laws relating to fundraising by the issue of company securities (Ch 6D of the Corporations Act) commenced in their current form in 2000. The continuous disclosure laws (Ch 6CA of the Corporations Act) and financial services and markets laws (Ch 7 of the Corporations Act) commenced in 2002. Each of these areas of law has been further revised or refined since its commencement. The remainder of this chapter explains the evolution of the current framework. The fact that most of the current legislation post-dates 1998 might suggest that governmental regulation of securities and financial markets in Australia is an entirely modern phenomenon, but this is not correct. Mandatory disclosure laws covering securities issuers, and limited regulation of financial intermediaries, pre-date the formation of the Commonwealth in 1901. Collective investments have been regulated since the 1950s. Takeovers regulation and the securities intermediaries and markets laws date from the late 1960s and early 1970s. Futures markets regulation commenced in the 1980s. While the current laws are demonstrably ‘new’, they clearly build on and refine those earlier regulatory regimes. There are two distinct strands to the development of securities and markets regulation in Australia. The first relates to developments in substantive regulation (that is, the rules and restrictions that are applied to different parts of and participants in the markets). Key milestones include the investor protection reforms of the 1890s (which followed the land and mining booms of the 1880s); the introduction in the 1970s of takeovers and securities industry laws (following the Poseidon boom of the late 1960s and the work of the Eggleston and Rae Committees); the introduction of futures industry laws in the mid-1980s; the restructure of all of those laws in the late 1990s under, first, the Corporate Law Economic Reform Program (CLERP) and, at the end of the century, after the Wallis Inquiry; and the changes made or proposed in the aftermath of the global financial crisis (GFC) of 2008. The second relates to the

constitutional arrangements for securities regulation, and involves the incremental move from a wholly state-based regulatory framework for securities and markets regulation (up until the 1960s) to a wholly national one (by 2001). Key milestones here were the enactment of (largely) uniform companies legislation by each of the states in the 1960s; the establishment of the Interstate Corporate Affairs Commission in 1974; the commencement of the Commonwealth–State co-operative scheme for corporations and securities regulation and the establishment of the National Companies and Securities Commission in 1981; the commencement of the Corporations Law and the establishment of the Australian Securities Commission (ASC) in 1991; and the referral of powers by the states and territories to the Commonwealth in 2001 that allowed for the enactment of Commonwealth [page 31] legislation covering companies and financial services. These key developments are explained briefly below.

Early developments in substantive regulation 1.40 By the time of Federation in 1901, each of the Australian states had in place limited regulatory regimes covering the formation and promotion of public companies and the activities of share brokers. In part this regulation had been adopted from English law; however, there were some significant local innovations (particularly in Victoria). Legislative intervention in the securities industry and securities markets dates back to the earliest stages of English commercial law — Professor Loss has identified statutes regulating brokers in the City of London that date back to the 13th century.31 The Bubble Act of 1720, which occupies a central place in the development of company law, was an early form of securities regulation, directed at: … persons who contrive or attempt such dangerous and mischievous undertakings or projects, under false pretences of public good, do presume … to open books for public subscriptions, and draw in many unwary persons to subscribe therein towards raising great

sums of money, whereupon the subscribers or claimants under them do pay small proportions thereof.32

The Bubble Act sought to limit those who could raise capital through the issue of securities, by requiring a Royal Charter — an early form of what is sometimes referred to as merit or ‘blue sky’ regulation.33 By the middle of the 19th century, following the recommendations of a select committee of the English Parliament established under the chairmanship of Gladstone, mandatory disclosure (in the form of a prospectus) for new issues of securities by joint stock companies was in place. The mandatory disclosure requirement was carried forward into the first ‘modern’ companies statutes, consolidated in the English Companies Act 1862 and subsequently adopted by the Australian colonial parliaments.34 The boom and bust of the latter part of the 19th century saw some important developments in securities regulation, particularly in Victoria. Stock exchanges had been formed in Sydney (1871), Hobart (1882), Melbourne and Brisbane (1884), Adelaide (1887) and Perth (1889), and levels of market participation were high. [page 32] The Mining Companies Act 1871 (Vic) had ‘introduced a stricter regulatory regime for mining companies in Victoria than that which applied to trading companies’ operating under the general companies statute; most notably the regime included more extensive mandatory disclosure requirements.35 When markets collapsed in the 1890s, there were calls for colonial legislatures to respond. Legislation adopted in Victoria in 1896 introduced several far-reaching investor protection mechanisms, including a prohibition on misleading statements in prospectuses.36 These additional investor protection mechanisms were applied to mining companies from 1910, and were subsequently adopted in a number of states. On Federation, the regulation of companies and securities remained a matter for the states, rather than the new Commonwealth Government, a

position confirmed by the High Court in Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330. Over the next 50 years or so, the pattern of regulation remained fairly constant. Relatively few companies operated across state boundaries and, as noted, separate stock exchanges existed in each of the state capitals. Although the collapse of world stock markets in 1929 had led to the introduction of a comprehensive system of national securities regulation in the United States (including the enactment of the Securities Act of 1933, the Glass-Steagall Act of 1933 and the Securities Exchange Act of 1934, and the formation of the Securities and Exchange Commission), there was no such response in Australia. The Australian Associated Stock Exchanges (AASE) was formed as a loose association of the local stock exchanges in 1937, but development of the markets was curtailed by the Second World War during which open market trading in listed companies was limited by government. During this period perhaps the most significant development in securities regulation was that which occurred in 1955, when the Victorian companies legislation was amended to regulate the offer of non-corporate collective investments such as unit trusts.37 The first major wave of substantive reform in Australian securities and markets law occurred in the late 1960s and early 1970s. By the 1960s Australian capital markets had developed significantly and were increasingly national in character. [page 33] In August 1967 the Standing Committee of Attorneys-General of the States appointed a Company Law Advisory Committee under the chairmanship of Richard Eggleston (the Eggleston Committee), to: … enquire into and report on the extent of the protection afforded to the investing public by the existing provisions of the Uniform Companies Acts and to recommend what additional provisions (if any) are reasonably necessary to increase that protection.

The Eggleston Committee released seven interim reports between 1969 and 1972 dealing with, respectively: accounts and audit; disclosure of substantial shareholdings and takeover bids; investigation provisions of the Uniform Companies Act; misuse of confidential information, dealings in

options and disclosure by directors; fundraising by corporations; offers to the public; share hawking; and registration of charges. The most enduring of the Eggleston Committee’s work was its enunciation of certain core principles for the regulation of company takeovers, discussed in 1.37 above. Otherwise, though, much of its work was overtaken by the events of the so-called Poseidon boom of 1969 and the work of the Senate Select Committee on Securities and Exchange, established in March 1970 and conducted from 1971 under the chairmanship of Senator Peter Rae (the Rae Committee).

Securities industry regulation 1.41 The minerals markets boom (and subsequent bust) of the late 1960s is well documented; the seven volumes of the Rae Committee’s report set out the events in detail. Legislative responses to events in the market were swift; New South Wales enacted legislation regulating the stock exchanges and the securities industry in 1970, and Victoria, Western Australia and Queensland followed within a few years. This early securities industry legislation was concerned with registration of stock markets and intermediaries and with some aspects of trading in securities; regulation of companies (including offers to the public of their securities, their accounts, takeovers and the regulation of investment companies and debenture trust deeds) continued to be a matter for the Companies Acts.38 The Securities Industry Act 1970 (NSW) provided for the appointment of a Commissioner for Corporate Affairs; the approval of stock exchanges by government; the licensing of securities dealers and investment advisers and their respective representatives; the imposition of accounting and audit requirements for licensed dealers and of restrictions on the use and investment of stockbrokers’ trust funds; and the establishment of stock exchange fidelity funds. It created new market manipulation offences proscribing the creation of false markets through false trading, market rigging, fictitious transactions or the making of false or misleading statements about marketable securities. While covering a similar field, the legislation in the other states was not identical and this lack of consistency was criticised by the Rae Committee. In 1975, in response to the Rae Committee Report, more extensive legislation was enacted in each of the states, which endeavoured to adopt a more uniform approach. For

example, the Securities Industry Act 1975 (NSW) extended the 1970 Act to provide for deposits by members with stock exchanges and to impose requirements relating to the [page 34] conduct of securities businesses by licensees (including a requirement for dealers to give priority to client orders and a restriction on dealings by employees of licensees) and to require the creation of registers of interests in securities for licensees and financial journalists. A prohibition on dealings in securities by insiders in possession of non-public, price-sensitive information was also introduced.

Takeovers regulation 1.42 Drawing on the work of the Eggleston Committee, takeovers regulation was introduced in New South Wales in 1971, with the enactment of the Companies (Amendment) Act 1971 (NSW). The legislation provided for the disclosure of substantial shareholdings in companies and the regulation of takeover offers along the lines of the Eggleston Principles. It also strengthened the requirements for company accounts and audit, and expanded the Commissioner’s powers of investigation into the affairs of companies. Again, the other states followed and their legislation was to some extent harmonised in the mid-1970s in line with the Rae Committee recommendations.

Futures industry regulation 1.43 Regulation of futures markets followed some years later. The Sydney Greasy Wool Futures Exchange Limited had been established in 1960, and in 1972 had changed its name to the Sydney Futures Exchange. In April 1978 its scope and operation expanded greatly with the introduction of a gold futures market, to which markets in United States dollars and two-year and 10-year Treasury bonds were soon added.39 The Futures Market Act 1979 (NSW), which was enacted in 1979 and amended by the Futures Market (Amendment) Act 1982 (NSW), provided

for ministerial approval of futures exchanges and conferred supervisory power on the Corporate Affairs Commission. In 1983, nationwide regulation of futures markets came under consideration, and in 1984 the Commonwealth Government produced an Exposure Draft of a Futures Industry Bill as a template for discussion of consistent national regulation. In 1986 legislation along the lines of the draft Bill was adopted nationally (in accordance with the co-operative scheme discussed in 1.58 below): see Futures Industry Act 1986 (Cth). The legislation regulated the establishment of futures exchanges, clearing houses and futures associations and provided for a fidelity fund, and required futures brokers and advisers and their representatives to be licensed. It also included rules for conduct of futures businesses and for licensees’ accounts and audit, and prohibited insider trading, market manipulation, front-running and trading by licensees with their employees.

Second wave of reform: Wallis Inquiry, CLERP and FSR 1.44 While the constitutional and administrative arrangements for securities and markets regulation underwent significant change from the mid-1970s onwards (see 1.56 below), the substantive form of securities and markets law remained relatively settled (although not unchanged) from about 1976 to the late 1990s. [page 35] The second major wave of substantive reform began in March 1997, with the release of the Wallis Inquiry Final Report, and the instigation of the (new) coalition government’s Corporate Law Economic Reform Program.

Financial System Inquiry 1.45 The main task of the Wallis Inquiry was to consider and report to government on the adequacy of the regulatory framework within which the whole of the Australian financial sector operated. The Wallis Inquiry’s Final Report contains numerous recommendations for reform of that framework that extend beyond the matters covered in this book,

particularly in the areas of financial safety and systemic stability and payments. In the area of securities and markets regulation, the key recommendation of the Wallis Inquiry was for the establishment of a single regulator for conduct and disclosure across the financial system. The Wallis Inquiry proceeded on the basis that specialised regulatory arrangements for the financial sector were justified by the complexity of financial products and the specialised nature of financial markets: see 1.6 above. The Wallis Inquiry found that conduct and disclosure regulation in Australia was being provided through a variety of agencies, with arrangements governed by the institutional form of the service provider. It considered such arrangements to be inconsistent with the emerging structure of markets, and took the view that they had resulted in inefficiencies, inconsistencies and regulatory gaps and were not conducive to effective competition in financial markets. Accordingly, the Wallis Inquiry recommended that: … a single market conduct and disclosure regulator for the financial sector should be established by the Commonwealth. This new body should seek to establish a consistent and comprehensive disclosure regime for the whole financial system, albeit one with flexibility to apply different rules, in response to different situations, beyond a common core. This regulator should also have responsibility for the regulation of advice and sales of retail financial products, including the licensing of financial advisers under a single regime. It should oversee industry based schemes for complaints handling and dispute resolution and establish a common means of access for consumers.40

The Wallis Inquiry took the view that ‘regulation for the integrity of market conduct, consumer protection and the regulation of companies have significant synergies’. Accordingly, it recommended that these functions be combined by establishing a single regulator comprising the (then) ASC and that part of the Insurance and Superannuation Commission (ISC) that dealt with disclosure, sales and advice. It also recommended that the new regulator be given powers, exercisable with respect to the financial sector, which mirrored those provided under the consumer protection provisions of the then TPA, and that administration of these powers should vest in the regulator to the exclusion of the ACCC. The Wallis Inquiry’s recommendation for a single market conduct and disclosure regulator covering the whole of the financial system (excluding credit) was acted

[page 36] upon by government in 1998, with the establishment of ASIC and the enactment of the consumer protection and unconscionable conduct provisions covering the financial sector in what is now Pt 2 Div 2 of the ASIC Act. Its recommendation for a consistent set of conduct and disclosure laws across the sector was taken up as part of the CLERP project, and implemented (in a modified form) in the FSR Act: see 1.48 below.

Corporate Law Economic Reform Program 1.46 Coinciding with the delivery of the Wallis Inquiry’s Final Report was the establishment by the then government of its Corporate Law Economic Reform Program (CLERP) in April 1997. CLERP replaced the earlier Corporate Law Simplification Program which had been pursued by the previous government. Under CLERP, the new government proposed ‘a fundamental review of key areas of regulation which affect business and investment activity’ with the objective of ensuring that ‘business regulation is consistent with promoting a strong and vibrant economy and provides a framework which assists business in adapting to change’. As part of the government’s microeconomic reform agenda, CLERP proposed reforms to companies and securities regulation to ‘promote business and market activity … by enhancing market efficiency and integrity and investor confidence’.41 This was to be achieved by focusing on the economic effect of regulation on business and markets. CLERP identified six key principles underlying its review, which were to be applied to the various areas identified for reform. The principles were: market freedom; investor protection; information transparency; cost effectiveness; regulatory neutrality and flexibility; and business ethics and compliance. On 1 April 1997 five proposal papers were released, dealing with (respectively) accounting standards, fundraising, directors’ duties and corporate governance, takeovers, and electronic commerce. CLERP 6 (financial markets and investment products) followed in December 1997, CLERP 7 (simplified lodgment and compliance) in 1999, and CLERP 8 (cross-border insolvency) and CLERP 9 (corporate disclosure) in 2004.

The proposals directly relevant to securities and markets regulation were CLERP 2 (fundraising), CLERP 4 (takeovers) and CLERP 6 (financial markets and investment products). 1.47 The first tranche of reforms resulting from CLERP were made by the Corporate Law Economic Reform Program Act 1999 (Cth) (CLERP Act), which commenced (for the most part) on 13 March 2000. Among other things the CLERP Act substantially amended the existing law covering fundraising by the issue and sale of securities, and takeovers. In the area of fundraising, the CLERP Act introduced the new Ch 6D into the (then) Corporations Law, repealing the predecessor Pt 7.12 (which covered public offers of securities) and the provisions of Pt 7.11 dealing with liability for defective prospectuses. While key elements of the earlier law remained, including the basic prohibition against making offers without a disclosure document [page 37] and reliance on the general ‘reasonable investor’ disclosure standard, all of the statutory provisions were redrafted. The principal policy changes were: … to permit shorter disclosure documents; to liberalise the advertising restrictions for issues of quoted securities; to clarify and simplify the liability provisions, and extend the defences based on due diligence and reliance on others; to facilitate access to capital by small and medium-sized enterprises by removing restrictions on small scale offers and offers to ‘sophisticated investors’; to facilitate fundraising and disclosure in electronic form; and to remove the requirement that a prospectus be not merely lodged but registered.42

In the area of takeovers, the CLERP Act repealed the whole of the extant Ch 6 of the Corporations Law, which regulated the acquisition of shares, takeover procedures, disclosure of substantial shareholdings, tracing beneficial ownership of shares, and ancillary matters such as liability for misstatements and the powers of ASIC, the Corporations and Securities Panel (the Panel) and the courts. In its place, new Chs 6 (acquisition of shares and takeovers), 6A (compulsory acquisitions and buy-outs), 6B (liability) and 6C (substantial shareholdings and beneficial ownership) were inserted. The CLERP Act made three significant policy changes to the

takeovers law, and numerous technical changes. The three policy changes related to the role of the Panel, the procedures for compulsory acquisition, and the extension of the takeovers regime to acquisition of interests in listed managed investment schemes. The CLERP Act strengthened the role of the Panel, which was to ‘take the place of the courts as the principal forum for resolving takeover disputes under the Corporations Law, with the exception of civil claims after a takeover has occurred and criminal prosecutions’: Explanatory Memorandum to the CLERP Bill. It also extended the legislative mechanism for compulsory acquisition to allow better and more efficient management of corporate groups and to reduce the opportunities for ‘greenmailing’ by minority shareholders.

Financial services reform 1.48 The separate proposals for reform of financial services and market regulation, proposed in CLERP 6, were not included in the CLERP Act reforms of 1999. These reforms had a longer gestation, and did not achieve legislative form until the enactment of the FSR Act in 2001. An important precursor to CLERP 6 was the Report of the Companies and Securities Advisory Committee (CASAC) entitled ‘Regulation of Onexchange and OTC Derivatives Markets’, released in July 1997. Innovation in the design of financial instruments during the 1990s, and the development of new trading technologies, had placed pressure on the traditional distinctions between securities and futures, and between onexchange and OTC markets. The decision in Sydney Futures Exchange Ltd v Australian Stock Exchange Ltd (1995) 56 FCR 236; 16 ACSR 148 (LEPO case) to the effect that deliverable share futures and options over shares fell outside the definition of ‘futures contract’ for the purposes of the (then) Ch 8 of the Corporations Act made these pressures clear. The CASAC [page 38] Report examined these distinctions and recommended that a ‘core regulatory approach’ be adopted for all financial markets and the

instruments traded on those markets, including securities and derivatives. CASAC argued (at [3.9]) that such an approach: … could clarify and simplify the law, thereby reducing uncertainties and compliance costs; avoid regulatory overlaps or gaps; facilitate the development of new products by eliminating unnecessary differences in the way products are regulated; reduce regulatory arbitrage, that is, artificially designing products to take advantage of different regulatory regimes; and increase the compatibility of Australian and overseas financial markets regulatory regimes.

The structure and approach of CLERP 6 was influenced by the work of the economist Robert Merton.43 The formal reform process for financial markets and investment products began in December 1997, with the release of the CLERP 6 Proposal Paper. The Paper put forward nine core proposals for discussion. The first was that there should be uniform regulation of financial instruments (including all securities, futures and other derivatives as well as foreign exchange, superannuation, general and life insurance and deposit accounts), to be achieved by developing ‘an integrated regulatory framework … providing for consistent regulation of functionally similar markets and products’. The second to fifth proposed new licensing arrangements for entities that operate a market facility, operate a CS facility, or provide financial intermediary (that is, dealing and advisory) services. The sixth was for rules covering the conduct of financial intermediaries’ business, including requirements relating to risk disclosure, confirmation documentation and periodic statements, accounts and record keeping, benefits disclosure, pressure sales, the suitability of personal product recommendations, and complaints and dispute resolution. The seventh was for a consistent and comparable disclosure regime for all financial instruments, to assist investors to make comparisons across all financial instruments. The eighth was that the market misconduct provisions of the Corporations Law, which included prohibitions on insider trading and market manipulation, should be harmonised for all markets where financial instruments are regularly traded by multiple buyers and sellers; and that rules relating to misconduct by financial advisers and dealers, including breaches of licence conditions, should be harmonised and enforced by the single regulator. The ninth related to the institutional arrangements for administration of the new regime, including the desirability of adopting the Wallis Inquiry recommendation for a single conduct and disclosure regulator covering the whole financial sector.

1.49 The Proposals Paper was followed in March 1999 by a consultation paper entitled ‘Financial Products, Service Providers and Markets: Implementing CLERP 6’. The Consultation Paper comprised 10 chapters dealing with, respectively: 1.

uniform regulation of financial products;

2.

licensing of financial service providers; [page 39]

3.

financial service provider conduct and disclosure;

4.

financial product disclosure;

5.

codes of conduct in the financial services industry;

6.

licensing of financial product markets;

7.

licensing of CS facilities;

8.

compensation arrangements;

9.

transfer of securities; and

10. misconduct and enforcement. The consultation paper raised two particular significant matters for discussion. First, it proposed a broad, functional definition of ‘financial product’. Second, it extended the reach of the reform proposals specifically into wholesale markets. The Consultation Paper proposed a broad definition of financial product that would include (among others) arrangements for making a financial investment or managing a financial risk. Making a financial investment involved two key elements — an investor giving money to another who uses the money to generate a financial return or other benefit for the investor, and the investor having no day-to-day control over the use of the money to generate the return or benefit. This was intended to encompass purchasing shares in a company, purchasing an interest in a managed investment scheme, opening a deposit or retirement savings account, purchasing a non-risk life insurance product (that is, the investment

component of life insurance products) and contributing to a superannuation fund. Managing a financial risk involved a person managing the financial consequences to them of particular circumstances occurring (whether by insurance, hedging or otherwise) or avoiding or limiting the financial consequences of fluctuations in, or in the value of, receipts or costs (including prices and interest rates). This would encompass arrangements under which financial risk exposure is transferred, financial risk is hedged or adjusted, or cash flow or price certainty is provided, including risk insurance products (both general insurance and the risk elements of life insurance), currency or interest rate swaps, and other derivatives. In relation to the regulation of wholesale markets, the Consultation Paper proposed that the new regulatory framework should apply to all financial products, whether they are made available to retail clients or not. Products that are only made available to wholesale clients would be brought within the regime so as to limit legislative barriers to retail participation in wholesale markets and foster integrity in wholesale markets. This appears to have reflected a desire on the part of policymakers that there should be no regulatory prohibition on retail consumers accessing wholesale markets, and in particular that prohibitions on retail consumers participating in OTC derivative markets should be discontinued. The proposal was that providers of wholesale products and services should be licensed, but that certain elements of the conduct and disclosure requirements would not apply where there is wholesale-only participation. These were to include requirements for professional indemnity insurance or fidelity fund arrangements and complaints handling mechanisms, and requirements to provide disclosure (in the form of Financial Services Guides or Product Disclosure Statements) and to meet suitability requirements. [page 40] 1.50 A first exposure draft of the CLERP 6 legislation was released in February 2000, and was followed in 2001 by the Financial Services Reform Bill 2001 (FSR Bill). The Explanatory Memorandum to the FSR

Bill began by noting the Wallis Inquiry’s criticism that financial system regulation was piecemeal and varied, and was determined according to the particular industry and the product being provided. This was seen as inefficient, as giving rise to opportunities for regulatory arbitrage, and in some cases leading to regulatory overlap and confusion. The purpose of the FSR Bill was to implement the Wallis Inquiry’s recommendation that there be a single licensing regime for financial sales, advice and dealings in relation to financial products, consistent and comparable financial product disclosure, and a single authorisation procedure for financial exchanges and CS facilities. It noted that the proposed regulatory framework would cover a wide range of financial products including securities, derivatives, general and life insurance, superannuation, deposit accounts and means of payment facilities, and that the requirements would apply to the activities of existing financial intermediaries such as insurance agents and brokers, securities advisers and dealers, and futures brokers, as well as any other person carrying on a financial services business. The FSR Bill was also intended to put in place a simplified authorisation process for market operators and CS facilities. The new regulatory regime was to provide a flexible and adaptable framework that encouraged innovation and competition in markets and CS facilities: Explanatory Memorandum 1.1– 1.7. The FSR Act commenced on 11 March 2002. A two-year transition period for existing financial services firms was allowed. The FSR Act repealed and replaced a range of existing regulatory requirements affecting securities and markets, most notably the then Ch 7 (securities) and Ch 8 (futures) of the Corporations Law. These were replaced by a new Ch 7 entitled ‘Financial Services and Markets’. The main object of the chapter, set out in Corporations Act s 760A, is: … to promote: (a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and (b) fairness, honesty and professionalism by those who provide financial services; and (c) fair, orderly and transparent markets for financial products; and (d) the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.

The move to the new regulatory arrangements provided for in the FSR Act, particularly in the areas of financial product disclosure and financial services licensing and disclosure, proved costly and difficult.44 This led

within months of the legislation coming into full effect in March 2004 to a ‘refinements’ project which made certain changes to the coverage and content of the FSR Act, not by legislative amendment, but through subordinate legislation and ASIC policy. Following a report from the Financial Sector Advisory Council on the implementation of the FSR Act and extensive lobbying from industry, a proposals paper was released in May 2005 setting out 25 proposals for refinements to the FSR Act, most of [page 41] which were adopted by December 2005. The majority of the refinements related to the disclosure requirements of the legislation, and were intended to ‘focus on ways to ensure that disclosure (both written and oral) operates effectively as an information tool for consumers, rather than a means for financial service providers to demonstrate compliance with the legislation’.45 The refinements project was followed in April 2006 by another set of reform proposals, made as part of the Corporate and Financial Services Regulation Review. Chapter 1 of the Review’s proposals paper put forward 27 matters for consideration in relation to the FSR Act, again designed to reduce the regulatory burden imposed by it. A number of these proposals resulted in legislative change in the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 (Cth).

Third wave of reform: post-GFC 1.51 The resilience of the regulatory arrangements established during the second wave of reforms was severely tested by the events in global financial markets triggered by escalating problems in the United States subprime mortgage market in 2007 and 2008. The causes and features of the widespread disruption to global equity and credit markets, which came to be referred to in Australia as the ‘global financial crisis’ (GFC), have been the subject of extensive research and analysis.46 Causative factors in the United States included high-risk lending, regulatory failure, inflated credit ratings, and investment bank abuses: Lenders introduced new levels of risk into the U.S. financial system by selling and

securitizing complex home loans with high risk features and poor underwriting. The credit rating agencies labeled the resulting securities as safe investments, facilitating their purchase by institutional investors around the world. Federal banking regulators failed to ensure safe and sound lending practices and risk management, and stood on the sidelines as large financial institutions active in U.S. financial markets purchased billions of dollars in mortgage related securities containing high risk, poor quality mortgages. Investment banks magnified the risk to the system by engineering and promoting risky mortgage related structured finance products, and enabling investors to use naked credit default swaps and synthetic instruments to bet on the failure rather than the success of U.S. financial instruments. Some investment banks also ignored the conflicts of interest created by their products, placed their financial interests before those of their clients, and

[page 42] even bet against the very securities they were recommending and marketing to their clients. Together these factors produced a mortgage market saturated with high risk, poor quality mortgages and securities that, when they began incurring losses, caused financial institutions around the world to lose billions of dollars, produced rampant unemployment and foreclosures, and ruptured faith in U.S. capital markets.47

By October 2008 the contagion effect of the deterioration in the balance sheets of global banks following the collapse of investment bank Lehman Brothers reached Australia. In October 2008 the Australian Government extended deposit and wholesale funding guarantees to Australian ADIs to stabilise the system and restore consumer confidence. 1.52 In the areas of securities and financial services law, the GFC led to a range of legislative and regulatory responses at the domestic level. Some were intended to stabilise the operation of financial markets during the crisis, while others were intended to address proximate causes of the crisis. These included changes to the rules relating to short selling of securities (see 16.30–16.31 below) and in the regulation of ratings agencies of derivative transactions and derivative trade repositories. More broadly, the effect of the GFC on asset prices, the availability of credit and the performance of particular investments or investment types resulted in significant investor losses in Australia, including at the level of retail investors and financial consumers. Losses sustained by clients of Storm Financial and Opes Prime, among others, prompted a review in 2009 by the Parliamentary Joint Committee on Corporations and Financial Services of the law regulating financial products and services, with

particular reference to the collapse of those two firms. The resulting report, entitled ‘Financial Products and Services in Australia’, was released in November 2009 (the Ripoll Report). In the Ripoll Report, the Committee reaffirmed the policy approach underlying FSR, and declined to recommend that particular investments or investment strategies should be closed to retail investors. Instead, the Committee made 11 specific recommendations for reform, including that the Corporations Act be amended to explicitly include a fiduciary duty for financial advisers operating under an AFS licence, requiring them to place their clients’ interests ahead of their own; that the government consult with and support industry in developing the most appropriate mechanism by which to cease payments from product manufacturers to financial advisers; and that the Corporations Act be amended to provide extended powers for ASIC to ban individuals from the financial services industry and to suspend or cancel an AFS licence. 1.53 A number of the Ripoll Report’s recommendations were adopted by the government, including through reforms to the regulation of margin lending and as part of the FoFA reforms. The FoFA reforms made significant changes to the regulation of financial advice given to retail clients, including banning various forms of commission-based, volumebased and (in respect of geared investments) [page 43] asset-based remuneration arrangements; replacing existing suitability requirements with a statutory duty requiring financial advisers to take reasonable steps to act in their clients’ best interests and place their clients’ interests ahead of their own when providing advice; controlling ongoing advisory fees; and strengthening ASIC’s banning, licence revocation and licence suspension powers. These reforms are considered in 14.53ff. 1.54 Coinciding with the GFC-related reforms, two other significant developments occurred in the regulation of financial services and markets during this period. The first arose out of the move to competition for the provision of market (that is, trading) facilities. These changes included the

reallocation of responsibility for regulating certain aspects of market participants’ conduct from market operators to ASIC; the introduction of ASIC Market Integrity Rules in respect of particular markets and the wider ASIC Market Integrity Rules (Competition in Exchange Markets) (2011); the introduction of new mechanisms to deal with breaches of those rules, including an infringement notice regime and a Markets Disciplinary Panel; and the grant of a market licence to Chi-X Australia which offers a competing market for products traded on the ASX. These developments are considered in Chapters 10 and 11. The second significant development concerned changes to laws relating to unconscionable conduct, consumer protection and unfair contracts in the financial sector, reflecting the economy-wide rationalisation and enhancement of consumer laws through the amendment and renaming (as the CCA) of the TPA and the harmonisation with the Commonwealth law of the various state fair trading laws through adoption of the Australian Consumer Law.

TRANSITION TO A NATIONAL REGULATORY SYSTEM 1.55 Running alongside the developments in the substantive law governing securities and markets discussed above, was the transition from a wholly state-based regulatory framework to a national one. This transition began slowly, with preliminary work to harmonise companies legislation through the Uniform Companies Act (1961–62) and the establishment of the Interstate Corporate Affairs Commission in 1974. The beginning of each subsequent decade brought with it further moves in this direction. A formal co-operative scheme was established between the states in 1981, and a new National Companies and Securities Commission (NCSC) was formed to operate alongside state Corporate Affairs Commissions. In 1991, the co-operative scheme was replaced by the Corporations Law, which although still dependent on the exercise by state parliaments of their legislative powers, involved more sophisticated mechanisms to mesh administration and adjudication across the various jurisdictions. At the same time the NCSC and the state Corporate Affairs Offices were replaced by a single national companies and securities regulator, the ASC.48 In 2001, following the failure of the Corporations

Law scheme and a referral of powers from the states, the Corporations Law was replaced by the Corporations [page 44] Act 2001 (Cth), a Commonwealth law applying of its own force to the whole of Australia.

Position until 1980 1.56 The decision of the High Court in Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 established early in the life of the Australian Federation that companies and securities laws were a matter for the states, not the Commonwealth. Over the first half of the 20th century, each state developed its own corporations and securities legislation, modelled on the English companies legislation of 1929 but containing significant regional differences.49 Each state had its own registrar of companies; and companies operating in more than one state were required to comply with varying (and sometimes inconsistent) regulatory requirements. The emergence of companies operating across state boundaries, and of national markets for securities, led inevitably to calls to standardise the law across the Australian states and territories and to eliminate (or at least reduce) overlapping or inconsistent regulatory requirements. In 1959, the Commonwealth’s Joint Committee on Constitutional Review recommended that the uniform companies legislation be adopted by the states. Model legislation based largely on the Victorian statute was prepared, and subsequently enacted (with some variations) as the Uniform Companies Act by each of the states and the Australian Capital Territory in 1961–62. Although the Uniform Companies Act achieved some measure of consistency, particularly in the numbering and arrangement of the legislation,50 it remained state legislation under the administration of the State Registrars of companies. The enactment of the securities industry legislation in 1970 did not much alter the regional nature of regulation. As the Rae Committee noted in 1974:

Beginning in 1970, four States have … enacted securities industry legislation. The New South Wales Registrar has also become the Commissioner for Corporate Affairs and the Queensland Registrar has been given the title of Commissioner. The securities industry legislation is concerned with registration of stock markets and intermediaries and with some aspects of trading in securities. The regulation of companies, including offers to the public of their securities, their accounts, takeovers and the regulation of investment companies and debenture trust deeds continues to be principally a matter for the Companies Acts. Both sets of legislation continue to be administered for the most part by the Companies Offices.

In 1970 the Eggleston Committee argued for the formation of a national Companies Commission to deal with (limited) matters related to company accounts and audit, operating alongside local Registrars: The Committee regards it as essential that a single body should be constituted and that it be empowered by each of the Companies Acts and Ordinances to grant relief from and to alter or add to particular legislative requirements … It would be an authority set up cooperatively by the States and Territories to avoid

[page 45] placing unnecessary burdens on companies and to keep the detailed accounts requirements in line with modern practice.51

Within a few years, the Eggleston Committee’s modest recommendation for a national body with responsibility for accounts and audit was overtaken by the Rae Committee’s more sweeping recommendations for a national regulator of securities markets. In its interim report in the wake of the Poseidon boom, delivered in 1971, the Rae Committee had recommended the establishment of a national regulator of securities markets and public companies. In its final report in 1974, the Rae Committee noted that: … in Australia at present there is no body or group of bodies which has, individually or collectively, the responsibility, the jurisdiction, the power and the expertise to ensure the adequacy and effectiveness of regulation of the securities market and related public company activities.

A key theme of the Rae Committee Report was: … that the securities market is largely an interacting national market. Yet not one of the Companies Offices and none of the State and Territorial Acts has a national operation. In several chapters we have described in detail how the proper understanding and detection of manipulatory and improper practices often depends upon an investigator watching

closely and concurrently the activities in several cities and then moving swiftly to collect and examine documents in these cities. An investigator confined to one capital city can frequently see only a limited part of the picture. There is a need for a body which watches closely the entire Australian securities market and which will investigate expeditiously on a national scale.52

In 1974, in accordance with the Interstate Corporate Affairs Agreement of December 1973, the governments of Queensland, New South Wales and Victoria established an Interstate Corporate Affairs Commission (ICAC), headquartered in Sydney. Western Australia joined the arrangement in 1975. The arrangement was intended to achieve: … greater uniformity in the law relating to companies and the regulation of the securities industry; to establish reciprocal arrangements and common standards and procedures; to co-ordinate the administration of the law relating to companies and thus avoid unnecessary duplication and to increase the protection afforded to the investing public.53

This was to be done through uniformity in administration and reciprocal arrangements with respect to: incorporation of companies; the regulation of the securities industry and trading in securities; registration of prospectuses; approval of trust deeds and trustees in relation to interests; requirements relating to accounts and audit; proclamation of companies as investment companies; and class and individual [page 46] exemption powers relating to fundraising and takeovers. However, ICAC was not considered a success, mostly because power remained vested in the various state bodies and co-operation between them was difficult to achieve. The more radical recommendation of Ch 16 of the Rae Committee Report, for a federal regulatory agency with full investigative and regulatory powers of its own, began to achieve more widespread support. 1.57 The ad hoc efforts at inter-state co-operation in the 1970s were replaced in 1981 with a co-operative regime established more formally between the Commonwealth and the states.54 The co-operative scheme provided for identical (or substantially identical) legislation covering companies and securities matters to be enacted in each state and territory,

and for the establishment of a national regulator. As well as the Companies Act 1981 and corresponding state codes, the legislative package included the Securities Industry Act 1981 and Codes, which were based on the 1970 New South Wales legislation, and the Companies (Acquisition of Shares) Act 1981 and Codes, which provided for the regulation of takeovers along the lines of the principles established by the Eggleston Committee and contained in the 1971 takeovers legislation. The co-operative scheme also provided for the establishment of the NCSC, which for the most part acted as a national regulator of takeovers and markets while delegating to the state Corporate Affairs Commissions the registration and regulation of companies and fundraising.

Corporations Law scheme 1991 1.58 The co-operative scheme lasted for 10 years, until 1991. In 1989, believing it had plenary power to pass a comprehensive Act on companies and securities to apply across the nation, the Commonwealth passed the Corporations Act 1989. However, in February 1990 the High Court, in a case brought by New South Wales, South Australia and Western Australia, held that the Commonwealth’s legislative power under the Commonwealth Constitution s 51(xx) to make laws with respect to trading corporations and financial corporations did not authorise those parts of the Commonwealth Corporations Act 1989 providing for incorporation of trading corporations and financial corporations: NSW v Commonwealth (1990) 169 CLR 482. That decision meant that comprehensive nationwide companies and securities legislation was impossible without co-operation between the Commonwealth and the states. Instead of a single national law, a new form of co-operative arrangement was proposed. At a meeting on 29 June 1990 held in Alice Springs between Commonwealth, state and Northern Territory Ministers, a new cooperative arrangement was agreed that gave much more extensive administrative and legislative control to the Commonwealth. The agreement reached was recorded in the Alice Springs Heads of Agreement, tabled in the Commonwealth Senate on 11 December 1990. Under the new arrangements, the Commonwealth amended the Corporations Act 1989

and the Australian Securities Commission Act 1989 so that they would apply in the [page 47] Australian Capital Territory. Each state and the Northern Territory then adopted the operative provisions of that legislation (referred to for this purpose as the ‘‘Corporations Law’) through the enactment of adopting legislation by each of their respective parliaments. Importantly, each state and the Northern Territory agreed to legislate so as to require courts and others to treat the applied law as if it were a law of the Commonwealth. The object was to simulate the effect that would have been produced if the Commonwealth had been able independently to pass one law for the whole of Australia. The Alice Springs Heads of Agreement also provided for the new ASC to be the sole administering authority, to the exclusion of state and territorial corporate affairs authorities. The Ministerial Council, which had been the main co-ordinating mechanism between the states and the Commonwealth under the co-operative scheme, was to continue, but under new arrangements giving the Commonwealth more power, the Commonwealth Attorney-General being permanently in the chair. The Council would have no control over the ASC. The Commonwealth’s power to control the introduction of new or amending legislation was also greatly enhanced. The rise in the Commonwealth’s power can be partly explained by a change in the climate of thought favouring centralised control brought about by some spectacular corporate failures during the 1980s which were thought to have tarnished the national image. The willingness of the Commonwealth to assume a larger part of the financial costs was also instrumental. 1.59 To implement the Alice Springs Heads of Agreement, the Commonwealth in 1990 enacted amendments to the Corporations Act 1989 and the Australian Securities Commission Act 1989. As part of those amendments the Commonwealth created the Corporations Law as part of the Corporations Act 1989 to be the Corporations Law of the Australian

Capital Territory. The Corporations Law was set out in s 82 of the Corporations Act 1989, and in 1990 each state and the Northern Territory passed legislation (styled, in each case, as the Corporations (Name of State) Act 1990) declaring the Corporations Law as set out in s 82 of the Commonwealth Act to be a law in force in its jurisdiction. The major part of that legislation, including that on securities, came into operation on 1 January 1991. Thus, there were really eight Corporations Laws in force in Australia, one for the Australian Capital Territory, one for each of the six states and one for the Northern Territory. The Corporations Law incorporated many of the provisions of the cooperative scheme Codes, including the Companies (Acquisition of Shares) Codes (in Ch 6 of the Corporations Law) and the Securities Industry Codes (in Ch 7 of the Corporations Law). However, the mandatory disclosure requirements in relation to the issue of securities, incorporated in Pts 7.11 and 7.12 of the Corporations Law, differed significantly from the predecessor prospectus requirements contained in the Companies Code. While the Companies Codes had prescribed the disclosure of certain specified information in relation to the offer of securities to the public, the Corporations Law included a general obligation to disclose all material matters in connection with any offer of securities that did not fall within certain prescribed categories of excluded offer. [page 48] In due course the Alice Springs Heads of Agreement were replaced by a further agreement between the various governments (entitled the Corporations Agreement) made on 23 September 1997.

Failure of the Corporations Law scheme 1.60 The efficacy of the Corporations Law as a national regulatory regime was thrown into doubt in the late 1990s by a series of High Court decisions relating to the constitutionality of the arrangements on which administration of the Corporations Law scheme rested.

In Re Wakim (1999) 198 CLR 511; 31 ACSR 99; [1999] HCA 27 the High Court held that the cross-vesting arrangements in the Corporations Law (which allowed the Federal Court and the state Supreme Courts to hear corporations matters) were incapable of conferring jurisdiction on the Federal Court. In R v Hughes (2000) 202 CLR 535; 34 ACSR 92; [2000] HCA 22, a person charged with an offence under the Corporations Law as it applied in Western Australia (that is, under the conferring Corporations (Western Australia) Act 1990 (WA)) argued that the Commonwealth Director of Public Prosecutions did not have the power to prosecute him under what was, essentially, state law.55 The uncertainty over the constitutional validity of the Corporations Law was a matter of significant concern for the Australian business community. After some delay and debate the state Attorneys-General agreed in August 2000 to resolve these concerns by referring to the Commonwealth on an interim basis the power to make laws with respect to the matters contained in the then Corporations Law and FSR Bill.

Corporations Act 2001 (Cth) 1.61 Under the agreement reached between the joint Standing Committee of Attorneys-General and the Ministerial Council for Corporations, the substance of the Corporations Law scheme, and the powers of Commonwealth authorities to carry out the scheme, were referred to the Commonwealth pursuant to s 51(xxxvii) of the Commonwealth Constitution. This provided a constitutional basis for the Commonwealth Parliament to enact the Corporations Act as a Commonwealth law applying of its own force throughout Australia.56 [page 49] The referral made by the states under s 51(xxxvii) is limited both in its scope and its duration. The referral allows the Commonwealth to enact laws in substantially the form of the Corporations Law and the FSR Bill as in force at the date of the referral, and to amend the law in relation to ‘the formation of corporations, corporate regulation and the regulation of

financial products and services’. However, the referral contains provisions that mean that the Commonwealth Parliament cannot use the powers referred to it to make laws with respect to industrial relations. Also, the referral is for a limited period, and expires unless extended periodically.57 The referral was extended in 2016. 1.62 The new Corporations Act 2001 (Cth) came into effect on 15 July 2001, replacing the Corporations Law. As a result, for the first time in its history, Australia now had a single company and securities law of national application. The referral of power that underpins the Corporations Act operates on the framework of a new Corporations Agreement 2002, discussed in 2.5 below. Under the terms of the Corporations Agreement ASIC remained, as it had been under the Corporations Law regime, solely responsible for the general administration of company law. The agreement also provided for the continued involvement of a Ministerial Council, made up of representatives of the state and territory governments and the Commonwealth Government. The Ministerial Council has the right to be consulted on amendments to the Corporations Act. As Commonwealth law, the Corporations Act operates against the background of other Commonwealth legislation on criminal law, administrative law and statutory interpretation which applies to Commonwealth legislation generally. (This is sometimes referred to as adjectival law.) For example, the Corporations Act is interpreted in accordance with the Acts Interpretation Act 1901 (Cth). Similarly, the Crimes Act 1914 (Cth) and the Criminal Code applies in relation to offences against the Corporations Act. The administration of the Corporations Act is subject to Commonwealth administrative laws including the Administrative Decisions (Judicial Review) Act 1977 (Cth), Freedom of Information Act 1982 (Cth) and Privacy Act 1988 (Cth). ___________________________ 1.

Financial markets serve various functions, including mobilising and directing savings to their most productive uses, providing price discovery through the exchange and evaluation of information, facilitating the management and pricing of risk, assisting individuals in assessing and making investment decisions by reflecting risk in the pricing of financial instruments, and facilitating capital raising by a diverse range of firms: Commonwealth of Australia, Financial Markets and Investment

Products, CLERP Proposal Paper 6, 1997, pp 20–1. 2.

A ‘managed investment scheme’ is, broadly speaking, a collective investment arrangement that is structured otherwise than as a body corporate and that is open to passive investors. Examples include listed and unlisted unit trusts, investment syndicates and limited partnerships. Investment arrangements that are prudentially regulated, such as superannuation trusts and life insurance companies’ statutory funds, are not included. The definition of ‘managed investment scheme’ is discussed in detail in 3.17–3.32 below. Managed investment schemes that are listed or are otherwise open to retail investors must be constituted, registered and operated in accordance with Ch 5C of the Corporations Act. As at 30 June 2015 there were 3642 registered managed investments schemes: ASIC Annual Report 2014–15, p 167.

3.

J Lawrence, ‘The Economics of Market Confidence: (Ac)Costing Securities Market Regulations’ (2000) 17 C&SLJ 171–2.

4.

For a detailed treatment of company law and corporate governance in Australia, see instead R P Austin and I M Ramsay, Ford, Austin and Ramsay’s Principles of Corporations Law, 16th ed, LexisNexis Butterworths, Sydney, 2013; J H Farrar and P F Hanrahan, Corporate Governance, LexisNexis Butterworths, Sydney, 2016.

5.

Commonwealth of Australia, Financial System Inquiry Final Report, 1997, p 186.

6.

The Campbell Committee of Inquiry into the Australian Financial System was established in 1979 by John Howard, when he was Commonwealth Treasurer, under the Chairmanship of Sir Keith Campbell. It was the first major governmental review of the Australian financial system since the 1936 Royal Commission into the monetary and banking system. Following the change of government in March 1983, the new Treasurer, Paul Keating, instigated a review of the Campbell Committee’s recommendations known as the Martin Review (after its chairman, V E Martin). The Martin Review reported in February 1984; it substantially accepted and adopted the Campbell Committee’s recommendations. Significant deregulation of financial institutions and capital markets followed. This included removing official controls on all bank interest rates; removing restrictions on bank borrowing and lending products; and floating the exchange rate and removing exchange controls. New approval arrangements allowed for the entry into the Australian market of new foreign banks and merchant banks. A new system of regulation for banking, based on prudential guidelines and monitoring rather than direct controls, emerged. For a more detailed description of regulatory change in the financial sector in the period between the Campbell Committee Report and the Wallis Inquiry, see A Tyree and P Weaver, Weerasooria’s Banking Law and the Financial System in Australia, 6th ed, LexisNexis Butterworths, Sydney, 2006, Ch 2.

7.

Commonwealth of Australia, Financial System Inquiry Final Report, 1997, p vii.

8.

Above, p 187.

9.

Above.

10.

Commonwealth of Australia, Financial System Inquiry Final Report, 2014, Ch 5.

11.

Above, p 8.

12.

Above, p 10.

13.

Above, p 3. See also P Hanrahan ‘Should the FSI Revisit the Philosophy of Financial Regulation?’ (2014) 8 Law and Financial Markets Review 199.

14.

Commonwealth of Australia, Financial System Inquiry Final Report, 2014, pp 4–6.

15.

Above, p 12.

16.

The ‘Poseidon boom’ refers to the rapid rise and subsequent collapse of the share price in certain Australian mining stocks from 1969–70. See, for example, T Sykes, The Money Miners: Australia’s Mining Boom 1969–1970, Wildcat Press, Sydney, 1978.

17.

Rae Committee Report, vol 1, 1974, [15.2].

18.

A Georgosouli, ‘Investor Protection Regulation: Economically Rational?’, March 2006, available at SSRN: .

19.

Commonwealth of Australia, Financial System Inquiry Final Report, 1997, p 235.

20.

Commonwealth of Australia, Best Practice Regulation Handbook, 2007, p 60.

21.

See, for example, L P Schwartz, ‘Cost-Benefit Analysis in Canadian Securities Regulation: Research Study Commissioned by the Task Force to Modernize Securities Legislation in Canada’, 31 August 2006. For a contrary view, see, for example, S M Bainbridge, ‘Mandatory Disclosure: A Behavioral Analysis’, (2000) 68 U Cin L Rev 1023, which usefully summarises the debate in the United States about the ‘market failure’ case for mandatory disclosure in securities markets.

22.

Commonwealth of Australia, Financial Markets and Investment Products — Corporate Law Economic Reform Program Proposals for Reform: Paper No 6, 1997, p 47.

23.

For a detailed discussion of the distinction between retail and wholesale investors (which varies depending on the context), see 6.17–6.25 below.

24.

As at 30 June 2015 there were 43 authorised financial markets: ASIC Annual Report 2014–15, p 167.

25.

Prior to 1 August 2010, market supervision was the responsibility of the market operator.

26.

As at 30 June 2015 there were seven licensed clearing and settlement facilities: ASIC Annual Report 2014–15, p 167.

27.

ASIC Annual Report 2014–15, p 167.

28.

See Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; 62 ACSR 427; [2007] FCA 963; Wingecarribee Shire Council v Lehman Bros Australia Ltd (in liq) (2012) 301 ALR 1; [2012] FCA 1028; ABN AMRO Bank NV v Bathurst Regional Council (2014) 99 ACSR 336; [2014] FCAFC 65. For a discussion of the circumstances in which a financial intermediary is a fiduciary, see P F Hanrahan, ‘The Relationship between Equitable and Statutory “Best Interests” Obligations in Financial Services Law’ (2013) 7 Journal of Equity 46.

29.

The operating rules also include the ASX Listing Rules that apply to issuers.

30.

Australian Securities and Investments Commission v National Exchange Ltd (2005) 148 FCR 132; 56 ACSR 131; [2005] FCAFC 266 at [33].

31.

L Loss, Fundamentals of Securities Regulation, Little, Brown, Boston, 1983, p 1.

32.

6 Geo 1, C18, s 18.

33.

In many jurisdictions, including in a number of states of the United States, promoters are permitted to raise capital through the issue of securities of a corporation only if the corporation and the use to which the capital will be put has satisfied a minimum standard for approval by the regulator. For example, under Californian law, an offer cannot proceed unless the regulator forms the view that ‘the proposed plan of business of the applicant and the proposed issuance of securities are fair, just and equitable [and] that the applicant intends to transact its business fairly and honestly’: Cal Corp Code §24150. This kind of merit-based regulation is sometimes referred to as ‘blue sky’ regulation.

34.

25 & 26 Vict, c 89. The legislation of 1862 consolidated various company law statutes passed in England during the 1840s and 1850s, to provide for incorporation by lodgment of constituent

documents, to require associations of more than 20 members to incorporate by prohibiting them from operating as partnerships or joint stock companies, and to introduce limited liability for members: see P Lipton, ‘A History of Company Law in Colonial Australia: Economic Development and Legal Evolution’ (2007) 31 MULR 805 at 814. 35.

P Lipton, ‘A History of Company Law in Colonial Australia: Economic Development and Legal Evolution’ (2007) 31 MULR 805 at 820.

36.

Companies Act 1896 (Vic) s 47. For a detailed discussion of the 1896 legislation, see P Lipton, ‘A History of Company Law in Colonial Australia: Economic Development and Legal Evolution’ (2007) 31 MULR 805 at 826–8.

37.

The Victorian Statute Law Revision Committee, in a report made in 1954, said that it had ‘heard considerable evidence, with regard to unit and option certificates, lots, concessions, and other forms of interests in or in the undertaking of business’. Noting that such forms of interest were issued outside the legislation controlling the issue of shares to the public, the Committee concluded that ‘this field provides opportunity for fraudulent practice’: Parliament of Victoria, Report from the Statute Law Revision Committee on Amendments of the Statute Law to Deal with Fraudulent Practices by Persons Interested in the Promotion and/or Direction of Companies and by Firms, 26 October 1954. In response, the Victorian Parliament introduced measures to regulate the promotion of these alternative investment arrangements. These measures prohibited the offer of interests in such schemes by anyone other than a public company, and required the issue of a prospectus in relation to the offer, the appointment of an approved trustee, and the adoption of an approved deed. For a detailed discussion of the history of collective investment regulation, see B Mees, M Wehner and P Hanrahan, Fifty Years of Managed Funds in Australia, CCLSR Preliminary Research Report, 2005.

38.

Rae Committee Report, 1974, vol 1, [15.20].

39.

For a discussion of the Australian futures market in the early 1980s, see E F Frochlich, ‘Some Features and Legal Aspects of the Futures Industry’ (1986) 60 ALJ 224.

40.

Wallis Inquiry Final Report, p 17.

41.

Treasury, ‘CLERP — Policy Framework’, 1 May 1998, available at .

42.

H Ford, R Austin and I Ramsay, An Introduction to the CLERP Act 1999: Australia’s New Company Law, Butterworths, Sydney, 2000, p 41.

43.

See, in particular, R Merton and Z Bodie, ‘A Conceptual Framework for Analysing the Financial Environment’ in D B Crane et al (eds), The Global Financial System: A Functional Perspective, Harvard Business School Press, Cambridge MA, 1995, pp 3–31.

44.

See, for example, M Adams, A Young and M Nehme, ‘Preliminary Review of Over-Regulation in Australian Financial Services’ (2006) 20 AJCL 1.

45.

Commonwealth of Australia, ‘Information Package: Refinements to Financial Services Regulation’ 19 December 2005, available at .

46.

For contemporaneous Australian perspectives on the crisis and its implication for securities and financial services regulation, see, for example, D Gruen, ‘Reflections on the Global Financial Crisis’, Address to the Sydney Institute, Economic Roundup, Issue 2, 2009, pp 51–65; J Laker, ‘The Global Financial Crisis — Lessons for the Australian Financial System’, Address to the Australian Economic Forum, 19 August 2009; and A D’Aloisio, ‘Responding to the Global Financial Crisis: The ASIC Story’, Address to the Trans-Tasman Business Circle, 30 November 2010. For key official international analyses, see United States Financial Crisis Inquiry Commission, Financial Crisis Inquiry Report, 2011; United Kingdom Financial Services Authority, The Turner Review: A Regulatory Response

to the Global Banking Crisis, 2009; The High-Level Group on Financial Supervision in the European Union, Report, 2009. More generally, see R P Buckley and D W Arner, From Crisis to Crisis: The Global Financial System and Regulatory Failure, Kluwer Law International, 2011. 47.

United States Senate, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse — Report of the Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs of the United States Senate, 13 April 2011, p 12.

48.

For a detailed discussion of the emergence of federal regulation between 1961 and 2000, see B Mees and I Ramsay, ‘Corporate Regulators in Australia (1961–2000): From Companies’ Registrars to the Australian Securities and Investments Commission’, CCLSR, 2008.

49.

See R McQueen, ‘An Examination of Company Law and Regulation 1901–1961’ (1992) UNSWLJ 1.

50.

G Sawer, ‘Federal–State Cooperation in Law Reform: Lessons of the Australian Uniform Companies Act’ (1963) 4 MULR 238.

51.

Company Law Advisory Committee (Eggleston Committee), Report to the Standing Committee of Attorneys-General on Accounts and Audit, 24 March 1970, [51].

52.

Rae Committee Report, vol 1, 1974, [15.20]–[15.21].

53.

Public Record Office of Victoria VA 679 Corporate Affairs Office, available at .

54.

The Northern Territory did not join the co-operative scheme until 1986.

55.

In Hughes the High Court held that the Commonwealth DPP was competent to prosecute Hughes under the Corporations Law because of specific Commonwealth heads of power in the Australian Constitution. Significantly, Hughes’ charges (which related to an investment scheme involving the United States) were supported by the Commonwealth’s power to regulate trade and commerce with other countries and extra-territorial matters. The decision left open the possibility that, without the link to a direct Commonwealth head of power, a conferral of authority to the Commonwealth DPP (or other authority such as ASIC) may prove to be invalid. It may not be possible to establish such a link in the absence of special facts (such as the overseas transactions present in the Hughes case).

56.

The Commonwealth Parliament has power under s 51(xxxvii) of the Constitution to make laws with respect to ‘matters referred to the Parliament of the Commonwealth by the Parliament or Parliaments of any State or States, but so that the law shall extend only to States by whose Parliament the matter is referred, or which afterwards adopt the law’.

57.

See G Williams, ‘Cooperative Federalism and the Revival of the Corporations Law: Wakim and Beyond’ (2002) 20 C&SLJ 160.

[page 51]

Chapter 2 ADMINISTRATION of the SECURITIES and FINANCIAL SERVICES LAWS Introduction Constitutional arrangements for regulation Role of the Commonwealth Treasurer Appointments Market infrastructure licensing Oversight of ASIC rule-making Directions to ASIC Statements of expectations and intent Australian Securities and Investments Commission Structure and operation of ASIC Regulatory documents issued by ASIC Administrative law controls on ASIC ASIC’s Modification and Exemption Powers Rationale for giving ASIC power to relieve Breadth of the power Exercise of the power ASIC’s Information-Gathering Powers Mandatory reporting General information-gathering powers ASIC Hearings ASIC Investigations Conducting an investigation ASIC’s power to conduct oral examinations ASIC’s power to require reasonable assistance

2.1 2.2 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.17 2.21 2.31 2.34 2.35 2.37 2.38 2.41 2.48 2.62 2.67 2.68 2.70 2.76

[page 52] ASIC’s Enforcement Role Criminal prosecutions Civil penalty proceedings Civil proceedings Administrative actions Other ASIC Act Bodies Corporations and Markets Advisory Committee Parliamentary Joint Committee

2.79 2.81 2.85 2.92 2.97 2.103 2.104 2.105

INTRODUCTION 2.1 Chapter 1 provided a broad overview of Australia’s securities and financial services laws as they apply to primary and secondary markets for securities and other financial products. This chapter explains in greater detail the current administrative arrangements under which the Corporations Act 2001 (Cth) (Corporations Act) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) operate. In particular, it explains the role of the Commonwealth Treasurer and the role and powers of the Australian Securities and Investments Commission (ASIC) in connection with the regulation of securities and financial services. It also makes brief mention of the organisation and functions of other key bodies established under the ASIC Act, including the (now defunded) Corporations and Markets Advisory Committee (CAMAC) and the Parliamentary Joint Committee on Corporations and Financial Services (PJC).

Constitutional arrangements for regulation 2.2 As Chapter 1 explained, exclusive legislative and administrative responsibility for securities and financial services law in Australia now resides in the Commonwealth. The Commonwealth’s power to make laws with respect to securities and financial services arises in part from the referral of powers made by each of the states to the Commonwealth in

2001. Under the referral (which was renewed in 2016), each state handed over its legislative powers covering the formation of corporations, corporate regulation and the regulation of financial products and services in accordance with s 51(xxxvii) of the Commonwealth Constitution. However, the referral is not the sole source of the Commonwealth’s power in this area; for example, ASIC Act Pt 2 Div 2 (unconscionable conduct and consumer protection) is made pursuant to the Commonwealth’s power under s 51(xx) of the Constitution, to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’.1 [page 53] 2.3 The present constitutional arrangements comprise three main elements. The first is the legislation of each of the state parliaments referring certain matters to the Commonwealth Parliament in accordance with s 51(xxxvii) of the Constitution. The second is the legislation of national application, enacted by the Commonwealth Parliament in (partial) reliance on the referral, for the formation of corporations, corporate regulation and the regulation of financial products and services (including the establishment of ASIC). The third is the Corporations Agreement 2002, which sets out the political agreement reached by each of the participating governments as to how the national legislation is to work.

State referral legislation 2.4 The referring legislation (called, in each state, the Corporations (Commonwealth Powers) Act 2001) makes two separate referrals. The first confers power on the Commonwealth to enact the Corporations Bill 2001 and the Australian Securities and Investments Commission Bill 2001 in the form tabled at the time. The second confers power on the Commonwealth to amend the Corporations Act or the ASIC Act in relation to the formation of corporations, corporate regulation and the regulation of financial products and services. Each referring Act expressly provides that ‘nothing in this Act is intended to enable the making of a law pursuant to the amendment reference with the sole or main underlying purpose or

object of regulating industrial relations matters even if, but for this subsection, the law would be a law with respect to a matter referred to the Parliament of the Commonwealth by the amendment reference’: see, for example, s 1(2) of the Corporations (Commonwealth Powers) Act 2001 (Vic).

Corporations Agreement 2002 2.5 The political arrangements underpinning the referral are recorded in the Corporations Agreement 2002 (as amended in 2006). The Corporations Agreement deals with a number of matters related to the national law, including the ongoing role of the Ministerial Council for Corporations (which comprises the relevant Commonwealth, state and territory ministers), the responsibilities and functions of ASIC, the procedures for (and restrictions on) amending the national law and the referral legislation, and the funding arrangements.

ROLE OF THE COMMONWEALTH TREASURER 2.6 Ministerial responsibility for corporations and financial services law lies with the Commonwealth Treasurer. The Treasurer has certain express powers as ‘Minister’ under the Corporations Act and the ASIC Act, discussed below. The Treasurer also oversees the operation of ASIC and the other portfolio agencies regulating the financial sector.

Appointments 2.7 The Minister is responsible for making nominations or appointments to the various bodies and committees involved in the formation or administration [page 54] of corporations law, including ASIC (ASIC Act s 9), CAMAC (ASIC Act s

147),2 the Takeovers Panel (ASIC Act s 172), the Companies Auditors and Liquidators Disciplinary Board (ASIC Act s 203), and the Financial Reporting Council (ASIC Act s 235A). The Minister also appoints the chair of the Australian Accounting Standards Board (ASIC Act s 236B) and the Auditing and Assurance Standards Board (ASIC Act s 236F). The Minister is required to consult with the Ministerial Council on some of these appointments, under the terms of the Corporations Agreement. The role of these bodies is discussed in 2.103 below.

Market infrastructure licensing 2.8 Given their significance for the systemic stability of the financial system, the Minister also has a role to play in approving and regulating certain entities that provide the systems and infrastructure of financial markets, including clearing and settlement (CS) facilities. The Minister’s role and powers in relation to licensing are discussed more fully in Chapter 10 below. The power to grant a licence to operate a financial market is in the hands of the Minister under Corporations Act s 795B. The Minister also has power to grant exemptions from the licensing requirement under Corporations Act s 791C; to impose, vary or revoke conditions on an Australian market licence under Corporations Act s 796A; to suspend or cancel an Australian market licence under Corporations Act s 797C; and to disallow a change to the operating rules of a licensed market under Corporations Act s 793E. The Minister may give written directions to a licensee under Corporations Act s 794A requiring it to comply with its obligations as a licensee, and may require a special report from a licensee under Corporations Act s 794B. In relation to CS facilities, the Minister has power to grant an Australian CS facility licence under Corporations Act s 824B; to impose, vary or revoke conditions on an Australian CS facility licence under Corporations Act s 825A; to suspend or cancel a licence under Corporations Act s 826C; and to disallow a change to the operating rules of a licensed CS facility under Corporations Act s 822E. While derivative trade repository licences are granted by ASIC (rather

than the Minister) under Corporations Act s 905C, the Minister has power to give written directions to a derivative trade repository licensee under Corporations Act s 904F requiring it to comply with its obligations as a licensee.

Oversight of ASIC rule-making 2.9 ASIC’s power to make rules under Corporations Act s 798G relating to the activities or conduct of licensed markets, of persons in relation to licensed markets and in relation to financial products traded on licensed markets (the market integrity rules) is subject to Ministerial oversight. Under s 798G(3), ASIC must not make a market integrity rule (other than an emergency rule provided for in s 798G(4)) unless the Minister has consented in writing. The Minister can also [page 55] review a direction given by ASIC under s 798J at the request of an affected entity, under s 798J(5). The Minister is also involved in rule-making by ASIC under Corporations Act Pt 7.5A, which deals with derivative transaction rules and derivative trade repository rules. It is the role of the Minister to determine, by legislative instrument, the class or classes of transactions in relation to which execution requirements, reporting requirement or clearing requirements may be imposed by the derivative transaction rules, under Corporations Act s 901B. Also, ASIC must not make a derivative transaction rule or derivative trade repository rule (other than an emergency rule provided for under s 901L or s 903J) unless the Minster has consented, in writing, to the making of the rule: Corporations Act ss 901K and 903H.

Directions to ASIC 2.10 ASIC is expected to act independently of government; it has been

formally recognised by government that ‘it is imperative that ASIC continue to act independently and objectively in the exercise of its powers’: Statement of Expectations, April 2014.3 However, the Minister is able under ASIC Act ss 12 and 14 to provide limited written directions to ASIC. Section 12 of the ASIC Act allows the Minister to give ASIC a written direction as to its general policies and priorities, but not as to the conduct of a ‘particular case’: ASIC Act s 12. The Minister’s direction must be published in the Gazette and laid before each House of Parliament. The only example to date of such a direction being given was in 1992, dealing with relations between the (then) Australian Securities Commission and the Commonwealth Director of Public Prosecutions (CDPP). Cooperation between ASIC and the CDPP is now covered by a Memorandum of Understanding signed between them in 2006. The Minister may direct ASIC to carry out an investigation of certain matters where in the Minister’s opinion it is in the public interest, under ASIC Act s 14. The matters that may be investigated include those relating to alleged or suspected contravention of the Corporations Act and the ASIC Act (other than the excluded provisions),4 or a contravention of any other law concerning specified matters (including matters involving fraud or dishonesty in relation to a body corporate or financial products, or dealing in financial products).

Statements of expectations and intent 2.11 In practice, the Minister communicates his or her expectations of Treasury portfolio bodies (including ASIC) through the issue to them of a document called a ‘Statement of Expectations’. In 2003, a Review of the Corporate Governance of Statutory Authorities and Office Holders (Uhrig Review) considered various matters concerned with the corporate governance of Commonwealth statutory [page 56] authorities and office holders. Its report, released in July 2003,

recommended that Ministers should issue Statements of Expectations to their portfolio bodies to ‘clearly articulate the Government’s expectations of each body, whilst respecting areas of independence of the body in accordance with the legislation establishing it’. A Statement of Expectations was issued by (then Treasurer) Peter Costello to (then ASIC Chairman) Jeffrey Lucy on 20 February 2007. This was replaced by a new Statement of Expectations issued in April 2014. The Uhrig Review recommended that the body should respond to the Minister in a Statement of Intent outlining how it proposed to meet the Minister’s expectations. ASIC responded to the 2014 Statement of Expectations with a Statement of Intent, July 2014. Both the statements are publicly available on the ASIC website.5

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION 2.12 As cl 301 of the Corporations Agreement makes clear, ASIC has sole responsibility for the general administration of the Corporations Act and the ASIC Act. ASIC has been in existence since 1990; it was first established under its former name, the Australian Securities Commission, as a statutory corporation by s 8 of the Australian Securities Commission Act 1989 (Cth). Initially its functions were limited to acting as registrar of companies (a role previously performed by the state Corporate Affairs Commissioners) and as regulator in the areas of company law, securities and futures, and takeovers. On 1 July 1998 ASIC’s functions were expanded to include acting as consumer protection regulator in relation to the financial sector as a whole, taking over in part from the Australian Competition and Consumer Commission (ACCC) in this area. To reflect its extended role and responsibilities, its name was changed on 1 July 1998 from the Australian Securities Commission to the Australian Securities and Investments Commission. ASIC’s responsibilities were further expanded in 2009–10, to include real-time supervision of securities markets (taken over from the Australian Securities Exchange (ASX)), regulation of consumer credit and of trustee companies (taken over from the states and territories) and expanded responsibilities under the new consumer laws.6 Its mandate

was further extended in 2011 to cover the national business names register, and in 2012 new responsibilities under margin lending reforms, Stronger Super and Future of Financial Advice were added. In 2013, ASIC was given rule-making power in relation to over-the-counter derivative products. The breadth of ASIC’s mandate (as at September 2016) is illustrated in the following figure: [page 57] Figure 2.1: Breadth of ASIC mandate7

[page 58] ASIC is a body corporate with perpetual succession, which has a common seal and may acquire, hold and dispose of real and personal property (other than on trust), may enter into contracts and may sue and be sued in its own name: ASIC Act s 8. Its functions and powers are set out in ASIC Act ss 11, 12A and 13: see below. ASIC is subject to the Public Governance, Performance and Accountability Act 2013 (Cth). For the purpose of the finance law (as defined in that Act) ASIC is taken to be a non-corporate rather than corporate Commonwealth entity; to be part of the Commonwealth, and not to be a body corporate: ASIC Act s 8(1A). ASIC operates within an accountability framework that includes appearances before parliamentary committees on a regular and an ad-hoc basis to explain its actions and decisions. These include the Senate Economics Legislation Committee (which examines all Treasury portfolio agencies and reviews the annual reports of these agencies) and the PJC (which enquires into the activities of ASIC and the operation of the corporations legislation, and reviews the annual reports of bodies established under the ASIC Act).8

Structure and operation of ASIC Key functions and powers 2.13 Reflecting the constitutional underpinnings of its regulatory responsibilities, the ASIC Act contains separate provisions setting out the functions and powers of ASIC. Section 11 of the ASIC Act, which is based on the referral of powers described in 2.4 above, sets out ASIC’s functions and powers related to the administration of the Corporations Act and the ASIC Act, except the ‘excluded provisions’ (that is, ASIC Act s 12A and the consumer protection and unconscionable conduct provisions in ASIC Act Pt 2 Div 2). ASIC’s functions and powers are limited to those matters provided for in the legislation, by the doctrine of ultra vires.

Section 12A of the ASIC Act sets out ASIC’s functions and powers with respect to ASIC Act Pt 2 Div 2 and its functions as a financial sector regulator under the financial sector legislation, including the Insurance Contracts Act 1984 (Cth), Superannuation Industry (Supervision) Act 1993 (Cth), Superannuation (Resolution of Complaints) Act 1993 (Cth), Life Insurance Act 1995 (Cth), Retirement Savings Accounts Act 1997 (Cth), National Consumer Credit Protection Act 2009 (Cth), National Consumer Credit Protection (Transitional and Consequential Provisions) Act 2009 (Cth), Business Names Registration Act 2011 (Cth) and Business Names Registration (Transitional and Consequential Provisions) Act 2011 (Cth). By its legislation ASIC is given ‘power to do whatever is necessary for or in connection with, or reasonably incidental to, the performance of its functions’.9 Section 13 of the ASIC Act contains ASIC’s general powers of investigation. [page 59] In relation to the matters the subject of this book, ASIC’s regulatory responsibilities and functions are extensive. In addition to monitoring and enforcing compliance with Ch 6CA (continuous disclosure) Ch 6D (fundraising) and Pt 7.9 (financial product disclosure) of the Corporations Act, ASIC’s functions include supervising financial market licensees (Corporations Act Pt 7.2 Div 3 Subdiv C) and licensed CS facilities (Corporations Act Pt 7.3 Div 2 Subdiv C); regulating derivatives trading (Corporations Act Pt 7.5A); and licensing and supervising financial services providers (Corporations Act Pt 7.6). It is also responsible for consumer protection and market integrity regulation for the financial sector, including under ASIC Act Pt 2 Div 2 and Corporations Act Pt 7.10. In exercising its regulatory functions, ASIC has numerous powers and discretions conferred upon it by legislation.10 These powers are described, in broad terms, in this chapter. They include: powers to modify or exclude parts of the law as it applies generally or in a specific case; general information-gathering powers, including powers to require the production of information or books under notice;

power to conduct investigations and to require persons to give assistance in connection with an investigation, including answering questions on oath; power to require persons to provide reasonable assistance in connection with certain enforcement actions; power to conduct hearings; and power to take certain enforcement actions, including referring matters to the CDPP for prosecution, bringing civil penalty proceedings, bringing civil actions, accepting enforceable undertakings, issuing infringement notices, and taking a variety of administrative actions (such as issuing stop orders or suspending or cancelling licences). 2.14 In performing its functions and exercising its powers, ASIC must have regard to the broad principles for its operation set out in ASIC Act s 1(2). The ASIC Act has effect, and is to be interpreted, in accordance with these principles. They include that ASIC must ‘strive to maintain, facilitate, and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy’ and ‘promote the confident and informed participation of investors and consumers in the financial system’.

Organisation 2.15 Section 9 of the ASIC Act provides that ASIC is to consist of not fewer than three or more than eight members, at least three of whom must be full-time members. From its establishment in 1990 until 2008, the membership of ASIC was maintained by three full-time members: the Chairman, the Deputy Chairman and [page 60] a Commissioner. In August 2008, ASIC’s membership was increased to five; it later rose to six. The members are appointed by the GovernorGeneral on the nomination of the Minister.11

Under the terms of the Corporations Agreement, the Commonwealth agreed with the states to maintain certain regional services and offices. ASIC is required to establish a regional office in each state and territory and may establish such other offices as it thinks fit. In deciding the number and location of its offices ASIC is directed by the legislation to ensure that it serves adequately the needs of business communities throughout Australia: ASIC Act s 95. ASIC has a regional office for each state and territory under the charge of a Regional Commissioner. There is a central information processing centre in the La Trobe Valley, Victoria.

Delegation by ASIC 2.16 ASIC may delegate any of its functions and powers to a person (including a body corporate) by writing under its common seal: ASIC Act s 102(1). Generally, such delegations are made to the individual members of ASIC (that is, the Chair, Deputy Chair or a Commissioner) or to ASIC staff. However, the legislation does contemplate delegation of ASIC’s powers in certain circumstances to staff of the Australian Prudential Regulation Authority (APRA) or the ACCC, with the written consent of the relevant agency head. A delegate remains subject to ASIC’s directions and their acts as such are treated as acts of ASIC: ASIC Act s 102. The delegation may be to the holder of a specified office rather than to a designated person.12 In deciding whether to delegate its powers to a particular person or in a particular case, ASIC must seek to ensure that persons who make decisions affecting a particular business community are located as close to that community as practicable; and that members of business communities throughout Australia have prompt and convenient access to decisionmaking and to ASIC’s facilities: ASIC Act s 102(4).

Regulatory documents issued by ASIC Regulatory Guides 2.17 Unlike regulatory agencies in some other jurisdictions (for example, the Securities and Exchange Commission in the United States), ASIC does

not have wide-ranging formal rule-making powers under the Corporations Act or the ASIC Act. The exceptions are ASIC’s rule-making powers under s 798G (market integrity rules) and s 901A (derivative transactions rules). However, it does have the power to grant relief from the law in certain circumstances: see 2.31 below. Notwithstanding its lack of formal rule-making power in many areas, ASIC routinely develops and publishes statements of policy with which regulated [page 61] persons are accustomed to comply. This is possible because the discharge by ASIC of its various functions and powers often involves the exercise of a discretion, for example, as to whether to approve an application, grant a request for relief or take enforcement action. ASIC’s policies and procedures set out how those discretions are or will be exercised. From July 2007, the policies and procedures are set out in formal, numbered documents called ASIC Regulatory Guides. The Regulatory Guides (RG) reissued or replaced a range of regulatory documents previously issued by ASIC, including policy statements, practice notes, guides or guidelines, and answers to frequently asked questions. ASIC’s stated intention for the Regulatory Guides is to provide ‘guidance to regulated entities by: explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act), explaining how ASIC interprets the law, describing the principles underlying ASIC’s approach, and giving practical guidance (for example, describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations)’: see ASIC: A Guide to Our Regulatory Documents, June 2007. There are more than 250 Regulatory Guides on issue, dealing with a wide variety of subject matter. 2.18 While the formulation of guidelines and policies by an administrative agency such as ASIC is both appropriate and useful, it is important to remember that (unless the legislation provides otherwise) the

policy does not create a binding rule.13 Regulatory Guides are policy documents to which a court may have regard if relevant but they are not binding.14 ASIC may be permitted or required to depart from the stated policy if the circumstances demand it. In Skoljarev v Australian Fisheries Management Authority (1995) 133 ALR 690, 696 (FCA); aff’d (1996) 41 ALD 481, Davies J observed that ‘rules and standards are important, both as a means of giving effect to lawful policy which a government or an authority has determined and wishes to be implemented and as a means of ensuring that decisions, because they have been taken by reference to rules or settled standards, are fair, consistent and not arbitrary’. However, ‘absent a statutory provision requiring compliance with policy, a decisionmaker may depart from policy and, in an appropriate case, should do so’. As to the circumstances in which departure from policy is justified, his Honour concluded that they are impossible to define or delineate, beyond saying that ‘the decision [to depart] must be made having regard to the decision and its context, the nature and ramifications of the policy and the nature and consequences of the individual circumstances which are relied upon’. In review of ASIC decisions by the Administrative Appeals Tribunal (AAT) (see 2.22 below), the existence and content of ASIC policy may be a relevant fact which the AAT is bound to consider. Where it is, ‘a serious misconstruction of [the policy’s] [page 62] terms or misunderstanding of its purposes in the course of decision-making may constitute a failure to take into account a relevant factor and for that reason may result in an improper exercise of the statutory power’.15 Applicable Regulatory Guides have been held to be relevant in interpreting the conditions imposed by ASIC on an Australian financial services (AFS) licence.16

Legislative instruments (formerly, Class Orders) 2.19 ASIC has power under the Corporations Act to grant relief from the

operation of particular provisions of the Act, including the fundraising provisions (Corporations Act Pt 6D.4); the financial services licensing requirement (Corporations Act s 911A(2)(l)); the financial services disclosure requirements (Corporations Act s 951B); the financial product hawking restrictions (Corporations Act s 992B); the financial product disclosure requirements (Corporations Act s 1020F); and the title and transfer provisions (Corporations Act s 1075A). ASIC’s modification and exemption powers are discussed in 2.31ff below. Where ASIC exercises its power to grant relief in relation to a class of persons (rather than an individual), it will do so by way of legislative instrument. Until 2015, these legislative instruments were known as ‘class orders’.17 These legislative instruments are enduring documents which have the effect of modifying the law as it applies to the specified class of persons in the specified circumstances. In some cases, an affected person is required to take certain active steps to avail themself of the relief provided, while in others the application of the relief is automatic. A number of important class orders and legislative instruments have been made by ASIC that modify or exclude the securities and financial services laws; they are discussed throughout the book.

No-action letters 2.20 Even where ASIC has no specific power to modify or grant exemptions from the Act, it has some discretion as to how it exercises its enforcement powers. To provide guidance on the way it intends to exercise its discretions in relation to enforcement, ASIC may release a Regulatory Guide indicating what it will accept as sufficient compliance with the Act in a particular class of cases — this is referred to as a ‘class no-action position’ under Pt D of ASIC Regulatory Guide 108 — No-action Letters, December 2009 (RG 108).18 Alternatively, it may issue a ‘no-action letter’ to [page 63] an individual applicant, stating that it does not intend to take regulatory

action over a particular state of affairs or particular conduct: see ASIC RG 108.1. ASIC’s policy is to issue a no-action letter only where, in its view, it would serve a clear regulatory purpose (such as business facilitation) to provide such a letter, and it would not advance the policy of the legislation to take enforcement action in relation to the relevant conduct. ASIC will generally issue no-action letters only where it has not yet settled its views on a subject, or for circumstances that arise infrequently. Where its position is settled and can be generalised, ASIC will instead publish that position as a Regulatory Guide. ASIC RG 108 makes clear that a no-action letter conveys a policy decision, not a legal opinion. Importantly, it does not preclude third parties (including the CDPP) from taking legal action in relation to the conduct, or conduct of the kind, covered by the no-action position; nor will it necessarily impede a court from holding that such conduct infringes the legislation. If events or circumstances change, ASIC may review or withdraw a no-action letter.

Administrative law controls on ASIC 2.21 The exercise by ASIC of its various regulatory functions and powers is subject to a variety of administrative law controls. These include merits review of ASIC’s decisions by the AAT; judicial review of decisions by the Federal Court; and control of the members of ASIC by the High Court.

Review by the AAT 2.22 Under the Corporations Act and the ASIC Act, ASIC is given power to make decisions on a wide range of matters. They include decisions related to licensing, granting relief from or modifying the law, intervening in takeovers, investigating, providing information to other agencies and authorities, and litigating. Both the Corporations Act and the ASIC Act provide for a merits review of ASIC’s decision-making in certain of these areas to be carried out by the AAT.19 The review is conducted in accordance with the Administrative Appeals Tribunal Act (1975) (Cth) (AAT Act). Section 25 of the AAT Act relevantly provides that a Commonwealth

statute (such as the ASIC Act or the Corporations Act) ‘may provide that applications may be made to the Tribunal … for review of decisions made in the exercise of powers conferred by that enactment’. The AAT Act defines ‘decision’ widely as including doing or refusing to do any act or thing; however, it is clear that not all actions taken by ASIC are ‘decisions’ for this purpose. Application for review can be made by any person whose interests are affected by the decision, under s 27 of the AAT Act. Review of ASIC decision-making by the AAT is possible in the circumstances set out in Corporations Act Pt 9.4A and ASIC Act s 244. Part 9.4A of the Corporations Act provides for a review by the AAT of a decision made under the Corporations Act [page 64] (subject to some exceptions) by the Minister, ASIC or the Companies Auditors and Liquidators Disciplinary Board: Corporations Act s 1317B. Decisions that cannot be reviewed by the AAT are set out in Corporations Act s 1317C — they include decisions in respect of which a provision in the nature of an appeal or review is expressly provided by the Corporations Act and a decision that is declared to be final or conclusive evidence of some matter. Nor is a decision by ASIC to deregister a company or a decision to seek an order for examination of persons by a court reviewable by the AAT. Specific decisions made by ASIC in connection with securities and financial services regulation excluded from review by the AAT include: a decision to make an application to a court under s 1325A, s 1325B or s 1325C; a decision to make market integrity rules under s 798G; a decision to take action under s 798K; decisions relating to derivative transaction rules under ss 901A and 903A; a decision to take action under s 901F or s 903E; a decision to approve a code of conduct under s 1101A; a decision to make a determination under s 1317D(3); and a decision to issue or withdraw an infringement notice under s 1317DAC or s 1317DAI. Certain relevant decisions by the Minister are also excluded from review by the AAT, under s 1317C(gcb), (gd) and (gda).

Section 244 of the ASIC Act allows for application to be made to the AAT for a review of a decision by ASIC to make an order under ASIC Act Pt 3 Div 8. Division 8 is discussed below; it allows for ASIC to make certain orders where, in its opinion, information about affairs of a body corporate or financial products needs to be found out for the purposes of the exercise of any of ASIC’s powers under ASIC Act Pt 3 (dealing with investigations and information-gathering) and that information cannot be found out because a person has failed to comply with a requirement made under Pt 3. 2.23 Reviewable decisions include certain key ASIC decisions that affect a person’s capacity to conduct regulated activities (including decisions suspending or cancelling AFS licences under Corporations Act s 915C or banning individuals from providing financial services under Corporations Act s 920A). In these cases, applicants for review are generally concerned to ensure that there is no disruption to their business pending the AAT’s decision. Frequently, applicants will apply for stay and confidentiality orders in these circumstances, under ss 41 and 35 of the AAT Act respectively.20 The basis on which such orders should be granted is considered in Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130; [2009] FCAFC 185 Downes and Jagot JJ emphasised that the decision to grant such an order involved the balancing of competing interests — those of the person the subject of the order to preserve their business and reputation, of clients to be protected and of the market to be informed. The majority noted (at [53]–[54]) that a banning order is made following the holding of a confidential hearing and on the basis [page 65] of a published statement of reason; and that the order must be publicised by ASIC in accordance with the Act. Downes and Jagot JJ considered that, for the AAT to: … form an opinion under s 41(2) of the AAT Act (that it would be desirable and in the

‘interests of any persons who may be affected by the review’ to make an order staying or otherwise affecting the operation or implementation of ASIC’s decision) these elements of the statutory regime, and the balance between the competing interests that they represent, must be treated as a fundamental element in the weighing of the competing considerations.

In relation to AAT Act s 35, and noting that suppression orders are rarely made in courts even though publicity undoubtedly disadvantages the parties, their Honours said (at [76]): When measured against the existence of the norm of a public hearing and the scheme established by the Corporations Act with respect to banning orders, it is apparent that the AAT would need some cogent reason by reference to the particular case to depart from the ordinary requirement of a public hearing. It is difficult to accept that harm (even serious harm) to the recipient’s reputation resulting from public awareness of the banning order will be a sufficiently cogent reason to justify the grant of a stay in most cases. This is because the risk of harm of this type is inherent in the nature of a banning order.

2.24 Under s 43 of the AAT Act, the AAT may affirm, vary or set aside the decision under review. The process undertaken by the AAT is sometimes referred to as a ‘merits’ review, because the role of the AAT is to satisfy itself that the decision under review was the correct or preferable one on the material before it.21 This contrasts with judicial review, which is directed at whether the reasons given by the decision-maker were adequate or defective. The AAT ‘does not simply review the adequacy of the primary decision-maker’s reasons’. It must ‘make its decision de novo’.22 In carrying out its review, the AAT stands in the shoes of ASIC. For the purpose of determining whether the decision under review was the correct or preferable decision on the material before it, the AAT ‘may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision’: AAT Act s 43(1). Accordingly, the AAT ‘is not confined to the decision-making power upon which the previous decision-maker actually relied in making the decision under review, but is armed with all the powers and discretions of the original decision-maker that are relevant to the review’.23 It is all the ‘powers and discretions’ which ASIC had when making the disqualification order, not the procedures which bind ASIC, to which the AAT accedes.24 [page 66]

2.25 Appeal from a decision of the AAT on a question of law is permitted under s 44 of the AAT Act.25 Whether in a particular case the facts as found answer a statutory description or satisfy statutory criteria will very frequently be exclusively a question of law.26 The process of construction may, in some cases, involve a question of mixed fact and law, but where on the facts as found, only one conclusion is open, the question is exclusively one of law.27 The Full Federal Court has characterised the distinction to be drawn as being: … between the factum probandum (that is, the ultimate fact in issue) and the facta probantia (the facts adduced to prove the ultimate fact). Where the factum probandum involves a term used in a statute (or a quasi-statutory instrument) the question whether the accepted facta probantia establish the factum probandum will generally be one of law.28

Review by the Federal Court 2.26 Where the complaint about a decision of ASIC is as to the process used by ASIC rather than the merits of the decision, an application may be made for judicial review by the Federal Court of Australia or the Federal Circuit Court under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act). Broadly speaking, review under the ADJR Act goes to whether a decision-maker has acted fairly and within his or her powers in coming to a decision. The ADJR Act applies to ‘a decision of an administrative character made under an enactment’.29. A person aggrieved can ask the court for an order of review in relation to a decision to which the Act applies (ADJR Act s 5), conduct engaged in for the purpose of making a decision to which the Act applies (ADJR Act s 6), or failure to make a decision to which the Act applies (ADJR Act s 7). 2.27 In examining the decision or conduct, the court is concerned with its legality, rather than its merits. Grounds for review include absence of natural justice or procedural fairness, ultra vires, jurisdictional error, error of law or fraud. This reflects the ‘limited confines of judicial review … in which fairness of the process rather than fairness of the outcome is the main concern’.30 A court conducting judicial review [page 67]

has no jurisdiction simply to correct administrative error or injustice.31 Section 39B of the Judiciary Act 1903 (Cth) gives the Federal Court jurisdiction ‘with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth’. This includes officers of ASIC.32 Section 39A enables proceedings to be commenced in the Federal Court by use of the old administrative law procedures available under the writs of mandamus and prohibition and the remedy of injunction, and allows the High Court to remit to the Federal Court, in accordance with s 44 of the Judiciary Act, actions commenced in the High Court under s 75(iii) or (v) of the Constitution: see 2.28 below.

Control by the High Court 2.28 Because the members of ASIC are appointed by the GovernorGeneral on the nomination of the Minister they are officers of the Commonwealth for the purposes of s 75(v) of the Commonwealth Constitution.33. As officers of the Commonwealth they are amenable to a writ of mandamus or prohibition or an injunction issued by the High Court in its original jurisdiction. The constitutional writs are directed at jurisdictional error, as distinct from other types of error of law.34

Oversight by the Commonwealth Ombudsman 2.29 Defective administration by ASIC can be the subject of a complaint to the Commonwealth Ombudsman, under the Ombudsman Act 1976 (Cth). The Ombudsman is an independent person appointed to investigate complaints about action that relates to matters of administration taken by Commonwealth Government officials or Commonwealth agencies. The Ombudsman is given wide powers to question officials and other persons and to inspect documents and premises. If the Ombudsman finds evidence of defective administration, this fact is reported to the agency and the responsible Minister. The Ombudsman will usually make recommendations that certain action be taken to remedy the conduct complained about. If the recommendations are not acted upon, the Ombudsman can inform the Prime Minister and make a report on the matter to the Parliament.

Oversight by the Office of the Information Commissioner 2.30 Following reforms to the freedom of information and privacy regimes in 2010, ASIC is also subject to oversight by the Office of the Information Commissioner. ASIC is subject to the Freedom of Information Act 1982 (Cth) (FOI Act). Importantly, FOI Act s 11 provides that every person has a legally enforceable right of access [page 68] to documents of agencies and official ministerial documents, subject to certain exceptions and exemptions. Section 14 of the Privacy Act 1988 (Cth) restricts the collection by ASIC of personal information to collection for a lawful purpose directly related to a function or activity of ASIC. The Information Commissioner is empowered to investigate alleged breaches of the principles as to privacy of information set out in the legislation.

ASIC’S MODIFICATION AND EXEMPTION POWERS 2.31 One of the most significant functions that ASIC performs in the area of securities and financial services regulation is the exercise of its statutory powers to modify the application of, or grant exemptions from, provisions of the Corporations Act. Its general exemption and modification powers extend to (among others) the fundraising provisions (Corporations Act s 741); the provisions regulating derivative transactions and derivative trade repositories (Corporations Act s 907D); the financial services licensing requirements (Corporations Act s 926A); the financial services disclosure requirements (Corporations Act s 951B); certain conduct requirements relating to financial products and financial services (Corporations Act s 992B); the financial product disclosure requirements (Corporations Act s 1020F); and the securities title and transfer provisions (Corporations Act s 1075A).35

2.32 While the language is not identical in all the provisions, the exemption and modification powers generally give ASIC power to exempt a person from the relevant law, or to declare that the law applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration. The exemption or declaration may apply to all or specified provisions of the relevant law; apply to all persons, specified persons, or a specified class of persons; relate to all financial products, specified financial products or a specified class of financial products; and relate to any other matter generally or as specified. An exemption may apply unconditionally or subject to specified conditions. If it is subject to conditions, the person to whom it applies must comply with the conditions, and ASIC has standing to seek orders from the court that the person complies. Usually, an exemption or declaration must be in writing, and ASIC must publish notice of it in the Gazette. The exception is for some exemptions granted under Corporations Act s 907D (derivative transactions and derivative trade repositories) and for certain exemptions and declarations made under Corporations Act s 926A (financial services licensing), which are legislative instruments for the purposes of [page 69] the Legislative Instruments Act 2003 (Cth) and, accordingly, must be publicised in accordance with the requirements of that Act. 2.33 ASIC publishes a quarterly report providing an overview of situations where ASIC has exercised, or refused to exercise, its exemption and modification powers from the financial reporting, managed investment, takeovers, fundraising or financial services provisions.36

Rationale for giving ASIC power to relieve 2.34 ASIC’s power to grant exemptions and modifications is conferred by the Commonwealth Parliament to resolve an inherent tension between the need for comprehensive and detailed regulation in the area of securities

and financial services on the one hand, and for commercial flexibility on the other. As the Eggleston Committee recognised as early as 1970, there are ‘inherent difficulties in formulating statutory requirements which will at all times and in all circumstances be properly and fairly applicable to all companies and groups of companies regardless of their size, the nature of their operations or the number and character of their shareholders’: Eggleston Committee Report, vol 1, [42]. For that reason the Eggleston Committee recommended the establishment of a companies commission with the power to grant relief from legislative requirements in the areas of company accounts and prospectus disclosure in particular: see 1.56 above. Conferring the power to grant relief on ASIC allows for an independent and competent authority to modify or grant exemptions from the strict requirements of the law in appropriate circumstances. As the High Court noted in Australian Securities and Investments Commission v DB Management Pty Ltd (2000) 199 CLR 321; 33 ACSR 447; [2000] HCA 7 at ACSR 454 (in relation to ASIC’s exemption and modification power for takeovers) these powers are ‘a legislative response to a problem of policy concerning regulation of takeovers’ which ‘involved a compromise between the technique of general legislative prescription applying inflexibly to all cases, and that of administrative discretion addressing issues on a case by case basis’. In the case of Ch 7 of the Corporations Act, ASIC’s power to grant exemptions and modifications enables the legislature to adopt a broad, functional approach to regulation while dealing with the possibility that some things, while technically caught by the legislation, should be excluded from it: see, for example, the Explanatory Memorandum to the Financial Services Reform Bill, [6.32].

Breadth of the power 2.35 There are no statutory limitations on ASIC’s power to relieve, beyond the inherent limitation that the power must be exercised for the purpose for which it was conferred. This has been broadly interpreted. The breadth of ASIC’s modification power in connection with takeovers

was confirmed by the High Court in Australian Securities and Investments Commission [page 70] v DB Management Pty Ltd (2000) 199 CLR 321; 33 ACSR 447; [2000] HCA 7 at ACSR 458, with the effect that, in the words of the Takeovers Panel, it ‘permeates every aspect of every takeover’.37 The effect of the decision in DB Management was to allow ASIC to vary provisions of the (then) Corporations Law, even to the extent of abrogating individual property rights.38 2.36 When they were first enacted, the exemption and modification powers provided to ASIC in respect of Ch 7 of the Corporations Act generally contained a limitation that they could not be exercised by ASIC to modify provisions such that they applied in relation to persons or financial products to which they would not otherwise have applied: former Corporations Act ss 951B(2), 992B(2) and 1020F(3). However, those restrictions were removed by the Financial Services Reform Amendment Act 2003 (Cth) (which Act also introduced Corporations Act s 926A). The Explanatory Memorandum to the Financial Services Reform Amendment Bill stated (at [3.79]) that: The exemption and modification powers given to ASIC in parts of the Act outside of Chapter 7 … which do not contain the limitation have been in place for some time, and there is no evidence that ASIC has ever used those powers inappropriately. The powers are invariably used in order to provide some form of concessional treatment, rather than to impose additional obligations. In addition, ASIC’s use of its exemption and modification powers is subject to a number of safeguards to ensure that the powers are not abused, including administrative review by the Administrative Appeals Tribunal, judicial review and consideration in appropriate circumstances by the Commonwealth Ombudsman.

It appears that the exemption and modification powers in Ch 7 of the Corporations Act (that is, Corporations Act ss 926A, 951B, 992B, 1020F or 1075A) are intended to be sufficiently broad to allow the creation, by ASIC, of criminal offences.39 This is contemplated by the sections themselves, which each provide that: … if conduct (including an omission) of a person would not have constituted an offence if

a particular [modification] had not been made, that conduct does not constitute an offence unless, before the conduct occurred … the text of the declaration was made available by ASIC on the Internet, or ASIC gave written notice setting out the text of the declaration to the person.

In a prosecution based on a provision as modified, the burden of proof is on ASIC to show that the notice requirement was met. The Explanatory Memorandum to the Financial Services Reform Bill states (at [6.129]– [6.131]) that: In the Bill there are a number of proposed provisions that give ASIC the power to make exemptions or modifications to proposed Chapter 7 (for example, proposed sections 951B and 1020F). These provisions contain a requirement that ASIC must notify a person in writing about a modification or make it available on the Internet before such a modification can result in the person having any additional

[page 71] criminal liability. Generally, exemptions are not subject to the same notice requirements, as contraventions of exemptions do not give rise to any additional criminal liability … These proposed provisions will ensure that people cannot potentially be subject to criminal liability for failing to comply with requirements about which they could not have been aware.

Exercise of the power 2.37 In each relevant case the Corporations Act does not set out criteria governing the granting of exemptions or modifications. (In contrast, ss 655A and 673 which concern exemptions from or modifications of the takeover laws, require ASIC to consider the purposes of Ch 6 set out in s 602 in exercising its powers). However, this does not mean the power can be exercised ‘for any reason whatever or for no reason at all’.40 The decision-maker may only exercise a power or discretion under the Act for the purpose for which it was given.41 In the exercise of its discretions under the Ch 7 exemption and modification powers, ASIC should have regard to the objectives set out in s 760A. In Re Queensland Power Trading Corporation and Australian Securities and Investments Commission, (2005) 89 ALD 346; [2005] AATA 945 which concerned ASIC’s decision to refuse to grant an

exemption from the Australian financial services licensing requirement in s 911A(1), the tribunal set out the principles guiding its (de novo) exercise of the power (at [87]), saying that: A decision-maker contemplating the exercise of the discretion to exempt someone from the obligation to hold an AFSL must not lose sight of the fact the power is given in order to provide relief from the strict operation of the rules. It is therefore appropriate to have regard to the individual circumstances of the person seeking the exemption. If the operation of the rules would lead to unusually burdensome results for the applicant, a decision-maker should consider granting relief provided the objectives of the regulation are not compromised … While the decision-maker would be sympathetic to requests for relief in cases where an exemption would clearly advance the objectives of the Act, it should be circumspect in other cases. Parliament has created a regulatory regime that was intended to apply to all but exceptional cases. The regime would be undermined if exemptions were given without good reason.

The manner in which ASIC exercises its exemption and modification powers is set out in various ASIC Regulatory Guides (see 2.17 above) dealing with specific circumstances and applications of the power. These include ASIC Regulatory Guide 21 — How ASIC Charges Fees for Relief Applications, January 2006; ASIC Regulatory Guide 51 — Applications for Relief, December 2009; ASIC Regulatory Guide 167: Licensing: Discretionary Powers, April 2016; and ASIC Regulatory Guide 254 — Offering Securities under a Disclosure Document, March 2016 and the numerous regulatory guides listed in Appendix 2 to RG 254. [page 72]

ASIC’S INFORMATION-GATHERING POWERS 2.38 ASIC collects information relevant to the exercise of its regulatory functions in a number of ways. These include through general intelligence, such as complaints made by the public, and through its own economic research and analysis of publicly available information. Beyond this, ASIC is entitled to require the provision to it of information in certain circumstances. This occurs in one of four main ways. The first is through the lodgment by regulated entities and others of reports, documents and

other information as required by law, either periodically or on the happening of a particular event, including reportable breaches of the law. This is discussed briefly in 2.41–2.47 below. The second is through the exercise by ASIC of statutory powers to require the provision of information or books in connection with what it describes as ‘surveillance’: that is, otherwise than in connection with a formal investigation into suspected misconduct. This includes ASIC’s power to require the production of documents, its power to inspect documents, its power to require the disclosure of certain information under notice, and its power to require the assistance of certain licensees: see 2.48–2.61 below. The third is its hearings power, which is discussed in 2.62–2.66 below. The fourth is through the exercise of its powers in connection with investigations and following the commencement of proceedings, including its power to require a person to attend an examination and answer questions under oath, its power to compel assistance with an investigation or proceedings, and its search warrant powers: see 2.67–2.78 below. 2.39 ASIC’s extensive information gathering powers, and its approach to exercising them, are explained in ASIC Information Sheet 145 — ASIC’s Compulsory Information Gathering Powers, September 2015. The powers are used in connection with both surveillances and investigations. As the document explains, ‘the difference between the two types of inquiries lies in the range of information-gathering powers we are able to use, and the purpose for which the information is gathered’. The Information Sheet provides that: Formal investigations occur when we suspect there has been a contravention of a law relating to our regulatory responsibilities, which include regulation of corporations, financial services and consumer credit. Only formal investigations can invoke the use of all our powers to conduct an examination and to request reasonable assistance. After a formal investigation begins, we can also apply for and obtain search warrants when the circumstances call for it. We seek to find out whether there is evidence that a suspected contravention has occurred. If that evidence exists, we consider what action should be taken. A surveillance inquiry can utilise only our powers to inspect documents and compel the production of documents or the disclosure of information. Its purpose is to test and ensure compliance with the law.

2.40 ASIC is required to take all reasonable measures to protect

information that is given to it in confidence or in connection with the performance of its functions under the corporations legislation from unauthorised use: ASIC Act s 127(1). ASIC has described its practice in the disclosure of information obtained under its [page 73] compulsory powers in ASIC Regulatory Guide 103 — Confidentiality and Release of Information, February 1996. Disclosure that is required or permitted under certain laws is authorised: ASIC Act s 127(2). ASIC may provide information to other government agencies whether Commonwealth, state, territorial or foreign: ASIC Act s 127(4). Thus, for example, it can supply information it has obtained to a Royal Commission.42 Where ASIC has obtained information under compulsion, the exercise by ASIC of its power to give information is subject to the interest of the person providing it in its confidentiality. ASIC should, consistently with the principles of natural justice, give an examinee an opportunity to be heard before making the confidential record available for public hearings. There may be exceptional situations where the principle does not require that, as where to do so would frustrate an investigation by the recipient authority. ASIC may disclose the information subject to a condition that it is not published without ASIC’s consent.43

Mandatory reporting 2.41 ASIC’s first source of information about regulated entities and markets comes from the documents and reports that various persons are required to lodge with it under the Corporations Act, either periodically or on the happening of a particular event. Particular reporting obligations are imposed by legislation on securities issuers (which must be public companies), Australian financial services licensees, market licensees, CS facilities, and various gatekeepers involved in the operation of primary and secondary markets.

Misconduct and breach reporting

2.42 The Corporations Act imposes obligations on a number of entities connected with the operation of primary and secondary markets, to report breaches and instances of misconduct when they arise. These include obligations imposed on market operators, CS facilities, derivative trade repositories, financial services licensees, and certain ‘gatekeepers’ such as auditors and trustees. 2.43 The holder of an Australian market licence is required to provide written notice or to report to ASIC in a number of circumstances, involving either breach by the licensee of its own statutory obligations, or certain matters affecting participants. This includes where the market operator takes disciplinary action against a participant, or has reason to suspect that a person has or will contravene the operating rules or the Act: Corporations Act s 792B. The actions of the licensees are protected by qualified privilege under the Corporations Act Pt 7.12 Div 1. These obligations are discussed in 10.17 below. [page 74] 2.44 The holder of an Australian CS facility licence is under a similar obligation to notify ASIC of, or to report to ASIC on, certain matters, including where it takes disciplinary action against a participant in the facility or has reason to suspect a contravention of its operating rules or the Act: Corporations Act s 821B. The actions of an Australian CS facility licensee are also protected by qualified privilege under Corporations Act Pt 7.12 Div 1. These obligations are discussed in 10.30 below. 2.45 The holder of a derivative trade repository licence must notify ASIC of certain information uneder Subdiv A, Div 5 of Pt 7.5A of the Corporations Act. 2.46 The holder of an AFS licence is required to notify ASIC of certain matters under Corporations Act s 912D, and to provide information to ASIC about its authorised representatives under Corporations Act s 916F. AFS licensees are also subject to special financial reporting requirements in Corporations Act Pt 7.8 Div 6, and are required by the conditions placed

on its AFS licence to notify ASIC of matters such as a material adverse change in financial position: Corporations Regulations 2001 (Cth) (Corporations Regulations) reg 7.6.04. These obligations are discussed in 13.36 below. 2.47 The Corporations Act imposes duties on certain people, sometimes described as ‘gatekeepers’, to notify ASIC of breaches of the law or other irregularities that they may discover in the course of performing their statutory functions. This includes trustees for debenture holders, auditors, compliance committee members, receivers, administrators and liquidators: Corporations Act ss 283DA, 311, 601HG, 990K, 601JC, 422, 438D and 533. Those reporting to ASIC are afforded qualified privilege in most cases, which protects them from defamation proceedings when acting honestly: Corporations Act ss 442E, 426, 535, 601JE, 601HG, 990L and 1289.

General information-gathering powers 2.48 The second group of information-gathering powers granted to ASIC are those allowing it to require the provision to it of specific information related to the offer of securities and other financial products, the operation of financial markets and the provision of financial services. The exercise of these powers does not depend upon ASIC having commenced a formal investigation in accordance with ASIC Act s 13: see 2.67 below. These include: its general power to inspect books kept in accordance with the corporations legislation, under ASIC Act s 29; its powers to require the production of books and audit information under notice, pursuant to ASIC Act Div 3 Pt 3; its powers to require the disclosure of certain information, including under ASIC Act Pt 3 Div 4, Corporations Act s 912C and the consumer laws in ASIC Act Pt 2 Div 2; and its power to compel certain licensees to assist it, including under Corporations Act ss 792C, 821C, 904D and 912E. Generally speaking, a person is required to produce a relevant document

even if it might incriminate them or make them liable to a penalty. However, a person is not [page 75] required to hand over a document to which legal professional privilege applies: see 2.54 below.

Inspection of books 2.49 ASIC has a general power under ASIC Act s 29 to inspect any book that the Corporations Act and the ASIC Act (other than the excluded provisions)44 requires a person to keep. This includes, for example, a company’s financial records that must be kept in accordance with Corporations Act s 286. The person conducting the inspection must be authorised in writing by ASIC to do so; the authorised person can require a person who has possession of the book to make it available for inspection, and failure to do so is a strict liability offence by virtue of ASIC Act ss 29(2A) and 63(3). ASIC’s powers of inspection are not limited by the purpose requirement in ASIC Act s 28 (see 2.52 below) and do not required the issue of a formal notice. The power of inspection does not entitle ASIC to take possession of the books or to make copies of them.

Production of books 2.50 Sections 30, 30A,45 31, 32A and 33 of the ASIC Act confer upon ASIC power to issue written notices requiring the production of books.46 The powers conferred by ss 30, 31, 32A and 33 may only be exercised for the purposes specified in ASIC Act s 28, including for the performance or exercise of any of ASIC’s functions or powers, for the purpose of ensuring compliance with the corporations legislation, in relation to a suspected contravention of relevant law,47 or for the purposes of an investigation under ASIC Act Pt 3 Div 1. This includes obtaining books and information for possible contempt proceedings against a person whom ASIC suspects of having contravened orders made under Corporations Act s 1323.48 ASIC’s power to require the production of books is reinforced by its

power, under ss 35, 36 and 36A, to apply for and execute a warrant to search for and take possession of relevant books. Warrants are discussed at 2.55 below. [page 76] Notices under ss 30, 31 and 32A may be given only to the particular persons49 specified in the relevant section, while a notice under s 33 may be given to any person. In each case the notice will require the production of ‘specified books’ to a ‘specified member or staff member [of ASIC]’ at a ‘specified place and time’. The time and place must be reasonable in all the circumstances: ASIC Act s 87. A notice to produce documents under ASIC Act Pt 3 Div 3 may require a company to undertake a degree of investigation, including making enquiries of responsible officers, employees and agents as to the existence of relevant information.50 In Riley McKay Pty Ltd v Bannerman (1977) 15 ALR 561 at 567,51 the High Court held that a notice to produce books is not liable to be set aside because it will be inconvenient for the recipient to answer the notice or because the recipient will need to devote considerable time and resources to producing the books which fall within the scope of that notice.52 Where documents falling within the scope of a notice issued under ASIC Act Pt 3 Div 3 contain information relating to matters which are outside the scope of the notice, it may be possible to mask that information.53 It has been held that the s 30 power is not unlimited and that the manner of its exercise should not be excessive.54 In Riley McKay Pty Ltd v Bannerman Brennan J warned that the commission should ‘administer the Act in such a way as not to impose upon a person or company a burden completely disproportionate to the value to the commission of the information sought’. Power to give notices 2.51 ASIC’s powers to require the production of books under notice to specified persons are as follows:

Section 30(1) covers books relating to the affairs55 of a body corporate (other than an exempt public authority). The notice can be given to the body corporate or an ‘eligible person’ in relation to the body corporate — this includes a person who is or has been a officer, employee, agent, banker, [page 77] solicitor or auditor of the body or is acting or has acted in any other capacity on behalf of the body: ASIC Act s 5(1). Section 30(2) covers books relating to the operation of a registered managed investment scheme. The notice can be given to the responsible entity of the scheme or an ‘eligible person’ in relation to the responsible entity. Section 31 covers books relating to a range of specified matters to do with financial products. These include the business or affairs of a financial market or CS facility; a dealing in financial products; advice given, or an analysis or report issued or published, about financial products; the character or financial position of a financial services business; and certain audits and audit reports relating to dealings or to financial services businesses: see ASIC Act s 31(g)–(m). The range of persons to whom the notice can be given include financial market and CS facility operators and their board members; persons who carry on or who have carried on a financial services business, their representatives and nominees; ‘eligible persons’ in relation to any of them; and ‘any other person’ who, in ASIC’s opinion, has been a party to a dealing in financial products. Section 32A applies for the purposes of the consumer protection provisions in Pt 2 Div 2 of the ASIC Act; it covers books relating to financial services and their supply: see ASIC Act s 32A(c)–(d). The notice may be given to a person who supplies, or has supplied, a financial service or an eligible person in relation to that person. ASIC’s general power to require the production of books relating to these matters from anyone in possession of them is contained in ASIC Act s 33. It provides for ASIC to give a written notice to any person requiring

the production of specified books which are in that person’s possession and which relate to the affairs of a body corporate or registered scheme or to the matters specified in ASIC Act s 31(g)–(m) or s 32A(c)–(d). A notice to produce books under this section may be issued not only to a person who is the target of an investigation, but also to persons ‘with no other involvement in an investigation than that they happen to possess documents or information relevant to an investigation involving the conduct of other persons’.56 A notice to produce books under ASIC Act s 33 need not specify any connection between the documents which are sought and the body corporate in question, and that notice will be valid if the relevant books in fact have the necessary characteristic (for example, that they relate to the affairs of a particular corporation) such that the notice falls within the statutory power.57 The notice relates to books in a person’s possession. The term ‘possession’ is defined in Corporations Act s 86 to include custody and control. A person has custody or control of books if he or she has those books in his or her physical [page 78] possession or has a legal entitlement to require them to be produced.58 Documents held by a person’s solicitor are within that person’s control.59 Thus, a notice issued to a person under ASIC Act s 33 could require production of documents held by a banker, accountant or solicitor on behalf of that person. A person who has physical possession of documents may be required to produce them under this section, whether or not he or she has a legal right to possession of them.60 Form and purpose of the notice 2.52 A notice given under ss 30, 31(1), 32A or 33 may be given by ASIC or a member or staff member of ASIC authorised under ASIC Act s 34, and must be in the form prescribed by reg 5 of the Australian Securities and Investments Commission Regulations 2001 (Cth) (ASIC Regulations). Regulation 5 includes a requirement that the notice specify ‘the nature of the matter to which the request for production of books relates’. By virtue

of s 25C of the Acts Interpretation Act 1901 (Cth) as applied to the ASIC Regulations by s 13(1)(a) of the Legislative Instruments Act 2003 (Cth) the regulation is complied with if ‘there is substantial compliance with the form’.61 If only one or some of a number of matters are stated in the notice, the omission of other relevant matters will not invalidate that notice.62 However, a notice that does not correctly state the matter to which the request relates will be invalid, because the non-compliance prevents the recipient being in a position to assess whether the notice is within power.63 If a person to whom a notice under ASIC Act Pt 3 Div 3 is directed can demonstrate that it was issued for an ulterior purpose, such as to coerce or intimidate the recipient or others, it may be set aside by the court.64 However, the onus of establishing that a notice has been issued for an improper purpose rests upon the recipient that seeks to challenge the notice, and the making of such a challenge does not in itself require ASIC to lead evidence in support of the notice.65 [page 79] It is not improper for ASIC to use its notice powers to obtain information following the commencement of civil penalty proceedings even where the use of those powers might put it in a different position from other litigants. The use by ASIC of its notice power under s 32A after the commencement of civil penalty proceedings has been held not to be improper.66 Reasonable excuse for non-compliance 2.53 The recipient of a notice issued under ASIC Act Pt 3 Div 3 may not refuse or fail to comply with that notice unless he or she has a ‘reasonable excuse’ for not doing so, and a failure to comply with such a notice is an offence: ASIC Act s 63(1). A reasonable excuse for non-compliance could be established if the recipient of the notice could establish sufficient practical difficulty in complying with the notice within the time permitted.67 A contractual duty of confidentiality does not provide a reasonable excuse for non-production of documents in response to a notice

issued under ASIC Act Pt 3 Div 3.68 A person who produces such documents is protected against liability for breach of that duty of confidentiality under ASIC Act s 92.69 It is not a reasonable excuse for a person to refuse or fail to give information, to sign a record or to produce a book in accordance with a requirement made of that person, that the information, signing of the record or production of the book might tend to incriminate that person or make that person liable to a penalty: ASIC Act s 68(1). This provision excludes the common law privilege against self-incrimination.70 The interaction of the statutory regime with the protections against selfincrimination is explained by Foster J in Watson v AWB Ltd (No 3) (2009) 181 FCR 96; [2009] FCA 1174.71 Examinations are undertaken by ASIC under ss 13 and 19–27. The ASIC inspector may require the examinee to answer a question that is put to the examinee at the examination which is relevant to a matter that ASIC is investigating: s 21(3). Under s 22, the examination is to take place in private and a written record of the examination is to be created and kept under s 24. Under s 63(1) [page 80] a person must not intentionally or recklessly fail to comply with a requirement under ss 19 and 21(3) and non-compliance with such a requirement is an offence. Section 65(3) relieves a person from liability for that offence if the person has a reasonable excuse for not so complying. Pursuant to s 68(1) of the ASIC Act, it is not a reasonable excuse for failing to give information that the person may tend to incriminate the person or make the person liable to a penalty, however s 68(3) provides that the statement is not admissible in evidence against the person in criminal or civil penalty proceedings other than one involving making false statements; and that legal professional privilege is preserved by s 69. Foster J held that s 68(3) preserved the essence of the privilege against self-incrimination because it denies to the relevant prosecuting authorities the capacity to use the transcripts in a criminal or civil penalty proceeding

other than in the limited exception. His Honour noted that an examinee must comply with s 68(2) by claiming privilege before answering questions or signing the record to attract the benefit of s 68(3). His Honour held that the ASIC Act had modified the privilege against self-incrimination to some extent but the answers to questions asked during the examinations which are recorded on the transcripts could not be used in criminal or civil penalty proceedings other than in the limited circumstances permitted by s 68(3). Legal professional privilege 2.54 At general law, a client may assert legal professional privilege to resist disclosure of a communication between a legal practitioner and his or her client which is confidential in character and which was created for the dominant purpose of the lawyer giving, or the client obtaining, legal advice, or for use in existing litigation or litigation which was within the reasonable contemplation or apprehension of the client.72 The dominant purpose test also applies in pre-trial proceedings such as discovery.73 Legal practitioners are entitled to refuse to give information or produce a book in response to a notice under ASIC Act Div 3 Pt 3 if compliance with the requirement to do so would involve a breach of legal professional privilege, subject to providing the client’s name and address to ASIC: ASIC Act s 69. For some time it was an open question whether a legal practitioner’s client is entitled to decline to produce books within the scope of a notice under ASIC Act Pt 3 Div 3 on the basis that those documents were subject to legal professional privilege. On the one hand, in Corporate Affairs Commission v Yuill (1991) 172 CLR 319; 4 ACSR 624, the majority in the High Court (Brennan, Dawson and Toohey JJ) held that Pt VII of the Companies (New South Wales) Code (NSW) evidenced a legislative intention to abrogate a client’s entitlement to assert legal professional privilege to resist the production of documents or to answer questions in the course of a special [page 81] investigation under the co-operative scheme legislation. The decision of the

High Court in Yuill’s case was applied to investigations by ASIC under ASIC Act Pt 3 in Australian Securities Commission v Dalleagles Pty Ltd (1992) 8 ACSR 109. On the other hand, in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543; [2002] HCA 543, the High Court held that legal professional privilege was a fundamental common law immunity from production which could only be overridden by statute expressly or by necessary intendment, and that documents sought by the ACCC under s 155 of the former Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)) were protected from production because the statute did not abrogate privilege. The High Court in Daniels did not, in terms, overrule Yuill’s case. All members of the court distinguished it on the basis that it was concerned with different legislation to that under consideration in Daniels. The majority went further to observe that ‘it may be that Yuill would now be decided differently’ (Gleeson CJ, Gaudron, Gummow and Hayne JJ at [35]), and Kirby J observed that ‘there are weaknesses and difficulties in the majority opinions’ in Yuill’s case (at [89]). In practice, ASIC acknowledges the right to claim legal professional privilege in respect of the production of books under ASIC Act Pt 3 Div 3. In particular, ASIC typically does not seek to exercise its powers under ASIC Act Pt 3 Div 3 to obtain access to documents relating to the representation of a client in an investigation or at an examination. An exercise of ASIC’s powers in that manner would involve a fundamental threat to an examinee’s right to legal representation in connection with such an investigation. ASIC’s approach to claims of legal professional privilege is explained in ASIC Information Sheet 165 — Claims of Legal Professional Privilege (INFO 165), issued in December 2012. In responding to a compulsory notice issued by ASIC, a person must provide all responsive information (that is, the information requested in the notice) to ASIC except for information that attracts a valid claim of legal professional privilege. In respect of privileged information, ASIC’s policy allows for the privilege holder to: waive privilege and provide the information to ASIC in response to the compulsory notice; seek to provide the privileged information to

ASIC on a limited and confidential basis intended to preserve privilege; or withhold the information from ASIC. Warrant to seize books 2.55 Section 35 of the ASIC Act authorises ASIC to obtain a search warrant, by application to a magistrate under s 36, if a member or staff member has reasonable grounds to suspect that books whose production could be required under Div 3 are, or may be within three days, on particular premises in Australia. Such a warrant may be issued by a magistrate under s 36, if he or she is satisfied that there are reasonable grounds to suspect that particular books whose production could be required under Div 3 are, or may be within the next three days, on particular premises. Section 36A (introduced by the Corporations Amendment (No 1) Act 2010 (Cth), which commenced on 13 December 2010) in turn provides for execution of the warrant. By contrast with a warrant issued under the Crimes Act 1914 (Cth) Pt 1AA, it is not [page 82] necessary that a warrant issued under the ASIC Act specify an offence. Prior to the amendments made by the Corporations Amendment (No 1) Act 2010 (Cth), these sections only permitted the issue of a warrant where books were not produced in response to an earlier notice to produce books, and ASIC rarely used its powers under the former sections: Replacement Explanatory Memorandum to the Corporations Amendment (No 1) Bill 2010, [3.6], [3.17]–[3.24]. Use to which books may be put 2.56 Section 37 sets out ASIC’s powers where books are produced under notice or seized under warrant: the authorised person may take possession, inspect, make copies and take extracts from any of the books. The person may use, or permit the use of, any of the books for the purposes of a proceeding; this includes a proceeding under a law of the Commonwealth or of a state or territory (s 37(10)) and has been held to extend to

contempt proceedings for contravention of orders made under Corporations Act s 1323.74 Requirement to provide explanation of books 2.57 A person who has produced books in response to a notice under ASIC Act Div 3 Pt 3 and any person who was party to compiling those books, may be required to provide an explanation of any matter about the compilation of those books or to which the books relate: ASIC Act s 37(9). A person may not refuse to provide an explanation of the books which were produced in response to the notice on the ground that his or her explanation may constitute self-incrimination or expose that person to a penalty: ASIC Act s 68(3). The explanation, or the fact that the person provided it, is not admissible in a criminal proceeding or a proceeding for the imposition of a penalty (other than a proceeding relating to the falsity of the statement), if he or she claims that it might tend to incriminate the person or expose him or her to a liability to a penalty, before making that explanation, and the explanation might in fact tend to incriminate that person or expose him or her to a penalty: ASIC Act s 68(2)–(3). However, information provided under ASIC Act Pt 3 Div 3 subject to a claim for the statutory privilege under ASIC Act s 68 is admissible in proceedings for a disqualification or banning order, licence suspension or cancellation within specified provisions of the Corporations Act: s 1349(4)–(5).

Disclosure of information Information about dealing 2.58 ASIC Act Pt 3 Div 4 empowers ASIC to obtain certain information concerning dealings in financial products. Various provisions of the Corporations Act regulate behaviour in the securities markets. To police those provisions ASIC needs to be able to ascertain the identity of persons who dispose of, and those who acquire, securities. The normal course [page 83]

of trading on the stock exchange involves anonymous dealing between sellers and buyers who are usually not aware of the other’s identity. Section 41 of the ASIC Act gives ASIC power to require a person who carries on a financial services business (such as a broker or dealer) to disclose to it in relation to an acquisition or disposal of financial products the name of a principal and the nature of the instructions given to the dealer. Similar obligations are placed on marked operators and CS facilities. Under ASIC Act s 43, ASIC can obtain information about dealings in securities from the issuer or from certain other named persons, but only in the circumstances set out in s 43(3): that is, where ASIC considers that certain circumstances (such as contraventions of particular provisions or, in the case of a takeover, unacceptable circumstances) may have occurred. The disclosure is to be made in private: ASIC Act s 47. The dealer can have a legal representative present: ASIC Act s 48. Information regarding AFS licensees 2.59 Corporations Act s 912C provides that ASIC may, by written notice to an AFS licensee, direct the licensee to give to ASIC a written statement containing specified information about the financial services provided by the licensee or its representatives, or the financial services business carried on by the licensee. Section 912C is not a provision to which ASIC Act s 68 (which abrogates the privilege against self-incrimination in respect of ASIC’s information-gathering powers under ASIC Act Pt 3) applies. Information under the consumer laws 2.60 Changes to ASIC Act Pt 2 Div 2 made by the national consumer laws in 2010 conferred on ASIC the power to issue ‘substantiation notices’ under Subdiv GC. Section 12GY of the ASIC Act applies if a person has made a claim or representation promoting the supply of a financial service; ASIC may in this case require that the person give information or produce documents to ASIC that could be capable of substantiating or supporting the claim or representation. However, ASIC Act s 12GYB(3) expressly provides that an individual may refuse or fail to give particular information or produce a particular document on the grounds of selfincrimination.

Assistance from licensees

2.61 Certain licensees are required to ‘assist’ ASIC in the discharge of its functions. This assistance can take the form of providing access to books or giving ASIC other information. The holder of a market licence must give such assistance to ASIC as it reasonably requests in relation to the performance of ASIC’s functions: s 792D; it must give ASIC reasonable access to the market’s facilities under s 792E. Similar obligations are imposed on CS facility licensees by ss 821C and 821D and derivative trade repository licensees by ss 904D and 904E. Section 912E requires a financial services licensee and its representative to give such assistance to ASIC as it reasonably requests in relation to whether the licensee or its representatives are complying with the financial services laws, and in relation to the performance of ASIC’s other functions. The assistance may include showing ASIC the licensee’s books or giving ASIC other information. [page 84]

ASIC HEARINGS 2.62 Under ASIC Act s 51, ASIC has power to hold hearings for the purposes of the performance or exercise of any of its functions and powers under the corporations legislation (other than the excluded provisions), other than a function or power conferred on it by Pt 3 Div 1 (that is, in connection with an investigation) or by Corporations Act s 657C or s 657G (that is, as to whether unacceptable conduct has occurred in relation to a takeover, which is the function of the Takeovers Panel). ASIC uses its hearings power on various occasions. One is when it is considering the policy it should adopt for the exercise of a particular power it possesses to exempt persons or a class of persons from provisions of the Corporations Act. Hearings may also be held when ASIC is examining market practices or is canvassing law reform issues, although this is rare. Most hearings are held for the purposes of ASIC exercising its decision-making powers in the manner explained in 2.63. 2.63 Various provisions of the Corporations Act direct ASIC to give

particular persons an opportunity to appear at a hearing before it makes a decision affecting that person. For example, a person affected by a decision of ASIC to refuse, suspend or cancel an AFS licence is entitled to a hearing under Corporations Act s 913B(5) or s 915C. Another example is in Corporations Act s 739(2) under which ASIC can issue a stop order (see 2.98) preventing further offerings of securities under a defective disclosure document. In general, ASIC has a discretion as to whether hearings may be held in public or take place in private, except where the legislation specifies that the hearing must be private: ASIC Act s 52. For example, hearings held prior to the suspension or cancellation of an AFS licence must be private: Corporations Act s 915C(4). 2.64 In a hearing, ASIC may take evidence on oath or affirmation. Witnesses can be required to answer questions or produce documents: ASIC Act s 58. The privilege against self-incrimination is abrogated, but answers are admissible only in penal proceedings in respect of the falsity of an answer: ASIC Act s 68. That protection is available only where the witness claims that compliance with ASIC’s requirement might tend to incriminate the witness, and compliance might in fact tend to incriminate the witness. The practice is for a person who claims the privilege to say ‘privilege’ before each answer. There is no immunity in respect of other information that ASIC may obtain as a consequence of the person making the self-incriminating statement. A corporation does not enjoy the privilege against self-incrimination.75 Legal practitioners are entitled to refuse to give information or produce a book where compliance would involve a breach of legal professional privilege, the exemption being conditional on the furnishing of the client’s name and address: ASIC Act s 69. 2.65 At a hearing, ASIC is not bound by the rules of evidence. However, it is required to observe the rules of natural justice when it is conducting a hearing: ASIC Act s 59(2). Natural justice embodies two broad concepts: a fair hearing concept and [page 85]

an absence of bias. There are no fixed rules of natural justice: they vary in the light of the power exercised and legislation governing its exercise. The flexibility of the rules of natural justice is illustrated by National Companies and Securities Commission v News Corporation Ltd (1984) 8 ACLR 843. The National Companies and Securities Commission (NCSC) proposed to hold a hearing to investigate suspected offences. The NCSC, unlike ASIC, had that power. The hearing was to be in private. Witnesses were to be called for examination. Witnesses could be accompanied by a legal representative and they would be given a transcript of their evidence. The NCSC foreshadowed publication of its views to be arrived at after the hearing and after persons about whom there might be damaging material in the published material were given an opportunity to rebut the NCSC’s views. News Corporation claimed that the duty to observe the rules of natural justice required the NCSC to allow News Corporation and its legal representatives to be present throughout the whole hearing, to intervene in proceedings and to cross-examine witnesses, to call witnesses in reply and to make submissions. Those claims were rejected by the High Court. The court noted that the content of the obligation to observe the rules of natural justice was affected by the investigative rather than adjudicative nature of the hearing. A hearing in which an authority can make a decision directly affecting the rights of a person attracts a more intense application of the two concepts of natural justice. However, the court saw no merit in the proposed publication and warned that it could be unlawful. ASIC’s practice is to afford natural justice to each person likely to be adversely affected by a submission by ASIC to the Minister or ‘other external provision’ of a report arising from a s 51 hearing. ASIC provides such persons with a copy of the draft hearing report and gives them a chance to make written submissions within a reasonable time. That will not be done in favour of a person who will be adversely affected only by being a member of a class of persons or of the public. 2.66 ASIC’s Regulatory Guide 8 — Hearings Practice Manual, March 2000, explains the principles and procedures adopted by ASIC relating to administrative hearings. ASIC recognises that persons who may be affected by ASIC decisions must be given an opportunity to be heard. ASIC RG 8 deals with three broad categories of administrative hearings: protective

hearings (where ASIC is considering using its administrative powers to protect the public, particularly consumers and investors); initial licensing and occupational registration hearings (for example, where ASIC is deciding whether to license a securities dealer or register a person as an auditor); and application of security hearings (for example, where ASIC is considering a claim made by another person for payment of security lodged by a licensed securities dealer). Various ‘guiding principles’ are set out in RG 8. Principle 1 is the person’s opportunity to be heard, which includes the right to present written or oral submissions and evidence. Principle 2 is the person’s entitlement to know the subject matter of the hearing and the particular areas that are of concern to ASIC, to know the circumstances which might lead ASIC to make a decision against the person, and to have sufficient time to respond. Principle 3 is that decision-makers must be impartial. Principle 4 is that findings of fact must be based on relevant, credible and [page 86] probative material. Principle 5 is that there is no onus of proof. Principle 6 is that court rules of procedure and evidence are not applicable. Principle 7 is that although each matter must be decided on its merits, ASIC will consider policy and precedents. RG 8 explains ASIC’s policy of conducting hearings informally and quickly. ASIC considers that 28 days should in general be sufficient time for a person to prepare for a hearing. Although a delegate of ASIC is empowered to compel a person to attend a hearing, ASIC states that it cannot envisage any case where a delegate would compel a person affected by the decision to appear and that it would be rare for a delegate to summon a person to appear as a witness. A written statement from a witness will usually suffice. RG 8 emphasises that hearings are quite different from court proceedings. It describes the manner in which hearings are run as ‘inquisitorial’. The manual states that a delegate will generally draw attention to contradictory material or inconsistent evidence and give the

person who would be affected by the decision the opportunity to address these matters. It is the prerogative of the person affected by the decision to decide which material to present, the form in which it is presented, how much evidence to produce, whether to dispute the accuracy of the material on which ASIC is considering making its decision, and (if relevant) whether or not to ask the delegate to exercise power to permit ‘specified acts’ which would otherwise be prohibited. Although the concept of burden of proof is inapplicable, the manual emphasises that a hearing is a person’s opportunity to persuade ASIC to make a decision in his or her favour.

ASIC INVESTIGATIONS 2.67 As the foregoing discussion indicates, ASIC has power to make various inquiries in connection with the performance of its regulatory functions, and to require the production of books and other information. Its coercive powers to obtain information are further enlarged when it embarks on a formal investigation. In particular, a formal investigation instigated under ASIC Act Pt 3 Div 3 allows ASIC to conduct oral examinations and to require assistance from any person. ASIC has power to make such formal investigation as it thinks expedient in four cases: 1.

where it has reason to suspect a contravention of the corporations legislation (other than the unconscionable conduct and consumer protection provisions of the ASIC Act) or of any other law where the contravention concerns the management or affairs of a body corporate or managed investment scheme, or involves fraud or dishonesty and relates to a body corporate or managed investment scheme or to financial products: ASIC Act s 13(1);

2.

where it has reason to suspect that unacceptable circumstances have, or may have, occurred in relation to a takeover: ASIC Act s 13(2);

3.

where it has reason to suspect misconduct by a registered liquidator: ASIC Act s 13(3); and [page 87]

4.

where it has reason to suspect that a contravention of the unconscionable conduct or consumer protection provisions of the ASIC Act may have occurred: ASIC Act s 13(6).

ASIC is required to comply with a direction from the Minister that it conduct a formal investigation in relation to a particular matter under ASIC Act s 14: see 2.10 above. Once ASIC is entitled to undertake an investigation, the ambit of the investigation is not confined to determining whether the particular suspected contravention occurred. The investigation, once triggered, provides an occasion for ASIC to conduct an investigation at least wide enough to enable it to perform any of its functions under ASIC Act s 1(2).76

Conducting an investigation Commencement 2.68 In order to commence an investigation under ASIC Act s 13, ASIC or its delegate must have reason to suspect one or more of the requisite contraventions may have been committed. Although such a suspicion requires more than mere speculation, it can be formed on the basis of something less than prima facie evidence, and may take into account matters which are credible but would not be admissible in evidence.77 There is no express requirement under ASIC Act s 13 that ASIC or its delegate suspects that a particular provision of the corporations legislation may have been contravened; however, it may in practice be necessary for ASIC or its delegate to have identified such a provision in order to form the necessary suspicion.78 The requirements of this section are satisfied if, as a matter of fact, ASIC or its delegate holds the requisite suspicion and has grounds for holding that suspicion.79 It is sufficient if a duly authorised ASIC officer who has responsibility for the investigation has reason to suspect that the relevant contravention has been committed and considers it expedient to conduct an investigation, and it is not necessary that the commencement of the investigation be formally documented.80 The fact that an officer who formed the relevant suspicion was under a

misapprehension as to the source of ASIC’s statutory power to conduct the investigation would not of itself invalidate the exercise of that power.81 [page 88] ASIC’s practice is to document the scope of its intended investigation in a ‘s 13 file note’; the note may be varied over the course of the investigation as new issues come to light. The preparation of this note is not essential to the power to investigate, nor does it confine the permitted scope of the investigation.82 An investigation may be stayed if it can be established that ASIC or its delegate does not hold the necessary suspicion that a contravention has occurred.83 However, the party which is challenging the commencement of the investigation bears the onus of establishing that ASIC does not hold the requisite suspicion.84 ASIC is not required to notify the potential target of an investigation of its commencement.85 Nor does the potential target of an investigation have a right to be heard in relation to whether the investigation should be commenced.86 At common law, ASIC is not required to provide the subject of an investigation with a statement of its reasons for commencing the investigation.87 In Little River Goldfields NL v Moulds (1991) 6 ACSR 299 at 305, Davies J held that the exercise of ASIC’s powers under ASIC Act s 13 also does not constitute a decision which was an ‘ultimate or operative determination’ so as to be reviewable under the ADJR Act: see 2.26 above.

Procedural fairness 2.69 It is arguable that ASIC is obliged to afford procedural fairness in the course of an investigation, although the content of procedural fairness in an investigation will be limited by the nature of the investigative process.88 The contrary view is that ASIC is not required to provide procedural fairness at the investigative stage, where an investigation is part of a process which may ultimately result in legal proceedings which will allow the target an opportunity to be heard.89

Procedural fairness is unlikely to require an investigator to disclose the nature or source of any complaints made against the subject of the investigation, or the intended scope and course of the investigation, or to require the investigator to give notice of his or her intention to obtain or use information which is adverse to the subject of the investigation, since such requirements would generally be inconsistent with the [page 89] effective conduct of the investigation. It appears that it is not necessary to allow a further ‘procedural fairness’ process at the end of an investigation, if substantive procedural fairness has been given to the person under investigation in the course of the investigation.90 A decision to commence criminal proceedings would not normally require that procedural fairness be afforded to the person against whom charges are to be brought.91 Earlier authorities suggest that procedural fairness requires an investigator to avoid actual bias or the appearance of bias, either by reason of a pecuniary interest in the matter or by reason of circumstances which would give a reasonable bystander ground to entertain a reasonable apprehension that the investigator would not bring a fair or unprejudiced mind to the matter.92 However, there is authority that the existence of a conflict of interest affecting a consultant to an investigation would not affect the validity of that investigation, and the fact that an investigator has formed a preliminary view as to a matter arising in the investigation will not generally constitute bias.93

ASIC’s power to conduct oral examinations 2.70 ASIC Act Pt 3 Div 3 authorises ASIC to examine persons whom it suspects or believes can give information relevant to a matter which it is investigating, and sets out the manner in which such an examination is to take place and the persons who may be present at it. ASIC can conduct an examination of a person if it suspects or believes on reasonable grounds that the person can give information relating to a matter that it is investigating or proposes to investigate: ASIC Act s 19.

A person may be required to attend for examination on oath and to answer questions by giving him or her a written notice in a prescribed form, setting out the identity of the inspector and the general nature of the matter that is being investigated, and requiring the person to appear and answer questions under oath and to give all reasonable assistance in connection with the investigation: ASIC Act s 19(2); ASIC Regulations reg 4 Form 1. That notice must also set out the effect of ASIC Act s 23(1) (dealing with the examinee’s right to legal representation) and ASIC Act s 68 (dealing with self-incrimination). Information about the effect of ss 23(1) and 68 need not be repeated to the same person in subsequent notices in [page 90] respect of the same investigation.94 Section 19(3) does not require ASIC to set out the law relating to privilege against self-incrimination generally — rather, it only requires ASIC to explain the effect of s 68 which sets out the circumstances in which the privilege is not available.95 The notice requiring a person to attend an examination must state the ‘general nature of the matter’ under investigation: ASIC Act s 19(3)(b). The examinee is in turn required to answer questions at the examination which are ‘relevant to a matter that the Commission is investigating’: ASIC Act s 21(3). A notice must identify the ‘general nature of the matter’ in such a way that an examinee can ‘perceive the general ambit of the subject matter of the investigation’.96 It should state any possible offence with reference to a section of a particular statute, the names of the companies concerned, and the time period within which the relevant conduct was alleged to have occurred was sufficient, but need not identify the particular person or persons who were suspected of the contravention (which may be uncertain at the time of commencement of an investigation): ASIC Act s 19(3).97 The ‘matter’ referred to in s 19(3) is the matter which is the subject of the investigation under this section, namely whether a contravention of the kind to which the section is directed may have been committed.98 The statement of the nature of the matter under investigation does not have to

be sufficiently detailed to allow the relevance of particular questions at the examination to be established, for the purpose of ASIC Act s 21(3).99 A notice issued under this section is not invalidated by a failure to describe the transitional provisions which apply to the particular inquiry.100 ASIC may also exercise its power to require reasonable assistance under ASIC Act s 19(2)(a) with or without requiring a person to appear for examination under s 19(2) (b): see 2.76 below.101 The power to issue examination and reasonable assistance notices under Corporations Act s 19 continues after civil penalty proceedings have [page 91] commenced, and the use of such powers does not amount to an improper exercise of power.102

Conduct of an examination 2.71 An examination must take place in private, and the person conducting the examination (inspector) has the power to give directions as to who may be present during all or part of the examination: ASIC Act s 22(1). Persons who may be present at an examination include the inspector or inspectors conducting the examination, the examinee, a member of ASIC or a staff member approved by ASIC, the examinee’s lawyer and any other person approved by the investigator: ASIC Act s 22(2). A person other than the inspector conducting an investigation may put questions to an examinee at an examination, if authorised to do so by the inspector, and this may allow ASIC to, for example, retain counsel to conduct an examination.103 An examinee is required to answer all questions put to him or her at an examination which are relevant to any matter under investigation: ASIC Act s 21. An examinee cannot insist that he or she be provided with notice of the questions which are to be asked at the examination.104 In the course of an examination, an examinee may be asked questions which are not limited to his or her knowledge of factual matters, and which require that he or she express an opinion, even of a speculative character, about a

question of law.105 An examinee who refuses or fails to take the oath or affirmation, or who refuses or fails to answer questions, commits an offence unless he or she has a reasonable excuse: ASIC Act s 63(1), (3). 2.72 An examinee at a compulsory examination under ASIC Act Pt 3 Div 1 is not entitled to decline to answer a question on the ground that the answer might tend to incriminate the examinee or make the examinee liable to a penalty: ASIC Act s 68(1). This provision excludes the common law privilege against self-incrimination. However, if the examinee claims the statutory privilege under ASIC Act s 68, a self-incriminating answer is not admissible in evidence against the examinee in criminal proceedings or proceedings for the imposition of a penalty, other than proceedings relating to the falsity of the answer: ASIC Act s 68(3). That immunity is only available to the examinee, and not to other persons who are incriminated by the examinee’s statements. The immunity is also not available in civil proceedings, other than those which are directed to the imposition of a penalty against the examinee. An application by ASIC for a injunction does not involve the imposition of a penalty.106 A corporation is not entitled to claim the privilege against self-incrimination when an officer of a company is giving evidence at an examination which may incriminate the company: ASIC Act s 68(2). [page 92] 2.73 An answer at an examination given subject to a claim for the statutory privilege under ASIC Act s 68 is admissible in proceedings for a disqualification or banning order, licence suspension or cancellation: Corporations Act s 1349(4)–(5). As a matter of practice, ASIC often gives a direction to the examinee that he or she must not disclose matters upon which he or she was examined, except for the purposes of obtaining legal advice, and gives a direction to the examinee’s legal representative that he or she must not disclose the content of the examination except for the purpose of advising the examinee. The power to give that direction is implied by ASIC Act s 19(2)(a) (obligation to provide reasonable assistance); and ASIC Act s 22

(examination takes place in private).107 A non-disclosure direction can only continue for a reasonable time and as reasonably necessary for the purposes of the investigation.108

Examinee’s right to legal representation 2.74 An examinee is entitled to be legally represented at an examination and the examinee’s lawyer may, at such times as the inspector determines, address the inspector and examine the examinee: ASIC Act s 23(1). However, a particular lawyer may be excluded from representing an examinee at an examination if he or she is personally involved in the conduct under investigation and there is reason to suspect that he or she may have committed an offence, or where the representation of several examinees by the same lawyer would prejudice the investigation.109 The power to exclude the lawyer is conferred by s 22(1) of the ASIC Act on an inspector in his or her own right, not upon ASIC. The power to direct the exclusion of a lawyer is only enlivened where the inspector believes that exclusion is necessary for the purposes of the examination and that belief is held on reasonable grounds and in good faith. The right of attendance conferred on the examinee’s lawyer by s 23(1) is sufficient to attract the rules of procedural fairness. Because the right of the lawyer conferred by s 23(1) is generally a right in respect of which the lawyer will owe fiduciary duties to his or her client, the duties generate in the client a sufficient interest also to attract an obligation of procedural fairness. Accordingly, the giving of a direction excluding a lawyer from an examination will require the affording of procedural fairness both to the lawyer and to his or her client.110 [page 93]

Use of transcript of examination 2.75 The inspector may, and must if the examinee so requires, have a record made of statements at an oral examination: ASIC Act s 24(1). On his or her written request, an examinee is entitled to a copy of any written record of an examination without charge, but subject to any conditions

which the inspector may impose: ASIC Act s 24(2)(b). Those conditions may relate to maintaining the confidentiality of that transcript.111 ASIC may also be entitled to delay supplying a copy of a transcript of examination to an examinee if the release of that transcript would prejudice the investigation; for example, if an examinee sought to obtain a transcript of his or her prior evidence during the course of his or her examination.112 ASIC may use and disclose information contained in a written record of examination in connection with the commencement of a prosecution: ASIC Act s 49. ASIC may also use and disclose such information in connection with civil proceedings which it brings on behalf of a company or another person pursuant to ASIC Act s 50, or in the intervening proceedings brought by another person under Corporations Act s 1330. ASIC may give a copy of a record of examination and of any related book to a person’s lawyer, if ASIC is satisfied that that person is conducting, or contemplating in good faith, proceedings in relation to a matter to which the examination related: ASIC Act s 25(1). It appears that such a record of examination or copies of such books may be provided either to a lawyer acting for a plaintiff or a defendant in proceedings or contemplated proceedings.113 A record of examination or any such book may only be used for the purposes of those proceedings, and may not be published or communicated to any other person, except for those purposes: ASIC Act s 25(2). In Johns v Australian Securities Commission (1993) 173 CLR 408; 11 ASCR 467, the High Court held that ASIC’s right to release information to a litigant under ASIC Act s 25(1) was subject to an obligation that, as a matter of procedural fairness, ASIC should first provide the examinee with an opportunity to make submissions opposing the release of that information. In ASIC RG 103, ASIC indicates that, in exercising its discretion as to whether to release a record of an examination under ASIC Act s 25(1), it must first be satisfied that a person is carrying on or contemplating a proceeding and that the proceeding is in respect of a matter to which the examination or part of it related; and will consider whether ASIC’s enforcement functions would be jeopardised or any other person may be adversely affected by release of that record. ASIC notes that it also has a general discretion as to the release of such a record of examination, in

which it will take account of its functions and powers, the objects of the Corporations Act and the ASIC Act, and the public interest generally; but that, in the absence of compelling reasons to the contrary, it will generally assist litigants by disclosing [page 94] records of examination under ASIC Act s 25(1): RG 103.18. ASIC may impose conditions on the manner in which a record of examination or related books may be used, and will usually impose a condition requiring an applicant to give notice to any person whose interests would be affected by publication of that record or books, before using them in open court, to allow that person to seek orders protecting his or her interest from the court: RG 103.34–103.36, 103.42.

ASIC’s power to require reasonable assistance Assistance in connection with an investigation 2.76 When an investigation is underway, ASIC may require any person to ‘give ASIC all reasonable assistance in connection with the investigation’: ASIC Act s 19(2). The power to require reasonable assistance can include, for example, conducting diligent searches and inquiries for documents relating to a particular matter or information held on a computer, signing a power of attorney or giving authority for a third party to release information.114 It is not clear whether s 68(1) of the ASIC Act abrogates the privilege against self-incrimination in respect of assistance that goes beyond giving information, signing a record of interview or producing a book. In Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [47], White J was willing to assume that the privilege was not abrogated in respect of the requested assistance, without deciding the issue.

Assistance in connection with a prosecution

2.77 If ASIC, on reasonable grounds, suspects or believes that a person can give information relevant to a prosecution for an offence arising out of an investigation or examination, it can require that person to give ASIC all reasonable assistance in connection with the prosecution: ASIC Act s 49(3). That requirement does not apply to a person in respect of whom ASIC has formed the view, as a result of an investigation or an examination, that he or she may have committed an offence and ought to be prosecuted for that offence, or to that person’s lawyer: ASIC Act s 49(4). The obligation to render reasonable assistance may include answering questions, explaining documents and diligently searching for and producing documents.115 An overlapping power arises to require reasonable assistance in respect of all criminal proceedings for offences against the Corporations Act, under Corporations Act s 1317R(1)(b). The statutory duty to render reasonable assistance under ASIC Act s 49 arguably overrides an express or implied contractual duty of confidentiality.116. However, it is not clear whether the obligation to provide reasonable assistance under ASIC Act s 49 would prevent a person asserting a claim to legal professional privilege in relation to a communication. Nor is it clear that the obligation to provide reasonable assistance under ASIC Act s 49 displaces the privilege against selfincrimination at [page 95] general law. A failure to comply with a requirement by ASIC to give reasonable assistance, without reasonable excuse, is an offence: ASIC Act s 63(3). In the event of default, the court may order compliance with that requirement: ASIC Act s 70. ASIC may also require reasonable assistance from a partner, officer, employee or agent, including a present or past banker or auditor, of a defendant: Corporations Act s 1317.

Assistance in connection with civil penalty proceedings 2.78 Section 1317R(1)(a) of the Corporations Act extends ASIC’s power to require reasonable assistance to applications made by it for declarations of contravention or pecuniary penalty orders in respect of the civil penalty

provisions. Lawyers are exempted from s 1317R(1)(a) and (b) by s 1317R(5).117

ASIC’S ENFORCEMENT ROLE 2.79 The securities and financial services provisions of the Corporations Act and the ASIC Act work in such a way that a variety of consequences can follow where a person contravenes (by act or omission) a provision of the Act. The contravention may be an offence, punishable by criminal sanctions. If the provision is a civil penalty provision, the contravention may attract the civil penalty provisions in Corporations Act Pt 9.4B. The contravention may create civil liability, giving a person affected the right to recover the amount of loss or damage caused by the contravention or to obtain other orders, such as injunctions. In other cases, a contravention may give ASIC or the court the right to make orders affecting the activities of the person in contravention; for example, by revoking or suspending a licence or by banning a person from acting in a particular capacity (for example, as a representative of a financial services licensee or as a director of a company). Where there is a contravention of the laws it administers, ASIC has a range of enforcement options available to it. Depending on the circumstances these may include: referring matters to the Commonwealth Director of Public Prosecutions (CDPP) for criminal prosecution; making application to the court for declarations of contravention, pecuniary penalty orders, or compensation orders for breach of the civil penalty provisions; bringing civil proceedings on behalf of investors for recovery; bringing civil proceedings for injunctive or other relief; obtaining enforceable undertakings; issuing infringement notices; issuing stop orders; making banning orders against a person; and applying to a court for disqualification orders against a person.

[page 96] 2.80 ASIC’s approach to enforcement is outlined in its Information Sheet 151 — ASIC’s Approach to Enforcement, September 2013. Figure 2.2 in that document sets out its general approach to taking enforcement action.

Criminal prosecutions 2.81 The securities and financial services laws contained in the Corporations Act and Pt 3 Div 3 of the ASIC Act impose numerous statutory requirements and restrictions. Contravention of most, but not all, of these requirements and restrictions may be a criminal offence, depending on the circumstances of the contravention and, in some cases, the state of mind of the person concerned. The main exceptions are Corporations Act s 1041H and ASIC Act s 12DA, which prohibit misleading or deceptive conduct and which give rise to civil but not criminal liability. In some cases, the relevant statutory provision will specify whether contravention is an offence or not. Section 1311 of the Corporations Act is the general offence provision, which states that a person who does an act or thing that the person is forbidden to do by or under a provision of the Act, or does not do a thing that the person is required or directed to do by or under a provision of the Act, or otherwise contravenes the Act is guilty of an offence unless that or another provision of the Act provides that the person is guilty of an offence or is not guilty of an offence. Section 12GB of the ASIC Act is the general offence provision for ASIC Act Pt 2 Div 2 (unconscionable conduct and consumer protection). 2.82 The provisions of the Commonwealth Criminal Code apply to offences under the Corporations Act and the ASIC Act. The Criminal Code, which came into general effect in December 2001, is a schedule to the Criminal Code Act 1995 (Cth). The Code must be applied to offences under the Commonwealth law to determine what ‘the prosecution would need to prove in order to prosecute that offence’.118 The purpose of the Code is set out in s 2.1; it is ‘to codify the general

principles of criminal responsibility under laws of the Commonwealth. It contains all the general principles of criminal responsibility that apply to any offence, irrespective of how the offence is created’.

ASIC’s role in criminal matters 2.83 In criminal matters, ASIC’s role is generally confined to investigation, because the decision to lay criminal charges under the Corporations Act or the ASIC Act lies with the CDPP. The CDPP has carriage of criminal matters once they are on foot: see below. However, for certain minor offences, ASIC has power to serve a penalty notice on the person (effectively, a fine) under Corporations Act s 1313. [page 97] Figure 2.2: ASIC’s approach to enforcement119

[page 98]

Role of the CDPP 2.84 Where it appears that a criminal offence has been committed, ASIC prepares a brief for the CDPP for a decision whether to prosecute, and for the conduct of that prosecution. The CDPP is an independent prosecuting agency, established under the Director of Public Prosecutions Act 1983 (Cth); it has no investigative powers or functions. The decision to investigate matters and the decision to refer matters to the CDPP is a decision for the relevant referring agency (such as ASIC, APRA or the Federal Police). The CDPP considers briefs of evidence referred by investigating agencies; by this process the decision to prosecute is taken independently of those who were responsible for the investigation. The CDPP determines whether charges should be pursued, and if so, which charges can be appropriately made out by the available evidence.120 The relationship between ASIC and the CDPP is set out in a Memorandum of Understanding (MOU) dated 1 March 2006, which outlines the liaison arrangements between the two and agrees upon the bases on which different types of enforcement action will be undertaken. Under the MOU, when ASIC believes a criminal offence may have been committed and has gathered sufficient evidence to enable it to support that view, ASIC is required to refer a brief of evidence to the CDPP in a timely manner. The decision to prosecute rests with the CDPP; the MOU requires that the CDPP will give appropriate weight to ASIC’s views concerning the public interest in prosecuting matters. In addition, the MOU permits ASIC to prosecute some summary regulatory offences as are agreed from time to time between ASIC and the CDPP at the national level. ASIC may conduct these proceedings where there is a guilty plea without reference to the CDPP and, where agreed, in such proceedings where there is not a guilty plea. The MOU also requires that ASIC will consult with the CDPP before making an application for a civil penalty order.

Civil penalty proceedings

2.85 Certain provisions of the Corporations Act are ‘civil penalty provisions’ for the purposes of Corporations Act Pt 9.4B. The civil penalty provisions are set out in Corporations Act s 1317E, and include ss 674 and 675 (continuous disclosure), 798H (complying with market integrity rules), 901E (complying with derivative transaction rules), 903D (complying with derivative trade repository rules), 961K and 961Q (financial services best interest duties), 962P and 962S (financial services fees), 963E, 963F, 963G, 963J and 963K (financial services conflicted remuneration), 964A (financial services shelf-space fees), 964D and 964E (financial services asset-based fees), 965 (financial services anti-avoidance), 985E, 985H, 985J, 985K, 985L, 985M (margin lending), 1041A (market manipulation), 1041B and 1041C (false trading and market rigging), 1041D (dissemination of information about illegal transactions) and 1043A (insider trading). The civil penalty regime [page 99] in the Corporations Act allows for the ‘punishment’ of contraventions that have a material impact, or are serious, through the imposition of a penalty that can be handed out by a civil (rather than criminal) court. The purpose of the penalties themselves is punitive. In ALRC Discussion Paper 65: Securing Compliance: Civil and Administrative Penalties in Australian Federal Regulation, April 2003, at [3.44] the Australian Law Reform Commission said: Civil pecuniary penalties are more closely aligned with criminal fines than with private law civil damages. Civil damages aim to compensate individuals for harm caused. Civil pecuniary penalties, on the other hand, serve a punitive purpose and are payable whether or not any harm was actually caused by the unlawful action. Whilst civil pecuniary penalties are thought not to entail the moral sanction of a criminal conviction, they do not serve as merely the tax or price on an illegal act.

The relationship between criminal proceedings and civil penalty proceedings is set out in ss 1317M, 1317N and 1317P of the Corporations Act. Under s 1317M, a court must not make a declaration of contravention or a pecuniary penalty order against a person for a contravention if the person has been convicted of an offence constituted by conduct that is substantially the same as the conduct constituting the

contravention. Proceedings under the civil penalty provisions must be stayed while a criminal prosecution is on foot. Criminal proceedings may be instigated after civil penalty proceedings. The nature and purpose of civil penalty provisions is discussed in Morley v Australian Securities and Investments Commission (2010) 247 FLR 140; 81 ACSR 285; [2010] NSWCA 331; and the materials to which the Court of Appeal refers: at [694].121

ASIC’s standing to bring proceedings 2.86 Where it believes that there has been a contravention of a civil penalty provision, ASIC has standing under Corporations Act s 1317J to make an application to a court for a declaration of contravention, a pecuniary penalty order, and a compensation order. Under Corporations Act s 1317E, if the court is satisfied that a person has contravened one of these provisions, it must make a declaration of contravention. The declaration of contravention specifies the provision that was contravened, the person who contravened it, the conduct constituting the contravention, and the corporation or registered scheme to which it related, and is conclusive evidence of those matters. The declaration of contravention may be accompanied by an order [page 100] that the person pay a civil penalty, or that they compensate a person affected by their contravention, or both.

Applicable rules of evidence and procedure 2.87 Proceedings for a declaration of contravention or pecuniary penalty order are civil proceedings; Corporations Act s 1317L specifies that ‘the Court must apply the rules of evidence and procedure for civil matters’ when hearing them.122 The civil burden of proof applies to proceedings brought under Pt 9.4B, including proceedings for the imposition of a civil penalty: see also Corporations Act s 1332. 2.88 Courts have consistently stated that the burden of proof is to be

applied in the manner described by Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362–3, that is, that ‘the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the satisfaction of the tribunal’.123 After referring to s 140(1) of the Evidence Act 1995 (Cth), Edelman J in ASIC v Cassimatis (No 8) [2016] FCA 1023 at [38]–[39] usefully summarised the principle in the following terms: Part of [the Briginshaw] principle is the consideration of the ordinary experience of people that the more grave the allegation, the less likely it might be expected to be (all other things being equal) that a respondent would, on the balance of probabilities, have committed the act. An assessment of the gravity of the allegations will include consideration of the likely consequences if the allegations are made out. As Mansfield and Gilmour JJ said in Ashby v Slipper [2015] FCAFC 15; (2014) 219 FCR 322, 345 [69] the more grave the allegations and their potential consequences, ‘the stronger is the evidence required to conclude that the allegations have been established which will give rise to those consequences’.

2.89 Because an order for a pecuniary penalty involves the imposition of a penalty, the privilege against exposure to a penalty applies. This means that the defendant cannot be compelled to provide proof against himself or herself.124 Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; [2004] HCA 42 involved the applicability of the privilege against self-exposure to penalty which could arise at various stages of case management of a civil case, including discovery and the filing of evidence. The High Court determined that provisions of the character identified as ‘civil penalty provisions’ in the Act were punitive. Their characterisation as protective, which had often been applied to such provisions, [page 101] was not an appropriate, or at least not a complete, statement of their character for purposes of the penalty privilege.

ASIC’s obligation to act fairly 2.90 In all proceedings ASIC as a government agency is expected to be a model litigant, and as such is expected to ‘adhere to those standards of fair dealing in the conduct of litigation that courts … have come to expect —

and where there has been a lapse therefrom, to exact — from the Commonwealth and from its officers and agencies’.125 This obligation manifests itself in different ways depending on the circumstances; examples given by the Full Federal Court in Scott v Handley [1999] FCA 404 include ensuring conscientious compliance with procedures designed to minimise cost and delay, assisting the court to arrive at the proper and just result, and not taking purely technical points of practice or procedure. The nature of civil penalty proceedings and the extent of ASIC’s ‘duty of fairness’ in relation to the conduct of those proceedings was discussed at length by the New South Wales Court of Appeal in Morley v Australian Securities and Investments Commission (2010) 247 FLR 140; 81 ACSR 285; [2010] NSWCA 331 at [626]–[777]. The Court of Appeal concluded that ASIC’s obligation of fairness gave rise to a duty to call particular evidence and that breach of this duty by not calling the evidence required discounting of whatever evidence ASIC did call in proof of its case. However, in Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; 88 ACSR 246; [2012] HCA 17 at [147] the High Court held that neither the source of a duty of that kind, nor the source of the rule which was said to apply if that duty was breached, was sufficiently identified. In any event, ASIC’s failure to call the solicitor as a witness in its case was held to have occasioned no unfairness: at [156].126

Consequences of a declaration of contravention 2.91 Once a declaration of contravention has been made, Corporations Act s 1317G(1) allows a court to require the payment of a pecuniary penalty if the contravention has a material impact, or is (otherwise) serious. Under Corporations Act s 1317G, the court may order the person to pay the Commonwealth a [page 102] pecuniary penalty of up to $200,000 ($1 million in the case of a corporation) if the contravention: materially prejudices the interests of the company or the scheme, or

their respective members; materially prejudices the company’s ability to pay its creditors; or is serious. A contravention is ‘serious’ if ‘the default or neglect which constitutes a breach of the requisite duty’ is ‘grave or significant’.127 Various commentators have concluded that the test of seriousness involves an element of moral wrongdoing. The amount of the penalty is determined by reference to the same principles that underlie sentencing: ‘general deterrence and personal deterrence (where punishment is imposed to avert future harm), and rehabilitation and retribution (where punishment is imposed simply because the offender deserves it)’.128 In Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80; [2002] NSWSC 483 at [125], Santow J noted that ‘the principal purpose of a pecuniary penalty is to act as a personal deterrent and a deterrent to the general public against a repetition of like conduct’. Further, the penalty should be no greater than is necessary to achieve the objective of compliance with the appropriate standards of commercial conduct within the management of corporations by deterrents.129

Civil proceedings 2.92 ASIC also has standing to bring or intervene in various types of civil proceedings in respect of contraventions of the Corporations Act or the ASIC Act.

Injunction 2.93 ASIC has standing to seek injunctive relief with respect to contraventions of the Corporations Act (under Corporations Act s 1324) or the ASIC Act Pt 2 Div 2 (under ASIC Act s 12GD).130 The court may grant a permanent injunction even when a winding up order has already been made against a corporate defendant.131 Like the [page 103]

making of a declaration, the grant of an injunction under s 1324 may serve to mark the court’s disapproval of the defendant’s conduct and operate as a deterrent to others.132 The principles governing exercise of the court’s power under s 1324 are summarised by Palmer J in Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605; [2002] NSWSC 741; they are that the jurisdiction which the court exercises under s 1324 is statutory, and not the court’s traditional equity jurisdiction; the court is not to be confined by the considerations which would be applicable if it was exercising its traditional equity jurisdiction; the court should consider whether the injunction will have some utility or will serve some purpose within the contemplation of the Corporations Act, and that is so whether the application is for a permanent injunction under subs (1) or an interim injunction under subs (4); and when the application is made by ASIC rather than a private litigant, the court is likely to give greater weight to the question of whether the injunction will serve a purpose within the contemplation of the Corporations Act.133 These principles were accepted in relation to final relief by Martin J in Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1; [2009] QSC 58 at [248];134 however, his Honour considered that ordinarily principles (serious question to be tried, and balance of convenience) apply to the grant of interim or interlocutory injunctions under s 1324.135 Section 1324(1) gives the court power to grant an injunction to restrain a breach or potential breach of the Corporations Act; the injunction may be granted in respect of conduct that is a contravention of the Act or that amounts to involvement in a contravention of the Act. The relevant principles and considerations were addressed by Santow J in ASIC v Adler (2002) 42 ACSR 80; [2002] NSWSC 483 at [56]; that case concerned disqualification orders, but the same principles have been held to apply to restraint orders made under s 1324.136 Section 1324(2) gives the court power to grant an injunction requiring a person to do an act or thing required by the Corporations Act. Section 1324(10) gives the court power to order the payment of damages, either in addition to or in substitution for the grant of the injunction.137

Section 12GD of the ASIC Act provides for prohibitory injunctions to restrain contraventions of ASIC Act Pt 2 Div 2 (that is, unconscionable conduct and consumer [page 104] protection in relation to financial services). As with s 1324(1) of the Corporations Act, s 12GD of the ASIC Act gives the court power to restrain conduct that contravenes the relevant provisions, or amounts to involvement in a contravention. Section 12GD does not provide for mandatory injunctions or damages in the alternative.

Representative proceedings brought by ASIC 2.94 ASIC may bring civil proceedings for damages or the recovery of property in the name of a third party, if as a result of an investigation it appears to it that it is in the public interest that such proceedings should be brought: ASIC Act s 50.138 This section has a remedial purpose, and ASIC’s decision whether it is in the public interest that proceedings should be brought involves the exercise of a wide discretion as to which matters, such as the regulatory purpose of the proceedings, their prospects of success and the likelihood of recovery, will be relevant.139 An action can be brought under this section in relation to breach of trust by a trustee, which constitutes a breach of duty for the purposes of the section.140. Proceedings can be commenced under this section even if ASIC’s investigation has not been completed.141 ASIC may commence such proceedings in the name of a company, with or without the consent of that company, and in the name of natural persons, but only with their written consent given prior to the proceedings being commenced: s 50(c)–(d). A decision made by ASIC or its delegate to bring proceedings under this section may be reviewable under the ADJR Act: see 2.23 above.142 That decision would also be reviewable in proceedings under Judiciary Act 1903 (Cth) s 39B, on the basis that that decision was made by an officer of the Commonwealth.143

Application for compensation on behalf of persons affected

2.95 ASIC may, in certain circumstances, make application to the court for orders compensating people affected by contraventions of Chs 5C (managed investments), 6CA (continuous disclosure), 6D (fundraising) or Pt 7.10 (market misconduct) of the Corporations Act. Where a person is found to have engaged in conduct in contravention of these provisions, ASIC may make an application under Corporations Act s 1325(2) on behalf of ‘one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct’. However, ASIC must not make the application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made. [page 105] ASIC may make an application on a similar basis under ASIC Act s 12GM, in respect of contraventions of ASIC Act Pt 3 Div 3 (unconscionable conduct and consumer protection).

Other orders 2.96 ASIC has standing to make application for a variety of other specific orders in connection with contraventions of the securities and financial services law, including under Corporations Act ss 983A (for restraining orders in relation to accounts of financial services licensees), 1101B (for contraventions of Ch 7 or market operating rules), 1323 (for orders prohibiting payment or transfer of money or property),144 1324B (for orders to disclose information or publish advertisements), 1325A (for contraventions of Chs 6, 6A, 6B or 6C), 1325B (in relation to takeover bids) and 1325C (in relation to unfair or unconscionable arrangements); and ASIC Act ss 12GLA (for non-punitive orders), 12GLB (for punitive orders requiring adverse publicity) and 12GN (for orders prohibiting payment or transfer of money or property). ASIC may also intervene in proceedings as to matters arising under Corporations Act s 1330.145 ASIC’s Information Sheet 180 — ASIC’s Approach to Involvement in Private Court Proceedings, June 2013 explains when ASIC will intervene in private court proceedings.

Administrative actions 2.97 ASIC also has available a range of administrative options that may be utilised in connection with enforcement. These include its power to issue stop orders and infringement notices, to accept enforceable undertakings, to vary or suspend an AFS licence, or to make orders excluding persons from the financial services industry.

Stop orders 2.98 ASIC can prevent the dissemination of, and issue of securities or financial products pursuant to, defective disclosure documents using its stop order powers in Corporations Act ss 739 (for disclosure documents issued under Ch 6D) and 1020E (for Product Disclosure Statements issued under Pt 7.9). The circumstances in which ASIC is authorised to act under Corporations Act s 739(1) are explained in Thompson v Australian Securities and Investments Commission (2002) 117 FCR 159; 41 ACSR 456; [2002] FCA 512 at [31]. An order may be made where, and only where: a disclosure document (see s 705) in respect of an offer of securities (see s 700) has in fact been lodged with ASIC; ASIC is satisfied that an offer of securities under that disclosure document would contravene s 728; and [page 106] it remains possible for an order under the subsection to operate according to its terms in the sense that an offer, issue, sale or transfer of securities under the disclosure document lodged with ASIC may still be made. Where ASIC is authorised to act under s 739(1), it must, before making any order other than an interim order, hold a hearing and give a reasonable opportunity to any interested people to make oral or written

submissions to ASIC on whether an order should be made: see s 739(2). Where ASIC considers that any delay in making a stop order pending the holding of a hearing would be prejudicial to the public interest, it may make an interim order under s 739(3). Before ASIC may issue an interim order under s 739(3) it must be authorised to act under s 739(1). It must have decided (subject to the outcome of the hearing under s 739(2)), to exercise the discretion given to it by s 739(1) in favour of making an order under s 739(1); and consider that any delay in making an order under s 739(1) pending the holding of the hearing required by s 739(2) would be prejudicial to the public interest.

Infringement notices 2.99 Part 9.4AA of the Corporations Act allows for the issue by ASIC of infringement notices for alleged contraventions of the continuous disclosure provisions in ss 674 and 675 of the Corporations Act. The purpose of the Part is ‘to provide for the issue of an infringement notice to a disclosing entity for an alleged contravention of s 674(2) or s 675(2) as an alternative to proceedings for civil penalties under Pt 9.4B’: s 1317DAB. Infringement notices are discussed in Chapter 7 below. A disclosing entity that receives an infringement notice has two options open to it. It can comply with the notice (which includes paying the amount of the penalty specified in the notice), in which case ASIC is precluded from bringing certain proceedings against the entity in respect of the alleged contravention: see Corporations Act s 1317DAF(5). Or it can choose not to comply with the notice, in which case ASIC is free to pursue the normal remedies for non-compliance against the entity: Corporations Act s 1317DAG.

Enforceable undertakings 2.100 Another of the enforcement options open to ASIC is to accept an enforceable undertaking under ASIC Act s 93AA. ASIC is able to accept enforceable undertakings ‘in connection with a matter in relation to which the Commission has a function or power’ under the ASIC Act. The provision was introduced by the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 (Cth) and is modelled on s 87B of the former Trade Practices Act 1974 (Cth). An undertaking given in

accordance with s 93AA can be enforced by ASIC through the courts. Section 93AA says that, if ASIC considers that a person who gave the undertaking has breached any of its terms, ASIC may apply to the court for orders, including orders that the person comply with the undertaking, disgorge to the Commonwealth any benefit arising from the breach, or compensate a person suffering loss or damage as a result of the breach. ASIC’s policy on enforceable undertakings is contained in ASIC Regulatory Guide 100 — Enforceable Undertakings, February 2015. The Guide indicates that ASIC may accept an enforceable undertaking instead of seeking a civil order from [page 107] a court (for example, an award of damages or compensation, or an injunction), taking administrative action (for example, cancelling a licence), or referring a matter to another administrative body. ASIC will not accept an enforceable undertaking instead of commencing criminal proceedings, to secure payment of a pecuniary civil penalty, in respect of deliberate misconduct or fraud, for trivial matters, or as an alternative form of relief. Nor will it accept an undertaking once a matter has been referred to a specialist body such as the Financial Reporting Panel or the Takeovers Panel. Importantly, undertakings are used only where ASIC has formed the view that a breach has occurred. ASIC’s policy indicates that it ‘will not consider an enforceable undertaking unless we have reason to believe there has been a contravention of relevant legislation and have commenced an investigation into the conduct we believe gives rise to the suspected breach. We will not contemplate an undertaking to forestall an investigation’: RG 100.17. The policy goes on to state that ASIC will use an ‘enforceable negotiated settlement only if we consider it provides a more effective regulatory outcome than non-negotiated, administrative or civil sanctions’: RG 100.18.

Licensing actions

2.101 Part 7.6 Div 4 of the Corporations Act sets out ASIC’s (extensive) powers under the Australian financial services licensing regime. These powers are discussed in 13.48 below. They include power to impose, vary or revoke conditions on an AFS licence under Corporations Act s 914A, and power to suspend or cancel a licence either immediately (Corporations Act s 915B) or after a hearing: Corporations Act s 915C. ASIC’s powers in relation to licensing are subject to limitations where the licensee is an APRA regulated body (such as a bank).

Banning orders 2.102 Under Corporations Act Pt 7.6 Div 8, ASIC has power to make a banning order against a person in certain circumstances, including where the person becomes an insolvent under administration, or is convicted of fraud. A banning order is a written order that prohibits a person from providing any financial services or specified financial services in specified circumstances or capacities: Corporations Act s 920B(i). Importantly, ASIC also has power to make a banning order where the person has not complied with a financial services law, or ASIC has reason to believe the person will not comply with a financial services law. The banning order may be made only after giving the person an opportunity to appear, or be represented, at a hearing before ASIC that takes place in private and to make submissions to ASIC on the matter (except where the banning follows the person’s conviction for serious fraud): Corporations Act s 920A(2). The banning order must be accompanied by a statement of reasons for the order: Corporations Act s 920F. As with all of ASIC’s decision-making powers, its power to make banning orders is subject to review under applicable principles of Commonwealth administrative law. The banning order may be for a specific period, or operate permanently. Banning orders are discussed in 13.56–13.59 below. [page 108]

OTHER ASIC ACT BODIES

2.103 The ASIC Act provides for the establishment of a number of bodies with responsibility for particular policy and administrative functions in relation to corporate and financial services regulation. The bodies with responsibilities related to the subject matter of this book are ASIC (see 2.12), the Takeovers Panel, CAMAC, and the Parliamentary Joint Committee on Corporations and Financial Services (PJC). The other bodies established under the ASIC Act are the Financial Reporting Council, the Australian Accounting Standards Board, and the Auditing and Assurance Standards Board (which perform various functions related to financial reporting) and the Companies Auditors and Liquidators Disciplinary Board.

Corporations and Markets Advisory Committee 2.104 CAMAC is provided for in ASIC Act Pt 9; its purpose is to provide a source of independent advice to the government on issues that arise from time to time in corporations and financial markets law and practice: see ASIC Act s 1(1)(c). In spite of widespread opposition from across the business and legal community, CAMAC was defunded by the Commonwealth Government in 2014 and is, at the time of writing, not operating.

Parliamentary Joint Committee 2.105 The PJC is established under ASIC Act Pt 14; it consists of five members of the House of Representatives and five Senators who are not Ministers. Its duties are set out in ASIC Act s 243: among other things it inquires into, and reports on, the activities of ASIC and the Takeovers Panel, and the operation of the relevant legislation. The PJC exercises its oversight function by holding hearings twice yearly at which the operations of ASIC are scrutinised. ___________________________ 1.

In NSW v Commonwealth (1990) 169 CLR 482; 1 ACSR 137; [1990] HCA 2 (Corporations Act case) the majority of the High Court (Deane J dissenting) affirmed that s 51(xx) did not confer power on the Commonwealth to provide for the incorporation of companies. For a discussion of the extent of

the Commonwealth’s power under s 51(xx) to make laws with respect to constitutional corporations already formed, see NSW v Commonwealth (2006) 229 CLR 1; [2006] HCA 2 (Workchoices case). 2.

CAMAC was defunded by the Commonwealth Government in 2014 and, while it remains in the ASIC Act, at the time of writing it is not operating.

3.

Available at , viewed 4 September 2016.

4.

The excluded provisions include ASIC Act s 12A and Pt 2 Div 2, which deal with unconscionable conduct and consumer protection in relation to financial services.

5.

See , go to ‘Our role’, and ‘Statements of expectation and intent’.

6.

See ASIC Annual Report 2009–10, p 6.

7.

ASIC Capability Review Panel, Fit for the Future, A Capability Review of the Australian Securities and Investments Commission, 2015, Figure 10.

8.

For a discussion of ASIC’s accountability framework, see ASIC Capability Review Panel, Fit for the Future, A Capability Review of the Australian Securities and Investments Commission, above [1.2]. See also D Nestorovska, ‘Assessing Effectiveness of ASIC’s Accountability Framework’ (2016) 34 C&SLJ 193.

9.

ASIC Act ss 11(4) and 12A(6).

10.

For a discussion of the range of powers conferred on ASIC in connection with enforcement, see, for example, Morley v Australian Securities and Investments Commission (2010) 247 FLR 140; 81 ACSR 285; [2010] NSWCA 331 at [725].

11.

In December 2015, the ASIC Capability Review Panel recommended changes to the governance of ASIC: see Fit for the Future, A Capability Review of the Australian Securities and Investments Commission, A Report to Government, above.

12.

Acts Interpretation Act 1901 (Cth) s 34AA; Re BPTC Ltd (in liq) (No 2) (1992) 8 ACSR 533 at 537; aff’d Burns Philp & Co Ltd & Burns v Murphy (1993) 29 NSWLR 723; 10 ACSR 244.

13.

See, for example, Re Civic Capital Ltd and Australian Securities and Investments Commission (2007) 99 ALD 658; [2007] AATA 2042; Hneidi v Minister for Immigration and Citizenship (2010) 182 FCR 115; [2010] FCAFC 20 at [41]–[44]; Lantern Hotel Group v Australian Securities and Investments Commission [2015] AATA 428 at [104]–[105].

14.

Re Green (as voluntary administrators of Bevillesta Pty Ltd) (2011) 84 ACSR 215; [2011] NSWSC 417 at [29].

15.

Minister for Immigration v Gray (1994) 50 FCR 189 at 208; Australian Securities and Investments Commission v Administrative Appeals Tribunal (2011) 195 FCR 485; 85 ACSR 227; [2011] FCAFC 114 at [129].

16.

Australian Securities and Investments Commission v Administrative Appeals Tribunal (2011) 195 FCR 485; 85 ACSR 227; [2011] FCAFC 114 at [130].

17.

Instruments made before 2015 used the prefix ‘CO’ before their number. For example, instrument 03/67 is a class order, and is referred to as [CO 03/67]. From 2015 legislative instruments are cited using their full title, for example, ASIC Corporations (Advertising by Product Issuers) Instrument 2015/539.

18.

ASIC Regulatory Guide 108 — No-action Letters, December 2009.

19.

See generally, P Hanks and S Newman, ‘Standing in the Australian Securities Commission’s Shoes:

The Administrative Appeals Tribunal and the Corporations Law’ (1992) 10 C&SLJ 318. 20.

See, for example, Jeffers v Australian Securities and Investments Commission (2015) 67 AAR 50; [2015] AATA 537; O’Sullivan v Australian Securities and Investments Commission (2015) 66 AAR 296; [2015] AATA 265. See also S Rosewarne, Individual Rights and Protection of the Public: The Corporate Regulator, the AAT and Balancing the Competing Interests (online), AIAL Forum (65), May 2011, pp 55–62.

21.

See Shi v Migration Agents Registration Authority (2008) 235 CLR 286; [2008] HCA 31 at [35] (Kirby J); at [98]–[99] (Hayne and Heydon JJ); see also Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 588 (Bowen CJ and Deane J).

22.

Re Queensland Power Trading Corporation and Australian Securities and Investments Commission (2005) 89 ALD 346 at 362.

23.

See Australian Securities and Investments Commission v Donald (2003) 136 FCR 7; 48 ACSR 394; [2003] FCAFC 318 at [24] (Kenny J).

24.

Australian Securities and Investments Commission v Murdaca (2008) 105 ALD 461; 68 ACSR 66; [2008] FCA 1399 (Gordon J).

25.

See TNT Skypak International (Aust) Pty Ltd v Commr of Taxation (1988) 82 ALR 175 at 178; Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321; [2003] FCAFC 232 at [11], [16]; Australian Securities and Investments Commission v Saxby Bridge Financial Planning Pty Ltd (2003) 133 FCR 290; 47 ACSR 649; [2003] FCAFC 244 at [42], [107]; Australian Securities and Investments Commission v Administrative Appeals Tribunal (2011) 195 FCR 485; 85 ACSR 227; [2011] FCAFC 114 at [82].

26.

Vetter v Lake Macquarie City Council (2001) 202 CLR 439; [2001] HCA 12 at [24] (Gleeson CJ, Gummow and Callinan JJ).

27.

Vetter v Lake Macquarie City Council (2001) 202 CLR 439; [2001] HCA 12 at [27].

28.

Australian Securities and Investments Commission v Administrative Appeals Tribunal (2011) 195 FCR 485; 85 ACSR 227; [2011] FCAFC 114 at [112].

29.

See Australian Broadcasting Tribunal v Bond (1990) 70 CLR 321; 94 ALR 11; [1990] HCA 33; Panganiban v Australian Securities and Investments Commission (2016) 113 ACSR 452; [2016] FCA 510.

30.

Attorney-General (NSW) v Quin (1990) 170 CLR 1 at 35–6; 93 ALR 1 at 25.

31.

Panganiban v Australian Securities and Investments Commission (2016) 113 ACSR 452; [2016] FCA 510 at [69].

32.

Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559; 37 ACSR 1; [2001] HCA 1.

33.

Hongkong Bank of Australia Ltd v Australian Securities Commission (1992) 108 ALR 70 at 75; 7 ACSR 724 at 728; Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559; 37 ACSR 1; [2001] HCA 1.

34.

See East Australian Pipeline Pty Ltd v Australian Competition and Consumer Commission (2007) 233 CLR 229; 63 ACSR 404; [2007] HCA 44.

35.

In addition, Corporations Act s 911A(2)(l) provides that a person is exempt from the requirement to hold an AFS licence for a financial service that is covered by an exemption specified by ASIC in writing and published in the Gazette. The source of ASIC’s power to grant an exemption from the AFS licensing requirement is probably Corporations Act s 926A, rather than s 911A(2)(l) itself: see Re Queensland Power Trading Corporation and ASIC (2005) 89 ALD 346 at 360. However, this is not clear, as s 911A(2)(1) has been in the Act since the commencement of the Financial Services Reform

Act 2001 (Cth), while s 926A was inserted by the Financial Services Reform Amendment Act 2003 (Cth). 36.

The reports are available at , and go to ‘Publications’, ‘Reports’ and ‘Reports on relief applications’.

37.

Re Prudential Investment Co of Australia Ltd (2003) 49 ACSR 147; [2003] ATP 36 at ACSR 160.

38.

See M J Whincop, ‘The Institutional Politics of Corporate Law in Australia: From Gambotto to DB Management’ (2000) 11 AJCL 1.

39.

The power in Corporations Act s 907D is only an exemption power.

40.

Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 496; [1948] 1 ALR 89 (Latham CJ).

41.

See Drake v Minister for Immigration and Ethnic Affairs (No 1) (1979) 24 ALR 577 at 590–1 (Bowen CJ and Deane J).

42.

Johns v Australian Securities Commission (1992) 7 ACSR 703; aff’d: (1992) 8 ACSR 156; further aff’d: (1993) 178 CLR 408; 11 ACSR 467; [1993] HCA 56.

43.

Johns v Australian Securities Commission (1993) 178 CLR 408; 11 ACSR 467.

44.

That is, s 12A or Div 2 Pt 2 of the ASIC Act.

45.

The power in s 30A, under which an auditor can be required to produce books, can only be exercised for the purposes of performing or exercising ASIC’s functions and powers relating to audit-related matters or overseas audit requirements, and is not further discussed here.

46.

The term ‘books’ is widely defined in ASIC Act s 5(1) as including a register; accounts or accounting records, however compiled, recorded or stored; a document; banker’s books; or any other record of information. The terms ‘accounts’, ‘accounting records’ and ‘banker’s books’ are each defined in Corporations Act s 9. The term ‘document’ is also defined in s 9 and includes information stored on tape, microfiche, computer disc, or by some other electronic or mechanical means. Production of information held on computer may occur by production of a document which reproduces that information: Ace Custom Service Pty Ltd v Collector of Customs (1991) 3 FCR 576 at 585.

47.

That is, the Corporations Act or the ASIC Act or a law of the Commonwealth or of a state or territory that concerns the management or affairs of a body corporate, or involves fraud or dishonesty and relates to a body corporate: ASIC Act s 28(c).

48.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [31].

49.

If the person specified is a body corporate, then ASIC can also require production from a person who is or has been an officer or employee of the body, because of ASIC Act s 84.

50.

Dunlop Olympic Ltd v Trade Practices Commission (1982) 62 FLR 145.

51.

See also McDonald v Australian Securities Commission (1993) 30 ALD 71 (Davies J).

52.

See also Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1980) 31 ALR 514 at 529; Pyneboard Pty Ltd v Trade Practices Commission (1982) 39 ALR 565 at 572.

53.

Curlex Manufacturing Pty Ltd v Carlingford General Insurance Ltd [1987] 2 Qd R 335; Grofam Pty Ltd v ANZ Banking Group Ltd (1993) 43 FCR 408; GE Capital Corporate Finance Group Ltd v Bankers Trust Company [1995] 1 WLR 172; 2 All ER 993.

54.

O’Reilly v Commissioners of State Bank of Victoria (1983) 153 CLR 1 at 48; 46 ALR 225 at 234–5 (Mason, Murphy, Brennan and Deane JJ).

55.

The word ‘affairs’ in that context has the same meaning as in Corporations Act s 232: ASIC Act s 5(1): see General Benefits Pty Ltd v Australian Securities and Investments Commission (2001) 161 FLR 82; [2001] SASC 137 at [42]. The ‘affairs of a body corporate’ is in turn defined in s 53 of the Corporations Act to include a wide range of matters: Bond Corporation Holdings v Sulan (1990) 2 ACSR 435 at 441.

56.

Australian Securities Commission v Lucas (1992) 7 ACSR 676 at 682.

57.

See Australian Securities Commission v Zarro (1991) 32 FCR 546; 6 ACSR 385; General Benefits Pty Ltd v Australian Securities and Investments Commission (2001) 161 FLR 82; [2001] SASC 137 at [44], [48].

58.

See FCT v ANZ Banking Group Ltd (1979) 143 CLR 499; 23 ALR 480, where the High Court held that a notice under s 264 of the Income Tax Assessment Act 1936 (Cth) could validly require a bank to produce documents which it held in a safe deposit box on behalf of its client. Gibbs ACJ noted that such a notice could be given to a person who had physical possession of documents, whether or not that person had a legal right to those documents; and could also be given to a person who had legal control over the documents or a legal right to possession of the documents, whether or not they were in his or her physical custody.

59.

Australian Securities Commission v Dalleagles Pty Ltd (1992) 8 ACSR 109.

60.

Integrated Financial Group Pty Ltd v Australian Securities and Investments Commission (2004) 183 FLR 8; 49 ACSR 509; [2004] WASC 75 at [70]; aff’d (2004) 187 FLR 7; 50 ACSR 673; [2004] WASCA 213.

61.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [56].

62.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [96].

63.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [103].

64.

Australian Securities Commission v Lucas (1992) 7 ACSR 676; Kotan Holdings Pty Ltd v Trade Practices Commission (1991) 102 ALR 51.

65.

Spargos Mining NL v Standard Chartered Australia Ltd (No 2) (1989) 1 ACSR 314.

66.

Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (2004) 50 ACSR 406; [2004] NSWSC 859.

67.

Corporate Affairs Commission (NSW) v Yuill (1991) 172 CLR 319; 4 ACSR 624.

68.

von Doussa v Owens (1982) 6 ACLR 692.

69.

See Australian Securities Commission v Zarro (1991) 105 ALR 227; 6 ACSR 385.

70.

At general law, the privilege against self-incrimination has the effect that a person may not be required to answer a question which would have a tendency to expose that person to a reasonably likely risk of a criminal charge, penalty or forfeiture: Blunt v Park Lane Hotel Ltd [1942] 2 KB 253 at 257; Sorby v Commonwealth (1983) 152 CLR 281. See also Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; T Middleton, ‘The High Court’s Decision in Rich v ASIC and its Potential Impact upon ASIC’s Disqualification Orders, Banning Orders and Oral Examinations’ (2005) 23 C&SLJ 248; J P Knackstredt, ‘The Evolution of Civil Penalty Proceedings’ (2006) 24 C&SLJ 56. The privilege against self-incrimination can also be raised in civil cases; see Australian Securities and Investments Commission (ASIC) v Mining Projects Group Ltd (2007) 164 FCR 32; 65 ACSR 264; [2007] FCA 1620 at [7]–[9] (Finkelstein J).

71.

The decision is summarised in Re Australian Property Custodian Holdings Ltd (in liq) (recs and mgrs

apptd) (controllers apptd) (No 3) (2013) 93 ACSR 382; [2013] VSC 154 at [120]–[121]. 72.

Under ss 118 and 119 of the Evidence Act 1995 (Cth), the circumstances in which legal professional privilege may be claimed, in relation to proceedings in a federal court or a court in the Australian Capital Territory or New South Wales, also include a document or advice which was brought into existence with the dominant purpose of a client being provided with legal advice or professional legal services relating to actual or contemplated legal proceedings.

73.

Esso Australia Resources Ltd v Federal Commr of Taxation (1999) 74 ALJR 339.

74.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [34].

75.

Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477; 118 ALR 392.

76.

Australian Securities Commission v Lucas (1992) 7 ACSR 676; Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [78].

77.

Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266; Hussein v Chung Fook Cam [1967] 3 All ER 1626.

78.

Sim v National Companies and Securities Commission (1988) 13 ACLR 191.

79.

National Companies and Securities Commission v Sim (No 2) (1986) 11 ACLR 171 at 176.

80.

Little River Goldfields NL v Moulds (1991) 32 FCR 456; 6 ACSR 299 at 305; Australian Securities Commission v Rohani (1998) 29 ACSR 106 at 107; Boys v Australian Securities Commission (1997) 24 ACSR 1; aff’d (1998) 152 ALR 219; 26 ACSR 464; Kennedy v Australian Securities and Investments Commission (2005) 142 FCR 343; 52 ACSR 301; [2005] FCAFC 32 at [104].

81.

Johns v Australian Securities Commission (1993) 178 CLR 408 at 426; Kennedy v Australian Securities and Investments Commission (2005) 142 FCR 343; 52 ACSR 301; [2005] FCAFC 32 at [104].

82.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [58].

83.

National Companies and Securities Commission v Sim (No 2) (1986) 11 ACLR 171; Sim v National Companies and Securities Commission (1988) 13 ACLR 191.

84.

Little River Goldfields NL v Moulds (1991) 32 FCR 456; 6 ACSR 299 at 309.

85.

Karounos v Corporate Affairs Commission (1989) 7 ACLC 567.

86.

Norwest Holst v Dept of Trade and Industry [1978] Ch 201; News Corporation Ltd v National Companies and Securities Commission (No 3) (1983) 8 ACLR 338; 49 ALR 719; Karounos v Corporate Affairs Commission (1989) 7 ACLC 567.

87.

News Corporation Ltd v National Companies and Securities Commission (No 3) (1983) 8 ACLR 338 at 351; 49 ALR 719 at 754.

88.

National Companies and Securities Commission v News Corporation Ltd above; Kioa v West (1985) 159 CLR 550 at 584–5; Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 90; Bond Corporation Holdings Ltd v Sulan (1990) 26 FCR 580; 3 ACSR 172; Annetts v McCann (1990) 170 CLR 596; National Companies and Securities Commission v Bankers Trust Australia Ltd (1989) 24 FCR 217; 1 ACSR 330.

89.

Australian Securities and Investments Commission v Plymin (No 3) (2002) 42 ACSR 670; [2002] VSC 358 at [25]–[26].

90.

See Maxwell v Dept of Trade and Industry [1974] QB 523 at 524; Bond v Australian Broadcasting Tribunal (No 2) (1988) 84 ALR 646; Bond v Sulan (1990) 3 ACSR 172 at 179.

91.

See Commr of Police v Reid (1989) 18 ALD 439; R v Serious Fraud Office; Ex parte Nadir (1991) 1 All ER 730.

92.

R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 553; R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 262–3; R v Maurice; Ex parte AttorneyGeneral (Northern Territory) (1987) 73 ALR 123; Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 (Mason CJ and Brennan J at 87–8; Gaudron and McHugh JJ at 99–102).

93.

Boys v Australian Securities Commission (1997) 24 ACSR 1; aff’d (1998) 152 ALR 219; 26 ACSR 464; Clements v Bower (1990) 2 ACSR 573; Richmond River Pty Ltd v Australian Broadcasting Tribunal (1992) 34 FCR 385; Winter v Australian Securities Commission (1995) 56 FCR 107; 16 ACSR 61; McLachlan v Australian Securities Commission (1995) 28 ACSR 473.

94.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [45].

95.

Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [47].

96.

Australian Securities Commission v Graco (1991) 29 FCR 491; 5 ACSR 1 (Jenkinson J).

97.

Australian Securities Commission v Graco (1991) 29 FCR 491; 5 ACSR 1; Johns v Connor (1992) 35 FCR 1; 7 ACSR 519 at 532; Johns v Australian Securities Commission (1992) 35 FCR 146; 8 ACSR 156 at 176–9, on appeal (1993) 178 CLR 408; 11 ACSR 467; Stockbridge v Ogilvie (1993) 43 FCR 244; 10 ACSR 688; Australian Securities Commission v Avram (1996) 70 FCR 481; 22 ACSR 307; Australian Securities and Investments Commission v Sigalla (No 2) (2010) 79 ACSR 198; [2010] NSWSC 792 at [77].

98.

Australian Securities Commission v Graco (1991) 29 FCR 491; 5 ACSR 1; Johns v Connor above at ACSR 530; Johns v Australian Securities Commission (1992) 35 FCR 146; 8 ACSR 156 at ACSR 177; Kennedy v Australian Securities and Investments Commission (2005) 142 FCR 343; 52 ACSR 301; [2005] FCAFC 32 at [109].

99.

Australian Securities Commission v Graco (1991) 29 FCR 491; 5 ACSR 1 at ACSR 5; Johns v Connor (1992) 35 FCR 1; 7 ACSR 519 at ACSR 532; Stockbridge v Ogilvie (1993) 43 FCR 244; 10 ACSR 688.

100. Kennedy v Australian Securities and Investments Commission (2005) 142 FCR 343; 52 ACSR 301; [2005] FCAFC 32 at [109]–[112]. 101. Australian Securities Commission v Kutzner (1998) 25 ACSR 723. 102. Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (2004) 186 FLR 295; 50 ACSR 406. 103. Australian Securities and Investments Commission v Loiterton (2000) 101 FCR 370; [2000] FCA 973 at [20], [24]–[27]. 104. Re Davies-Roe and the Companies Act [1965] NSWR 767; Re Pergamon Press [1971] Ch 388; Harper v Costigan (1983) 50 ALR 665 at 675 (Morling J). 105. See Perron Investments (1989) 89 ATC 4310; H R Sorenson, ‘The Section 264(1) Examination’ (1996) 25 ATR 5 at 17. 106. Australian Securities and Investments Commission v Activesuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342 at [79]. 107. National Companies and Securities Commission v Bankers Trust Australia Ltd (1989) 24 FCR 217; 1 ACSR 330 at 336, 346–7; Gangemi v Australian Securities and Investments Commission (2003) 45 ACSR 383; [2003] FCA 494 at [30].

108. Wood v National Companies and Securities Commission (1990) 2 WAR 176; 1 ACSR 779; National Companies and Securities Commission v Bankers Trust Australia Ltd (1989) 24 FCR 217; 1 ACSR 330. 109. Wood v National Companies and Securities Commission (1990) 2 WAR 176; 1 ACSR 779; Australian Securities Commission v Bell (1991) 32 FCR 517; 6 ACSR 281 (not upholding the exclusion on the facts); Stockbridge v Ogilvie (1993) 43 FCR 244; 10 ACSR 688 (upholding the exclusion); Re Macquarie Advisory Group Pty Ltd (rec appt’d); Macquarie Advisory Group Pty Ltd (rec appt’d) v Australian Securities and Investments Commission (1999) 33 ACSR 106 (not upholding the exclusion); Gangemi v Australian Securities and Investments Commission (2003) 129 FCR 284; 45 ACSR 383 (upholding the exclusion). 110. Collard v Australian Securities and Investments Commission (2008) 252 ALR 353; [2008] FCA 1681. 111. Ex parte Wardley Australia Ltd; Ex parte Bond Corporation Holdings Ltd (1991) 9 ACLC 1565. 112. National Companies and Securities Commission v News Corporation Ltd (1984) 52 ALR 417; Connell v National Companies and Securities Commission (1989) 14 ACLR 765. 113. Ex parte Wardley Australia Ltd; Ex parte Bond Corporation Holdings Ltd (1991) 9 ACLC 1565; ASIC RG 103.16. 114. Re ABM Pastoral Co Pty Ltd (1978) 3 ACLR 239; Australian Securities Commission v Kutzner (1998) 25 ACSR 723; Smith v Papamihail (1998) 88 FCR 80; 29 ACSR 184. 115. Re ABM Pastoral Co Ltd (1978) 3 ACLR 239. 116. ANZ Bank Ltd v Ryan (1968) 88 WN(NSW) (Pt 1) 368 at 373. 117. Australian Securities and Investments Commission v Hellicar (2012) 88 ACSR 246; [2012] HCA 17 at [243]. 118. For a general discussion of the application of the Code to offences under the Corporations Act and the ASIC Act, see P Hanrahan, Funds Management in Australia: Officers’ Duties and Liabilities, LexisNexis Butterworths, Sydney, 2007, Ch 13. For a discussion of the Code and Pt 7.10 of the Corporations Act, see J Longo, ‘Market Misconduct Provisions of the Financial Services Reform Act: Challenges for Market Regulation’, paper presented at the Centre for Corporate Law and Securities Regulation seminar on Market Misconduct and the Financial Services Reform Bill, 25 July 2001, Melbourne and 14 August 2001, Sydney, available at . 119. ASIC, Information Sheet 151 – ASIC’s Approach to Enforcement, 2013. 120. For a useful discussion of the relationship between ASIC and the CDPP, see Public Submission by the Commonwealth Director of Public Prosecutions (CDPP) to the Senate Economics References Committee Inquiry into the Performance of the Australian Securities and Investments Commission, 13 December 2013. 121. Senate Standing Committee on Legal and Constitutional Affairs (Cooney Committee), Company Directors Duties: Report on the Social and Fiduciary Duties and Obligations of Company Directors, 1989, [10.21]–[10.24], [13.05]–[13.15]; Australian Law Reform Commission, Principled Regulation: Federal Civil and Administrative Penalties in Australia, ALRC Report 95, December 2002, [2.45]–[2.63]. For background, see K Mann, ‘Punitive Civil Sanctions: The Middle Ground between Criminal and Civil Law’ (1992) 101 Yale LJ 1795; and G Santow, ‘The Trial of Complex Corporate Transgressions — The United Kingdom Experience and the Australian Context’ (1993) 67 ALJ 265. The history and significance of this regime continues to be discussed; see, for example, T Middleton, ‘The Difficulties of Applying Civil Evidence and Procedural Rules in ASIC Civil Penalty Proceedings under the Corporations Act’ (2003) 8 C&SLJ 507; V Comino, ‘Civil or Criminal Penalties for Corporate Misconduct — Which Way Ahead?’ (2006) UQLRS 1; (2006) 34 ABLR 428; V Comino, ‘The Challenge of Corporate Law Enforcement in Australia’ (2009) 23 AJCL 233. 122. See generally, Australian Securities and Investments Commission v Hellicar (2012) 88 ACSR 246; [2012]

HCA 17. 123. See, for example, Adler v Australian Securities and Investments Commission (2003) 46 ACSR 504; [2003] NSWCA 131 at [146]–[149]; Whitlam v Australian Securities and Investments Commission (2003) 57 NSWLR 559; 46 ACSR 1; [2003] NSWCA 183 at [117]–[118]; Re HIH Insurance Ltd; Australian Securities and Investments Commission v Adler (2002) 41 ACSR 72; [2002] NSWSC 171 at [437]; Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1; [2009] NSWSC 1229 at [404]–[412]; Morley v Australian Securities and Investments Commission (2010) 247 FLR 140; 81 ACSR 285; [2010] NSWCA 331 at [745]. 124. See TPC v Abbco Ice Works Pty Ltd (1994) 52 FCR 96 at 129; Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 43 ACSR 189; Rich v Australian Securities and Investments Commission (2004) 220 CLR 129; 50 ACSR 242; [2004] HCA 42. 125. Scott v Handley [1999] FCA 404 at [45]; Australian Securities and Investments Commission v Rich (2009) 75 ACSR 1; [2009] NSWSC 1229 at [166]. 126. At issue was the failure by ASIC to call as a witness a solicitor who was present at the board meeting at which, ASIC alleged, a defective disclosure notice to the ASX was approved by the James Hardie board. The Court of Appeal had concluded (at [768]) that ‘… [the solicitor] should have been called by ASIC. A body in the position of ASIC, owing the obligation of fairness to which it was subject, was obliged to call a witness of such central significance to critical issues that had arisen in the proceedings. The scope of its powers and the public interest dimensions of its functions, most relevantly with respect to ensuring proper internal governance of corporations and that the market for securities in shares was fully informed, was such that resolution of the civil penalty proceedings required it to call, if only with a view to showing (if it were the case) that he could not in fact recall anything on the factual issues and for cross examination by the appellants, a witness of such potential importance’. ASIC’s failure to call the solicitor ‘significantly undermine[d] the cogency of ASIC’s case on the passing of this Draft ASX Announcement Resolution’. 127. Australian Securities Commission v Donovan (1998) 28 ACSR 583 at 608; see also Tasmanian Spastics Association; Australian Securities and Investments Commission v Nandan (1997) 23 ACSR 743 at 752. 128. Australian Securities and Investments Commission v Vizard (2005) 145 FCR 57; 54 ACSR 394; [2005] FCA 1037 at [33] (Finkelstein J); see also Australian Securities and Investments Commission v Beekink (2007) 61 ACSR 305; [2007] FCAFC 7 (Mansfield, Jacobson and Siopis JJ). 129. For a discussion of the approach of courts to imposing civil penalties, see J Farrar and P Hanrahan, Corporate Governance, LexisNexis Butterworths, 2016, Ch 18. 130. See, for example, Australian Securities and Investments Commission v Sweeney [2001] NSWSC 114; Australian Securities and Investments Commission v Parkes (2001) 38 ACSR 355; [2001] NSWSC 377; Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561; [2002] NSWSC 310; Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605; [2002] NSWSC 741; Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1; [2009] QSC 58. 131. Australian Securities and Investments Commission v Stone Assets Management Pty Ltd (2012) 205 FCR 120; 90 ACSR 523; [2012] FCA 630 at [48]–[49]. 132. Australian Securities and Investments Commission v Storm Financial Ltd (recs and mgrs apptd) (in liq) (No 2) [2011] FCA 858 at [49]; Re Idylic Solutions Pty Ltd; Australian Securities and Investments Commission v Hobbs [2012] NSWSC 1276 at [66] and [69]; Australian Securities and Investments Commission v Activesuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342 at [623]. 133. Australian Securities and Investments Commission v Mauer-Swisse Securities Ltd (2002) 42 ACSR 605;

[2002] NSWSC 741 at [36]. 134. See also Australian Securities and Investments Commission v Activesuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342 at [622]. 135. See also CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd [2016] WASC 231 at [10]– [13]. 136. Re Idylic Solutions; ASIC v Hobbs (2013) 93 ACSR 421; [2013] NSWSC 106 at [92]–[106]; Australian Securities and Investments Commission v Activesuper Pty Ltd (in liq) (No 2) (2015) 106 ACSR 302; [2015] FCA 527 at [30]. 137. See McCracken v Phoenix Constructions (Qld) Pty Ltd (2014) 289 ALR 710; [2012] QCA 129 at [21]– [40]; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789. 138. T Middleton, ASIC Corporate Investigations and Hearings, [8.2160]ff. D Richardson, ‘Section 50 of the Australian Securities Commission Act 1989: White Knight or White Elephant?’ (1994) 12 C&SLJ 418; J Austin, ‘Does the Westpoint Litigation Signal a Revival of the ASIC s 50 Class Action?’ (2008) 22 AJCL 8. 139. Australian Securities Commission v Deloitte Touche Tohmatsu (1996) 70 FCR 93; 21 ACSR 332. 140. Walsh v Permanent Trustee Australia Ltd (1996) 21 ACSR 213. 141. Deloitte Ross Tohmatsu v Australian Securities Commission (1995) 54 FCR 562; 15 ACSR 652; on appeal Australian Securities Commission v Deloitte Touche Tohmatsu (1996) 70 FCR 93; 21 ACSR 332. 142. Somerville v Australian Securities Commission (1993) 11 ASCR 595; 11 ACLC 1132. 143. Somerville v Australian Securities Commission (1993) 11 ACSR 595 at 599–600. 144. See P von Nesson, ‘The Section 1323 Injunctive Power of the Australian Securities Commission: Its Operation and Shortcomings’ (1996) 22 Mon LR 140. 145. See, for example, Permanent Trustee Australia Ltd v Dowd (1993) 11 ACSR 68; Highstoke Pty Ltd v Hayes Knight GTO Pty Ltd (No 2) [2007] FCA 36.

[page 109]

Chapter 3 DEFINING FINANCIAL PRODUCTS Introduction Securities Shares in a body Debentures of a body Legal or equitable rights or interests in securities Options Depository interests Interests in Managed Investment Schemes Statutory definition of ‘managed investment scheme’ Exclusions from the definition When a scheme must be registered with ASIC Interests in (non-private) unregistered schemes Derivatives Margin Lending Facilities Other Financial Products Underlying policy Structure of the Corporations Act definition Functional definition Incidental financial products Financial instruments expressly included Financial instruments expressly excluded ASIC Act Definition of Financial Product

3.1 3.5 3.6 3.8 3.13 3.14 3.16 3.17 3.18 3.32 3.33 3.35 3.36 3.38 3.39 3.40 3.42 3.43 3.48 3.50 3.58 3.60

INTRODUCTION 3.1 Securities and financial services law is built around certain key definitions that mark out the boundaries of regulation. Particular conduct (such as dealing or operating a market) that occurs in relation to a ‘security’ or other ‘financial product’

[page 110] as defined is or may be within the scope of the legal and regulatory framework explained in this book. Therefore, understanding the reach of those definitions is an important first step to understanding when, and how, the relevant laws apply. This task is not without difficulty. First, the structure of the relevant definitions in the Corporations Act 2001 (Cth) (Corporations Act) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) is convoluted. Identical terms have different meanings depending on where they are used in the legislation, and interpreting the statutory definitions of those terms often involves tracing threads of subsidiary definitions through numerous sections of the Act or of relevant regulations.1 Second, the approach adopted by the legislature to the structure of the key definitions (which endeavours to focus on the commercial function of relevant arrangements, rather than their legal features or form) involves broad, and often imprecise, language. The drafting approach is a wide, general definition with express exceptions.2 As a result, the outer boundaries of some parts of the definitions (such as the definitions of ‘managed investment scheme’ and ‘derivative’, or the functional definitions in Corporations Act ss 763B, 763C and 763D) are difficult to locate. Courts will not read down the broad language of the definitions by reference to any preconception as to the intended policy (that is, what might be assumed to be appropriately subjected to the applicable law). As Giles JA observes in International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 82 ACSR 517; [2011] NSWCA 50 at [74], wide capturing language narrowed in its operation by specific exemptions ‘may not be a desirable way to legislate, quite apart from the difficulty of tracking through the provisions and seeking to apply sometimes imprecise and convoluted language’.3 3.2 This chapter explains the key definitions relevant to matters covered in this book: the different definitions of ‘securities’ in Corporations Act ss 92, 700 and 761A, the definition of managed investment scheme in s 9, the definition of derivative in s 761G, the definition of margin lending facility

in s 761EA, and the two differing definitions of financial product in Corporations Act Pt 7.1 Div 3 and ASIC Act s 12BAA. [page 111] 3.3 The cornerstone concept used in Ch 6D of the Corporations Act is ‘securities’. What is meant by securities differs depending on where the expression is used in the Corporations Act. It always includes a ‘share in a body’ and a ‘debenture of a body’, as well as options to acquire a share or debenture by way of issue. Beyond that, depending on the context, it may also include other instruments such as government bonds, interests in registered or unregistered managed investment schemes, units of shares, legal or equitable rights or interests in the various types of securities, options to acquire already issued securities, or rights to acquire securities under a rights issue. Section 92(4) defines securities for the purposes of Ch 6D (fundraising) and security for the purposes of Ch 7 (financial services and markets). It provides that, in Ch 6D, securities has the meaning given by Corporations Act s 700 and, in Ch 7, security has the meaning given in Corporations Act s 761A. Section 700 says that, in Ch 6D, ‘securities has the same meaning as it has in Ch 7, but does not include a security referred to in paragraph (e) of the definition of security in s 761A’. Section 761A in turn provides that security means: (a) a share in a body; or (b) a debenture of a body; or (c) a legal or equitable right or interest in a security covered by paragraph (a) or (b); or (d) an option to acquire, by way of issue, a security covered by paragraph (a), (b) or (c); or (e) a right (whether existing or future and whether contingent or not) to acquire, by way of issue, the following under a rights issue: (i)

a security covered by paragraph (a), (b), (c) or (d);

(ii) an interest or right covered by paragraph 764A(1)(b) or (ba); or (f)

a CGS depository interest; or

(g) a simple corporate bond depository interest; but does not include an excluded security. In Part 7.11, it also includes a managed

investment product.4

Section 92(3) is also important — it defines ‘securities’ for the purposes of Chs 6–6CA and Pt 1.2A (takeovers, information about ownership of listed entities and continuous disclosure). The definition of securities used for these purposes includes managed investment scheme interests. 3.4 The cornerstone concept used in Ch 7 of the Corporations Act and Pt 2 Div 2 of the ASIC Act is ‘financial product’. For Corporations Act purposes, it is defined expressly to include a wide range of financial instruments and arrangements, including most securities, derivatives, general insurance products, life insurance products, superannuation interests, retirement savings accounts, bank deposits, government bonds, foreign exchange products and margin lending facilities.5 Further, [page 112] it extends to other facilities through which, or through the acquisition of which, a person makes a financial investment, manages a financial risk, or makes a non-cash payment, other than arrangements expressly excluded by the Corporations Act or the Corporations Regulations 2001 (Cth) (Corporations Regulations). In the ASIC Act, the definition also includes certain credit facilities.

SECURITIES 3.5 This part explains the things that are securities for, among others, the purposes of the prospectus laws in Ch 6D of the Corporations Act. The different components of the definitions of securities and security in Corporations Act s 92(3) and (4) are summarised in the following table. Table 3.1: Elements of the definition of ‘securities’ and ‘security’ Section 92(3): definition of ‘securities’ that

Sections 92(4) and 700: definition of

Sections 92(4) and 761A: definition of

Sections 92(4) and 761A: definition of ‘security’ that applies

applies for the purposes of Chs 6–6CA and Pt 1.2A

‘securities’ that applies for the purposes of Ch 6D

‘security’ that for the purposes of Pt applies for the 7.11 purposes of Ch 7 (excluding Pt 7.11) Shares in a body Shares in a body Share in a body Share in a body Debentures of a Debentures of a Debenture of a Debenture of a body body body body Legal or equitable Legal or equitable Legal or equitable Legal or equitable right rights or interests rights or interests right or interest or interest in a share in shares or in shares or in a share or or debenture debentures debentures debenture Interests in a Interest in a registered registered MIS MIS (managed investment scheme) Legal or equitable Legal or equitable right rights or interests or interest in interests in interests in a in a registered MIS registered MIS Options to Options to Option to Option to acquire, by acquire, by way acquire, by way of acquire, by way way of issue, a share, of issue, a share, issue, a share or of issue, a share debenture or interest debenture or debenture or a or debenture or in a registered MIS, or interest in a legal or equitable legal or equitable a legal or equitable registered MIS, right or interest in right or interest right or interest in any or a legal or either of them in either of them of them equitable right or interest in any of them [page 113] Options to







acquire, by way of transfer, a share, debenture or interest in a registered MIS, or a legal or equitable right or interest in any of them









Excludes a

Excludes an

A right (whether existing or future and whether contingent or not) to acquire, by issue, any of the following under a rights issue: a share, a debenture, an interest in a registered or unregistered MIS, a legal or equitable right or interest in any of them, or an option to acquire any of them by way of issue A CGS depository interest A simple corporate bonds depository interest Excludes an

A right (whether existing or future and whether contingent or not) to acquire, by issue, any of the following under a rights issue: a share, a debenture, an interest in a registered or unregistered MIS, a legal or equitable right or interest in any of them, or an option to acquire any of them by way of issue

A CGS depository interest A simple corporate bonds depository interest Excludes an excluded

derivative (other than an option to acquire a share, debenture or interest in a registered MIS or a legal or equitable right or interest in any of them) and a market traded option

excluded security (that is, a right to participate in a retirement village scheme)

excluded security (that is, a right to participate in a retirement village scheme)

security (that is, a right to participate in a retirement village scheme)

Shares in a body 3.6 In all cases the statutory definition of securities includes shares in a body. As a result, shares in a body are also financial products, because of Corporations Act s 764A(1)(a) and ASIC Act s 12BAA(7)(a). Until 1999, a ‘share’ was defined in the (then) Corporations Law as ‘a share in the share capital of a body, [including] stock except where a distinction between [page 114] stock and shares is express or implied’. That definition was repealed by the Financial Sector Reform (Amendments and Transitional Provisions) Act (No 1) 1999 (Cth) with effect from 1 July 1999, and the legislation no longer defines what a share is. Accordingly, the general law definition of a share applies. The legal nature of a share is discussed in 1.5 above.6 In Sydney Futures Exchange Ltd v Australian Stock Exchange Ltd (1995) 16 ACSR 148 at 166 (the LEPO case), Lockhart J described a share in a company as ‘a right to a specified amount of the share capital of a company, carrying with it rights and liabilities when the company is a going concern and in the

course of its winding up’. Those rights and liabilities arise under the company’s internal governance rules (that is, the replaceable rules or the constitution of the company or both), the general law and the applicable legislation.7 A company may create and issue shares of different classes, with different rights and liabilities attaching; the classes of shares on issue may, for example, include ordinary shares and preference shares. 3.7 The statutory definition of securities refers to shares in ‘a body’, and therefore is not limited to shares in a company registered or taken to be registered under the Corporations Act. ‘Body’ is defined in Corporations Act s 9 and means ‘a body corporate or an unincorporated body and includes, for example, a society or association’. ‘Body corporate’ is a generic expression which includes any incorporated body formed in Australia or elsewhere, whether under legislation for the formation of companies (such as the Corporations Act) or under other legislation (such as associations incorporation statutes or specific Acts of Parliament). By virtue of the extended definition in Corporations Act s 9, body corporate also includes a foreign company and ‘an unincorporated registrable body’, which in turn includes an unincorporated body that, under the law of its place of formation, may sue or be sued or may hold property in the name of its secretary or of an officer of the body duly appointed for that purpose: see Corporations Act s 9. Not all bodies have share capital. However, where they do, shares in that share capital will be within the statutory definition of securities.

Debentures of a body 3.8 In all cases the statutory definitions of securities also include debentures of a body. As with shares, debentures are also financial products, because of Corporations Act s 764A(1)(a) and ASIC Act s 12BAA(7)(a). The wide definition of body is explained above. ‘Debenture’ is defined in Corporations Act s 9, and means (subject to a number of specific exclusions) ‘a chose in action that includes an undertaking by the body to repay as a debt money deposited with or lent to the body’. A chose in action is a personal right of property which can only be claimed or enforced by action

[page 115] as distinct from taking physical possession.8 The statutory definition of ‘debenture’ goes on to provide that ‘the chose in action may (but need not) include a security interest over property of the body to secure repayment of the money’. What distinguishes a debenture from other types of financial instruments is that there is an obligation on the issuer to repay money deposited with or lent to the body as a debt. A debenture issued by a company may be ‘irredeemable, redeemable only if a contingency, however remote, occurs, or redeemable only at the end of a period, however long’: see Corporations Act s 124(1)(b). 3.9 The emergence of a variety of complex or structured products, often issued by investment banks, gave rise to the question whether such products are properly characterised as debentures, or as some other form of investment product. In Re Macquarie Bank Ltd and Australian Securities and Investments Commission (2001) 39 ACSR 508; [2001] AATA 868, the Administrative Appeals Tribunal (AAT) took the view that a product known as ‘high yield equity notes’ (HYENAs), issued by Macquarie Bank, was not a debenture for the purposes of the Corporations Act. On their terms, the repayment obligation assumed by Macquarie in the HYENAs could involve ‘a placement of shares with the investor, rather than the repayment of the principal itself’. The AAT concluded that the HYENA was a put option over shares, rather than a debenture. Accordingly, it was not a security.9 For the most part, complex or structured products are treated by the Australian Securities and Investments Commission (ASIC) and their issuers as financial products that are not debentures.10 3.10 The difficulty in applying the definition of debenture to complex instruments is illustrated by the treatment by the courts of certain complex products marketed to municipal councils before the Global Financial Crisis. In Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1; [2012] FCA 1028, Rares J was asked to decide whether certain instruments acquired by the applicant councils were

debentures or derivatives.11 The instruments in question were synthetic collateralised debt obligations (SCDOs). After considering the nature of the instruments [page 116] (at [1180]–[1185]) and the elements of the statutory definition of debenture (at [1186]–[1202]) his Honour concluded that the obligation of the issuer under the instrument was in substance an undertaking to repay as a debt money deposited with it or lent to it; albeit an obligation to pay such money, if any, as would be calculated later as due by reference to the outcome of a speculative investment in another arrangement. In this particular case, however, the trust deed under which the product was issued included a restriction on the issuer that meant that borrowing money and providing credit did not form part of its business. For this reason, Rares J considered that exception (a) (ii) to the definition of debenture operated, and the instruments were not debentures because ‘the principal trust deed had the effect of preventing [the issuer] from carrying on a business that could issue a debenture’: at [1204]. Instead, the products were derivatives: at [1214]. However, in ABN AMRO Bank NV v Bathurst Regional Council (2014) 309 ALR 445; [2014] FCAFC 65 (Jacobson, Gilmour and Gordon JJ) the Full Federal Court came to a different conclusion on whether similar instruments were, in substance, an undertaking to repay as a debt money deposited or lent. After considering the nature of the instruments (at [624]–[641]) and the relevant law (at [642]–[660]) the court took the view that the instruments did not have this character. In so doing the court recognised ‘the force of the observations of Rares J [in Wingecarribbee] who reached a different conclusion as to the nature of instruments, which are similar to those in the present case’: at [686]. The court went on to say (at [687]–[690]): We accept his Honour’s observation at [1201] that the word ‘repay’ in the definition of ‘debenture’ does not suggest that the concept of ‘as a debt’ necessarily requires equivalence between the loan and what the borrower must repay. We also accept that a debenture may, in certain circumstances comprise a limited recourse borrowing … But in our view the observations of Rares J … do not take into account the question of whether the

undertaking to repay as a debt embraces an undertaking to pay a sum of money (which may be zero) at a time and in an amount that is dependent on the performance of something that is separate from the conduct of the operations of the business of the company that received the loan. As the High Court said in Handevel at 196, not every document creating or acknowledging a debt of a company was a debenture. Similarly, not every chose in action which includes an undertaking to make payment of a sum of money, dependent upon any form of contingency, constitutes a debenture of the type contemplated by the definition in s 9. … [The] obligation to redeem the … notes at a time and in an amount contingent upon the performance of the indices, is not an obligation to repay the moneys deposited, as a debt.

In its discussion of the definition of debenture, the Full Court in ABN AMRO made a number of significant observations about the definition of debenture. These were, in summary: First, when the words of the chapeau to the definition in s 9, ‘to repay as a debt money deposited with or lent to’ the company, are read in light of the regulatory provisions of Ch 2L and Ch 6D, it is evident that those words import the notion of an undertaking to repay a debt comprising a loan made to the company as part of its working capital (at [675]).

[page 117] Second, it is true that a debt is capable of including a debt that is repayable on a contingency. But the word ‘debt’ is not one of precise and inflexible denotation. It must be applied in a practical and common sense fashion, consistent with its context and statutory purposes … Similarly, any attempt to formulate a universally applicable definition of a contingent debt is difficult, if not impossible. What is, or what is not, a contingent debt depends largely upon the statutory context and the commercial usages in which the question arises (at [684]). Third, as a general rule, the term debenture was not applied at common law to an instrument unless it purported to be a debenture … That is not to say that the question is to be determined as a matter of form over substance, but the form and structure of the document provides some guidance as to the intentions and commercial objectives of the parties (at [691]). There is a strong case for party autonomy in construing complex financial instruments (at [693]). Fourth, it is fundamental to the nature of a debenture that it be issued by the company which borrowed the funds … It is that company which must acknowledge the debt and undertake to repay it. (at [694]).

This approach to interpreting the definition differs from that adopted by the Full Court in Brookfield Multiplex12 in interpreting the definition of managed investments scheme, discussed in 3.21 below.

3.11 Section 9 of the Corporations Act expressly excludes various arrangements from the definition of debenture. Paragraph (a) excludes ordinary commercial loans made to bodies that are not finance companies; it provides that ‘an undertaking to repay money deposited with or lent to the body by a person’ is not a debenture if the person ‘deposits or lends the money in the ordinary course of a business carried on by the person’ and ‘the body receives the money in the ordinary course of carrying on a business that neither comprises nor forms part of a business of borrowing money and providing finance’. Exception (a)(ii) was relied upon by Rares J in Wingecarribee but its application was not considered in ABN AMRO.13 Paragraph (b) excludes the ordinary deposit-taking activities of banks; it provides that ‘an undertaking by an Australian authorised deposit-taking institution (ADI)14 to repay money deposited with it, or lent to it, in the ordinary course of its banking business’ is not a debenture. It seems that ‘banking business’ will be treated in this context as referring to the ordinary deposit-taking and lending activities of banks.15 Banking business includes both banking and investing.16 However, the issue of [page 118] complex or structured investment products by an Australian ADI is probably outside the ordinary course of its banking business.17 Paragraph (c) of the definition excludes from the definition an undertaking to pay money under a cheque, an order for the payment of money, or a bill of exchange. Paragraph (e) excludes from the definition of debenture an undertaking by a body corporate to pay money to a related body corporate.18 ‘Related body corporate’ is defined in Corporations Act s 50. Until 2009, the definition of debenture expressly excluded ‘an undertaking to pay money under a promissory note that has a face value of at least $50,000’.19 Paragraph (d), which contained the carve-out, was repealed with effect from 6 November 2009; the effect of its repeal is discussed in Australian Securities and Investments Commission v Great

Northern Developments Pty Ltd: (2010) 79 ACSR 684; [2010] NSWSC 1087. 3.12 Ch 2L of the Corporations Act applies to debentures issued to the retail market, or as part of an off-market takeover bid under Corporations Act Ch 6 or an arrangement or reconstruction under Pt 5.1.20 The pattern of Ch 2L is to require the issuing body to appoint an approved trustee for debenture holders and to enter into a trust deed containing certain prescribed covenants. Debentures issued on this basis may, according to their terms, be described as ‘mortgage debentures’ or ‘debentures’ (if the repayment of investors’ moneys is secured) or ‘unsecured notes’ or ‘unsecured deposit notes’ (if it is not). Rather than specialist financiers, the moneys advanced to the body under a debenture issue regulated under Ch 2L typically come from ‘investors’, who acquire the debentures and either hold them to maturity or trade them in the secondary market for debt securities. Debentures may be listed for quotation on the Australian Securities Exchange (ASX) or traded over-the-counter.

Legal or equitable rights or interests in securities 3.13 The various definitions of securities and security used in the legislation also include a ‘legal or equitable right or interest’ in a share or debenture and, in the case of Corporations Act s 92(3)(d)(iii), in an interest in a registered managed investment scheme. The language is very broad, and it is likely that courts will adopt a purposive interpretation of it, having regard to the context in which the definition is used (for example, to require the issue of a prospectus). The legislative history of this part of the definitions, which can be traced back to the 1981 Companies Codes, suggests that the concept is related to that of a ‘unit’, which when used ‘in relation to a share, debenture or other interest, means a right [page 119] or interest, whether legal or equitable, in the share, debenture or other

interest, by whatever term called, and includes an option to acquire such a right or interest in the share, debenture or other interest’: see Corporations Act s 9. Unit is used in s 92(1) and (2), but not (3) or (4), suggesting that the intention was not to include options in the latter case.21 A legal or equitable right or interest in a security is likely to be treated as a security in its own right where an investment arrangement contemplates that an investor will hold something less than full beneficial ownership in the ordinary sense. For example, the interest held under a paperless debenture issue might be caught.22 The interests of a beneficiary of a trust over the security may also fall into this category; however, this appears to depend on the nature of the trust. If there is a single beneficiary with a beneficial interest in particular shares or debentures, then the interest of the beneficiary may be treated as falling within this definition. However, if this is not the case the interest is more likely to be treated as an interest in a managed investment scheme.

Options Options over unissued securities 3.14 Options to acquire securities by way of issue are themselves securities under Corporations Act s 92(3) and (4). The definition in Corporations Act s 92(3), which applies for the purposes of Corporations Act Chs 6–6CA and Pt 1.2A, covers options to subscribe for shares, debentures, interests in registered managed investment schemes or legal or beneficial rights or interests in any of them. The definition in Corporations Act s 92(4), which applies for the purposes of Corporations Act Chs 6D and 7, covers options to subscribe for shares, debentures or legal or beneficial rights or interests in either.

Options over issued securities 3.15 Call options over issued securities are themselves securities under Corporations Act s 92(3), which applies for the purposes of Chs 6–6CA and Pt 1.2A. Section 92(3)(c) captures ‘options to acquire (whether by way of issue or transfer) a security covered by paragraph (a), (b), (c) or (d)’. The securities covered by these paragraphs are shares, debentures, interests

in managed investment schemes, and legal or beneficial rights or interests in any of them. Only options to acquire (rather than dispose of) securities are caught: that is, the definition captures call but not put options. Options over issued securities are not securities under Corporations Act s 92(4) (which applies for the purposes of Chs 6D and 7); instead they are classified as derivatives for Ch 7 purposes: see 3.36 below.

Depository interests 3.16 Section 761A also includes within the definition of ‘securities’ both a CGS depository interest, and a simple corporate bond depository interest. A CGS depository interest is a depository interest, as defined in the Commonwealth Inscribed Stock Act [page 120] 1911 (Cth), that can be transferred through a licensed clearing and settlement (CS) facility. A simple corporate bonds depository interest is a beneficial interest in simple corporate bonds (as defined in s 713A) where the interest is or was issued by a simple corporate bonds depository nominee. Depository interests provide retail investors with a beneficial ownership in an underlying security. The Commonwealth Government Securities Legislation Amendment (Retail Trading) Act 2012 (Cth) utilises depository interests to facilitate retail trading of Commonwealth Government Securities. The use of depository interests for simple corporate bonds was introduced in 2014 by the Corporations Amendment (Simple Corporate Bonds and Other Measures) Act 2014 (Cth).

INTERESTS IN MANAGED INVESTMENT SCHEMES 3.17 This part deals with interests in managed investment schemes. Interests in registered managed investment schemes are treated as securities

for the purposes of Chs 6–6CA and Pts 1.2A and 7.11 of the Corporations Act, but not otherwise. Interests in all registered schemes and some unregistered schemes are financial products for the purposes of Ch 7 of the Corporations Act and Pt 2 Div 2 of the ASIC Act. The circumstances in which a scheme is required to be, and is, registered with ASIC are explained in 3.33 below. The generic term ‘managed investment scheme’ is used in Australia to refer to a variety of structures for the issue of interests that are not traditional company securities (such as shares or debentures) or prudentially-regulated investments (such as investment life insurance products, bank deposits or superannuation products).23 Until 1998, such arrangements were referred to in legislation as ‘prescribed interest schemes’. Prior to 1955, these alternative investment structures were largely unregulated. In 1954, an inquiry conducted by the Victorian Statute Law Revision Committee ‘heard considerable evidence, with regard to unit and option certificates, lots, concessions, and other forms of interests in or in the undertaking of business’. Noting that such forms of interest were issued outside the legislation controlling the issue of shares to the public, the Committee concluded that ‘this field provides opportunity for fraudulent practice’24 and recommended reform.25 Regulatory [page 121] arrangements modelled in some respects on the requirements for debenture issuers were adopted in each state, and then nationally, from the mid1950s onwards. The regulatory requirements governing the structure and operation of such schemes were then fundamentally reformed in 1998 by the Managed Investments Act 1998 (Cth) and are now contained in Ch 5C of the Corporations Act.26 Typically, registered managed investment schemes are collective investment arrangements that are open to passive investors and offer returns on a best-endeavours (rather than capital-backed) basis. That said, lending transactions with fixed returns can fall within the managed investment scheme definition.27 Managed investment schemes may be registered or unregistered, and registered schemes may be listed or unlisted.

The statutory definition in Corporations Act s 9 is framed broadly; it is intended to capture all forms of collective investments that are not otherwise regulated or expressly excluded from regulation. This reflects the historical development of the regulation of such arrangements as essentially an anti-avoidance measure.28 Examples of the types of commercial arrangements that come within the statutory definition of a managed investment scheme include public unit trusts, managed funds, ASX listed trusts (such as A-REITs, or Australian Real Estate Investment Trusts), trustee company common funds, limited partnerships, investment pools and clubs, cash management trusts, mortgage funds, serviced strata schemes, some investor-directed portfolio services, film schemes, horse-racing and horse-breeding syndicates, unlisted property trusts and syndicates, and agribusiness schemes such as forestry or horticultural schemes. These are only examples.

Statutory definition of ‘managed investment scheme’ 3.18 The statutory definition of ‘managed investment scheme’ is contained in Corporations Act s 9. It begins with a broad, inclusive formulation (in para (a)) which is then followed by a list of express exclusions from the definition (in paras (c)–(n)).29 Paragraph (a) of the definition captures a scheme that has the following features: [page 122] people contribute money or money’s worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not); any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders); and the members do not have day-to-day control over the operation of

the scheme (whether or not they have the right to be consulted or to give directions).

Interpreting the definition 3.19 The different elements of para (a) of the definition are interpreted broadly.30 Drawing on earlier High Court authority on the meaning of the predecessor definition of ‘prescribed interest’,31 courts have approached the definition on the basis that the words should not be read down, given the context (which is of prohibiting the offering of such arrangements unless the statutory requirements are met) and the fact that there is a power under the legislation to exempt (by regulation or ASIC instrument) arrangements that are caught in the broad definition but should not be subject to regulation under the Act. In Australian Softwood Forests Pty Ltd v Attorney-General for NSW (1981) 148 CLR 121; 6 ACLR 45; [1981] HCA 49, Mason J observed (at ACLR 51): … there is no very good reason for reading the words down. The context is that of prohibitions against issuing or offering to the public for subscription or purchase or inviting the public to subscribe for or purchase ‘interests’ unless there is in force in relation to them an approved deed and unless there is provided information similar to that which is prescribed in connexion with an offer to the public of shares … That a very wide meaning should be given to ‘interest’ is attested by the exclusion from the statutory definition of shares and debentures, interests in life insurance policies, and, subject to some qualifications, interests in partnership agreements. The presence of the power to exempt by regulation other rights or interests from the definition is also of telling significance.

This formulation has been adopted by the courts in interpreting the definition of managed investment scheme.32 [page 123] Therefore, it seems unlikely that the definition can be read down on the basis that the legislation could not have intended to catch and proscribe a given transaction, even having regard to ss 15AA and 15AB of the Acts Interpretation Act 1901 (Cth).33 The approach in Australian Softwood Forests ‘stresses the literal meaning of the words used in the definition, giving to them any broad application indicated by such a meaning’.34 As a

result, it is not appropriate to read down what would otherwise follow from the application of that general approach, by reference to what might be ‘the supposedly unintended consequences of a literal reading on everyday commercial transactions’.35 It is not possible to exclude an arrangement from the definition on the basis that the consequences of treating it as caught were ‘such as to show that the legislation could not have intended to catch by the definition schemes’ of that kind; this approach ‘discourage[s] reading down the broad words of the definition here in question “influenced by any preconception as to the intended policy”’.36 3.20 The broad approach adopted by courts in interpreting the definition is consistent with the legislative history, considered in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd: (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 at [1]–[27] (Sundberg and Dowsett JJ) and [144]–[158] (Jacobson J, dissenting). In particular, it reflects the reluctance on the part of the Australian Law Reform Commission and the Companies and Securities Advisory Committee, in their 1993 review of collective investments, to limit the statutory definition by reference to what might be appropriately subjected to regulation.37 The review expressly accepted that ‘it is not possible to replace the existing definition of “prescribed interest” with a more precise definition of “collective investment scheme” which applies to fund raising schemes other than those which are prudentially supervised or schemes in which the investors themselves are primarily responsible for the conduct of their scheme’.38 At first instance in Brookfield Multiplex,39 Finkelstein J had acknowledged the difficulties in applying the different components of the definition but found that ‘those difficulties … fall away when the construction takes account of the purpose of Ch 5C, where the regulation of managed investment schemes is to be found’. [page 124] In finding that the litigation funding arrangement was not a managed investment scheme, the primary judge had observed (at [37]):

… with the evident purpose of the legislation in mind, the essence of a managed investment scheme, stripped of all its technicalities, is a scheme in which people invest money (or money’s worth) in a common venture with the expectation of profit that will result from the efforts of others.

However, on appeal in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 the majority cautioned against this approach saying (at [29]): In our view, that statement as to the ‘essence of a managed investment scheme’ is of little assistance in construing the Act and may be misleading. We have referred to the difficulties experienced by the commission in seeking to identify with precision the subject matter of such a generalization. It abandoned the task as too difficult. With all respect, his Honour’s approach seems not to recognise those difficulties. Further, it is difficult to infer an intention to exclude an undefined category of schemes which would otherwise be within subpara (a) of the s 9 definition in light of the extensive list of express exclusions contained in the definition and the power to exclude or exempt others administratively.

3.21 Difficulties of construction often arise in connection with schemes that, although within the language of the definition, have none of the features or characteristics (such as an operator, or scheme property) that would be required if they were registered under Ch 5C. In Brookfield Multliplex, Sundberg and Dowsett JJ considered that the fact that an arrangement as structured did not have these features was not relevant in considering whether it falls within the statutory definition; rather, if a scheme requires registration then it must be constituted and conducted so as to permit registration. On this view it is not helpful, or possible, to limit the operation of para (a) of the s 9 definition by reference to some implied limitation to be derived from the Ch 5C regulatory scheme itself: Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 at [33], [55]– [56] and [64]. However, in Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 79 ACSR 684; [2010] NSWSC 1087 at [90], White J declined to follow this approach, taking the view that: … [it] does not give full weight to the fact that not only does s 601ED(5) provide that a person must not operate a managed investment scheme that is required to be registered unless the scheme is so registered, but s 601ED(1) requires the managed investment scheme to be registered if other provisions of that section are satisfied.

The implication in Great Northern is that, if the arrangement cannot be

made registrable without ‘transforming’ the fundamental nature of the relationship between the parties, it is not caught by the definition. His Honour says (at [89]), that ‘it is incongruous that a scheme should need to be registered when it does not have the features that would pertain to the scheme once it was registered’. White J relies on the observations of Gilmour J (with whom Spender J agreed) in National Australia Bank Ltd v Norman (2009) 180 FCR 243; 74 ACSR 561; [2009] FCAFC 152 at [183], that s 601ED(5) ‘envisages that the unregistered managed [page 125] investment scheme is of a kind which ought to have been, and could in fact have been, registered’. Nevertheless the view of the majority in Brookfield Multiplex, above, is to be preferred. 3.22 Some guidance as to the scope of the definition can be gleaned from proceedings brought by ASIC against those said to be operating unregistered schemes in breach of s 601ED, including in relation to private mortgage funds,40 property development (including retirement village development) schemes,41 dubious offshore ‘trading systems’,42 and novel projects.43 However, reasoning by analogy has its limitations, as Macrossan J observed in R v Commons (1986) 4 ACLC 551 at 554: It can be misleading to endeavour to form an accurate impression of the full scope of the intended statutory coverage by looking too single mindedly at the precise details of the particular schemes which the limited number of court decisions to date have indicated are caught. While analogy can be illuminating, there is a danger that the decisions which are, after all, mere examples, can induce the observer to believe that they define the limits of the scope of the definition. While certain points of principle may emerge from the decisions upon particular schemes, it is the broad words of the statute which must be returned to and, with respect, it is the deliminations of the correct approach which has been settled for

[page 126] us in Wade v A Home Away Pty Ltd (1980) CLC ¶40-669 and, authoritatively for us, Australian Softwood Forests Pty Ltd v Attorney-General for NSW (1981) CLC ¶40-734 which is of the greatest utility, together with the pronouncements of principle in the latter case.

Elements of the definition 3.23 The definition in para (a) of s 9 is properly approached by addressing each of the subparagraphs separately, and in accordance with their terms. 3.24 First, there must be a ‘scheme’. The High Court held in relation to the earlier definition of prescribed interest that ‘all the word “scheme” requires is that there should be some programme, or plan of action’.44 In Australian Securities and Investments Commission v Takaran Pty Ltd (2002) 170 FLR 388; (2002) 43 ACSR 46; [2002] NSWSC 834 at [15], Barrett J said: The essence of a ‘scheme’ is a coherent and defined purpose, in the form of a ‘programme’ or ‘plan of action’, coupled with a series of steps or course of conduct to effectuate the purpose and pursue the programme or plan. In some cases, the scope of the scheme will readily be gathered from some constitutive document in the nature of a blueprint setting out all relevant matters. In others, there may be no writing or such as there is may tell only part of the story, leaving the remainder to be supplied by necessary implication from all the circumstances. Profit-making will almost invariably be a feature or objective of the kind of scheme with which the s 9 definition of managed investment scheme is concerned, given the definition’s references in several places to ‘benefits’. Whatever is incidental and necessary to the pursuit of the profit (or ‘benefits’) will therefore be comprehended by the scheme …

Finkelstein J in Australian Securities and Investments Commission v GDK Financial Solutions Pty Ltd (2006) 236 ALR 699; 60 ACSR 447; [2006] FCA 1415 at [2], observed that a ‘scheme … is the combination of these things necessarily connected by design’, while ‘[t]he scheme may also include those things or attributes that “contribute to the coherence and completeness” of the three essential elements’.45 3.25 Next, the elements of subpara (a)(i) of the statutory definition must be demonstrated. This requires: that people contribute money or money’s worth; as consideration to acquire rights to benefits; such benefits being produced by the scheme. Earlier authority had given a broad meaning to ‘contribute’, as meaning to ‘make available’ or ‘supply’.46 In Brookfield Multiplex Ltd v

International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 at [page 127] [53], the majority took a narrower view, concluding that the notion of contribution required payment or supply for a common purpose, foreshadowing the requirement for pooling or use in a common enterprise identified in subpara (a)(ii) of the s 9 definition. The contribution must be as consideration to acquire rights and benefits produced by a scheme. 3.26 Subparagraph (ii) of the definition requires that the contributions either be pooled, or used in a common enterprise. Sometimes both will be evident, and sometimes only one. For example, in Brookfield Multiplex, the majority considered that the litigation funding arrangement in place between the various parties was a scheme that involved: … both pooling of contributions and use in a common enterprise. We should say something about the distinction between the two. Pooling will frequently be a question of degree. There may be cases in which relevant assets are utilized by individual members in such a way that it cannot readily be said that they are pooled. Using discrete parcels of land to produce crops which are pooled may be an example. In such a case, there may be use in a common enterprise but no pooling of the land.47

3.27 The first alternative is that the contributions are ‘pooled’. Two key questions arise in deciding whether this requirement is met. The first is whether the contributions must be physically pooled, for example by being comingled in a bank account. The second is whether there must be some intention on the part of the putative members that pooling occur, and if so how that intention is to be ascertained. In Brookfield Multiplex (at [92]), Sundberg and Dowsett JJ considered that the definition is not concerned with physical pooling, such as that which occurs with water, but rather with pooling with a purpose. In their Honours’ view the definition would be satisfied if contributions were available, and known to be available, for a relevant purpose, regardless of physical location. This is because the contributions to the scheme may be money’s worth that is not capable of being combined or comingled.

3.28 The case law indicates that there must be an intention that the contributions be pooled. In National Australia Bank Ltd v Norman (2009) 180 FCR 243; 74 ACSR 561; [2009] FCAFC 152 at [95], Graham J expressly rejected the conclusion of Buss JA Burton v Arcus (2006) 32 WAR 366; 57 ACSR 468; [2006] WASCA 71 that pooling could occur without the express or implied approval or knowledge of the investors. In Norman, Gilmour J emphasised that the phrase ‘contributions are to be pooled’ in para (a)(ii) require an intention, objectively discerned, forming part of the ‘scheme’ and formed prior to the making of contributions, that the contributions are to be pooled. The intention may be discerned objectively and variously from documents, discussions or conduct; the subjective evidence of members as to what, and by what means, they understood was the scheme prior to making their contributions would be relevant but not necessarily determinative of this question: at [148]. Absent proof [page 128] of such intention that they are to be pooled, Gilmour J did not consider that the mere fact that moneys were collected into one bank account met the definition of a ‘scheme’ for the purposes of s 9: at [152]–[153]. As Barker J observes Findlay v Next Financial Ltd [2012] FCA 1350 at [21]: Norman stands for the proposition that the necessary intention may be discerned both objectively and subjectively. The intention may be discerned objectively and variously from documents, discussions or conduct. Subjective evidence of members as to what they understood of the scheme may also be relevant, but not necessarily determinative. It cannot be ruled out in these circumstances, that evidence of how contributions were actually used may possibly be relevant in determining whether there was a relevant intention to pool when the contributions were made if they help explain or confirm other evidence to that effect, although of itself it may be considered not to be determinative of any such intention.

3.29 Even if there is no pooling, a managed investment scheme may exist if the contributions are used in a ‘common enterprise’. A common enterprise was described by Mason J in Australian Softwood Forests Pty Ltd v Attorney-General for NSW (1981) 148 CLR 121; 6 ACLR 45; [1981] HCA 49 at CLR 133:

The argument is that in order to constitute a common enterprise, there must be a joint participation in all the elements and activities that constitute the enterprise. I do not agree. An enterprise may be described as common if it consists of two or more closely connected operations on the footing that one part is to be carried out by A and the other by B, each deriving a separate profit from what he does, even though there is no pooling or sharing of receipts of profits. It will be enough that the two operations constituting the enterprise contribute to the overall purpose that unites them. There is then an enterprise common to both participants and, accordingly, a common enterprise.

The Explanatory Memorandum to the Managed Investments Bill says (at [19.7]) that ‘the term “used in a common enterprise” may include arrangements described as enterprise or agricultural schemes’. For example, in Osric Investments Pty Ltd v Woburn Downs Pastoral Pty Ltd (2002) 20 ACLC 1; [2001] FCA 1402, contracts entered into by varying parties related to an arrangement for stud cattle breeding that were ‘interdependent with each other’ were held to amount to a common enterprise. It appears that the enterprise need not be an enterprise in common with other investors, but may be an enterprise common to the investor and the promoter.48 In Brookfield Multiplex, Sundberg and Dowsett JJ said that ‘separate actions by different participants, deriving separate profits, may constitute a joint enterprise if the actions are sufficiently closely connected and contribute to a shared purpose’: at [97]. 3.30 As noted, one or other of pooling or a common enterprise must be present. In Wingecarribee, discussed at 3.10 above, Rares J concluded that the complex financial products acquired by the local councils were not part of a managed investment scheme because: [page 129] There was no scheme or plan of action for Grange’s clients to pool, or to use, their purchase money in any common enterprise. The investors bought bearer notes from Grange in individual transactions. Grange had previously acquired those notes itself as sole noteholder when they were issued. Grange increased the price it charged for the notes over its purchase price and sold the notes to the investors. Grange’s investment, that it paid to the issuer, was not the face value of the notes but of a lesser sum than face value. That sum had to be used as the transaction documents provided. But that payment by Grange was not a pooling of Grange’s clients’ funds or a use of them in any scheme.49

3.31 Subparagraph (iii) of the definition requires that at least some of the investors must be passive (in the sense that they do not have day-to-day control over the operation of the scheme). Schemes over which all investors have day-to-day control are not managed investment schemes. Arrangements that allow for the day-to-day involvement of investors, such as joint ventures, intra-group schemes, franchises, general partnerships, and direct investment arrangements, are not caught: see ALRC/CASAC Report No 65, p 25. In deciding whether investors have day-to-day control, it is important to look to the substance and not the form of the arrangement. In Enviro Systems Renewable Resources Pty Ltd v Australian Securities and Investments Commission (2001) 80 SASR 1; 36 ACSR 762; [2001] SASC 11 Martin J held that investors did not have day-to-day control of the operation of the relevant scheme, even though the documentation had been structured in such a way as to suggest that the arrangement was a franchise under which each investor would be operating its own business. His Honour said ‘when the scheme documentation is analysed in its entirety, the intent of the scheme is that [the promoter] will control the day-to-day operations of the scheme from beginning to end’. In that case, Martin J found that although it was possible that some participants in the scheme may have chosen to take an active role, the scheme was in reality designed to attract passive investors. He noted (at [37]) that: … [the] purpose or object of the legislation and the regulatory regimes created pursuant to the legislation would be easily defeated if the court felt obliged to rely solely upon a strict view of the legal rights and duties created by the documentation and was required to ignore the realities of the scheme as it is designed to operate in practice.

In Burton v Arcus (2006) 32 WAR 366; 57 ACSR 468; [2006] WASCA 71 at [80], cited with approval in Australian Securities and Investments Commission v West (2008) 66 ACSR 143; [2008] SASC 111 at [127], Buss JA concluded that the members of a scheme will have day-to-day control over the operation of the scheme if the members as a whole participate in making the routine, ordinary, everyday business decisions relating to its management, and the members as a whole are bound by the decisions which are made. Conversely, if the members as a whole do not participate in making the routine, ordinary, everyday business decisions relating to the management of the scheme, or if the members as a whole are not bound by

the decisions which are made, they will not have day-to-day control over its operation. [page 130]

Exclusions from the definition 3.32 Paragraphs (c)–(n) of the definition then go on to exclude a number of forms of collective investment, and other arrangements and vehicles, from the broad definition of a managed investment scheme contained in para (a). The following are expressly excluded from the definition by the legislation: Large partnerships are excluded by para (c) of the definition. A partnership that has more than 20 members but does not need to be incorporated or formed under an Australian law because of regulations made for the purposes of Corporations Act s 115(2) is not a managed investment scheme. Bodies corporate (other than a body corporate that operates as a time-sharing scheme) are excluded by para (d). Intra-group schemes are excluded by para (e), which covers any scheme in which all the members are bodies corporate that are related to each other and to the body corporate that promotes the scheme. Franchises are excluded by para (f). ‘Franchise’ is defined in s 9 of Corporations Act as ‘an arrangement under which a person earns profits or income by exploiting a right, conferred by the owner of the right, to use a trade mark or design or other intellectual property or the goodwill attached to it in connection with the supply of goods or services. An arrangement is not a franchise if the person engages the owner of the right, or an associate of the owner, to exploit the right on the person’s behalf’.50 Life companies’ statutory funds maintained under the Life Insurance Act 1995 (Cth) are excluded by para (g). Regulation 5C.11.01 of the Corporations Regulations excludes an ‘approved benefit fund’ within the meaning of s 16B of the Life Insurance Act.

Most forms of superannuation are excluded by para (h). The exclusion covers regulated superannuation funds, approved deposit funds, pooled superannuation trusts, and public sector superannuation schemes within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth). Schemes operated by Australian authorised deposit-taking institutions (ADIs) in the ordinary course of their banking business are excluded by para (i). The ordinary course of banking business is discussed in 3.11 above. The issue of debentures or convertible notes by a body corporate is also excluded, under para (j). While the issue of debentures or notes by a body corporate is not itself a managed investment scheme, it can be part of a managed investment scheme. In Australian Securities and Investments Commission v Karl Suleman Enterprises Pty Ltd (2003) 45 ACSR 401; [2001] NSWSC 400 at [6], Barrett J held that ‘although the investment product concerned was a “debenture”, the relevant acts of the first defendant in relation to solicitation of investment occurred in the course of and within [page 131] the scope of the operation by the first defendant of a managed investment scheme’. Paragraph (k) excludes barter schemes, under which each participant may obtain goods or services from another participant for consideration that is wholly or substantially in kind rather than in cash. Retirement village schemes are excluded by para (l). The exclusion covers any scheme operating within or outside Australia: (i) under which the participants, or a majority of them, are provided, or are to be provided, with residential accommodation within a retirement village (whether or not the entitlement of a participant to be provided with accommodation derives from a proprietary interest held by the participant in the premises where the accommodation is, or is to be, provided); and (ii) which is not a time-sharing scheme.

Paragraph (m) excludes a scheme that is operated by a Western Australian co-operative company registered under Pt VI of the Companies (Cooperative) Act 1943 (WA) or under a previous law of Western Australia that corresponds to that Part. Litigation funding schemes and litigation funding arrangements (including schemes like that held by the Full Federal Court in Brookfield Multiplex Ltd v International Litigation Partners Pte Ltd (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 to be a managed investment scheme) are excluded by Corporations Regulations reg 5C.11.01(1)(b), (c), and (d). Paragraph (n) allows for further exclusions by regulation.

When a scheme must be registered with ASIC 3.33 The regulatory scheme created by Ch 5C of the Corporations Act requires that certain arrangements coming within the definition of managed investment scheme be registered with ASIC. The registration requirement is triggered if three criteria are met: 1.

The scheme satisfies any one of the following: (a) it has more than 20 members; (b) it was promoted by a person, or an associate of a person, who was, when the scheme was promoted, in the business of promoting managed investment schemes; or (c) it is one of a number of schemes that ASIC has determined, in accordance with Corporations Act s 601ED(3) are related and that between them have more than 20 members: see Corporations Act s 601ED(1).

2.

Interests in the scheme have been issued in circumstances that would have required the giving of a Product Disclosure Statement under Corporations Act Pt 7.9 Div 2 if the scheme had been registered when the issues were made and the division applied to the interests at that time: Corporations Act s 601ED(2) and Corporations Regulations reg 5C.11.05A.

[page 132] 3.

The scheme has not been granted an exemption from registration by ASIC in accordance with Corporations Act s 601QA.51

The effect of Corporations Act s 601ED is that managed investment schemes that are operated by professional operators and open to retail investors will ordinarily be registered with ASIC under Ch 5C of the Corporations Act. All listed schemes (including those whose units are part of a stapled security)52 are registered. Chapter 5C imposes a significant number of structural and governance requirements on the scheme and its operator (referred to in the legislation as its ‘responsible entity’). These include that the responsible entity must hold an Australian financial services licence authorising it to operate the scheme, must hold scheme property on trust for the members of the scheme, and must act in the best interests of the members in exercising its powers and carrying out its duties in relation to the scheme. 3.34 As at 30 June 2015 there were 3642 ‘active’ managed investment schemes registered with ASIC.53 These include a disparate range of business and investment models. Most schemes (by number and value of funds under management) are unlisted managed funds.54 The other main categories of scheme include listed managed funds (that is, exchange traded funds and listed investment trusts);55 A-REITs;56 unlisted [page 133] property schemes;57 mortgage funds;58 infrastructure funds;59 agribusiness schemes;60 and time-share and serviced strata schemes. There are a small number of ‘other’ schemes, including horse racing and horse breeding syndicates. The managed investment scheme laws do not mandate a particular legal structure for registration. However, registered schemes that hold assets (such as financial assets or real estate) for investment purposes are generally structured as trusts, largely for taxation reasons. In listed

property and infrastructure, interests in a trust-based scheme are often stapled to shares in an operating company. In trust-based structures the contributions of the members are generally pooled and their interest is in the nature of a beneficial interest in the whole of the property of the trust.61 In contrast, ‘enterprise-type’ schemes (particularly agribusiness schemes) are often structured as a series of bilateral executory contracts between the investor, the scheme operator and various other entities. The scheme in that case is not a pool of assets; it is the undertaking carried out over time in accordance with those contracts. The nature of the members’ interest in those schemes is quite different. This is the distinction that was drawn by the Companies and Securities Law Review Committee (CSLRC) in 1987 between ‘fiduciary and non-fiduciary prescribed interests’.62 The nature of the investors’ rights in such schemes was the subject of extensive judicial and parliamentary consideration in the aftermath of the collapse of the Timbercorp and Great Southern agribusiness schemes in 2009, and the subject of a reference to the Corporations and Markets Advisory Committee in November 2010.63

Interests in (non-private) unregistered schemes 3.35 Only registered schemes are subject to the structure and governance requirements in Ch 5C of the Corporations Act. However, the definition of financial product in Ch 7 extends beyond interests in registered schemes, to capture some interests in some unregistered schemes. Corporations Act s 764A(1)(ba) includes in the definition of financial product: … any of the following in relation to a managed investment scheme that is not a registered scheme, other than a scheme (whether or not operated in this jurisdiction) in relation to which none of paragraphs 601ED(1)(a), (b) or (c) are satisfied: (i)

an interest in the scheme

(ii) a legal or equitable right or interest in an interest covered by subparagraph (i);

[page 134] (iii an option to acquire, by way of issue, an interest or right covered by subparagraph (i) or (ii).

A scheme satisfies one of the paragraphs of s 601ED(1) if: (a) it has more than 20 members; or (b) it was promoted by a person, or an associate of a person, who was, when the scheme was promoted, in the business of promoting managed investment schemes; or (c) a determination under s 601ED(3) is in force in relation to the scheme and the total number of members of all the schemes to which the determination relates exceeds 20. A managed investment scheme of the kind referred to in s 764A(1)(ba) might be unregistered because it is exempted from the registration requirement by s 601ED(2) or by ASIC exemption (see 3.33 above), or because it is being operated in contravention of the registration requirement. An interest described in s 764A(1)(ba) is a financial product, but it is not a security.

DERIVATIVES 3.36 ‘Derivative’ is defined in Corporations Act s 761D. The definition of derivative covers, among other things, futures contracts as defined under s 9 of the (pre-FSR)64 Corporations Act, option contracts that were previously within the definition of securities in ss 9 and 92(1) of the preFSR Corporations Act, and over-the-counter (OTC) derivatives. As with the definition of financial product discussed below, the legislature has attempted to focus on ‘the functions or commercial nature of derivatives, rather than trying to identify each product that will be regarded as a derivative’.65 The nature of derivatives was described by the Parliamentary Joint Committee on Corporations and Securities, in its Report on Derivatives handed down on 20 November 1995, in the following broad terms: Derivatives are financial products which derive changes in their value from the price of an underlying commodity, security, currency, cash flow or index. The main types of derivatives are futures,66 options67 and swaps,68 although the range of derivatives products is continually expanding and many derivatives contracts combine features of more than one type.

[page 135] Derivatives can be divided into two categories depending on how they are traded. Exchange traded derivatives are standard products traded on exchanges. These transactions are subject to rules of the exchange and securities legislation. Over the counter (OTC) derivatives are not traded on exchanges and are usually tailored for a client by a financial institution … Derivatives are used as a method of risk management, to rapidly adjust the balance of an investment portfolio, or for speculation …69

The definition of derivative in Corporations Act s 761D, as extended by Corporations Regulation 7.1.04, attempts to capture these concepts in a generalised definition. It is based in significant part on the recommendations of the Companies and Securities Advisory Committee in its Report on the Regulation of On-Exchange Derivatives Markets, 1996: see 1.48 above. Section 761D(1) provides that, subject to subs (2), (3) and (4) a derivative is an arrangement in relation to which the following conditions are satisfied: (a) under the arrangement, a party to the arrangement must, or may be required to, provide at some future time consideration of a particular kind or kinds to someone; and (b) that future time is not less than the number of days, prescribed by regulations made for the purposes of this paragraph, after the day on which the arrangement is entered into; and (c) the amount of the consideration, or the value of the arrangement, is ultimately determined, derived from or varies by reference to (wholly or in part) the value or amount of something else (of any nature whatsoever and whether or not deliverable), including, for example, one or more of the following: (i) an asset; (ii) a rate (including an interest rate or exchange rate); (iii) an index; (iv) a commodity. In International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 82 ACSR 517; [2011] NSWCA 50, the court was divided on the question of whether a litigation funding agreement was caught by the wide definition of derivative contained in the Act. In so doing, Giles JA took the view (at [66]) that ‘the definition of “derivative” is extraordinarily wide,

one which could catch many arrangements not ordinarily thought of as derivatives’. In contrast, Hodgson JA (at [238]) concluded that: … even giving full weight to the reluctance to read down words in a statute for the protection of investors, it seems to me that … the appellant’s construction would make the operation of the definition of ‘derivative’ so broad that it would be virtually meaningless. This is reinforced by the fact that, absent the definition, the present interest comes nowhere near the category of derivative as commercially understood.70

[page 136] 3.37 Section 761D goes on expressly to exclude a number of arrangements from the definition of derivative. Under s 761D(4): … an arrangement under which one party has an obligation to buy, and the other has an obligation to sell, property is not a derivative for the purposes of this Chapter merely because the arrangement provides for the consideration to be varied by reference to a general inflation index such as the Consumer Price Index.

More broadly, s 761D(3) provides that certain arrangements, described in paras (a)–(d) are not derivatives for the purposes of Ch 7 even if they are covered by the definition in s 761D(1). Under para (a), an arrangement is excluded from the definition if (i) a party has, or may have, an obligation to buy, and another party has, or may have, an obligation to sell, tangible property (other than Australian or foreign currency) at a price and on a date in the future; and (ii) the arrangement does not permit the seller’s obligations to be wholly settled by cash, or by set-off between the parties, rather than by delivery of the property; and (iii) neither usual market practice, nor the rules of a licensed market or a licensed CS facility, permits the seller’s obligations to be closed out by the matching up of the arrangement with another arrangement of the same kind under which the seller has offsetting obligations to buy; but only to the extent that the arrangement deals with that purchase and sale. The effect of s 761D(3)(a) was described by the Full Federal Court in Keynes v Rural Directions Pty Ltd (2010) 79 ACSR 405; [2010] FCAFC 100 at [28], in which forward contracts for the sale and delivery of grain were held to be excluded, in the following terms: The term ‘financial product’ is critical to the operation of the chapter. The express

exclusions contained in s 765A are designed to ameliorate the effect of the very broad language used in the other definition sections which seek to capture many kinds of financial transactions. Section 765A narrows the operation of Ch 7 so as to keep it within the intended bounds. Section 761D(3) is important because it leads to the exclusion of a very large number of everyday transactions, namely sales of tangible property for future delivery. Such transactions are not generally thought to be financial transactions. However, it is well-known that there are markets in which contracts for the sale and purchase of ‘tangible property’ are traded. Such markets are more readily seen as being ‘financial’ and therefore appropriately regulated. Where the price of tangible property fluctuates significantly over time, there is always the likelihood that people will seek to profit from such fluctuations. For that reason s 761D(1) catches ‘arrangements’ for the supply of tangible property where the prices are not fixed or the ‘values’ of the arrangements may fluctuate. However, s 761D(3) narrows that effect. Broadly speaking, it does so by excluding from the definition of ‘derivative’ arrangements for the supply of tangible property where one of the parties is actually expected to deliver the relevant property, and where rights and obligations under such arrangements are not usually traded, or not traded in a recognizable market.

Paragraph (b) excludes a contract for the future provision of services. The litigation funding agreement in International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 82 ACSR 517; [2011] FCAFC 50 was held by Giles JA (at [88]) and Hodgson JA (at [242]) not to be a contract for the future provision of services, although Young JA (at [133]) took the view that it was. [page 137] Paragraph (c) excludes anything that is covered by a paragraph of s 764A(1), other than para (c) of that subsection.71 The effect of s 761D(3) (c) when read with s 764A(1)(a) and (c) is that a financial product which is otherwise a derivative is not treated as a derivative for the purposes of Ch 7 if it also amounts to a debenture,72 an interest in a managed investment scheme or other specified financial product. Paragraph (d) excludes anything declared by the regulations not to be a derivative for the purposes of Ch 7.

MARGIN LENDING FACILITIES 3.38 Most forms of credit are not treated as financial products for the purposes of the Corporations Act,73 although the position is different

under the ASIC Act.74 The exception is margin lending facilities made available to clients who are natural persons. The definition of margin lending facility was introduced into the legislation in 2009 when margin lending was brought within the regulatory remit of ASIC.75 It includes both ‘standard’ and ‘non-standard’ arrangements. The key elements of the definition of standard margin lending facilities include: the provision of credit by a person (the ‘provider’) to a client who is a natural person (s 761EA(2)(a)); a requirement that the borrower must use the loan (wholly or partly) to acquire shares or other financial products (s 761EA(2)(b)(i)) or to refinance a margin lending facility (s 761EA(2)(b)(ii)); that the loan must be wholly or partly secured over shares or other defined securities (‘marketable securities’). ‘Marketable securities’ is defined by existing Corporations Act s 9 (s 761EA(2)(c) and (d)); and that the client is subject to a ‘margin call’ in circumstances where the ‘current LVR’ of the facility exceeds the agreed threshold: s 761EA(2)(e). The current LVR is defined as the ratio of the outstanding debt to the security provided for the loan: s 761EA(3). [page 138] The type of margin loan targeted by the definition of a ‘non-standard margin lending facility’ is not based on a loan agreement, but uses a type of securities lending agreement (with variations) to achieve a similar economic outcome as would a standard margin loan. This type of structure was used by lenders such as Opes Prime and Tricom and provided as a ‘margin loan’, ‘equity finance’ or ‘securities finance’.76 The key difference, from the client’s point of view, is that in a non-standard margin loan, title to the security provided for the loan passes out of the client’s hands.77 The Explanatory Memorandum to the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 at [1.41] indicates that the definition is intended to capture, among other things:

the basic or ‘vanilla’ margin loan; Opes Prime and Tricom style arrangements, where appropriate. This is to ensure that products that are functionally similar to a margin loan (and advertised as a margin loan) are also captured; hybrid products that utilise the key features of a margin loan; a limited or non-recourse margin loan (where the amount the lender can recover is restricted to the mortgaged financial product); or a margin loan where the assets securing the loan are more than just the financial products purchased through the loan, such as residential property.

OTHER FINANCIAL PRODUCTS 3.39 For the reasons explained above, the key definition relevant to Chs 6–6D of the Corporations Act (which deal with fundraising, takeovers, information about ownership of listed entities, and continuous disclosure) is that of securities, contained in Corporations Act ss 92(3) and (4) and 700. Whether or not a particular financial instrument is a security as defined is fundamental in deciding whether that law applies. In Ch 7 of the Corporations Act (which deals with financial services and markets, and mandatory disclosure for financial products other than securities) and Pt 2 Div 2 of the ASIC Act (which deals with unconscionable conduct and consumer protection for the financial sector) the key definition is that of financial products. Whether or not a particular financial instrument is a financial product as defined determines whether conduct in relation to that instrument is regulated under the relevant legislation. The differing definitions of ‘financial product’ are contained in Corporations Act Pt 7.1 Div 3 and ASIC Act s 12BAA. In each case the definition used in the legislation is very broad. Both include securities, along with a wide variety of other investment, [page 139] risk management and payment arrangements. In the ASIC Act the

definition of financial product extends to certain types of credit facilities also.

Underlying policy 3.40 The Corporations Act and the ASIC Act adopt a broad, functional definition of financial product. The decision to adopt this approach to the definition reflects the policy position taken by the Financial System Inquiry (FSI) made in March 1997 and adopted in the CLERP 6 project (explained in 1.44–1.50 above) to the structure of financial regulation generally. It is important, in interpreting and applying the definition of financial product, to understand this underlying policy. In particular, the broad definition was intended to overcome gaps and remove opportunities for regulatory arbitrage that might result from more institutionally-focused approaches, and to create a flexible, principles-based framework that could capture new types of financial instruments as they evolved. FSI involved a comprehensive review of the regulatory framework for the Australian financial system. Its key findings included that, at the time of the Inquiry, conduct and disclosure regulation in relation to the financial sector was being undertaken by a variety of agencies, by reference to the institutional form of the service provider. FSI took the view that this was inconsistent with the broadening structure of markets, had resulted in inefficiencies, inconsistencies and regulatory gaps, and was not conducive to competition in the financial system. FSI’s recommendations therefore included that a single market integrity and consumer protection regulator be established, combining the then functions of the Australian Securities Commission, that part of the Insurance and Superannuation Commission dealing with disclosure, sales and advice, and the codes of practice overseen by the Australian Payments System Council. FSI also recommended that the regulator be given powers (exercisable within its jurisdiction) that mirrored those provided under the consumer protection provisions of the (then) Trade Practices Act 1974 (Cth), and exclusive responsibility for their administration. This was done in 1998 with the establishment of ASIC. FSI also recommended that the regulator seek to establish a consistent and comprehensive disclosure regime for the whole financial system, based

on product profile statements. The regulator was to have responsibility for the regulation of sales and advice on retail financial products including the licensing (within a single licensing regime) of all financial advisers. Further, FSI recommended that the distinction between securities and futures contracts then reflected in Chs 7 and 8 of the Corporations Law should be replaced by a single regime for financial markets and instruments.78 Another concern of FSI relevant to the eventual drafting of the definition of financial product was to ensure that it was flexible and adaptive enough to [page 140] encompass new developments in financial engineering and financial instruments. FSI had concluded that: Innovations in financial, technological developments and deregulation have heralded significant changes in products traded in financial markets and in the methods of trading those products. As a result, the regulatory regime lacks the flexibility required to deal fully with these developments and does not offer legal certainty for financial market participants in some areas. Since the pace of innovation in financial markets is unlikely to abate, there is a need to reconsider the regulatory framework.79

3.41 This policy shift towards an integrated regulatory framework underlies the broad definition of financial product used in Ch 7. The Explanatory Memorandum to the Financial Services Reform Bill states that ‘the proposed regulatory framework covers a wide range of financial products including securities, derivatives, general and life insurance, deposit accounts and means of payment facilities’.80 The definition of financial product in Ch 7 purports to respond to the need for flexible and adaptive coverage in four ways. First, it adopts a broad, functional definition of financial product in Corporations Act s 761A, that defines whether a facility is a financial product for the purposes of the chapter by reference to what the facility is used for, rather than its legal form. Second, it allows for particular facilities to be expressly included or excluded from the definition of financial product without reference to the functional definition, by Corporations Act ss 764A and 765A and regulations made from time to time under those sections. Third, it excludes facilities that,

while technically caught by the functional definition, are only incidentally financial products, under Corporations Act s 763E. Fourth, it gives ASIC the power to liberate particular facilities from the definition by declaration under Corporations Act s 765A(2). As the High Court observed in International Litigation Partners Pte Ltd v Chameleon Mining NL (recs and mgrs apptd) (2012) 246 CLR 455; 91 ACSR 473; [2012] HCA 45 at [5]: The legislative scheme implemented by the Reform Act has two significant characteristics. One is overinclusiveness. Rights and liabilities are drawn in overtly broad terms, on the footing that instances of overreach which become apparent in the administration of the legislation may be remedied by adjustments to the Act made not by remedial legislation but by exercise of powers conferred upon the Executive Government or bodies such as the Australian Securities and Investments Commission. The second characteristic is the creation by the legislation of rights and liabilities by means of criteria which reflect fluid market and economic usage rather than any ascertainable and stable meaning in the law.

Structure of the Corporations Act definition 3.42 The definition of financial product is contained in Pt 7.1 Div 3 of the Corporations Act. It comprises four subdivisions. Subdivision A is introductory. Subdivision B contains a functional definition of broad application that defines an [page 141] arrangement as a financial product by reference to what the arrangement is commonly used for, rather than its legal form or structure. Subdivision C then contains a list of express inclusions — arrangements defined by reference to their legal form that are financial products whether or not they come within the functional definition. Subdivision D then contains express exclusions — arrangements defined by reference to their legal form that are excluded from the definition of financial products even if they come within the functional definition. The structure of the definition means that individual components of other, broader transactions or arrangements may be financial products. The definitional structure deals with this in various ways. First, things that

may be caught by the functional definition in Corporations Act s 763A can be excluded under the ‘incidental products’ exception in Corporations Act s 763E, although the incidental products exclusion cannot be used for arrangements that appear on the list of express inclusions in Corporations Act s 764A: see 3.50 below. Second, where an arrangement that is a financial product is a ‘component of a facility that also has other components’ Ch 7 applies only in relation to the component that is a financial product: Corporations Act s 762B.81

Functional definition 3.43 Section 763A(1) provides that something is a financial product if it is a facility82 through which, or through the acquisition of which, a person does one or more of the following: makes a financial investment; manages financial risk; or makes non-cash payments. This definition is expressed to be subject to Corporations Act s 763E, which excludes from the definition arrangements that are financial products only incidentally (other than arrangements expressly included in the definition by Corporations Act s 764A). In looking at the purpose or use of a facility, to see whether it comes within the functional definition, the use or purpose to which it is commonly put, rather than the use or purpose of the person using or acquiring it, is relevant: Corporations [page 142] Act s 763A(2). A financial product, once it has that character, does not lose it merely because it is on-sold and the person acquiring it was not making a financial investment or managing financial risk: Corporations Act s 763A(3).

Making a financial investment 3.44 Section 763B defines when a person makes a financial investment for the purposes of Ch 7. A person, referred to in the section as an investor, makes a financial investment if they give money or money’s worth (called the contribution) to another person and the other person uses the contribution to generate a financial return, or other benefit, for the investor, or either party intends that this will occur. However, the investment is only caught by the definition of a financial product if the investor has no day-to-day control over the use of the contribution to generate the return or benefit. The drafting shows some commonality with the definition of managed investment scheme, discussed in 3.17 above. The difference is that, for an arrangement to be a managed investment scheme, there must be pooling or a common enterprise: see 3.26 above. An arrangement that does not involve pooling or a common enterprise (and therefore is not a managed investment scheme) may nevertheless be a financial product, if it satisfies the other elements of the definition. 3.45 Examples of a person making a financial investment include acquiring shares or debentures, acquiring interests in a managed investment scheme, superannuation trust or investment-linked policy of life insurance, or depositing money with an ADI. However, the legislation explains in a note to the section that the definition would not catch ‘a person purchasing real property or bullion (while the property or bullion may generate a return for the person, it is not a return generated by the use of the purchase money by another person)’. Investments that involve a person taking active day-to-day control of the use of their contribution (such as general partnerships and joint ventures in the ordinary course) would also fall outside the definition. However s 763B(b) applies: … wherever the investor has, as a matter of fact, no day-to-day control over the use of the contribution for the purpose of generating a financial return or other benefit. The fact that the structure of the arrangement pursuant to which an investor gives another person money contemplates or provides that the investor will have an element of day-to-day control does not, … exclude the contribution from constituting a financial investment if, as a matter of fact, the investor has no day-to-day control over the investment of the contribution.83

A financial investment will be made in accordance with s 763B even if no benefit or return is in fact generated, where: A participant gives money to another person who uses that contribution to generate a financial return or other benefit for the participant; [page 143] The participant intends that the other person will use the contribution to generate a financial return or other benefit for him or her; and The other person intends the contribution will be used to generate a financial return or other benefit for the participants.84

Managing a financial risk 3.46 The second part of the functional definition is explained in Corporations Act s 763C. That section states that a person manages a financial risk if they manage the financial consequences to them of particular circumstances happening, or avoid or limit the financial consequences of fluctuations in, or in the value of, receipts or costs (including prices or interest rates). The notes to the section give as examples of managing financial risk taking out insurance, or hedging a liability by acquiring a futures contract or entering into a currency swap. However, the following is said to be an arrangement that does not constitute managing a financial risk: ‘employing a security firm (while that is a way of managing the risk that thefts will happen, it is not a way of managing the financial consequences if thefts do occur).’ While it is clear that this part of the definition was intended to catch insurance in various forms, and derivatives when used for hedging, the extent to which it extends beyond this is unclear. For example, pre-paid service contracts and extended warranty arrangements could potentially fall within the definition (although in practice many such arrangements, depending on the identity of the provider, and whether they are contracts of insurance for the purposes of the Corporations Act s 764A, may be

excluded by the incidental products exemptions discussed below).85 Concern over the breadth of this part of the definition led to the express exclusion from the definition of financial product of surety bonds (Corporations Regulations reg 7.1.07) and loss limiting arrangements in goods leases, including collision damage waivers: Corporations Regulations reg 7.1.07A. Certain structured investment and credit products may have elements of risk management embedded in them. This raises the possibility that such products may be subject to dual regulation, with the risk managements parts subject to, for example, the disclosure requirements in Pt 7.9 and the other parts of the product subject to different disclosure requirements (such as the consumer credit code or the prospectus requirements in Ch 6D). In International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 82 ACSR 517; [2011] NSWCA 50, all members of the Court of Appeal concluded that a litigation funding agreement was within the scope of s 763C. Giles JA (at [42]–[44]) took the view that, by entering into the agreement, the respondent had managed the financial consequences to it (such as an adverse costs order) of litigation by passing them, initially and perhaps forever, to the funder. This was done through the acquisition of the agreement, which his Honour considered was a facility within [page 144] the definition in the Act. The operation of the agreement, rather than the parties’ purpose in entering into it, is relevant. Hodgson JA took the view (at [122]) that: … plainly the funding agreement was a facility through which [the respondent] managed financial risk (within s 763A(1)(b) of the Act), in that it managed the financial consequences to itself of certain things happening (namely, adverse costs orders and loss of litigation, and possibly also the incurring of its own costs through pursuit of the litigation).

However, on appeal the High Court decided that the arrangement was outside the definition of financial product, because it was a ‘credit facility’ and therefore covered by the overarching exclusion in s 765A(h).86

Making non-cash payments 3.47 The functional definition of financial product in s 763A includes ‘a facility through which … a person … makes non-cash payments’. Section 763D says that, for the purposes of Ch 7, a person makes non-cash payments if they make payments, or cause payments to be made, otherwise than by the physical delivery of Australian or foreign currency in the form of notes and/or coins.87 Examples of actions that constitute making noncash payments given in the legislation are: making payments by means of a facility for direct debit of a deposit account; or making payments by means of a facility for the use of cheques; or making payments by means of a purchased payment facility within the meaning of the Payment Systems (Regulation) Act 1998 (Cth), such as a smart card; or making payments by means of travellers’ cheques (whether denominated in Australian or foreign currency). Of course, non-cash payment arrangements that involve the provision of credit by the supplier or a third party are not caught by Corporations Act s 763A, because of express exclusion of credit, including ‘an article known as a credit card or charge card’, from the definition of financial product by operation of s 765A(1)(h) and Corporations Regulations reg 7.1.06 (which overrides s 763D). There are various other non-cash payment arrangements that are specifically excluded from the definition of financial product by Corporations Act s 765(1)(y) and the related regulations, including money orders issued by Australia Post and telegraphic transfers and international money transfers offered by banks and remittance dealers: see Corporations Regulations regs 7.1.07F and 7.1.07G. The Explanatory Memorandum suggests that the technology through which the payment facility is offered is not itself a non-cash payment facility. The Explanatory Memorandum to the Financial Services Reform Bill states (at [6.59]): [page 145]

Who is the issuer of a particular financial product, including a noncash payment facility, is dealt with in proposed section 761E. In particular, proposed subsection 761E(4) makes it clear that the issuer of the product is the person who is responsible to the client or for the obligations owed under the terms of the product. In relation to noncash payments such as direct debit facilities, the issuer of the facility (who is subject to certain obligations under proposed Chapter 7, including financial service provider licensing and product disclosure) is the financial institution with which the account to be debited is held, rather than the person to whom payments can be made using the facility. Similarly, in relation to Automated Teller Machines (ATMs) it would be the financial institution with which the account being credited or debited through the use of the machine that would be the provider of the facility, not the supplier of the ATM.

Section 763D(2)(a)(i) expressly excludes from the definition a facility under which payments can be made to only one person (for example, a gift voucher from a particular retailer). There is provision in subpara (ii) of that section for facilities for payment by a limited number of payers, or to a limited number of payees, to be exempted by regulation. Section 763D(2)(b) and Corporations Regulations reg 7.1.08 have the effect of excluding from the definition a facility that is a letter of credit from a financial institution, a cheque drawn by a financial institution on itself or another financial institution, or a guarantee from a financial institution. Non-cash payment facilities are discussed in ASIC Regulatory Guide 185 — Non-Cash Payment Facilities, November 2005 ASIC has issued a number of exemptions relating to non-cash payment facilities, including Class Orders 03/705 (licensing relief), 05/736 (low value facilities), 05/737 (loyalty schemes), 05/738 (gift facilities), 05/740 (road toll facilities), and 05/740 (pre-paid mobile facilities).

Incidental financial products 3.48 Given the breadth of the functional definition in Pt 7.1 Div 3 Subdiv B, it is clear that it could catch things that are technically within the definition, but are part of a broader arrangement that, when viewed as a whole, does not have as its primary purpose investment, financial risk management, or payments. An example would be a manufacturer’s warranty provided in connection with the sale of goods. The primary purpose of the transaction is the sale of goods — the manufacturer’s

warranty (which might potentially fall within Corporations Act ss 763A(1) (b) and 763C) is only incidental to that sale. Section 763E therefore provides that if something that would otherwise be a financial product because of the general definition in Corporations Act s 763A is ‘an incidental component of a facility that also has other components, or is a facility that is incidental to one or more other facilities’ and it is reasonable to assume that the main purpose of the components or facilities viewed as a whole is not a financial product purpose, it is not a financial product. ‘Financial product purpose’ means a purpose of making a financial investment, managing financial risk, or making non-cash payments: Corporations Act s 763E(2). It is important to note that Corporations Act s 763E asks us to look to the main [page 146] purpose of the components or facilities viewed as a whole, rather than just to any substantial purpose. Section 763E is discussed in the Explanatory Memorandum to the Financial Services Reform Bill (at [6.46]) in the following terms: Proposed section 763E is intended to ensure that the definition of ‘financial product’ does not pick up a range of consumer transactions that have an element, but not the primary purpose, of for example managing a financial risk. For example, the definition of ‘managing a financial risk’ could potentially cover warranty periods or guarantees in contracts for the sale of goods, or card registration services with the incidental benefit that the consumer will not be liable for any unauthorised use of a credit card between the time the service is notified of the loss and the time the service notifies the issuing bank. Similarly, a security bond arrangement by a telecommunications provider, which provided for the payment of interest, could be a facility for the making of a financial investment. Under proposed section 763E where the financial product purpose (making a financial investment, managing a financial risk, or making a noncash payment) is incidental to the main purpose of a facility, it is not to be regarded as a financial product.

3.49 Section 763E will not exclude from the definition of financial product anything that is expressly included by Subdiv C. This means that the products and arrangements specified in Corporations Act s 764A will always be financial products, even where the main purpose for entering

into them is not a financial product purpose. The Explanatory Memorandum states (at [6.47]) that: Proposed section 763E only applies to the general definition of ‘financial product’. Thus to the extent that a product comes within the list of specific inclusions in proposed section 764A, it will come within the regime whether or not it is incidental to the main purpose of a facility. This means that products such as insurance associated with taking out a home loan or consumer credit insurance would be regulated under the regime, as would superannuation associated with a contract of employment.

Financial instruments expressly included 3.50 Section 764A contains a list of express inclusions: that is, things that are financial products whether or not they come within the functional definition in Subdiv B.

Securities 3.51 Securities are expressly included in the definition of financial products: see s 764A(1)(a). For this purpose the definition of ‘security’ in Corporations Act s 761A applies. Accordingly, the reference to securities is to shares in a body, debentures of a body, legal or equitable rights or interests in shares or debentures, and options to acquire, by way of issue, a security of this type. Where the expression ‘security’ is used in Ch 7 of the Corporations Act, it has the meaning set out in Corporations Act s 761A. This includes, in para (e): … a right (whether existing or future and whether contingent or not) to acquire, by way of issue, the following under a rights issue: (i) a security covered by

[page 147] [s 761A(1)] (a), (b), (c) or (d); (ii) an interest or right covered by paragraph 764A(1)(b) or (ba).

Rights under a rights issue are not treated as securities for any other purposes (for example, they are not securities for the purposes of the fundraising provisions in Corporations Act Ch 6D). Section 9A of the

Corporations Act contains a technical definition of ‘rights issue’ that applies for this purpose; in broad terms, a rights issue is an offer, made on the same terms to every person who owns securities in a particular class, to issue them (or their assignee, in the case of a renounceable rights issue) with the percentage of the securities to be issued that is the same as the percentage of the securities in that class that they hold before the offer. Because these rights are treated as securities for Ch 7 purposes, they are financial products by operation of Corporations Act s 764A(1)(a) and ASIC Act s 12BAA(7)(a).

Managed investment scheme interests 3.52 The definition of financial products includes an interest in a registered managed investment scheme, or in a managed investment scheme that, while not registered, has more than 20 members, is promoted by a professional promoter, or is one of a group of schemes declared by ASIC to be related that between them have more than 20 members: Corporations Act s 764A(1)(b) and (ba). The definition of managed investment scheme is discussed in 3.16 above. Interests in private schemes (that is, managed investment schemes in relation to which none of paras 601ED(1)(a), (b) or (c) is satisfied) are not financial products for the purposes of Ch 7 of the Corporations Act (although they are financial products for the purposes of ASIC Act Pt 2 Div 2: see 3.35 above).

Derivatives 3.53 The definition of financial product also includes a derivative: Corporations Act s 764(1)(c). The definition of ‘derivative’ is contained in Corporations Act s 761D, and is discussed at 3.36 above.

Prudentially regulated products 3.54 The list of financial arrangements expressly included in the definition also includes a variety of prudentially regulated insurance, superannuation and banking products. These products are not generally traded on financial markets. The express inclusions in s 764(1)(d)–(i) include:

Insurance: this includes a general insurance product, a life risk insurance product, or an investment life insurance product, but excludes benefits provided by an association of employees that is an organisation for the purposes of the Workplace Relations Act 1996 (Cth), superannuation benefits, pensions and payments to employees provided by an employer, funeral benefits, or policies issued by an employer to an employee. Superannuation: this includes an interest in a regulated superannuation fund, an approved deposit fund, or a pooled superannuation trust. Certain superannuation products are, however, expressly excluded from the definition: see below. A retirement savings account within the meaning of the Retirement Savings Account Act 1997 (Cth), is also included. [page 148] Bank deposits: that is, any deposit-taking facility made available by an ADI in the course of its banking business.

Government securities 3.55 The definition of financial product also includes ‘a debenture, stock or bond issued or proposed to be issued by a government’: Corporations Act s 764(1)(j). Government securities are also included in the definition of securities contained in Corporations Act s 92(1). The effect of including government securities in the definition of financial product is primarily to regulate the conduct of secondary markets in those products, as Ch 7 does not apply to the activities of governments as issuers. Section 5A(4) of the Corporations Act provides that ‘a provision of Chapter 6A or 7 only binds the Crown in a particular capacity in circumstances (if any) specified in the regulations’ (of which there are none). For this purpose, a reference to the Crown in a particular right ‘includes a reference to an instrumentality or agency (whether a body corporate or not) of the Crown in that right’: Corporations Act s 5A(1). As to whether a government-owned corporation that issues financial products is acting as the Crown, see Re Queensland

Power Trading Corporation and Australian Securities and Investments Commission (2005) 89 ALD 346 (AAT).

Foreign exchange 3.56 Section 764A(1)(k) treats certain foreign exchange contracts as financial products. In particular, foreign currency transactions where currency is not immediately exchanged are treated as financial products. However, foreign exchange contracts that are derivatives are treated as derivatives.

Emission units 3.57 Finally, s 764A(1)(ka) includes ‘an Australian carbon credit unit’ as defined in the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) and s 764A(1)(kb) includes an ‘eligible international emissions unit’ as defined in the Australian National Registry of Emissions Units Act 2011 (Cth).

Financial instruments expressly excluded 3.58 Section 765A contains a list of express exclusions from the definition of financial product. Things that are on this list are not financial products even if they come within the functional definition in Subdiv B. They include: an excluded security (that is, a retirement village interest); an undertaking by a body corporate to pay money to a related body corporate. This would exclude from the definition debentures issued to a related body corporate; health insurance; certain government insurance, including insurance provided by the Commonwealth, state insurance and Northern Territory insurance, and export finance insurance; reinsurance; [page 149]

credit facilities (the definition of ‘credit facility’ is discussed below); certain netting and settlement systems, and financial markets; foreign currency exchange (but note that this does not exclude foreign currency derivatives); certain contracts for the sale or purchase of tangible property at a future time that are not derivatives because they cannot be cash settled or set off. Contracts of this kind that allow for the price to be adjusted in the future by reference to an index such as Consumer Price Index (CPI) are also excluded; an interest in an exempt public sector superannuation scheme; interests in general partnerships, managed investment schemes comprised wholly of related bodies corporate, franchises, barter schemes, retirement village schemes, and Western Australian cooperatives; deposit-taking facilities used for state banking; certain union-related benefits, and insurances issued by employers to employees; funeral benefits; and physical equipment or physical infrastructure by which something else that is a financial product is provided. So, for example, an ATM through which non-cash payments can be made is not itself a financial product. The legislation allows for other facilities, interests and things to be declared by regulation to be excluded from the definition of financial product. Things excluded by regulation include: interests in exempt public sector superannuation schemes; surety bonds; waivers and loss reduction arrangements in rental agreements (for example, collision damage waiver insurance for a rental car); bank drafts: that is, cheques drawn by a financial institution on itself or on another financial institution; overseas student health insurance contracts; funeral expenses policies; rights of a debenture holder against the trustee; Australia Post money orders and electronic fund transfers; and Australian Capital Territory insurance: see Corporations Regulations regs 7.1.05–7.1.05H. ASIC also has power to declare that things are excluded from the definition of financial product, under Corporations Act s 765A(2).

Credit facilities 3.59 The definition of financial product in the Corporations Act expressly excludes credit facilities (other than margin lending): s 765A(1) (h). The definition of ‘margin lending facilities’ in s 761EA is discussed at 3.38 above. As the Explanatory Memorandum to the Financial Services Reform Bill notes, credit facilities would not ordinarily be caught by the functional definition of financial product in Pt 7.1 Div 3 Subdiv B, if they are not a means or facility by which a person makes a financial investment, manages a financial risk or makes non-cash payments. However, the line between credit and other forms of financial instruments or arrangements is not always clear. The Explanatory Memorandum notes, for example, that ‘fixed rate loans could have been regarded as a facility for managing financial risk and credit [page 150] cards would have been facilities for making non-cash payments’.88 Accordingly, it was thought appropriate to make it clear that any form of facility that would be regarded as credit is outside the regulatory reach of Ch 7. Corporations Act s 765A(1)(h) excludes from the definition of financial product ‘a credit facility within the meaning of the regulations’ and ‘a facility for making non-cash payments … if payments made using the facility will all be debited to a credit facility’. The definition of ‘credit facility’ is set out in Corporations Regulations reg 7.1.06(1) and includes various arrangements for the provision of credit. ‘Credit’ is defined in Corporations Regulations reg 7.1.06(2)(a) as a contract, arrangement or understanding under which payment of a debt owed by one person to another person is deferred, or one person incurs a deferred debt to another person, including the following: any form of financial accommodation; a hire–purchase agreement; credit provided for the purchase of goods or services; certain arrangements for the hire, lease or rental of goods or services;

an article known as a credit card or charge card; an article, other than a credit card or a charge card, intended to be used to obtain cash, goods or services; an article, other than a credit card or a charge card, commonly issued to customers or prospective customers by persons who carry on business for the purpose of obtaining goods or services from those persons by way of a loan; a liability in respect of redeemable preference shares; a financial benefit arising from, or as a result of, a loan; assistance in obtaining a financial benefit arising from, or as a result of, a loan; issuing, indorsing or otherwise dealing in a promissory note; drawing, accepting, indorsing or otherwise dealing in a negotiable instrument (including a bill of exchange); granting or taking a lease over real or personal property; and a letter of credit. A litigation funding agreement was held to be a credit facility for this purpose by the High Court in International Litigation Partners Pte Ltd v Chameleon Mining NL (2012) 246 CLR 455; 91 ACSR 473; [2012] HCA 45. Importantly, both the plurality (French CJ, Gummow, Crennan and Bell JJ) and Heydon J emphasised the broad scope of the definition of credit. The plurality noted (at [26] and [28]) that: … the term ‘credit’ is defined in reg 7.1.06(3)(a) as meaning a contract, arrangement or understanding under which payment of a debt to the credit provider ‘is deferred’, and as including ‘any form of financial accommodation’ (reg 7.1.06(3)(b)(i)). The use in this way of the concept ‘means and includes’ is

[page 151] to avoid any doubt that what is identified by the inclusion falls within the scope of the designated meaning of ‘credit’. The result is that a contract, arrangement or understanding that is any form of financial accommodation is ‘credit’, and its provision ‘for any period’ will be a ‘credit facility’. … The expression ‘a contract, arrangement or understanding … [for] any form of financial

accommodation’ (emphasis added) is of considerable width of denotation. For example, an agreement by a bank to lend its name to a bill of exchange for the accommodation of its customer provides a form of financial accommodation, as is reflected in the expression ‘accommodation bill’. The same may be said for the provision of a guarantee of the obligations to the creditor of the principal debtor. The extension by a bank to a customer of an overdraft facility provides a form of financial accommodation in respect of the presently undrawn portion of the overdraft. Further, the inclusion of the words ‘arrangement or understanding’ indicates that regard may be had to matters of substance as well as of form.

Heydon J rejected the submission that ‘credit’ required: an ‘element of a definite unavoidable obligation but with a concept of deferral’, taking the view that ‘this construction imposes restrictions on the definition of credit considered in the context of a facility for providing credit in the form of “financial accommodation” which are not present in the statutory language’. His Honour concluded that ‘“Accommodation” is a wide expression … the words “any” and “form” in the expression “any form of financial accommodation” indicate that it is an expression to be construed amply’: at [44].

ASIC ACT DEFINITION OF FINANCIAL PRODUCT 3.60 Part 2 Div 2 of the ASIC Act contains the unconscionable conduct and consumer protection laws that apply to the financial sector as a whole, to the exclusion of the Australian Consumer Law as it applies as a law of the Commonwealth pursuant to ss 131 and 131A of the Competition and Consumer Act 2010 (Cth) (CCA).89 The scope of ASIC Act Pt 2 Div 2 is determined by the definition of financial product and, in turn, financial service contained in ASIC Act ss 12BAA and 12BAB. The definition of financial product contained in ASIC Act s 12BAA is not identical to that contained in Pt 7.1 Div 3 of the Corporations Act. Importantly, certain things that are excluded from the definition of financial product for the purposes of Ch 7 of the Corporations Act are not excluded from the ASIC Act definition. The most significant difference is that the ASIC Act definition of financial product expressly includes credit facilities (see ASIC Act s 12BAA(7)(k) and ASIC Regulations reg 2B) while the Corporations Act definition of financial product expressly excludes

them (see Corporations Act s 765A(1)(h) and Corporations Regulations reg 7.1.06): see 3.59 above. [page 152] In broad terms, ASIC Act s 12BAA(1), (2) and (3) correspond to Corporations Act s 763A(1), (2) and (3), and ASIC Act s 12BAA(4), (5) and (6) to Corporations Act ss 763B, 763C and 763D respectively. The exceptions to the definition of non-cash payment facilities in Corporations Act s 763D(2) are not mirrored in the ASIC Act. The ASIC Act does not contain a provision corresponding to Corporations Act s 763E, carving out arrangements that are financial products only incidentally. Section 12BAA(7) contains a list of things that are financial products for the purposes of ASIC Act Pt 2 Div 2; the list broadly corresponds to that in Corporations Act s 764A(1) but is not identical to it. The most important difference is ASIC Act s 12BAA(7)(k), which has the effect of including credit facilities in the ASIC Act definition of financial product. There are other differences also. For example, ASIC Act s 12BAA(7)(b) includes all interests in managed investment schemes, while Corporations Act s 764A(1)(b) and (ba) only include interests in registered or unregistered non-private schemes. Some contracts of insurance, life policies and sinking fund policies that are not caught by the Corporations Act definition are included in the ASIC Act definition: compare ASIC Act s 12BAA(7)(d) and (e) and Corporations Act s 764A(1)(d), (e) and (f). A broader range of superannuation interests and foreign exchange contracts is caught by the definition in the ASIC Act: compare ASIC Act s 12BAA(7)(f) and (j) and Corporations Act s 764A(1)(g) and (k). Section 12BAA(8) of the ASIC Act provides that certain financial arrangements are not financial products for the purposes of ASIC Act Pt 2 Div 2. The list is not identical to that contained in Corporations Act s 765A(1). The various things that are excluded from the definition of financial product by Corporations Regulations regs 7.1.05–7.1.05H, mentioned in 3.58 above, are not excluded from the ASIC Act definition.

___________________________ 1.

As Graham J observed in Ku v Song (2007) 63 ACSR 661 at 705 in relation to the share transfer provisions in Corporations Act Pt 7.11, the legislation often requires reference to ‘numerous definitions, often shrouded in obfuscation, and, needless to say, strewn throughout the Corporations Act and the Corporations Regulations in various places such as ss 9 and 761A and regulations 1.0.02 and 7.11.01’, leading his Honour to observe that ‘why the law had to be expressed in such an obscure way beggars belief’. In International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 82 ACSR 517; [2011] FCAFC 50, Young JA said (at [152]–[153]): ‘It might be remarked at this initial stage that Ch 7 of the Corporations Act is drafted in the most obscure and convoluted manner … I know it is our job to make plain what is obscure, and I know that commercial lawyers are thought by the legislature to be so able to find loopholes that every possible eventuality must be thought of and covered. However, the main aim is to protect the investing public and the investing public gain little comfort from obscure legislation.’

2.

Keynes v Rural Directions Pty Ltd (2010) 186 FCR 281; 79 ACSR 405; [2010] FACFC 100; International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 82 ACSR 517; [2011] NSWCA; reversed International Litigation Partners Pte Ltd v Chameleon Mining NL (2012) 246 CLR 455; (2012) 292 ALR 233; (2012) 86 ALJR 1289; (2012) 91 ACSR 473; [2012] HCA 45.

3.

Reversed International Litigation Partners Pte Ltd v Chameleon Mining NL (2012) 246 CLR 455; (2012) 292 ALR 233; (2012) 86 ALJR 1289; (2012) 91 ACSR 473; [2012] HCA 45.

4.

‘Managed investment product’ is defined in s 761A and means a financial product described in s 764A(1)(b): that is, an interest in a registered scheme, a legal or equitable right or interest in such an interest, or an option to acquire either by way of issue.

5.

First home owner savings accounts, which were previously included in the definition of ‘financial product’, were abolished in July 2015.

6.

See also Borland’s Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279 at 288.

7.

The rights and liabilities attaching to shares are discussed in J H Farrar and P F Hanrahan, Corporate Governance, LexisNexis Butterworths, 2016, Ch 20.

8.

Loxton v Moir (1914) 18 CLR 360 at 379 per Rich J; Torkington v Magee [1902] 2 KB 427 at 430; J G Starke, Assignment of Choses in Action in Australia, Butterworths, Sydney, 1972, pp 1–9; Emu Brewery Mezzanine Ltd v Australian Securities and Investments Commission (2006) 32 WAR 204; 57 ACSR 752; [2006] WASCA 105 at [31] per McLure JA.

9.

Macquarie was concerned that the HYENAs may be ‘securities’, and sought comfort relief from ASIC under Corporations Act s 741 to the effect that disclosure under Ch 6D was not required. ASIC refused the relief and concluded that HYENAs were securities; Macquarie then applied to the AAT for a review of ASIC’s decision. The HYENA was described by the AAT (at 516) as ‘a complex hybrid product which is relatively difficult to understand and involves a number of contingencies’. The holder of the HYENA was entitled to receive payments from Macquarie in the nature of ‘interest paid … by reference to individual shares listed on ASX and their perceived volatility’ and ‘repayment of the principal … by reference to the market value of the share at the date of maturity’. See J Donnan, ‘Debentures, Derivatives and Managed Investment Schemes — The Characterisation and Regulation of Investment Instruments’ (2002) 13 JBFLP 28–35.

10.

ASIC Report 201 — Review of Disclosure for Capital Protected Products and Retail Structured or Derivative Products, July 2010.

11.

It is an either/or question, because if an instrument is a debenture it is carved-out of the definition

of derivative, see 3.36 below. 12.

Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 at [23]–[24].

13.

ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; (2014) 309 ALR 445; (2014) 99 ACSR 336; [2014] FCAFC 65 at [700].

14.

An ADI is an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cth) and a person who carries on state banking within the meaning of para 51(xiii) of the Commonwealth Constitution.

15.

See Royal Bank of Canada v Inland Revenue Commrs [1972] Ch 665.

16.

Commr of Taxation v Hyteco Hiring Pty Ltd (1992) 39 FCR 502 at 513.

17.

See Re Macquarie Bank Ltd and Australian Securities and Investments Commission (2001) 39 ACSR 508; [2001] AATA 868 at ACSR 516.

18.

See New Cap Reinsurance Corporation Ltd v Daya (2008) 66 ACSR 95; [2008] NSWSC 64.

19.

See, for example, Australian Securities and Investments Commission v Emu Brewery Mezzanine Ltd (2004) 52 ACSR 168; [2004] WASC 241; Financial Industry Complaints Service Ltd v Deakin Financial Services Pty Ltd (2006) 157 FCR 229; 60 ACSR 372; [2006] FCA 1805; Re York Street Mezzanine Pty Ltd (in liq) (2007) 162 FCR 358; 64 ACSR 1; [2007] FCA 992.

20.

For a detailed discussion of Ch 2L see R Austin and I Ramsay, Ford, Austin and Ramsay’s Principles of Corporations Law, 16th ed, LexisNexis Butterworths, Sydney, 2015, Ch 19.

21.

See Bond Corporation Pty Ltd v White Industries Ltd [1980] 2 NSWLR 351.

22.

See ASIC Regulatory Guide 30 — Paperless Issues and Transfers under a Global Debenture, June 2009.

23.

See P Hanrahan, Funds Management in Australia: Officers’ Duties and Liabilities, LexisNexis Butterworths, Sydney, 2007, Ch 1.

24.

Parliament of Victoria Report from the Statute Law Revision Committee on Amendments of the Statute Law to Deal with Fraudulent Practices by Persons Interested in the Promotion and/or Direction of Companies and by Firms, 26 October 1954.

25.

In response, the Victorian Parliament introduced measures to regulate the promotion of these alternative investment arrangements. These measures prohibited the offer of interests in such schemes by anyone other than a public company, and required the issue of a prospectus in relation to the offer, the appointment of an approved trustee, and the adoption of an approved deed. The operator of the scheme was required to use its best endeavours to carry on and conduct the business of the company in a proper and efficient manner and to ensure that any business or scheme to which the deed related was carried on and conducted in a proper and efficient manner. It was also required to provide certain information to the trustee and to convene a meeting of the investors on their requisition.

26.

For an overview of the requirements of Corporations Act Ch 5C see P Hanrahan, Funds Management in Australia: Officer’s Duties and Liabilities, LexisNexis Butterworths, Sydney, 2007, Ch 4.

27.

See Australian Securities and Investments Commission v Hutchings (2001) 38 ACSR 387; [2001] NSWSC 522; Australian Securities and Investments Commission v Emu Brewery Mezzanine Pty Ltd (2004) 52 ACSR 168; [2004] WASC 241; Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 79 ACSR 684; [2010] NSWSC 1087 at [63]–[65].

28.

For a detailed discussion of the history of regulation in this area see P Hanrahan, Managed

Investments Law & Practice, looseleaf, CCH, ¶2-100–¶2-700; P Hanrahan, ‘ASIC and Managed Investments’ (2011) 29 C&SLJ 287. 29.

Also included in the definition (in para (b)) are time-sharing schemes. A time-sharing scheme is an arrangement that allows people to use or occupy property for periods of time that operates over three or more years. The statutory definition is ‘… a scheme, undertaking or enterprise, whether in Australia or elsewhere: (a) participants in which are, or may become, entitled to use, occupy or possess, for 2 or more periods during the period for which the scheme, undertaking or enterprise is to operate, property to which the scheme, undertaking or enterprise relates; and (b) that is to operate for a period of not less than 3 years’. Time-sharing schemes are regulated in accordance with ASIC Regulatory Guide 160 — Time Sharing Schemes, June 2012. They are not discussed in this book.

30.

The different elements of para (a) of the definition are discussed in detail in P Hanrahan, Managed Investments Law & Practice, looseleaf, CCH, ¶6-100–¶6-250.

31.

In particular, Australian Softwood Forests Pty Ltd v Attorney-General for NSW (1981) 148 CLR 121; 6 ACLR 45; [1981] HCA 49.

32.

See Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd (1999) 33 ACSR 403; [1999] QSC 387; upheld on appeal in Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd (2000) 35 ACSR 620; [2000] QCA 452 at [17]; Burton v Arcus (2006) 32 WAR 366; 57 ACSR 468; [2006] WASCA 71 at [51]; Australian Securities and Investments Commission v Emu Brewery Mezzanine Ltd (2004) 52 ACSR 168; [2004] WASC 241 at [80]; Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 at [23]–[24].

33.

Carragreen Currency Corporation Pty Ltd v Corporate Affairs Commission (NSW) (1987) 5 ACLC 148 per Hodgson J. Note that this appears to depart from the approach taken by the Full Federal Court in interpreting the definition of ‘debenture’ in ABN AMRO, discussed in 3.10 above.

34.

Australian Securities and Investments Commission v Emu Brewery Mezzanine Ltd (2004) 52 ACSR 168; [2004] WASC 241 at [80].

35.

Australian Softwood Forests Pty Ltd v Attorney-General for NSW (1981) 148 CLR 121; 6 ACLR 45; [1981] HCA 49, per Mason J at ACLR 51, quoted in Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd (1999) 33 ACSR 403; [1999] QSC 387 at [17] and Australian Securities and Investments Commission v Emu Brewery Mezzanine Ltd (2004) 52 ACSR 168; [2004] WASC 241 at [81].

36.

Australian Securities and Investments Commission v Enterprise Solutions 2000 Pty Ltd (1999) 33 ACSR 403; [1999] QSC 387 at [17].

37.

ALRC and CASAC, Report No 65, Collective Investments: Other People’s Money, 1993.

38.

ALRC/CASAC, Report No 65, above at [3.5].

39.

Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 27 ACLC 712; [2009] FCA 450 at [6].

40.

Examples include Australian Securities and Investments Commission v Knightsbridge Managed Funds Ltd [2001] WASC 339; Re Lawloan Mortgages Pty Ltd (2002) 172 FLR 241; Australian Securities and Investments Commission v Takaran Pty Ltd (2002) 170 FLR 388; [2002] NSWSC 834; Australian Securities and Investments Commission v Atlantic 3 Financial (Aust) Pty Ltd (2003) 47 ACSR 52; Australian Securities and Investments Commission v Piggott, Wood & Baker [2006] FCA 1774; Australian Securities and Investments Commission v West (2008) 100 SASR 496; 66 ACSR 143; [2008] SASC 111.

41.

See Australian Securities and Investments Commission v Landy DFK Securities Ltd (2002) 20 ACLC 1613; Australian Securities and Investments Commission v Tasman Investment Management Ltd (2006) 193 FLR 297; Australian Securities and Investments Commission v Primelife Corp Ltd (2005) 54 ACSR 536; Mier v FN Management Pty Ltd (2005) 56 ACSR 93; Australian Securities and Investments Commission v Mount Warren Park (Nominees) Pty Ltd (2005) 56 ACSR 43; Emu Brewery Mezzanine Ltd (in liq) v ASIC (2006) 32 WAR 204; Re GDK Financial Solutions Pty Ltd (2006) 202 FLR 343; Lake Coogee Estate Management Pty Ltd v Australian Securities and Investments Commission (2006) 60 ACSR 281; Australian Securities and Investments Commission v Frasers Project Managers Pty Ltd [2008] FCA 541; Australian Securities and Investments Commission v Letten [2010] FCA 140.

42.

See Australian Securities and Investments Commission v Chase Capital Management Pty Ltd (2001) 36 ACSR 778; Australian Securities and Investments Commission v Hutchings (2001) 38 ACSR 387; Australian Securities and Investments Commission v ABC Fund Managers Ltd (2001) 39 ACSR 443; Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561; Australian Securities and Investments Commission v Commercial Nominees of Australia Ltd (2002) 42 ACSR 240; Australian Securities and Investments Commission v Drury Management Pty Ltd [2003] QSC 285; Australian Securities and Investments Commission v Comcash Australasia Pty Ltd (2004) 59 ACSR 632; Australian Securities and Investments Commission v Arafura Equities Pty Ltd (2005) 56 ACSR 429; Australian Securities and Investments Commission v McDougall (2006) 57 ACSR 175; Australian Securities and Investments Commission v Mercorella (No 2) (2006) 230 ALR 598; Australian Securities and Investments Commission v Risqy Ltd [2008] QSC 107; Australian Securities and Investments Commissions v IIdylic Solutions Ltd; Australian Securities and Investments Commission v PJCB International Ltd (2009) 76 ACSR 129.

43.

See Australian Securities and Investments Commission v McNamara (2002) 42 ACSR 488 (for the recovery of shipwrecks); Australian Securities and Investments Commission v Edwards (2004) 22 ACLC 1469; Australian Securities and Investments Commission v Fuelbanc Australia Ltd (2007) 64 ACSR 17.

44.

Australian Softwood Forests Pty Ltd v Attorney-General for NSW (1981) 148 CLR 141; 6 ACLR 45; [1981] HCA 49 per Mason J.

45.

Cited with approval by Gilmour J (with whom Spender J agreed) in National Australia Bank Ltd v Norman (2009) 180 FCR 243; 74 ACSR 561; [2009] FCAFC 152.

46.

See Crocombe v Pine Forests of Australia Pty Ltd (2005) 219 ALR 692; [2005] NSWSC 15 at [52]–[53]; and Burton v Arcus (2006) 32 WAR 366; 57 ACSR 468; [2006] WASCA 71 at [56]–[57].

47.

Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; 74 ACSR 447; [2009] FCAFC 147 at [99]. Their Honours go on to clarify that ‘We do not mean to imply that land may never be pooled’.

48.

WA Pines Pty Ltd v Hamilton (1980) CLC ¶40-654.

49.

Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (2012) 301 ALR 1; [2012] FCA 1028 at [1209].

50.

On the distinction between a franchise and a managed investment scheme, see, for example, Australian Securities and Investments Commission v Austral Timber Pty Ltd (1999) 17 ACLC 1697; and Enviro Systems Renewable Resources Pty Ltd v Australian Securities and Investments Commission (2001) 80 SASR 1; 36 ACSR 762; [2001] SASC 11.

51.

ASIC has exercised its exemption powers extensively. Among those managed investment schemes that may be exempt from registration (depending on the terms on which the arrangement is offered, the size of the venture and the identity of the person offering it) are ASIC Regulatory Guide 91 — Horse Racing and Breeding Schemes; ASIC Regulatory Guide 77 — Property Trusts and Property

Syndicates; ASIC Regulatory Guide 87 — Charities; ASIC Regulatory Guide 49 — Employee Share Schemes; ASIC Regulatory Guide 148 — Investor Directed Portfolio Services; ASIC Regulatory Guide 149 — Nominee and Custody Services; and ASIC Regulatory Guide 179 — Managed Discretionary Accounts Services. 52.

There are many examples of ‘stapled securities’ quoted on ASX. A stapled security consists of two or more financial instruments (for example, a share in a company and an interest in a registered managed investment scheme) bound together (usually by contract) in such a way that one instrument cannot be dealt with without the other. The price and distribution reflects the combined performance of the two issuing entities. For example, in the property sector, the staple may consist of a unit in a trust that owns the real property, and a share in the responsible entity (that is, the public company that operates the trust). The use of such a structure can produce taxation advantages for investors.

53.

ASIC Annual Report 2014–15. p 27. This does not include registered schemes described by ASIC as being in ‘wind up or strike off’.

54.

The term ‘managed fund’ is used to describe a scheme that holds a basket of financial assets selected by the operator and held on trust for the investors in the scheme. The main sub-categories of managed fund are cash; cash enhanced; equities; specialist equities; bonds; yield; alternative; and multi-sector. Although a meaningful breakdown of registered schemes by type is difficult, it is likely that about 3000 registered schemes fall into this category.

55.

For information about all ASX-listed schemes, see . Note that not all vehicles classified by ASX as listed managed funds are structured as registered managed investment schemes.

56.

Also known as listed property trusts. There were approximately 60 A-REITs (structured either as stand-alone trusts or as stapled securities) listed on ASX.

57.

This includes direct property trusts and syndicates (that own particular real estate assets) and unlisted schemes that invest in these direct property arrangements. Most are fixed term.

58.

This includes pooled mortgage funds and contributory mortgage schemes..

59.

This group includes a mix of infrastructure assets, such as toll roads and airports.

60.

These divide into forestry schemes and other agribusiness (such as horticulture, aquaculture and viticulture).

61.

The nature of the members’ interest in a scheme structured as a unit trust is discussed in P Hanrahan, Managed Investments Law & Practice, looseleaf, CCH, [65-300]. See also CPT Custodian Pty Ltd v Commr of State Revenue (2005) 224 CLR 98; [2005] HCA 53.

62.

CSLRC Discussion Paper 6 — Prescribed Interests. May 1987, Ch 4.

63.

P Hanrahan, ‘ASIC and Managed Investments’ (2011) 29 C&SLJ 287 at 309–10. See also CAMAC, Managed Investment Schemes — Report, July 2012.

64.

Prior to the enactment of the Financial Services Reform Act 2001 (Cth), the Corporations Law separately regulated futures.

65.

Explanatory Memorandum to the Financial Services Reform Bill, [6.72].

66.

Futures and forward rate agreements involve an agreement to buy or sell an asset at a given price on a future date.

67.

Options contracts give one party the right (but not the obligation) to buy or sell an asset in the future.

68.

Swaps involve an interest rate or currency exchange. In the case of an interest rate swap, one party is obliged to pay a fixed interest rate to the other party in return for a floating interest rate.

69.

Parliamentary Joint Committee on Corporations and Securities, Report on Derivatives, 1995, [1.3]– [1.5].

70.

On appeal, the High Court held that the funding agreement was a credit facility and therefore not a financial product for the purposes of Ch 7 of the Corporations Act: International Litigation Partners Pte Ltd v Chameleon Mining NL (2012) 246 CLR 455; 91 ACSR 473; [2012] HCA 45.

71.

For examples of the possibility of regulatory and definitional overlap in Ch 7 see T Ciro, ‘Functional Regulation and Financial Products: Regulatory Interplay Between Financial Derivatives and Contracts of Insurance’ (2002) 13 JBFLP 5; and J Donnan, ‘Debentures, Derivatives and Managed Investment Schemes — The Characterisation and Regulation of Investment Instruments’ (2002) 13 JBFLP 28.

72.

ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; 99 ACSR 336; [2014] FCAFC 65 at [658].

73.

This is because s 765A(1)(h) expressly excludes ‘a credit facility within the meaning of the regulations (other than a margin lending facility)’. Credit facility is defined for this purpose in Corporations Regulations reg 7.1.06.

74.

In contrast the definition of ‘financial product’ in s 12BAA(7)(k) includes a credit facility as defined in Australian Securities and Investments Commission Regulations 2001 (Cth) reg 2B.

75.

For a general discussion of this type of facility, see P Ali, I Ramsay and B Saunders ‘The Legal Structure and Regulation of Securities Lending’ CIFR Working Paper No 022/2014, May 2014.

76.

See Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into Financial Products and Services in Australia, November 2009, Ch 3; S Steele, ‘Lessons (to be) Learnt from the Opes Prime Insolvency’ (2008) 32 MULR 1127; W Murray, ‘Regulation of Margin Loans — Before and After the New Amendments to the Corporations Act 2001 (Cth)’ (2011) 26 AJCL 299.

77.

See Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 246 ALR 361; 66 ACSR 116; [2008] FCA 594.

78.

Financial System Inquiry Final Report, March 1997, pp 235–6.

79.

Above, p 277.

80.

Explanatory Memorandum to the Financial Services Reform Bill 2001, [1.6].

81.

Explanatory Memorandum to the Financial Services Reform Bill, [6.38] says: ‘Where a facility includes a number of components, only one of which is a financial product, the Chapter will only apply to the facility to the extent to which it consists of a financial product. For example, some banking products may involve dual credit and debit facilities. The [Act] will only apply to the debit aspects of the facility and not the credit aspects.’

82.

‘Facility’ is defined as including intangible property, an arrangement or term of an arrangement (including a term that is implied by the law or required by law to be included), or a combination of intangible property and an arrangement or term of an arrangement. Two or more arrangements together can constitute a single arrangement where they come within the terms of s 761B. Section s 761B operates where it is reasonable to assume that parties to two or more arrangements regard them as constituting a single scheme, and if they were a single arrangement, the constituent parts would together comprise a financial product.

83.

Australian Securities and Investments Commission v PFS Business Development Group Pty Ltd (2006) 57 ACSR 553; [2006] VSC 192 at [352].

84

Australian Securities and Investments Commission v Fuelbanc Australia Ltd (2007) 162 FCR 174; 64 ACSR 17; [2007] FCA 960 at [34].

85.

See The Barclay MIS Group of Companies Pty Ltd v Australian Securities and Investments Commission (2002) 125 FCR 374; [2002] FCA 1606.

86.

International Litigation Partners Pte Ltd v Chameleon Mining NL (2012) 246 CLR 455; 91 ACSR 473; [2012] HCA 45.

87.

For a brief discussion of Ch 7 and non-cash payments see A Tyree, ‘CLERP 6 and Payments’ (2000) 11 JBFLP 112.

88.

Explanatory Memorandum to the Financial Services Reform Bill 2001, [6.84].

89.

CCA s 131A(1) provides that Pt XI Div 2 of the CCA ‘does not apply … to the supply, or possible supply, of services that are financial services, or of financial products’. Division 2 applies the Australian Consumer Law as a law of the Commonwealth: see 8.53 below.

[page 153]

Part 2 Issuers

[page 155]

Chapter 4 REGULATION of SECURITIES OFFERINGS Introduction Pattern of Regulation Parameters of regulation Types of offers Offers that Need Disclosure to Investors Offers that need disclosure Offers excluded from the disclosure requirement Other Requirements for the Issuer Issuer must already be in existence Issuer may not be a proprietary company Debenture issue must comply with Ch 2L Advertising and Publicity Prohibitions Permitted advertisements Other exceptions to the prohibition Other Selling Restrictions Securities hawking Conduct in relation to financial products ASIC Act consumer protection Consequences of Non-Compliance Contravention is a criminal offence Court may make orders

4.1 4.2 4.3 4.8 4.10 4.11 4.17 4.31 4.32 4.33 4.34 4.35 4.36 4.38 4.39 4.43 4.43 4.44 4.45 4.46 4.47 4.51

INTRODUCTION 4.1 In common with that of all other mature market economies, Australian law regulates certain offerings of securities to retail and (in some cases) wholesale investors. The rationale for regulating securities

offers is discussed in Chapter 1 above. The primary focus of regulation is on ensuring that those to whom securities are offered [page 156] have available to them adequate information to enable them to make an informed decision about whether to acquire the securities on offer. Regulation is contained for the most part in Ch 6D of the Corporations Act 2001 (Cth) (Corporations Act), which (along with Pt 7.9 of the Corporations Act, which regulates the offer of financial products other than securities) is the main focus of this part of the book. As Chapter 1 makes clear, mandatory disclosure in connection with new issues of securities to the investing public has been required under Australian law since the middle of the 19th century. Over time, the regulatory framework for fundraising has become progressively more complex. Until the commencement of the Corporations Law scheme in 1991, disclosure in the form of a prospectus that contained the itemised matters set out in the legislation was required where there was a primary ‘offer to the public’ of securities. In 1991, the ‘offer to the public’ test as the lynchpin for disclosure regulation was removed, and replaced with a requirement that the issuer prepare a prospectus for every securities offering other than an ‘excluded offer’. At the same time, the checklist approach to prescribing prospectus contents was replaced with a general obligation to disclose: … all such information as investors and their professional advisers would reasonably require, and reasonably expect to find in the prospectus, for the purpose of making an informed assessment of the assets and liabilities, financial position, profits and losses, and prospects of the corporation and the rights attaching to the securities.

These new requirements were contained in Pts 7.11 and 7.12 of the Corporations Law. This basic pattern of regulation was altered again when Ch 6D was introduced into the (then) Corporations Law by the Corporate Law Economic Reform Program Act 1999 (Cth) (CLERP Act). The new law changed the circumstances in which disclosure was required, and the form

that disclosure could take. The lynchpin for regulation became whether or not an offer of securities ‘needs disclosure to investors’ under Pt 6D.2. If an offer is one that needs disclosure to investors under Pt 6D.2, then Ch 6D prohibits a person from offering securities if the body has not been formed or does not exist (Corporations Act s 726), and from offering securities or distributing an application form for securities unless a disclosure document for the offer has been lodged with ASIC and is provided to the offeree: Corporations Act s 727. The legislation now allows for one of five different types of disclosure documents to be used, depending on the circumstances of the offer. They are: prospectuses, short-form prospectuses, two-part simple corporate bond prospectuses, profile statements and offer information statements.1 A full prospectus of the kind required under the former Pt 7.12 of the Corporations Law is no longer required in every case.

PATTERN OF REGULATION 4.2 The prime notion in the regulation of securities offerings is that of an offer of securities that ‘needs disclosure to investors under Pt 6D.2’ of the Corporations Act: [page 157] see, for example, Corporations Act ss 113, 283AA, 726, 727, 734 and 736. If an offer is one that needs disclosure to investors under Ch 6D, then certain important consequences follow: 1.

Certain structural requirements may apply, including that the offeror may not be a proprietary company and, if the securities on offer are debentures, compliance with the requirements of Corporations Act Ch 2L (for the appointment of an approved trustee for debenture holders under a complying deed) may be required.

2.

The offer cannot be made before the body is formed.

3.

The offer must be conducted in accordance with the procedure

outlined in Corporations Act Pt 6D.2. This involves certain steps, including preparation of a disclosure document that contains prescribed information, lodgment of that disclosure document with the Australian Securities and Investments Commission (ASIC) and distribution of the disclosure document with the application form for the securities. 4.

Restrictions on the manner in which the offer is communicated to investors are imposed. These include restrictions on advertising the offer and on making unsolicited offers of securities face-toface or by telephone.

5.

The general market integrity and consumer protection provisions that govern all conduct in relation to securities apply (with some important exclusions) to the conduct of the offer.

If the offer is not one that needs disclosure to investors under Ch 6D, the mandatory disclosure requirements in Pt 6D.2 do not apply. However, some restrictions on advertising and securities hawking, and the general market integrity and consumer protection provisions, will apply to the offer. This chapter explains the parameters of fundraising regulation in Australia, and identifies the types of offers that need disclosure to investors under Ch 6D of the Corporations Act. It then goes on to explain the regulatory restrictions and requirements (other than those contained in Corporations Act Pt 6D.2) that apply to the different types of securities offers. The requirements of Pt 6D.2 for regulated offers are explained in Chapter 5 below. The civil and criminal consequences, for offerors and those associated with them, of misstatements or non-disclosure in relation to regulated and unregulated securities offers are explained in Chapter 8 below.

Parameters of regulation Limits of specialist regulation 4.3 In Chapter 1 above, we discussed the rationale for specialist regulation of securities and financial markets. That specialist regulation

includes, under Corporations Act Ch 6D, mandatory disclosure requirements imposed by law in connection with the offer of certain types of financial products. Chapter 6D operates within various parameters. The regime only applies to offers of ‘securities’ as defined; the offer of other types of financial products is regulated under a different regime, contained in Corporations Act Pt 7.9. It only applies where the offer has the requisite [page 158] connection with Australia. Further, ASIC has power under the Corporations Act to exempt certain offers from the regulatory regime, which it has exercised extensively. Within the class of securities offerings that are potentially subject to regulation, Ch 6D recognises that differing levels of regulatory intervention are justified in differing circumstances. Accordingly, the system of regulation is not intended to provide identical protection to every individual offeree in every kind of securities offering. In some circumstances, general proscriptive laws aimed primarily at protecting the integrity and stability of the market as a whole are considered adequate. In other circumstances, more specific prescriptive requirements aimed primarily at informing investors are imposed. Various considerations have determined the parameters of the specialist regulation applied to securities offers under the Corporations Act, which are reflected in Corporations Act Pt 6D.2 Div 2 (which sets out which offers need disclosure to investors) and Corporations Act Pt 6D.2 Div 3 (which sets out which level of disclosure is required). These include: Distinction between primary and secondary offers: Disclosure is required less frequently in relation to secondary offers of securities, compared with primary offers. Prima facie, all primary offers of securities are subject to the mandatory disclosure requirements by Corporations Act s 706; in contrast, only secondary offers that are made off-market by a person who controls the issuer, or that amount to an indirect issue of the securities or an indirect off-market sale by a controller, are caught by Corporations Act s 707. Nature of the offeree: Some classes of offeree may be supposed to

have adequate investment expertise to make their own inquiries and disclosure need not be mandated. Others may already be supposed to have sufficient information about the particular issuer and securities on offer. Generally speaking, disclosure under Corporations Act Pt 6D.2 is not required for offers to sophisticated or professional investors, to senior managers of the issuer or their close associates, or to existing securities holders under bonus plans, dividend reinvestment plans and debenture roll-overs. ASIC offers limited relief from the disclosure requirements where the offeree is an employee participating in an employee participation scheme.2 Type of security: More limited disclosure requirements apply to offers of simple corporate bonds. Continuous disclosure: If the securities offered are those of a public company listed on a securities exchange and are quoted on its stock market, and if the Listing Rules of that securities exchange have met standards set under the Corporations Act, the requirements for an offering may be relaxed. Hence, the Corporations Act at various points treats listed corporations and listed securities differently from others. Rights issues relating to quoted securities, and the on-sale of quoted securities by those who acquired them under a wholesale offer, receive disclosure relief. Where a prospectus is required in relation to an offer of continuously quoted securities, more limited content requirements apply. This reflects the fact that information about a listed [page 159] entity is provided on an ongoing basis to the markets under the continuous disclosure rules discussed in Chapter 7. Scale of the offer: The costs involved in providing full disclosure to investors may provide a disincentive to fundraising, particularly for start-up entities. A more limited disclosure obligation may be provided for small scale offers or initial public offerings by start-up entities, to encourage investment in these entities. Small scale personal offers raising less than $2 million in a 12-month period

may be exempt from the mandatory disclosure requirements. A more limited disclosure document is permitted for bodies raising their first $10 million by way of a securities offering.3 Alternative regulation: Separate regulation of a securities offer may not be required where it occurs as part of a transaction that is otherwise regulated, for example, a takeover or a scheme of arrangement. Nature of the issuer: Certain types of issuers are exempt from the disclosure requirements, including authorised deposit-taking institutions (ADIs) and life insurance companies that issue debentures, bodies incorporated under state or territory legislation (such as state corporations, incorporated associations and cooperatives) that offer securities in their home state or territory, and exempt public authorities.

Offers of securities 4.4 The fundraising provisions in Corporations Act Ch 6D apply in relation to offers of securities as defined in Corporations Act s 700. The various definitions of securities and security used in the Corporations Act are discussed in detail in Chapter 3 above. Under Corporations Act s 700, the definition includes shares in a body, debentures of a body, legal or equitable rights or interests in shares and debentures, and options over unissued shares and debentures. A warrant4 that is a security is exempted from all of the provisions of Ch 6D by Corporations Regulations 2001 (Cth) (Corporations Regulations) reg 6D.5.01. Chapter 6D does not apply in relation to the offer of member shares in certain mutual financial institutions, including building societies, credit unions and friendly societies: see Corporations Regulations regs 6D.2.01 and 12.8.03. The definition of ‘security’ in Corporations Act s 700 includes options to acquire shares and debentures by way of issue. Section 702 provides guidance on the treatment of offers of options under Ch 6D. Importantly, an offer of an option over securities is not an offer of the underlying securities. The grant of an option without an offer of the option is regarded as an offer of the option. Furthermore, an offer to grant an option is to be equated with an offer to issue the security constituted by the option.

[page 160] Options to acquire already issued securities by way of transfer are not regulated under Ch 6D — instead they are usually treated as derivatives and regulated under Ch 7. Options to dispose of (rather than acquire) securities (that is, put options) are not securities.5 Offers by foreign companies listed on Australian financial markets of CHESS depository interests (CDIs) over their securities to investors in Australia are regulated as if they were offers of the underlying securities, under ASIC Regulatory Guide 253 — Fundraising: Facilitating Offers of CHESS Depository Interests, October 2014. ASIC’s general approach to regulating such offers involves ‘looking through’ the CDI to the underlying foreign securities, so that offers of CDIs are regulated under the Corporations Act in the same way that offers of the underlying foreign securities would be regulated. The fundraising requirements of Corporations Act Ch 6D which apply to securities no longer apply (as they did until the commencement of the Financial Services Reform Act 2001 (Cth) (FSR Act) on 11 March 2002 and subject to transitional arrangements in Pt 10.2 of the Corporations Act) to interests in managed investment schemes. Disclosure in connection with the offer of financial products other than securities (including derivatives and interests in managed investment schemes) is required under Pt 7.9 of the Corporations Act, discussed in Chapter 6 below. In the case of stapled securities the components of which include both interests in a registered scheme and securities of a body, a combined prospectus and product disclosure statement must be prepared.

Territorial application of Ch 6D 4.5 Chapter 6D contains territorial limitations on its application. Offers that are not received in Australia are not subject to the disclosure requirements imposed under the Chapter. The general territorial application of the Corporations Act is governed by Corporations Act s 5. It provides that each provision of the Act applies ‘in this jurisdiction’: that is, all the states, the Australian Capital Territory

and the Northern Territory. Section 5(4) goes on to say that ‘each provision of this Act also applies, according to its tenor, in relation to acts or omissions outside this jurisdiction’. The extra-territorial application of the Corporations Act is based on the Commonwealth’s external affairs power (s 51(xxix) of the Constitution) and its other powers under s 51 of the Constitution: see Corporations Act s 3(3). The geographic coverage of Ch 6D is dealt with in s 700(4). It provides that Ch 6D ‘applies to offers of securities that are received in this jurisdiction, regardless of where any resulting issue, sale or transfer occurs’. Offers made by Australian companies into overseas markets are not caught. As the Explanatory Memorandum to the CLERP Bill points out, this definition has several consequences for electronic commerce: first, Ch 6D applies to offers that are transferred electronically into Australia from overseas; and second, offers made on internet sites that have [page 161] been generated by a server outside the jurisdiction are covered by the Ch 6D provisions if the offer is capable of being received in Australia: see Explanatory Memorandum, [8.64]. The application of Ch 6D to offers and advertisements that are accessible on the internet is limited by relief granted by ASIC under Corporations Act s 741. ASIC Class Order 02/246 relieves issuers of internet offers and advertisements from the operation of Ch 6D where there is no clear connection with Australia. The policy underlying the relief is explained in ASIC Regulatory Guide 141 — Offers of Securities on the Internet, March 2000. As stated in ASIC RG 141.6, the intention is to exclude from regulation: … offers, invitations and advertisements of securities that are accessible in Australia on the internet if: (a) the offer, invitation or advertisement is not targeted at persons in Australia; (b) the offer or invitation contains a meaningful jurisdictional disclaimer; (c) the offer, invitation or advertisement has little or no impact on investors in Australia; and (d) there is no misconduct.

Offers made outside Australia that are received within Australia are exempted from Ch 6D in certain specific circumstances, where compliance

with Australian law would be disproportionately burdensome on the foreign offeror and it is otherwise appropriate to grant relief in the circumstances. This relief is particularly relevant for foreign companies who wish to offer securities to existing security holders or employees who are in Australia at the time of the offer. ASIC Regulatory Guide 72 — Foreign Securities Disclosure Relief, September 2015 sets out the basis on which foreign offerors will be exempted from Ch 6D. As stated in ASIC RG 72.2: … it may be appropriate to grant relief from the requirement to prepare an Australian prospectus where: (a) a foreign offeror has complied with a disclosure regime offering similar levels of investor protection to the Australian prospectus requirements; or (b) very few offers are made to Australians.

ASIC also grants relief from the operation of Ch 6D in relation to rights issues by foreign companies and scrip offers under foreign bids and schemes of arrangement, subject to a range of conditions. The policy rationale is that, ‘after a person acquires an interest in a foreign entity, they accept that foreign law largely governs their relationship with the entity. Given the potential disadvantage to Australian investors if they are excluded from such transactions’, ASIC considers it appropriate to grant relief provided that suitable investor protection measures are in place. Specific relief may be available for foreign entities offering securities to employees located in Australia under an employee participation scheme, under ASIC Regulatory Guide 49 — Employee Incentive Schemes, November 2015.

Application to fundraising by governments 4.6 The application of Corporations Act Ch 6D to the fundraising activities of government entities is complex. The position is different for state and Commonwealth governments and government entities, and for different types of government and semi-government securities. Offers of debentures, stocks and bonds issued by ‘governments’ of any kind are not subject to Ch 6D, because these instruments are not securities within the [page 162]

meaning of Corporations Act s 700(1). However, semi-government instruments may be securities for the purposes of Corporations Act Ch 6D, if they are shares or debentures (or rights or interests in them), and the entity that issued them is a ‘body’. Where the issuer is a state or territory government instrumentality or authority, then even if the instruments on offer are securities as defined, Ch 6D may not apply because of Crown immunity, or the offer may not be one that requires disclosure to investors, because of the express exemption in s 708(21). The effect of Corporations Act s 5A(3) is that Ch 6D can apply to the Commonwealth Government entities, but not those of the states or territories. It provides that Ch 6D binds the Crown in right of the Commonwealth, but does not bind the Crown in right of any state, of the Australian Capital Territory, of the Northern Territory or of Norfolk Island. Here, a reference to the Crown in a particular right includes a reference to an instrumentality or agency (whether a body corporate or not) of the Crown in that right: Corporations Act s 5A(1). The predecessor provisions to Corporations Act s 5A(3) are ss 17(1A) and 18(2) of the former Corporations Act 1989 (Cth), which were introduced into that Act by the CLERP Act. The stated intention of the CLERP Act was to extend the operation of Ch 6D to fundraising by the federal government. The Explanatory Memorandum to the CLERP Bill stated (at [8.71]) that the intention of these provisions was ‘to remove the immunity of the Federal Government and its agencies from the fundraising provisions of the Law’. The underlying policy was to promote competitive neutrality as between government and private enterprises in the capital markets, reflecting the then-current political agenda for privatisation (including the part-sale of Telstra). However, the intention was never to include debt securities issued by the Commonwealth Government or its agencies that are guaranteed by the government: see Explanatory Memorandum, [8.76]. The immunity provided to state and territory governments and their instrumentalities and agencies extends only to their actions as ‘the Crown’. The question of whether an instrumentality or agency is acting as the Crown in right of the relevant state or territory is a complex one — the fact that an entity is owned by government will not be sufficient: see, for example, Re Queensland Power Trading Corporation and Australian

Securities and Investments Commission (2005) 89 ALD 346; [2005] AATA 945 (AAT). In many cases, legislation establishing an entity will specify that it does not, for any purpose, represent the Crown: see, for example, s 5(2) of the Grain Marketing Act 1991 (NSW), discussed in Re NSW Grains Board; Smith v Lawrence (2002) 171 FLR 68; [2002] NSWSC 913. In this case the entity is not entitled to Crown immunity. If this is not specified, then the question turns on whether the entity is carrying out a function of government.6 Even where an authority of a state or territory is not entitled to Crown immunity, offers of its securities may nevertheless be exempt from the disclosure requirements in Pt 6D.2 because of Corporations Act s 708(21): see 4.28 below. [page 163]

ASIC exemptions and modifications 4.7 The mandatory disclosure regime does not apply to a securities offering if ASIC has exercised its power under Corporations Act s 741 to grant an exemption from (or modification of) it. ASIC has power under Corporations Act s 741 to exempt a person from all or specified provisions of Ch 6D: see 2.31 above. The rationale for conferring upon ASIC the ability to exempt certain offers from the law or particular aspects of it is explained in 2.34 above. In the fundraising context, ASIC may grant relief to all persons, specified persons, or a specified class of persons. The exemption can relate to all securities, specified securities or a specified class of securities. Both unconditional and conditional relief is possible. ASIC is required by Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) s 1(2) to exercise its powers to ‘maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy’ and to ‘promote the confident and informed participation of investors and consumers in the financial system’. ASIC’s approach to the exercise of its discretionary powers to grant

relief is explained in ASIC Regulatory Guide 51 — Applications for Relief, December 2009. In particular, in considering new policy applications, ASIC aims to ‘weigh the commercial benefit and any net regulatory benefit or detriment that would flow from granting the sought relief on the conditions proposed’. Its stated policy is generally to ‘grant relief where: (a) we consider that there is a net regulatory benefit; or (b) the regulatory detriment is minimal and is clearly outweighed by the resulting commercial benefit’: see ASIC RG 51.44. Various ASIC Regulatory Guides indicate the circumstances in which ASIC will grant relief from disclosure requirements; these are summarised in Appendix 2 to ASIC Regulatory Guide 254 — Offering Securities under a Disclosure Document, March 2016. They include ASIC Regulatory Guide 49 — Employee Incentive Schemes, November 2015; ASIC Regulatory Guide 67 — Real Estate Companies, November 2015; ASIC Regulatory Guide 72 — Foreign Securities: Disclosure Relief, September 2015; ASIC Regulatory Guide 87 — Charities; ASIC Regulatory Guide 125 — Share Purchase Plans, March 2010; ASIC Regulatory Guide 173 — Disclosure for On-sale of Securities and Other Financial Products, March 2016; ASIC Regulatory Guide 188 — Disclosure in Reconstructions, February 2007; ASIC Regulatory Guide 189 — Disclosure Relief for Rights Issues, March 2016; and ASIC Regulatory Guide 253 — Fundraising: Facilitating Offers of CHESS Depository Interests, October 2014.

Types of offers Primary issues and secondary sales 4.8 Sections 706 and 707 of the Corporations Act impose the disclosure requirement in connection with an offer of securities. Section 706 deals with offers of securities for issue: that is, primary offers. Section 707 deals with offers of securities for sale: that is, secondary offers. Primary offerings are offerings of securities that have not yet been allotted by an issuer of securities who is seeking funds. For example, a new company may be

[page 164] building its initial share capital; an established private company may have converted itself into a public company and be seeking additional share capital; or an established public company may be raising more share capital by an offer to the market generally, by a rights issue confined to its existing shareholders or by a ‘placement’ to a select group of investors. Other examples are where a company makes shares available to its employees as part of an employee–share incentive scheme or where a company conducts a dividend reinvestment scheme. A person who responds to a primary offering is said to be responding to subscribe for the securities in contrast to purchasing them. According to Governments Stock and other Securities Investment Co v Christopher [1956] 1 WLR 237 at 242, ‘subscribe’ means taking or agreeing to take securities for cash with a liability to pay the nominal value of the securities. But it now appears clear that securities can be issued in return for non-cash consideration. It was confirmed in Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 8 ACLR 609 that subscription could be made in shares in consideration for shares. Secondary offerings are offerings of securities that have already been issued; for example, a holder of shares offers them for sale. A person who responds to a secondary offering is said to respond to purchase them. An important distinction is made in Ch 6D between primary and secondary offerings. A primary offering, referred to in Ch 6D as ‘an offer of securities for issue’, requires disclosure to investors under Pt 6D.2 unless s 708 or s 708AA says otherwise: Corporations Act s 706. A secondary offering, referred to as ‘an offer of securities for sale’, requires disclosure to investors only in the limited circumstances set out in s 707(2), (3) and (5): Corporations Act s 707(1). Even then, disclosure to investors is not required if s 708 or s 708A says otherwise. The scope of the disclosure requirements for secondary sales is discussed in 4.12–4.16 below.

Invitations and offers 4.9 The word ‘offering’ is used in this book to refer in a general way to

any indication by a person that particular securities will be available for acquisition, whether by subscription or purchase, by the person to whom the communication is made. An offering of securities, whether for subscription or purchase, can be made by way of inviting offers to subscribe or to purchase or by way of an offer of the securities for subscription or purchase. In judicial interpretation of earlier legislation referring to offers in relation to securities, it was decided the word ‘offer’ was not used in the technical contractual sense of an offer to be bound once someone accepts.7 It was used in the sense of ‘holding out a thing to a person to take it if he will’.8 [page 165] This approach is reflected in Corporations Act s 700(2), which provides that, for the purposes of Corporations Act Ch 6D, ‘offering securities for issue includes inviting applications for the issue of the securities’ and ‘offering securities for sale includes inviting offers to purchase the securities’. Section 700(3) provides that: … for the purposes of this Chapter, the person who offers securities is the person who has the capacity, or who agrees, to issue or transfer the securities if the offer is accepted.

Thus, offers in the technical sense (that is, something which can be accepted so as to form a contract) and invitations are both covered. An invitation is something pursuant to which an offer may be made; when that offer is accepted, a contract will be formed. Section 700(2) and (3) expand rather than limit the meaning of the term ‘offer of securities’. More broadly, the meaning of the term must be ascertained from its ordinary usage in the context of the legislation and its purpose. In Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305; [2005] NSWSC 267 at [97], Palmer J said: Section 700(2) makes it clear that the distinction between ‘offer’ and ‘invitation to treat’ which is drawn in the classical theory of contract formation is not to be slavishly applied in determining whether an offer requiring disclosure under Ch 6D has been made. Not

every casual or imprecise intimation that securities may be acquired would constitute an offer within the disclosure provisions and yet it could not be the case that the disclosure provisions are not attracted until the moment when the potential investor is confronted with an application form or with some other document containing all of the terms of a contract, so that mere assent is capable of bringing a binding contract into existence. Many investors would have made up their minds about whether to take up securities well before they are confronted either with the application form or with some document containing all of the terms of a contract.

In the Australian Investors Forum case the question of when an offer of securities was made was important, because Corporations Act s 708(10) says that disclosure to investors is not required for certain offers so long as the conditions in s 708(10) are met ‘before, or at the time when, the offer is made’. Section 708(10) is discussed in 4.21 below. A person may make an offer of securities in a number of ways including personally, by an employee or agent,9 or by authorising and approving an offer.10 [page 166]

OFFERS THAT NEED DISCLOSURE TO INVESTORS 4.10 Part 6D.2 Div 2 of the Corporations Act sets out which securities offers require disclosure to investors in the form of a disclosure document that meets the content, lodging and other requirements in Corporations Act Pt 6D.2. Section 706 captures all issue (that is, primary) offers. Section 707 captures sale (that is, secondary) offers that involve the off-market sale of securities of a body by a person who controls the body: Corporations Act s 707(2). It also captures sale offers that amount to the indirect issue of the securities (Corporations Act s 707(3)) or the indirect off-market sale of securities by the body’s controller: Corporations Act s 707(5). Sections 706 and 707 operate subject to ss 708, 708A and 708AA, which state that certain offers do not need disclosure to investors in certain circumstances. These circumstances are analysed at 4.17ff below.

Offers that need disclosure Issue offers 4.11 By operation of Corporations Act s 706, an offer of securities for issue always needs disclosure to investors under Pt 6D.2 of the Corporations Act unless Corporations Act s 708 or s 708AA says otherwise.

Off-market sale by a controller 4.12 The general rule is that most sale offers of securities do not need disclosure to investors under Pt 6D.2. The first exception to that general rule is offers of the kind described in Corporations Act s 707(2). Unless s 708 says otherwise, the effect of s 707(2) is that offer of a body’s securities for sale requires disclosure to investors if the person making the offer controls the body, and either the securities are not quoted, or (if they are quoted) they are not offered for sale in the ordinary course of trading on a relevant financial market. A person controls a body if they have the capacity to determine the outcome of decisions about the body’s financial and operating policies: Corporations Act s 50AA.

Sale amounting to indirect issue 4.13 The second exception to the general rule that sale offers do not need disclosure to investors is Corporations Act s 707(3). Section 707(3) is an anti-avoidance provision. Its primary purpose is to ensure that a body issuing securities does not circumvent the disclosure requirement in s 706 by issuing securities to a person (such as a professional investor) in circumstances that do not require disclosure to investors because of s 708, with the purpose of the person to whom the securities are issued then distributing the securities widely by way of an (otherwise unregulated) secondary offer.11 [page 167]

The on-sale provisions, including in Corporations Act s 707(3), are described in ASIC Regulatory Guide 173 — Disclosure for On-sale of Securities and Other Financial Products, March 2016 as an: … anti-avoidance mechanism that is designed to minimise the opportunity for issuers of securities or other financial products to avoid giving disclosure to retail investors by: (a) first issuing the financial products to an intermediary for whom disclosure is not required; and (b) the intermediary then on-selling the financial products to retail investors.12

To this end s 707(3) provides that, unless s 708 or s 708A says otherwise, an offer of a body’s securities for sale within 12 months after their issue needs disclosure to investors under Pt 6D.2 if the body issued the securities without disclosure to investors under the Part, and either: the body issued the securities with the purpose of the person to whom they were issued selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them; or the person to whom the securities were issued acquired them with the purpose of selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them. The prohibition applies to the first and any subsequent resale of securities during the relevant period.13

Purpose 4.14 Section 707(4) formulates the purpose test for subs (3). Securities are taken to be issued or acquired with the relevant purpose if there are reasonable grounds for concluding that the securities were issued or acquired with that purpose (whether or not there may have been other purposes for the issue or acquisition). Further, under s 707(4)(b) securities are taken to have been issued or acquired with the relevant purpose if: … any of the securities are subsequently sold, or offered for sale, within 12 months after issue, unless it is proved that the circumstances of the issue and the subsequent sale or offer are not such as to give rise to reasonable grounds for concluding that the securities were issued or acquired with that purpose.

An anti-avoidance provision of this type has been present in the securities laws for some time: see former s 1030 of the Corporations Law. However, in its former incarnations the operation of the provision has

turned on the purpose for which the body issued the securities — the purpose of the acquirer acquiring them was not relevant. This changed with the amendment of s 707(3) and (4) as part of the FSR Act. The purpose of the acquirer in acquiring the securities has become relevant for the operation of the provision. Paragraphs (3)(b) and (4)(b) of s 707 are both expressed disjunctively. Accordingly, in order for the statutory presumption in [page 168] s 707(4)(b) to be rebutted it is necessary for there to be proof of reasonable grounds establishing that neither the issuer nor the acquirer had the necessary purpose.14 4.15 The commencement of the amendments resulting from the FSR Act on 11 March 2002 led to concerns that the placements market in Australia would be adversely impacted by the provision. Until that time it was common practice in the Australian securities market for an issuer to issue securities to an institutional or other professional investor under what is generally referred to as a private placement. Such an offer would not require disclosure to investors because of s 708. However, many placees were not natural long-term holders of the securities — their intention in acquiring the securities may have included to hold the securities or on-sell the securities when market conditions determined that it was in the interests of their investors or shareholders to do so. Such an on-sale, if it occurred within 12 months of issue, would indicate that they had the purpose of selling or transferring the securities, unless that purpose could be rebutted. If the placee was found to have that purpose, the on-sale would require disclosure to investors unless the law provided otherwise. In 2004 the Corporations Act was amended to include Corporations Act s 708A, which exempts certain offers caught by s 707(3) from the disclosure requirements. Section 708A is discussed in 4.30 below. ASIC supplements the operation of s 708A by relief granted in accordance with ASIC RG 173. The operation of Corporations Act s 707(3), and its interaction with s

708(17) discussed below, was considered in Re Timor Sea Petroleum NL (2000) 35 ACSR 186; [2000] VSC 337. That case concerned a scheme of arrangement under which shares were to be issued to a trustee without any application moneys being received but upon terms that the shares would be sold by the trustee and the net proceeds of sale would be the subscription moneys for those shares. The operation of s 708(17) in this context is discussed in 4.27 below.

Sale amounting to indirect off-market sale by a controller 4.16 Section 707(5) operates in much the same way as s 707(3). Again, it is an anti-avoidance provision designed to prevent a controller from circumventing the disclosure obligation in s 707(2) by selling securities to a person, such as a professional investor, in circumstances that do not require disclosure because of s 708, and then arranging for the person to whom they are sold to distribute the securities widely by way of secondary offers that do not require disclosure under s 707. Section 707(5) says that, unless s 708 says otherwise, an offer of a body’s securities for sale within 12 months after their sale by a controller needs disclosure to investors under Pt 6D.2 if at the time they were sold by the controller either the securities are not quoted or (if they are quoted) they are not offered for sale in the ordinary course of trading on a relevant financial market; the controller sold the securities without Pt 6D.2 disclosure, and either: [page 169] the controller sold the securities with the purpose of the person to whom they were sold selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them; or the person to whom the securities were sold acquired them with the purpose of selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them. Section 707(6) sets out the purpose test for subs (5). As with s 707(3),

on-sale within 12 months of the date of acquisition raises the prima facie (but rebuttable) presumption that the parties had the requisite purpose to bring the on-sale within s 707(5).

Offers excluded from the disclosure requirement 4.17 The exceptions to the principle that an offer of securities for issue or sale needs disclosure to investors under Pt 6D.2 are contained in the Corporations Act ss 708, 708AA and 708A. Section 708 contains exceptions of general application that are relevant in relation to the various types of primary offers (Corporations Act s 706) and secondary offers (Corporations Act s 707) referred to above. Section 708AA (enacted in 2007) and s 708A (enacted in 2004) are more specific in their operation. Section 708AA applies to offers made in connection with certain rights issues that would otherwise require disclosure under Corporations Act s 706. Section 708A applies to certain sale offers that would otherwise require disclosure under Corporations Act s 707(3) because the sale amounts to an indirect issue of the securities. The various operative paragraphs of ss 708, 708AA and 708A each provide that an offer of securities does not require disclosure to investors under Pt 6D.2 in the circumstances described. The legislative provisions are detailed and specific, and close attention to the statutory language is required. What follows is a summary of the important exceptions to the disclosure requirement contained in those provisions. The defendants bear the onus of proving facts which would bring them within an exemption.15

Small scale personal offerings 4.18 Certain small scale personal offers of securities do not require disclosure to investors under Pt 6D.2, because of Corporations Act s 708(1)–(7). An offer by a body to issue securities, or by the controller of a body to sell securities off-market, does not require disclosure to investors so long as the offers are ‘personal’ to the [page 170]

offeree and none of the offers results in a breach of the ‘20 investor ceiling’ or the ‘$2 million ceiling’ as defined in s 708(3) (for primary offers) and (4) (for off-market sales by the body’s controller). The exception in s 708(1) for small scale personal offers does not apply to an offer for sale to which Corporations Act s 707(3) (sale amounting to indirect issue) or s 707(5) (sale amounting to indirect sale by controller) applies. In the case of a primary offer, an offer results in a breach of the 20 investor ceiling if it results in the number of people to whom securities have been issued exceeding 20 in any 12-month period. It results in a breach of the $2 million ceiling if the amount raised by the body by issuing securities exceeds $2 million in any 12-month period. For secondary offers, an offer results in a breach of the 20 investor ceiling if it results in the number of people to whom the offeror sells securities exceeding 20 in any 12-month period; and results in a breach of the $2 million ceiling if it results in the amount raised by the person by selling the body’s securities exceeding $2 million in any 12-month period. Offers for the issue or sale of securities coming under this exception must be ‘personal’. A personal offer is one that may only be accepted by the person to whom it is made; and is made to a person who is likely to be interested in the offer in light of previous contact between the person making the offer and the offeree, some professional or other connection between the person making the offer and the offeree, or statements or actions by the offeree that indicate an interest in offers of that kind: s 708(2). In counting the 20 persons, certain issues and sales can be disregarded, namely those that result from an offer that did not need a disclosure document because of any other subsection of s 708, was not received in Australia, or was made under a disclosure document: s 708(5). Section 708(7) sets out how the amount of money raised by a body issuing securities is to be calculated. The following must be included: the amount payable for the securities at the time of issue; any amount payable at a future time if a call is made (if the securities are shares issued partly paid); any amount payable on the exercise of an option (if the security is

an option); and any amount payable on the exercise of a right to convert the securities into other securities (if such a right exists): s 708(7). Offers and intended offers covered by Corporations Act s 708(1) may not be advertised, because of Corporations Act s 734(1). The advertising restrictions are discussed in 4.36 below.

Offers involving at least $500,000 4.19 Offers that involve a minimum subscription or purchase amount of $500,000, or that bring the total amount paid by a particular investor for securities in the relevant class over $500,000, are also excluded from the disclosure requirements in Pt 6D.2 by Corporations Act s 708(8)(a) and (b). Those accepting such offers are treated by the legislation as being sufficiently sophisticated, and having sufficient [page 171] incentive and ability to obtain information, not to require the protection of the mandatory disclosure regime. The exception applies where the minimum amount payable on acceptance of the offer by the person to whom it is made is at least $500,000, or where the amount payable on acceptance by the person to whom the offer is made and amounts previously paid by the person for the body’s securities of the same class add up to at least $500,000. ASIC’s view is that the exception is available only where the subscription or purchase amount is paid in money, not money’s worth (such as shares, rights under a mining lease, or other property). Under s 708(9) any money lent by the person offering the securities or an associate of that person is to be disregarded in calculating the amount payable, or paid, for securities for the purpose of this exception. The minimum amount payable for the securities on the acceptance of the offer refers to the amount payable on acceptance of the offer and not sums payable subsequently on the purchase. This means that an instalment arrangement under which there was an initial payment on acceptance of

less than $500,000 and a subsequent ‘balloon payment’ or instalment is not within the exemption.16

Offers to high net worth investors 4.20 Section 708 provides that disclosure is not required under Pt 6D.2 where the offeree is a sophisticated or professional investor that meets certain minimum asset or income thresholds. These exceptions are contained in ss 708(8)(c) (sophisticated investors) and 708(11)(b) (professional investors). The effect of Corporations Act s 708(8)(c) is that an offer of a body’s securities does not need disclosure to investors under Pt 6D.2 if the person to whom the offer is made is a high net worth investor. Specifically, the provision says that disclosure is not required if ‘it appears from a certificate given by a qualified accountant no more than two years17 before the offer is made that the person to whom the offer is made’ has net assets of at least $2.5 million or has a gross income for each of the last two financial years of at least $250,000 a year: see Corporations Act s 708(8) (c) and Corporations Regulations regs 6D.2.03 and 6D.5.02. In calculating the person’s assets or income, the assets or income of any company or trust controlled by the person may be included: Corporations Act s 708(9B) and (9C). A ‘qualified accountant’ for this purpose is a person specified in ASIC Regulatory Guide 154 — Certificate by a Qualified Accountant, October 2001, and ASIC Corporations (Qualified Accountant) Instrument 2016/786. Section 708(8)(d) extends the benefit of the exception to offers made to a company or trust controlled by a person who meets the requirements of s 708(8)(c). [page 172] Section 708(11)(b) says that an offer of securities does not need disclosure to investors under Pt 6D.2 if it is made to a person who has or controls gross assets of at least $10 million, including any assets held by an associate or under a trust that the person manages.18

Offers to experienced investors made through a financial

services licensee 4.21 Section 708(10) excludes from the disclosure requirements certain offers that reach offerees through their licensed financial adviser or broker. This exclusion relies on the licensed intermediary making an assessment that the offeree is sufficiently experienced in investing in securities to be able to understand and assess the offer without the benefit of the mandatory disclosure. Disclosure is not necessary if, on reasonable grounds, the licensee is satisfied that the offeree has previous experience in investing in securities that allows them to assess: various matters including the offer’s merits, the value of the securities, risks of acceptance, the information they require; and the adequacy of the information provided by the offeror. In addition, the exception only applies if the licensee gives the offeree a statement of the licensee’s reasons for being satisfied as to those matters, either before, or at the time when, the offer is made. It is also necessary that the offeree signs a written acknowledgment before, or at the time the offer is made, that the licensee has not given them a disclosure document in relation to the offer. In order for the exception to the disclosure requirement to apply, the offer must be made through a financial services licensee, and cannot be made by the offeror directly: Corporations Act s 708(10)(a). The licensee must be ‘satisfied on reasonable grounds’ of the matters set out in s 708(10)(b) and must provide to the offeree a written statement of its reasons for being satisfied as to those matters. In Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (2005) 55 ACSR 544; [2005] NSWSC 1065 at [10]–[11], Barrett J observed: … s 708(10) casts particular responsibility upon a financial services licensee. The requirement that the licensee be ‘satisfied on reasonable grounds’ as to the matters stated in s 708(10)(b) is one that must be approached with diligence and care. The licensee has a statutory duty to make enquiry about all matters relevant to the opinion it must form and then, of course, to consider whether, in the factual circumstances, there exists the reasonable grounds for it to be satisfied as to the matters stated. Woolly thinking about some general concept of ‘sophisticated investor’ is entirely misplaced.

In Australian Securities and Investments Commission v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052 Brereton J said (at [50]) that Corporations Act s 708(10)(b) imposed: … stringent requirements and obligations upon the relevant financial services licensee if the

exemption is to be available. The licensee’s satisfaction on reasonable grounds of the matter referred to in s 708(10)(b) is a condition of the availability of the exemption, and requires the licensee sufficiently investigate the experience of the investor to form the relevant opinion.

[page 173] In addition, the offeree must sign a written acknowledgment that the licensee has not provided the offeree with a disclosure document. The written statement and the written acknowledgment must be provided ‘before, or at the time when, the offer is made’. In Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305; [2005] NSWSC 267 at [98] and [99], Palmer J concluded: … in determining at what point of time an offer has been made for the purposes of … s 708(10) CA one has to apply a degree of pragmatism and common sense. The information conveyed to a potential investor need not contain all of the terms of a contract of subscription or transfer but the information must be sufficient to identify the essential terms of the proposed investment and must convey that the investor may act on that information if desired.

His Honour went on (at [99]) to say that, while the circumstances in which particular offers of securities are made will vary, the indicia that an ‘offer’ has been made will generally include that the issuer company has been identified, that the general nature of the securities and the price at which they may be acquired has been indicated, and that it has been suggested that the securities are available for acquisition now, or at a later time, by the person to whom the information is conveyed, by the requisite payment.

Offers to professional investors 4.22 Offers of securities made to certain professional investors do not require disclosure under Pt 6D.2 because of Corporations Act s 708(11)(a). ‘Professional investor’ is defined in Corporations Act s 9; it includes: a financial services licensee; a body regulated by the Australian Prudential Regulation Authority (APRA), other than the trustee of a superannuation entity;19

a body registered under the Financial Corporations Act 1974 (Cth); the trustee of a superannuation entity that has net assets of at least $10 million; a listed entity, or a related body corporate of a listed entity; an exempt public authority;20 and an investment company.21 [page 174] It also includes any foreign entity that, if established or incorporated in Australia, would fall within one of these categories.22

Offers to people associated with the body 4.23 Offers of a body’s securities do not require disclosure under Pt 6D.2 if they are made to certain people associated with the body. Section 708(12)(a) exempts an offer made to ‘a senior manager of the body or a related body or their spouse, parent, child, brother or sister’ while s 708(12)(b) exempts an offer made to a body corporate controlled by a person referred to in para (a). ‘Senior manager’ is defined in Corporations Act s 9, but the definition is modified for the purposes of Ch 6D by ASIC Class Order 04/899. The definition substituted by the class order, which applies ‘in relation to a body’, is ‘a person who is concerned in, or takes part in, the management of the body (regardless of the person’s designation and whether or not the person is a director or secretary of the body)’. It is not enough that the person is an employee of the body — they must have involvement in management. Nor is it necessary that the person is an employee of the body.23 The policy of Corporations Act s 708(12) is to distinguish those involved in management who are likely to know enough about the body’s affairs and the securities offered as not to need the full protection of the Corporations Act.24 The definition inserted by the class order reflects the definition of ‘officer’ that appeared in the Corporations Law prior to 2000. It must be interpreted having regard to the context in which it is used. The

definition of ‘officer’ now used in the Corporations Act is narrower, reflecting the approach taken by Ormiston J of the Supreme Court of Victoria in Commission for Corporate Affairs (Vic) v Bracht [1989] VR 821 at 830. An officer is someone who makes, or participates in making, decisions that affect the whole or a substantial part of the business of the company, or who has the capacity to affect significantly the company’s financial standing.25 In contrast, the definition of ‘senior manager’ adopted by the class order appears wider than this.26 [page 175]

Offers under a dividend reinvestment plan or bonus share plan 4.24 Primary offers of securities made under a dividend reinvestment plan or bonus share plan to existing holders of securities do not require disclosure under Pt 6D.2: s 708(13)(a). This exception applies where one or more existing shareholders in the body are offered fully-paid shares in that body under a dividend reinvestment plan or bonus share plan. A corresponding exemption exists for dividend reinvestment plans and bonus share plans operated by foreign companies, under Corporations Regulations reg 6D.2.02. Section 708(13)(b) contains a similar exemption for offers of interests in managed investment schemes; however, this appears to be an anomaly given that Ch 6D does not apply to the offer of such interests: see 4.4 above.

Offers to existing debenture holders 4.25 Primary offers of a disclosing entity’s debentures for issue, if made to one or more existing debenture holders, do not require disclosure under Ch 6D, because of s 708(14). For the exemption to apply, the issuer must be a ‘disclosing entity’ within the meaning of Corporations Act Pt 1.2A: see Chapter 7 below. Although a literal reading of ss 111AI, 283AA and 708(14) suggests that the benefit of the exemption extends to an offeror that was required by Ch 2L to appoint a trustee for debenture holders but did not, the better view is that s 708(14) should be read as if the words

‘and the disclosing entity has complied with s 283AA’ were added at the end of the subsection.27 This exception does not apply to an offer of simple corporate bonds, or an offer of debentures (other than simple corporate bonds) if the offer is made to holders of simple corporate bonds, because of Corporations Act s 708(14A). Offers of simple corporate bonds are discussed in Chapter 5 below.

Offers for no consideration 4.26 Disclosure under Pt 6D.2 is not required for offers in relation to securities, other than options, where no consideration is to be provided for the issue or transfer of the securities: Corporations Act s 708(15). Under s 254A(1)(a) companies have the power to issue ‘bonus shares’. Bonus shares are shares which are issued without consideration being payable to the issuing company. It is important to distinguish bonus shares, which are truly without consideration, from other offers of securities for which there is consideration that might not be immediately obvious. For example, if a company were to offer its shareholders the option of taking a cash dividend or a new share, it could be said that forgoing the dividend represented the provision of consideration. Securities offered as part of an employee share plan may be ‘free’, but the employee may be taken to have provided consideration in the form of their continued employment with the issuer. Section 708(15) expressly states that this exception does not apply to options. Instead, offers of options involving no consideration are covered by s 708(16). [page 176] It provides that disclosure to investors is not required under Pt 6D.2 where no consideration is payable to acquire or exercise the option.

Offers otherwise regulated

4.27 Section 708 also excludes from the disclosure requirement in Pt 6D.2 certain offers of securities that are made in connection with corporate reorganisations or reconstructions that are separately regulated under the Corporations Act. The rationale for this exemption is that persons acquiring the securities are otherwise adequately protected, either by receiving disclosure required in connection with the particular transaction, or by the need for court approval. Offers of securities exempted in this way include offers made under a compromise or arrangement under Corporations Act Pt 5.1 (s 708(17)) or a deed of company arrangement (s 708(17A)) or in connection with a takeover bid made under Corporations Act Ch 6 (s 708(18)). Offers made under a compromise or arrangement carried out in accordance with Corporations Act Pt 5.1 do not need separate disclosure to investors under Ch 6D: s 708(17). The offer must be in conjunction with a compromise or arrangement under Pt 5.1 approved at a meeting held as a result of an order under s 411(1) or s 411(1A). The scope of s 708(17) was considered in Re Timor Sea Petroleum NL (2000) 35 ACSR 186; [2000] VSC 337. In that case, Timor Sea Petroleum NL (Timor Sea) sought approval of a scheme of arrangement. The scheme involved, among other things, the issuing of shares to a trustee who would later sell those shares, giving the proceeds to Timor Sea Petroleum as subscription for the shares. ASIC argued that the scheme might contravene s 707(3) (sale amounting to an indirect issue). Timor Sea relied on s 708(17). ASIC argued in favour of a narrow interpretation of s 708(17) on the basis that otherwise the Ch 6D provisions could be defeated by shareholders agreeing under a scheme to issue shares to numerous persons without a disclosure document. However, Warren J distinguished between the facts in Re Timor Sea Petroleum NL and the examples given by ASIC as reasons for a narrow construction of s 708(17). Her Honour considered that, on the facts, the sale of the shares was ‘an integral part of the arrangement for which approval [was] sought’: at [23]. In contrast, the examples given by ASIC would not constitute a scheme of arrangement and her Honour found it likely that a court faced with these scenarios would ‘either refuse to authorise the convening of a meeting or refuse approval of the scheme’.28 Warren J held that the s 708(17) exception

applied in this case. Her Honour found that s 703(3) did not apply, because disclosure is unnecessary if s 708 ‘says otherwise’. Section 708(17A) excludes from the disclosure requirements in Pt 6D.2 offers of securities that are made to any or all of a company’s creditors under a deed of company arrangement entered into pursuant to Pt 5.3A of the Corporations Act. The exception is subject to certain conditions. The offer must not require the provision of consideration other than the release of the company from a debt or debts. Further, the disclosure provided to creditors under Corporations Act s 439A(3) or s 445F(2) (as the case may be) must be accompanied by a statement that sets out all relevant [page 177] information about the offer that is within the knowledge of the administrator and indicates that the statement is not a prospectus and may contain less information than a prospectus. Disclosure under Pt 6D.2 is not required for an offer of securities that is made as consideration for an offer to acquire securities under a takeover bid under Ch 6 and which is accompanied by a bidder’s statement: s 708(18). Although the offer is not required to produce a disclosure document under Ch 6D, the offeror will nevertheless be required by Corporations Act s 636 to make similar disclosures about the securities in the bidder’s statement.

Exempt offerors 4.28 Certain offerors are exempted from the disclosure requirements in Pt 6D.2 by s 708(19), (20) and (21). Primary and secondary offers of debentures issued by Australian ADIs or by bodies registered under the Life Insurance Act 1995 (Cth) do not need disclosure to investors under Pt 6D.2, because of Corporations Act s 708(19). An Australian ADI is an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cth), such as a bank, building society or credit union, or a person who carries on state banking within the meaning of s 51(xiii) of the Commonwealth Constitution. For the exception to apply, the instrument

in question must be a debenture. An undertaking by an Australian ADI to repay money deposited with it, or lent to it, in the ordinary course of its banking business is not a debenture (because of para (b) of the definition of debenture in the Corporations Act s 9). The exception is probably narrowly construed, so that it only applies to securities which comprise a debenture only and nothing else (that is, not to hybrid instruments).29 Bodies corporate (other than companies) that are incorporated by or under a law of a state or territory are ‘exempt bodies’ as defined in Corporations Act s 66A. This includes, for example, bodies incorporated under incorporated associations legislation or co-operatives legislation. Offers of an exempt body’s securities in its home state or territory do not need disclosure to investors under Pt 6D.2, because of Corporations Act s 708(20). An offer of securities of an exempt public authority of a state or territory does not require disclosure, because of s 708(21). This is true whether or not the offer occurs in the authority’s home state. ‘Exempt public authority’ is defined in s 9 and includes a body corporate that is incorporated within Australia or an external territory that is either an instrumentality or agency of the Crown in right of a state or a territory, or a ‘public authority’. The application of Ch 6D to instruments issued by governments and governmental entities is discussed in 4.6 above. Debentures, stocks and bonds issued by governments are not subject to Ch 6D, because they are not securities as defined. An [page 178] instrumentality or agency of the Crown in right of a state or territory enjoys Crown immunity from Ch 6D in any event, because of s 5A(3) of the Corporations Act. In deciding whether an entity is a public authority for the purposes of Corporations Act s 708(21) it is ‘necessary to make a close examination of the functions, activities and objects of the particular body’: see Re NSW Grains Board; Smith v Lawrence (2002) 171 FLR 68; [2002] NSWSC 913

at [52]. In the Grains Board case, Barrett J adopted with approval the propositions articulated by Hill J (with whom Wilcox and Drummond JJ agreed) in Commr of Taxation v Bank of Western Australia Ltd (1995) 61 FCR 407;30 these are that: a question whether a particular entity is an authority will be a question of fact and degree dependent upon all the circumstances of the case; a private body, corporate or unincorporated, established for profit will not be an authority; incorporation by legislation is not necessary before a body may be classified as an authority; for a body to be an authority of a state or of the Commonwealth, the body in question must be an agency or instrument of government set up to exercise control or execute a function in the public interest — it must be an instrument of government existing to achieve a government purpose; the body in question must perform a traditional or inalienable function of government and have governmental authority for so doing; it is not necessary for a person or body to be an authority that he, she or it have coercive powers, whether of an administrative or legislative character — conversely the fact that a person or body has statutory duties or powers will not of itself suffice to characterise that person or body as an authority; and the body must exercise control power or command for the public advantage or execute a function in the public interest — the central concept is the ability to exercise power or command.

Rights issues of quoted securities 4.29 Section 708AA says that offers of quoted securities made under a rights issue do not require disclosure to investors under Pt 6D.2 so long as the various conditions set out in s 708AA(2) are met, and ASIC has not made a determination (that the body has contravened certain disclosure and other requirements contained in the Corporations Act) under s 708AA(3). A rights issue is an arrangement under which existing security

holders are given the opportunity to acquire new securities in proportion to their pre-offer holdings on specified terms. [page 179] The disclosure rules relating to rights issues are modified by ASIC in the manner explained in ASIC Regulatory Guide 189 — Disclosure Relief for Rights Issues, March 2016. Section 708AA was introduced into the Corporations Act in 2007, replacing earlier ASIC class order relief for rights issues. That said, the provisions have since been further modified by ASIC instrument. The section (as modified) is helpfully set out in consolidated form in Appendix 2 of ASIC RG 189. ‘Rights issue’ is defined in Corporations Act s 9A (as modified). A rights issue is an offer of a body’s securities for issue in respect of which the following conditions are met: (a) the securities being offered for issue are in a particular class; (b) either: (i)

the offer is made to every person who holds securities in that class to issue them, or their assignee, with the percentage of the securities to be issued that is the same as the percentage of the securities in that class that they hold before the offer; or

(ii) if the conditions in subsection (3) are met — such an offer is made to: (A) every person with a registered address in Australia or New Zealand; and (B) every other person (if any) with a registered address outside Australia and New Zealand to whom the body decides to make offers, who holds securities in that class; (c) the terms of each offer are the same.

The conditions in subsection (3) relate to the inclusion of non-residents in the offer Under Corporations Act s 708AA(2), a body that wishes to rely on s 708AA in respect of a rights issue must give the operator of the prescribed financial market on which the securities are quoted a notice that complies with s 708AA(7) within the 24-hour period before the offer is made. Among other things the notice must state that the body has complied with

the provisions of Corporations Act Ch 2M (accounts and audit) that apply to the body, as well as the continuous disclosure requirements of Corporations Act s 674: see Chapter 7 below. The notice must state the potential effect of the rights issue on control of the body, and the consequences of that effect. Importantly, the notice must also include any information that is ‘excluded information’ as defined. Excluded information is information that is material (in the sense that investors and their professional advisers would reasonably require the information to make an informed assessment in relation to the body and the securities) that has not been disclosed by the body under the continuous disclosure rules. For example, this may comprise information that a body listed on the Australian Securities Exchange (ASX) has not disclosed because the information falls within ASX Listing Rule 3.1A: see 7.9 below. However, excluded information need only be disclosed ‘to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in a disclosure document’: Corporations Act s 708AA(9). [page 180]

Sale offers of quoted securities 4.30 Section 708A contains specific exemptions covering certain offers of securities for sale, made by persons who have acquired securities either from the issuer or from a person who controls the issuer, that might otherwise require disclosure to investors under Corporations Act s 707(3) (sale amounting to indirect issue) or s 707(5) (sale amounting to indirect off-market sale by a controller). Section 707 is discussed at 4.12–4.14 above. The exceptions to the disclosure requirement contained in s 708A are very technical, and close attention to the precise requirements of the section is necessary. ASIC RG 173 provides guidance for listed companies and listed managed investment schemes in relation to the circumstances in which ASIC will give relief from the disclosure requirements for the on-sale of securities and other financial products. In broad terms, Corporations Act s 708A allows for the sale of quoted securities, without disclosure to investors under Pt 6D.2, by a person who

has acquired them (either from the body or from a person who controls the body) in three circumstances. The first is where the securities are quoted on a financial market and the issuer or the controller has provided the market operator with information in what is sometimes referred to as a ‘cleansing notice’.31 The cleansing notice is similar in nature to the notice provided by the body to the market operator under s 708AA(2), discussed in 4.29 above. The second is where a prospectus relating to securities in the relevant class has been lodged with ASIC and is still extant. The third is where the issue of the securities was covered by a prospectus, and the securities had been issued to an underwriter or person nominated by the underwriter. A person who has acquired securities from the issuer or its controller in circumstances covered by s 707(3) or s 707(5) cannot rely on s 708A if the securities were issued by the body, or sold by the controller, for a purpose set out in s 707(3)(b)(i) or s 707(5)(c)(i): for example, for the purpose of on-sale. Nor can it rely on s 708A if a determination made by ASIC under s 708(2) (to the effect that the body had contravened certain disclosure or other requirements) was in force at the time the relevant securities were issued.

OTHER REQUIREMENTS FOR THE ISSUER 4.31 If an offer of securities is one that needs disclosure to investors under Corporations Act Pt 6D.2, certain consequential requirements and restrictions contained in the Corporations Act are triggered: the Corporations Act prohibits the offer of securities before the body is formed; the body may not be a proprietary company (unless the offer relates to shares in the company and is made to existing shareholders or employees); and if the offer relates to debentures, the body must have appointed a trustee for debenture holders under a trust deed in the form required by Corporations Act Ch 2L before the offer is made. [page 181]

Issuer must already be in existence 4.32 Section 726 of the Corporations Act says: A person must not offer securities of a body that has not been formed or does not exist if the offer would need disclosure to investors under Pt 6D.2 if the body did exist. This is so even if it is proposed to form or incorporate the body.

Accordingly, the body must already have been formed before the offer is made. As to when an offer of securities is considered to be made, see Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305; [2005] NSWSC 267 at [100] (Palmer J), discussed at 4.9 above. For the purposes of Ch 6D, the person who offers securities is the person who has the capacity, or who agrees, to issue or transfer the securities if the offer is accepted: see Corporations Act s 700(3).

Issuer may not be a proprietary company 4.33 Chapter 6D regulates the offer of securities ‘of a body’. In the ordinary course, that body may not be a proprietary company. Instead, a company that wishes to undertake a securities offering that requires disclosure to investors under Ch 6D must be formed as, or convert to, a public company. A proprietary company may convert to a public company under Corporations Act Pt 2B.7. This restriction applies because of Corporations Act s 113, and reflects the historical purpose of allowing the incorporation of proprietary companies. The right to register a company as a proprietary company was introduced in Victoria in the late 19th century. In return for accepting limits on its size and ability to undertake public fundraising, proprietary companies were subjected to less onerous governance and disclosure requirements. For example, it is now the case that proprietary companies may have as few as one director (public companies must have three); small proprietary companies are not ordinarily subject to the period disclosure requirements in Corporations Act Ch 2M (accounts and audit); and transactions by proprietary companies (other than those controlled by public companies) with related parties do not require shareholder approval under Corporations Act Ch 2E.

The restriction is contained in Corporations Act s 113(3), which says that, subject to limited exceptions, a proprietary company ‘must not engage in any activity that would require disclosure to investors under Chapter 6D’. The exceptions are the offer of its shares to existing shareholders of the company or to employees of the company or of a subsidiary of the company. Overall, the total number of non-employee shareholders that a proprietary company may have is limited to 50: Corporations Act s 113(1). A contravention of the prohibition in Corporations Act s 113 is a strict liability offence: Corporations Act s 113(4). However, the offer or issue of shares is not invalid merely because of a contravention: Corporations Act s 113(5). If a proprietary company does contravene the prohibition, ASIC may require it to convert to a public company: Corporations Act s 165. [page 182]

Debenture issue must comply with Ch 2L 4.34 If the securities offered are debentures (see 3.8 above), and the offer of debentures is made in Australia and needs disclosure to investors under Ch 6D, then Corporations Act s 283AA applies. Section 283AA provides that, before a body makes such an offer, regardless of where any resulting issue, sale or transfer occurs, the body must enter into a trust deed that complies with s 283AB and appoint a trustee that complies with s 283AC. In these circumstances the body is required to comply with Corporations Act Ch 2L: see Corporations Act s 283AA(3).32 The requirement to enter into an approved deed and appoint an approved trustee for debenture holders is not limited to circumstances where disclosure to investors is required under Corporations Act ss 706– 707. It is also triggered where debentures are offered in circumstances covered by Corporations Act s 708(14) (debenture roll-overs) or s 708A (sale offers of quoted securities), as consideration under a takeover bid made under Corporations Act Ch 6, or as part of a compromise or arrangement under Corporations Act Pt 5.1 approved at a meeting held as a result of an order made under s 411(1) or s 411(1A).

ADVERTISING AND PUBLICITY 4.35 In addition to requiring the provision of information to investors under Corporations Act Pt 6D.2 in connection with certain offers of securities, the Corporations Act places restrictions on advertising or otherwise publicising securities offers. The restrictions are contained for the most part in Corporations Act s 734. These specific restrictions on advertising securities offers operate in addition to the general prohibitions on misleading or deceptive conduct, mis-selling and market manipulation in connection with securities offers, contained in Corporations Act Pt 7.10 and ASIC Act Pt 2 Div 2 and discussed in Chapter 8 below. Until 1991, securities law restricted the publication of advertisements and public notices about forthcoming securities offers to ‘tombstone’ notices, that contained certain limited information about the offer (such as the name of the offering entity and the type and number of securities available) and nothing else. The advertising restrictions were relaxed by the changes to securities law made with the introduction of the Corporations Law in 1991. Following those changes, the effect of the law was that most securities offers could be advertised with a degree of freedom as to the content and form of the advertisement, so long as the advertisement or notice contained certain prescribed information (including a requirement to state that investors should obtain and read the prospectus before making a decision to invest). However, advertisements for unlisted securities made before a disclosure document is lodged with ASIC are still limited to a ‘tombstone’ format. Section 734 is structured in such a way as to prohibit the publication of advertisements, or statements that refer directly or indirectly to a securities offer or that might induce people to apply for securities, subject to certain exceptions. [page 183] Advertisements and statements that refer to offers covered by Corporations Act s 708(1) (that is, small scale personal offers) are prohibited in all cases: see 4.36 below. Advertisements and statements referring to offers that need

a disclosure document are permitted so long as they contain the ‘small print’ required by s 734(5) (for advertisements and statements published before the disclosure document is lodged with ASIC) or s 734(6) (for advertisements and statements published after the disclosure document is lodged with ASIC): see 4.37 below. The thrust of the small print is to direct the attention of readers, listeners and viewers to a disclosure document that has been lodged before they make their investment decision. Section 734(4) makes clear that the dissemination of a disclosure document that has been lodged with ASIC does not contravene the prohibition. Advertisements and statements relating to offers that do not need a disclosure document (other than small scale personal offers covered by the Corporations Act s 734(1)) are not restricted. Certain corporate documents, news reports and other independent publications are permitted under Corporations Act s 734(7), and ‘pathfinder’ disclosure documents are allowed under Corporations Act s 734(9): see 4.41 below. Section 734(8) contains a general exemption for publishers and broadcasters. It states that a person does not contravene s 734(1) or s 734(2) by publishing an advertisement or statement in the ordinary course of a business of publishing a newspaper or magazine, or broadcasting by radio or television, so long as the person did not know and had no reason to suspect that its publication would amount to a contravention of Corporations Act Ch 6D. Contravention of Corporations Act s 734(1) or s 734(2) is a strict liability offence: Corporations Act s 734(2B).

Prohibitions Small scale personal offers 4.36 Small scale personal offers of the kind referred to in Corporations Act s 708(1) may never be advertised. Section 734(1) says that a person must not advertise, or publish a statement that refers directly or indirectly to, an offer or intended offer of securities that would need a disclosure document but for s 708(1), which is discussed in 4.16 above; it is to the

effect that disclosure under Pt 6D.2 is not needed if an offer is ‘personal’ to the offeree and it does not result in a breach of the ‘20 investor ceiling’ or the ‘$2 million ceiling’ (as defined) in a 12-month period.

Offers that need disclosure to investors 4.37 Section 734(2) applies to any offer, or intended offer, of securities that needs a disclosure document under Corporations Act Pt 6D.2. It provides that a person must not ‘advertise the offer or intended offer’ or ‘publish a statement that: (i) directly or indirectly refers to the offer or intended offer; or (ii) is reasonably likely to induce people to apply for the securities’. However, the prohibition does not apply if the advertisement or publication is authorised by s 734(4), s 734(5), s 734(6) or s 734(7), or if it is allowed under s 734(9) or by ASIC instrument. [page 184] When enacted in its earlier form, the breadth of the prohibition in Corporations Act s 734(2) led to concerns that it may interfere with ordinary business or ‘image’ advertising conducted by issuers. Because of s 734(2)(b)(ii), a statement may be caught by the prohibition even though it does not refer directly or indirectly to the offer itself. For example, a company may run an advertising campaign emphasising its value to the economy or its sustainability credentials — matters that may be relevant to the decision of some investors whether to acquire securities (for example, as part of a demutualisation or privatisation). Section 734(3) deals with this issue. It provides that, in deciding whether a statement indirectly refers to an offer or is reasonably likely to induce people to apply for securities, certain matters should be taken into account. Subsection (3) says that regard should be had to three matters: whether the statement forms part of the normal advertising of the body’s products or services and is genuinely directed at maintaining its existing customers or attracting new customers for those products or services; whether it communicates information that ‘materially deals with the affairs of the body’; and whether it is ‘likely to encourage investment decisions being made on the basis of the statement

rather than on the basis of information contained in a disclosure document’.

Permitted advertisements 4.38 Section 734(5) and (6) allow for the publication of advertisements and statements that would otherwise be prohibited by s 734(2), if they are limited to (in the case of advertisements for unlisted securities placed before the disclosure document is lodged with ASIC) or include (in other cases) the ‘fine print’ prescribed by the subsections. The information that must be included is prescribed by s 734(5) (if publication occurs before the disclosure document is lodged with ASIC) or s 734(6) (if publication occurs after the disclosure document is lodged).33 Before a disclosure document for the offer is lodged with ASIC, the form that an advertisement or other publication relating to the offer can take depends on whether the securities are in a class already quoted, or not. If the securities are not in a class already quoted, then only a ‘tombstone’ advertisement is allowed. Any advertisement or statement may contain only the information set out in Corporations Act s 734(5)(b), and nothing more. It must include statements that identify the offeror and the securities, and to the effect that a disclosure document for the offer will be made available and that anyone who wants to acquire the securities will need to complete the application form that will be in or will accompany the disclosure document. The advertisement may also include a statement of how to arrange to receive a copy of the disclosure document. If the securities on offer are in a class already quoted, greater freedom in the content and form of the advertisement is allowed. The advertisement must include the prescribed statement set out in s 734(5)(a), identifying the issuer (and in the case [page 185] of a sale offer, the seller) and providing certain information about the forthcoming disclosure document.

After a disclosure document has been lodged with ASIC in relation to an offer, s 734(6) applies. An advertisement or publication does not contravene s 734(2) so long as it includes the prescribed statement identifying the issuer (and seller, where appropriate) and providing information about the disclosure document. ASIC has published general guidance on advertising in ASIC Regulatory Guide 234 — Advertising Financial Products and Advice Services Including Credit Good Practice Guidance, November 2012, and specific guidelines for debenture advertising in ASIC Regulatory Guide 156 — Advertising of Debentures and Notes to Retail Investors, February 2012.

Other exceptions to the prohibition 4.39 Section 734(4), (7) and (9) contain other exceptions to the prohibition in s 734(2). Subsection (4) allows for the dissemination of disclosure documents that have been lodged with ASIC, while subs (9) allows for the limited dissemination of draft ‘pathfinder’ documents to sophisticated and professional investors. Subsection (7) contains the general exceptions, for corporate reports and notices, news and comment (but not ‘advertorials’), and independent securities reports.

Lodged disclosure documents 4.40 Unless a stop order is in force under Corporations Act s 739 (see 5.57 below), a person may disseminate a disclosure document (that is, a prospectus, profile statement or offer information statement) that has been lodged with ASIC without contravening s 734(2): Corporations Act s 734(4).

Pathfinder disclosure documents 4.41 Before the disclosure document is lodged with ASIC, it may be disseminated in draft form to professional or sophisticated investors, under s 734(9). A draft disclosure document disseminated in this way is sometimes referred to as a ‘pathfinder document’; the purpose of a pathfinder document is to obtain market responses on certain matters connected with the offer, in the light of which the document is completed.

For example, the price may be omitted and the document may be circulated to evoke what addressees consider the appropriate price at which the issue should be offered. In that way the issuer does not have to set a price without the benefit of any market response. That is done in a so-called ‘open price underwritten tender’. The underwriter guarantees to the issuer corporation or vendor a base price to ensure that the corporation or vendor will get funds in any event. A book of demand is compiled from tenders by institutions and others at prices between the base price and the defined upper end of a range of prices. The price at the point where the demand fills the issue is taken as the issue or sale price. The process reduces risks for the underwriter and enables the issuer or vendor to fix the price in the light of demand. Under s 734(9) it is not a contravention of subs (1) or subs (2) for a person to send a draft disclosure document for securities to a person if an offer of the securities to [page 186] that person would not require disclosure due to the sophisticated investors (s 708(8) or s 708(10)) or professional investors (s 708(11)) exceptions.

General exceptions 4.42 Section 734(7) contains the general exceptions to the prohibition in s 734(2) that cover corporate documents, independent news reports and commentary, and independent securities reports. Corporate documents are covered by s 734(7)(a) (reports by the issuer or its officer to the stock exchange), (7)(b) (notice or report of a general meeting of the issuer) and (7)(c) (report published by the issuer that does not refer to the offer and does not include proscribed information). Independent news and commentary are covered by s 734(7)(d) (news reports or genuine comment) and (7)(e) (independent securities reports), so long as no one ‘gives consideration or another benefit for publishing the report’.

OTHER SELLING RESTRICTIONS

Securities hawking 4.43 For many years, securities regulation has prohibited securities ‘hawking’: that is, the practice of selling securities by way of unsolicited personal sales contact. The need for this legislation arose out of the activity of canvassers, many paid by commission, personally hawking securities from house to house and offering them to persons who in many instances lacked business experience. In many cases where the securities proved to be of little value, fraud was often suspected but, although the law provided a remedy for fraudulent misrepresentation, it was usually impracticable to seek that remedy because the victims had to prove fraud or recklessness and lacked the financial means to sue. In recent years the problem of ‘boiler shops’ selling securities by unsolicited telephone canvassing required an extension of the law to this type of conduct.34 The predecessor to s 736(1), s 1078(1) of the Corporations Law, prohibited hawking in the context of a person ‘go[ing] from place to place’. The phrase ‘go from place to place’ was defined in the Corporations Law as including communication with other persons by the use of telephone, facsimile machines and the like: former s 1077(a) of the Corporations Law. The current prohibition is contained in Corporations Act s 736(1), which provides that ‘a person must not offer securities for issue or sale in the course of, or because of, an unsolicited meeting with another person, or telephone call to another person’. ‘Offer’ has its extended s 700 meaning, and includes making invitations and distributing application forms. ASIC has published extensive guidance on its interpretation of the hawking provisions, in ASIC Regulatory Guide 38 — The Hawking Provisions, May 2005. [page 187] Various offers are exempted from the prohibition by Corporations Act s 736(2). They are offers covered by s 708(8) or s 708(10) (sophisticated investors); offers covered by s 708(11) (professional investors); offers of

listed securities made by telephone by a licensed securities dealer; offers made by licensed securities dealers to their existing clients; and offers made under an eligible employee share scheme. The expression, ‘licensed securities dealer’ appears to refer to an Australian financial services licensee: see ASIC RG 38. Contravention of Corporations Act s 736(1) is a strict liability offence: Corporations Act s 736(1B). Also, the prohibition on hawking of securities is accompanied by the giving of power to the person to whom the securities are issued or transferred to return the securities within one month after the issue or transfer. If the securities are returned, the person is entitled to be repaid the amount they paid for the securities: Corporations Act s 738. Prior to the CLERP Act the consequences of contravention were different: a court could order that a contract made in the course of security hawking be declared void. Under former s 1082 of the Corporations Law that could happen after a person had been convicted of the offence. The court could give consequential directions as to repayment of money or the retransfer of securities. Following the changes to the law it is now easier for the targets of securities hawking to obtain redress.

Conduct in relation to financial products 4.44 Part 7.10 of the Corporations Act proscribes market misconduct and other prohibited conduct in relation to financial products and financial services. These provisions apply generally to persons participating in the market for, or otherwise trading in, financial products. ‘Financial products’ include securities: see Corporations Act s 764A(1)(a). Accordingly, they can apply to an issuer or seller of financial products in connection with an offer of securities. Sections 1041A, 1041B, 1041C and 1041D apply to conduct that may affect trading in financial products on a financial market. They prohibit market manipulation, false trading and market rigging, and the dissemination of information about illegal transactions. The operation of these provisions is explained in Chapter 16 below. Sections 1041E, 1041F and 1041G apply more broadly, to conduct in relation to financial products generally. They prohibit false or misleading statements inducing dealing or affecting price, knowing inducement to deal on the basis of

defective information and dishonest conduct in the course of carrying on a financial services business. The operation of these provisions is explained in Chapter 8. Importantly, Corporations Act s 1041H prohibits misleading or deceptive conduct in relation to a financial product or a financial service (other than, among other things, conduct that contravenes Corporations Act s 728 (misleading or deceptive disclosure document). Contravention of Corporations Act s 1041I is not an offence, but will give rise to civil liability under s 1041I.

ASIC Act consumer protection 4.45 Part 2 Div 2 of the ASIC Act contains a number of controls on sales practices connected with the provision of financial services. The definition of ‘financial service’ [page 188] as it is used in ASIC Act Pt 2 Div 2 is discussed in 8.40 below. Importantly, it is wider than that used in Ch 7 of the Corporations Act. A person provides a financial service for the purposes of the ASIC Act if, among other things, they ‘deal in a financial product’: ASIC Act s 12BAB. ‘Financial product’ includes a security: see ASIC Act s 12BAA(7)(a), discussed at 3.51 above. A person deals in a financial product if they apply for or acquire a financial product, issue a financial product, underwrite securities or managed investment interests, vary a financial product or dispose of a financial product: ASIC Act s 12BAB(7). Arranging for a person to engage in conduct referred to in ASIC Act s 12BAB(7) is also dealing, unless the actions concerned amount to the provision of financial product advice: ASIC Act s 12BAB(8). The effect of ASIC Act s 12BAB is that, in connection with an offer of securities, the actions of the issuer (as well as those of intermediaries such as brokers and advisers) can amount to the provision of a financial service for the purposes of ASIC Act Pt 2 Div 2. While a person is taken not to

deal in a financial product if the person deals in the product on their own behalf, this exception does not apply if the person is an issuer of financial products and the dealing is in relation to one or more of those products: ASIC Act s 12BAB(9). There is no equivalent of the Corporations Act s 766C(4) (which carves out the actions of securities issuers other than investment companies from the definition of financial services used in the Corporations Act) in the ASIC Act. The ASIC Act prohibits various types of undesirable conduct in relation to the supply or possible supply for financial services. While these provisions are generally referred to as ‘consumer protection’ provisions, their application is not limited to consumer transactions. Many of the prohibitions may also apply in relation to commercial transactions between sophisticated parties. The application of ASIC Act Pt 2 Div 2 and its relationship with the Competition and Consumer Act 2010 (Cth) and state fair trading legislation is discussed in Chapter 8 below. Subdivision BA of ASIC Act Pt 2 Div 2 deals with unfair terms in standard form consumer contracts. Subdivision C relates to unconscionable conduct in trade or commerce in relation to financial services.35 Subdivision D is headed ‘Consumer protection’, although its ambit extends beyond consumer transactions. It includes ASIC Act s 12DA (misleading or deceptive conduct in trade or commerce in relation to financial services), s 12DB (false or misleading representations in trade or commerce in connection with the supply or possible supply of financial services), s 12DC (false or misleading representations in relation to financial products that involve interests in land) and s 12DF (conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for purpose or the quality of financial services). It also includes ss 12DE, 12DG, 12DH, 12DI, 12DJ, 12DK and 12DM that prohibit certain undesirable selling practices, including offering gifts and prizes without an intention to provide, bait advertising, referral selling to ‘consumers’ as defined, accepting payment for services without intention to supply, harassment or coercion towards consumers, pyramid selling of financial products, and asserting right to payment for

[page 189] unsolicited financial services. Subdivision E contains conditions and warranties in consumer transactions. These provisions are discussed in Chapter 15 below.

CONSEQUENCES OF NON-COMPLIANCE 4.46 Part 6D.3 of the Corporations Act sets out the prohibitions, liabilities and remedies associated with offers of securities. The key prohibitions are summarised in the following table. Table 4.1: Key prohibitions in Corporations Act Pt 6D.3 Prohibition Offering securities of a body that has not been formed or does not exist Offering securities without a current disclosure document Offering securities under a defective disclosure document Publishing a prohibited advertisement or statement Hawking securities

Section CA s 726 CA s 727 CA s 728 CA s 734 CA s 736

The consequences of contravening Corporations Act s 728 are explained in Chapter 8 below. This part outlines the consequences of contravening the other key prohibitions in Pt 6D.3.

Contravention is a criminal offence 4.47 Non-compliance with s 726, s 727, s 734 or s 736 is a criminal offence. The maximum penalty for each offence is set out in Sch 3 to the Corporations Act; for ss 726 and 727 it is 200 penalty units or imprisonment for five years or both, and for ss 734 and 736 it is 25 penalty units or imprisonment for six months or both. Where a body corporate is convicted of the offence, the penalty is a fine not exceeding five times the maximum pecuniary penalty amount: Corporations Act s 1312.

Physical and fault elements under the Criminal Code 4.48 Because the Corporations Act is a Commonwealth statute, the offence provisions are interpreted and applied in accordance with the Commonwealth Criminal Code36 (the Code). The purpose of the Code, set out in Code s 2.1, is: … to codify the general principles of criminal responsibility under the laws of the Commonwealth. It contains all the general principles of criminal responsibility that apply to any offence, irrespective of how the offence is created.

[page 190] Under the Code, criminal offences in Commonwealth law consist of physical elements and fault elements: Code s 3.1(a). The physical element of the various offences under Pt 6D.3 are: offering securities (ss 726 and 736); making an offer of securities (s 727(1) and (2)); accepting an application for, or issuing or transferring, securities (s 727(3) and (4)); and advertising or publishing a statement (s 734(1) and (2)). Sections 726 and 727 of the Corporations Act do not specify a fault element for the offences created by them. Accordingly, the requisite fault element is intention: Code s 5.6(1). This means that a person commits an offence under s 726 or s 727 only if ‘he or she [or it] means to engage in that conduct’: Code s 5.2(1). In contrast, Corporations Act ss 734(1) and (2) and 736(1) are strict liability offences: see ss 734(2B) and 736(1B). This means that there are no fault elements for any of the physical elements of the offence: Code s 6.1(1)(a). The defence of mistake of fact under Code s 9.2 is available: Code s 6.1(1)(b).

Primary and secondary offenders 4.49 In order for a person to be convicted of an offence under Pt 6D.3, that person must either have performed the physical element of the offence

itself (a primary offender), or have ‘aided, abetted, counselled or procured’ the commission of the offence by another person (a secondary offender). Where the physical element of the offence is offering or issuing securities, it is likely that the primary offender will be the issuer (or offeror, in the case of secondary offers).37 Section 700(3) of the Corporations Act provides that, for the purposes of Ch 6D, ‘the person who offers securities is the person who has the capacity, or who agrees, to issue or transfer the securities if the offer is accepted’. That said, it is worth noting that s 727(1) prohibits two types of conduct: making an offer of securities; or distributing an application form for the offer of securities. The proscribed conduct as it relates to the distribution of an application form is not confined to that of the owner or controller of the securities, and can extend to any person distributing the form, even if, for example, they are acting as an agent. There is no requirement in s 727(1) to demonstrate that the person knew the offers needed disclosure.38 4.50 Part 2.4 of the Code sets out when a person (for example, an officer or agent of an issuer) may be liable as a secondary offender. Under Code s 11.2(1), ‘a person who aids, abets, counsels or procures the commission of an offence by another person is taken to have committed that offence and is punishable accordingly’. Section 11.2(2) of the Code goes on to provide that, for the person to be guilty: ‘(a) the person’s [page 191] conduct must have in fact aided, abetted, counselled or procured the commission of the offence by the other person; and (b) the offence must have been committed by the other person’ (although, because of s 11.2(5), it is not necessary that the principal offender has been prosecuted or has been found guilty). For the person to be guilty under Pt 2.4, proof of intention is required. Under s 11.2(3) the person must have intended that his or her conduct would aid, abet, counsel or procure the commission of any offence (including its fault elements) of the type the other person committed; or that his or her conduct would aid, abet, counsel or procure the commission

of an offence and have been reckless about the commission of the offence (including its fault elements) that the company in fact committed. A person can be liable by virtue of Code s 11.2 only if they: (i) have ‘the required knowledge of the nature of the criminal purpose’; and (ii) they have ‘taken steps to assist in, and/or to promote the commission of the criminal purpose’.39 In Giorgianni v R (1985) 156 CLR 437 at 487–8, the High Court held: No-one may be convicted of aiding, abetting, counseling or procuring the commission of an offence unless, knowing all the essential facts which made what was done a crime, he intentionally aided, abetted, counselled or procured the acts of the principal offender. Wilful blindness … is treated as equivalent to knowledge but neither negligence nor recklessness is sufficient.

Court may make orders 4.51 A specific liability regime exists for contraventions of Corporations Act s 728 (offer of securities under a defective disclosure statement) which is discussed in Chapter 8 below. More broadly, Corporations Act Pt 9.4 confers upon the court power to make a variety of orders where there is a contravention of Corporations Act Ch 6D. The court may make an order under Corporations Act s 1324B (to provide information or publish advertisements). Importantly, where there has been a contravention of Ch 6D, the court may ‘make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5))’ if the court considers that the order or orders concerned will compensate a person affected by the contravention or will prevent or reduce the loss or damage that results: s 1325(1). The types of orders that can be made include orders declaring the whole or any part of a contract to be void ab initio, orders varying contracts, orders refusing to enforce contract provisions, orders directing the refund of money or return of property, orders directing the payment of compensation, and orders to supply services. As Barrett J observed in Australian Securities and Investments Commission v Karl Suleman Enterprizes (2003) 45 ACSR 401; 177 FLR 147; [2003] NSWSC 400 at [17],

[page 192] ‘the prohibition imposed by s 727 exists to protect persons from being enticed by contravening behaviour into subscription contracts with respect to securities’. The consequences of an offeror and its officers contravening Corporations Act s 727 can include orders under ss 1101B and 1324B; and disqualification of individual directors under s 206E.40 ___________________________ 1.

The alternatives are summarised in Corporations Act s 705.

2.

ASIC Regulatory Guide 49 — Employee Incentive Schemes, November 2015.

3.

In 2015 the government announced its intention to relax the fundraising rules to facilitate crowdsourced equity funding for unlisted public companies with less than $5 million in assets and less than $5 million in annual turnover to raise up to $5 million in funds in any 12-month period. At the time of writing that policy is being reconsidered.

4.

‘Warrant’ is defined in Corporations Regulations reg 1.0.02.

5.

See Re Macquarie Bank Ltd and Australian Securities and Investments Commission (2001) 39 ACSR 508; [2001] AATA 868 at [45].

6.

See RESI Corporation v Sinclair (2002) 54 NSWLR 387; [2002] NSWCA 123; Corporation of the City of Unley v South Australia (1997) 68 SASR 511.

7.

Attorney-General (NSW) v Mutual Home Loans Fund of Australia Ltd [1971] 2 NSWLR 163 at 165, aff’d (1973) 130 CLR 103; 2 ALR 241; Attorney-General (NSW) v Australian Fixed Trusts Ltd [1974] 1 NSWLR 110 at 117.

8.

WA Pines Pty Ltd v Registrar of Companies [1976] WAR 149 at 153; 1 ACLR 431 at 435; Radiata Forestry Development Co Pty Ltd v Evans (1977) 3 ACLR 82.

9.

Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561; [2002] NSWSC 310 at [63].

10.

Australian Securities and Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561; [2002] NSWSC 310 at [63]; Australian Securities and Investments Commission v Narain (2008) 169 FCR 211; 247 ALR 659; 66 ACSR 688; [2008] FCAFC 120 at [19] and [98]; Australian Securities and Investments Commission v ActiveSuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342 at [222].

11.

Australian Securities and Investments Commission v Axis International Management Pty Ltd (No 5) (2011) 81 ACSR 631; [2011] FCA 60 at [39].

12.

ASIC RG 173.1.

13.

See Australian Securities and Investments Commission v Axis International Management Pty Ltd (No 5) (2011) 81 ACSR 631; [2011] FCA 60 at [40]. See also Australian Securities and Investments Commission v Astra Resources plc (2015) 107 ACSR 323; [2015] FCA 759.

14.

Australian Securities and Investments Commission v Axis International Management Pty Ltd (No 5) (2011)

81 ACSR 631; [2011] FCA 60 at [44]. 15.

Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249 at 257–9; 95 ALR 481 at 486–8; Australian Securities and Investments Commission v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1; [2009] QSC 58 at [40]; Australian Securities and Investments Commission v Axis International Management Pty Ltd (No 5) (2011) 81 ACSR 631; [2011] FCA 60 at [52]; Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 79 ACSR 684; [2010] NSWSC 1087 at [44]; Australian Securities and Investments Commission v ActiveSuper Pty Ltd (2015) 105 ACSR 116; [2015] FCA 342 at [208]; Australian Securities and Investments Commission v Astra Resources plc (2015) 107 ACSR 323; [2015] FCA 759 at [225].

16.

Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 at [8.1]; Re Krypton Nominees Pty Ltd [2013] VSC 446 at [312].

17.

Section 708(8)(c) specifies six months, but the section has been modified by Corporations Regulations reg 6D.5.02 to allow for a period of two years.

18.

See MIS Funding No 1 Pty Ltd v Buckley (2013) 96 ACSR 691; [2013] VSC 607.

19.

That is, a superannuation fund, an approved deposit fund, a pooled superannuation trust, or a public sector superannuation scheme within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth).

20.

The meaning of ‘exempt public authority’ is discussed in 4.28 below.

21.

An investment company is a body corporate, or an unincorporated body, that: (i) carries on a business of investment in financial products, interests in land or other investments; and (ii) for those purposes, invests funds received (directly or indirectly) following an offer or invitation to the public, within the meaning of Corporations Act s 82, the terms of which provided for the funds subscribed to be invested for those purposes: see para (h) of the definition in Corporations Act s 9 below.

22.

Because of para (e) of the definition of professional investor, it also includes a person who controls at least $10 million (including any amount held by an associate or under a trust that the person manages). However, this paragraph does not apply in the context of the disclosure requirements in Chapter 6D, because of Corporations Act s 708(11)(a). Instead s 708(11)(b) excludes from the disclosure requirement offers to ‘a person who has or controls at least $10 million (including any amount held by an associate or under a trust that the person manages)’. See 4.20 above. See also MIS Funding No 1 Pty Ltd v Buckley (2013) 96 ACSR 691; [2013] VSC 607 at [29]–[40]; [53]–[57]. The test is applied by reference to the person’s gross assets: at [68].

23.

See Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler (2002) 41 ACSR 72; [2002] NSWSC 171.

24.

See also Cullen v Corporate Affairs Commission (NSW) (1988) 14c ACLR 789 at 793–4; Re Ansett (1991) 9 ACLC 277 at 285; Re C & J Hazell Holdings Pty Ltd (1991) 9 ACLC 802 at 805; Standard Chartered Bank of Australia Ltd v Antico (No 1) (1995) 18 ACSR 1 at 65–71; Australian Securities and Investments Commission v Parkes (2001) 38 ACSR 355 at 374–6.

25.

See Australian Securities and Investments Commission v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35; 62 ACSR 427; [2007] FCA 963; Shafron v Australian Securities and Investments Commission (2012) 247 CLR 465; 88 ACSR 126; [2012] HCA 18.

26.

See the comments of the Corporations and Markets Advisory Committee (CAMAC) on the scope of the definition of ‘officer’ in Corporate Duties Below Board Level — Discussion Paper, May 2005, p 12.

27.

Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 79 ACSR 684; [2010] NSWSC 1087 at [30]–[40].

28.

Applying Australian Securities Commission v Marlborough Gold Mines (1993) 177 CLR 485.

29.

Re Macquarie Bank Ltd and Australian Securities and Investments Commission (2001) 39 ACSR 508; [2001] AATA 868 at [38].

30.

By reference to the decisions of the High Court in Commr of Taxation v Silverton Tramway Co Ltd (1953) 88 CLR 558, Committee on Direction of Fruit Marketing v Australian Postal Commission (1980) 144 CLR 577; Renmark Hotel Inc v Commr of Taxation (1949) 79 CLR 10; Western Australian Turf Club v Commr of Taxation (1978) 139 CLR 288; Re Anti-Cancer Council (Vic); Ex parte State Public Services Federation (1992) 175 CLR 442; and General Steel Industries Inc v Commr for Railways (1964) 112 CLR 125.

31.

See, for example, Explanatory Memorandum to the Corporations Legislation Amendment (Simpler Regulatory System) Bill, [5.20].

32.

For a detailed discussion of Ch 2L, see R Austin and I Ramsay, Ford, Austin and Ramsay’s Principles of Corporations Law, 16th ed, LexisNexis Butterworths, Sydney, 2014, Ch 19.

33.

The effect of Ch 7 of the Corporations Act is to require the inclusion of other information in advertisements or statements, where those advertisements or statements may have the character of financial product advice. The additional information that must be included is discussed in Chapter 14 below.

34.

See the Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 1998 at [8.64] and Financial Markets and Investment Products: Promoting Competition, Financial Innovation and Investment (the first CLERP 6 paper) at 102.

35.

See also Corporations Act s 991A.

36.

The Criminal Code is a schedule to the Criminal Code Act 1995 (Cth). For a discussion of the application of the Criminal Code to the Corporations Act, see J Longo, ‘Market Misconduct Provisions of the Financial Services Reform Act: Challenges for Market Regulation’, paper presented at the Centre for Corporate Law and Securities Regulation seminar on Market Misconduct and the Financial Services Reform Bill, 25 July 2001, Melbourne, available at .

37.

See Hamilton v Whitehead (1988) 166 CLR 121; 82 ALR 626.

38.

Australian Securities and Investments Commission v Axis International Management Pty Ltd (2011) 81 ACSR 631; [2011] FCA 60 at [220]–[221].

39.

Re Pong Su (Ruling No 21); R v Ta Song Wong (2005) 202 FLR 1 per Kellam J.

40.

For example, in Australian Securities and Investments Commission v Astra Resources Ltd (No 2) (2016) 113 ACSR 162; [2016] FCA 560, the court made orders pursuant to s 1324B of the Act that companies that contravened s 727 notify the relevant investors, by letters and published advertisements, of their contraventions and of the potential rights of those investors in light of those contraventions. It also made declarations pursuant to s 206E of the Act that directors failed to take reasonable steps to prevent the contraventions of s 727(1) of the Act and that each of the directors be disqualified from managing corporations. However the court declined to make orders pursuant to s 1101B of the Act that each of the transactions by which the shareholders purchased their shares was voidable, together with associated orders providing for notification and refunds; Astra Resources was being wound up, and there was little prospect that it would be able to refund the monies invested. The orders would therefore lack practical utility and might also unfairly prejudice third parties. See also Australian Securities and Investments Commission v ActiveSuper Pty Ltd (No 2) (2015) 106 ACSR 302; [2015] FCA 527.

[page 193]

Chapter 5 CONDUCTING a REGULATED SECURITIES OFFER Introduction Types of disclosure documents Content Requirements for Prospectuses General disclosure General disclosure — continuously quoted securities Specific disclosure Debenture prospectuses Short-form prospectuses Two-part simple corporate bond prospectuses Content Requirements for Other Disclosure Documents Profile statements Offer information statements Clear Concise and Effective Positive Disclosure Obligations under General Law Statements needing qualification: half-truths and supervening falsity Fiduciary relationship Contracts of utmost good faith Due Diligence Purpose of due diligence Structuring due diligence Carrying out due diligence Offer Process Lodgment with ASIC Application forms Subscription moneys must be held on trust Issue or transfer of securities

5.1 5.2 5.9 5.10 5.13 5.16 5.22 5.24 5.25 5.26 5.26 5.27 5.28 5.30 5.31 5.32 5.33 5.34 5.34 5.38 5.39 5.40 5.41 5.46 5.47 5.48

[page 194] Correcting and Updating Disclosure Supplementary and replacement disclosure documents Form of supplementary or replacement document Consequences of lodging a supplementary or replacement document Dealing with applications Stop Orders Grounds for issuing a stop order Interim stop orders

5.52 5.53 5.54 5.55 5.56 5.57 5.58 5.61

INTRODUCTION 5.1 We saw in Chapter 4 that offers of securities for issue, and certain (limited) offers of securities for sale, require disclosure to investors in accordance with Pt 6D.2 of the Corporations Act 2001 (Cth) (Corporations Act) unless that requirement is expressly excluded in a particular case by s 708, s 708AA or s 708A of the Corporations Act. This chapter explores in some further detail the procedural and other requirements that apply where a person makes a securities offer that requires disclosure to investors under Pt 6D.2, and looks at what information must be included in the disclosure document provided to investors. The conduct of a regulated offer of securities requires that certain steps be taken by the issuer (or seller) of the securities. Preliminary to the offer, the offeror must determine the type of disclosure document that is required for the offer under Corporations Act s 709. It must then prepare the disclosure document, ensuring that it meets the applicable content requirements in Corporations Act ss 710–716 and the general law. For the reasons explained below, it is usually appropriate for the offeror to undertake a formal ‘due diligence’ process in preparing the disclosure document. If there is a misstatement in, or omission from, the disclosure document when an offer is made, the offeror contravenes Corporations Act

s 728. The consequences of contravening s 728 are discussed in Chapters 8 and 9 below. The disclosure document must then be lodged with the Australian Securities and Investments Commission (ASIC) in accordance with Corporations Act s 718. Making a regulated offer without having lodged a disclosure document with ASIC is prohibited by s 727(1). ASIC does not review, ‘pre-vet’ or otherwise approve the disclosure document. For offers of non-quoted securities, the offeror must wait for seven days after lodgment before issuing or transferring securities pursuant to the disclosure document: see s 727(3). The next step after lodgment is to make the offer, by providing a copy of the disclosure document to offerees in accordance with Corporations Act s 721. The practical effect of Corporations Act ss 723 and 727(2) is that the application form for the securities must be included in, or accompanied by, the disclosure document. As application moneys are received, they must be held on trust pending issue or sale of the securities: Corporations Act s 722. During the offer period, the offeror has ongoing obligations if it or its associates discover any defects in the disclosure document or become aware of any material developments affecting the adequacy [page 195] of the disclosure document. If this occurs, the offeror must update the disclosure document by way of a supplementary or replacement disclosure document, or withdraw the offer: Corporations Act ss 719, 724 and 728. After applications are received, the offeror may proceed to issue or transfer the securities in response to applications only if certain conditions are met. These include that an appropriate application form has been received, that any minimum subscription condition set out in the disclosure document has been met, that quotation (if foreshadowed in the disclosure document) has occurred, and that the offeror has not become aware of any defects in the disclosure document: Corporations Act ss 723 and 724. If any of these conditions is not met, then the offeror must deal with any

outstanding applications in the manner set out in the Corporations Act s 724. If the offeror receives an application for securities after the expiry date for the disclosure document, the offeror must deal with the application in the manner set out in Corporations Act s 725. ASIC has power under Corporations Act s 739 at any time before the securities are issued or transferred to suspend a securities offer by way of a ‘stop order’. A stop order may be made if ASIC is satisfied that information in a disclosure document lodged with ASIC is not worded and presented in a clear, concise and effective manner (s 715A), an offer of securities under a disclosure document lodged with ASIC would contravene Corporations Act s 728 (defective disclosure), or an advertisement or publication of a kind referred to in Corporations Act s 734(5) or (6) that relates to securities is defective. These various requirements for regulated offers are explained below. The statutory provisions are augmented by ASIC Regulatory Guide 254 — Offering Securities Under a Disclosure Document, March 2016.

Types of disclosure documents 5.2 The pattern of Pt 6D.2 of the Corporations Act is to require that, where an offer of securities needs disclosure to investors under s 706 (primary offers) or s 707 (some secondary offers), the offeror must prepare a disclosure document that complies with the requirements of the Part (Corporations Act s 709), lodge that disclosure document with ASIC (Corporations Act s 718), and provide the disclosure document to potential investors (Corporations Act s 721). Failure to do so is an offence, under Corporations Act s 727. The circumstances in which an offer needs disclosure to investors under s 706 or s 707 are explained in Chapter 4 above. As Chapter 1 points out, disclosure to investors by way of prospectus has long been required under Anglo-Australian law. Finkelstein J describes the function of the prospectus in the following terms in Cadence Asset Management Pty Ltd v Concept Sports Ltd (2005) 55 ACSR 145; [2005] FCA 1280 at [1]: Vast sums of money are invested in shares. Shares, however, have no intrinsic value

themselves. Their value depends upon the prospects of the corporation that has issued the shares. Their price depends upon how much people are willing to pay based on their evaluation of those prospects. When shares are created and offered to the public, those invited to subscribe must have some idea what the shares will be worth. They have no practical opportunity of making any independent inquiry. The prospectus serves this function. It is the means by which

[page 196] the promoters (and others) are required to disclose to the public everything which could influence the mind of the investor. The Joint Stock Companies Act 1844, 7 & 8 Vict c 110, introduced the principle of compulsory disclosure through the medium of a prospectus and this has been a feature of English and Australian company law ever since. The Australian disclosure provisions are currently to be found in s 710 and s 711 of the Corporations Act 2001 (Cth).

Prior to the substantial amendments made to the fundraising laws by the Corporate Law Economic Reform Program Act 1999 (Cth) (CLERP Act), all regulated offers of securities required a prospectus. In 1999, the law was changed to allow for different types of disclosure documents to be used in different circumstances. There are now, in effect, six different types of disclosure documents provided for in Ch 6D. They are: a full prospectus, a ‘transaction-specific’ prospectus,1 a short-form prospectus, a two-part simple corporate bond prospectus, a profile statement, and an offer information statement. The table in Corporations Act s 705 shows ‘what disclosure document to use if an offer of securities needs disclosure to investors’ under Pt 6D.2.2 Table 5.1: Disclosure document 1

Type Prospectus The standard full disclosure document.

2

Short-form prospectus May be used for any offer. Section 712 allows a prospectus to refer to content (712)

Sections content (710, 711, 713) procedure (717) liability (728 and 729) defences (731, 733)

2A

3

4

material lodged with ASIC instead of setting it out. Investors are entitled to a copy of this material if they ask for it. Two-part simple corporate bonds prospectus Must be used for any offer of simple corporate bonds.

Profile statement Section 721 allows a brief profile statement (rather than the prospectus) to be sent out with offers with ASIC approval. The prospectus must still be prepared and lodged with ASIC. Investors are entitled to a copy of the prospectus if they ask for it. Offer information statement Section 709 allows an offer information statement to be used instead of a prospectus for an offer to issue securities if the amount raised from issues of securities is $10 million or less.

content (713C, 713D, 713E) procedure (717) liability (728 and 729) defences (731 and 733) content (714) procedure (717) liability (728 and 729) defences (732 and 733)

content (715) procedure (717) liability (728 and 729) defences (732 and 733)

[page 197] 5.3 Understanding the different types of disclosure documents and the different information burdens that they impose on the offeror requires us to distinguish between the offeror’s duty to generate information about itself and the offer (that is, the information burden) on the one hand, and its duty to relay that information at first instance to investors (that is, the dissemination burden) on the other. Depending on the type of offer, the Corporations Act imposes different levels of information burden on offerors. The highest is the information burden imposed in connection with an offer of securities (other than continuously quoted securities) that requires a prospectus. In this case the

offeror must generate and make public the information required under ss 710 (general disclosure test) and 711 (specific disclosures). A lower information burden is imposed where an offer of continuously quoted securities requires a prospectus. In this case, the general disclosure test in s 710 can be satisfied by more limited disclosure than is ordinarily required, because of the Corporations Act s 713. This type of prospectus is referred to by ASIC as a ‘transaction-specific prospectus’. The disclosure burden for offers of simple corporate bonds (as defined) under ss 713A–713E is lower again. Sections 709(4) and 715 impose a lower information burden again, where a body is raising its first $10 million and chooses to do so via an offer information statement instead of a prospectus. An offeror making an offer pursuant to a prospectus can choose to reduce its dissemination burden by distributing to investors an abridged document that is either a short-form prospectus (Corporations Act s 712) or a profile statement (Corporations Act s 714), rather than the full prospectus. The information burden imposed on the offeror is not reduced, but the offeror is not required to disseminate certain of that information to investors unless it is specifically requested by the investor. The principal benefit to offerors of using this type of abridged disclosure to investors is in reduced printing costs, and reduced complexity in its offer documents.

Full prospectus and ‘transaction specific’ prospectus 5.4 The prospectus is the standard full-disclosure document that is required in relation to all offers of securities other than those that qualify to use an offer information statement. Section 709(1) provides that if an offer of securities (other than simple corporate bonds) requires disclosure to investors, a prospectus must be prepared for the offer unless s 708(4) applies (in which case an offer information statement may be used instead). The prospectus must comply with the content requirements in Pt 6D.2 Div 4. These differ depending upon whether the securities on offer are continuously quoted securities as defined in Corporations Act s 9. If they are, the content requirements are more limited — this is referred to by ASIC as a ‘transaction specific prospectus’. The content requirements for both types of prospectuses are discussed at 5.9ff below.

Short-form prospectus

5.5 Section 709(1) notes that a prospectus ‘may simply refer to material already lodged with ASIC instead of including it’. This is provided for in Corporations Act s 712. The Explanatory Memorandum to the CLERP Bill indicated that the primary aim of the short-form prospectus was to reduce the complexity of disclosure provided to retail investors. Para 8.6 of the Explanatory Memorandum states: [page 198] Prospectus length and complexity is a particular concern for retail investors, who may not be experienced in reading and comprehending technical information. The Bill will facilitate the presentation of prospectuses to retail investors in a manner best suited to their needs, while still making available a more technical analysis to investors, professional analysts and advisers who wish to seek further information.

One benefit in using a short-form prospectus is that it reduces printing and related costs for the issuer; for example, an issuer that has lodged its financial statements with ASIC is not required to reproduce them in full in the prospectus that is printed and distributed to potential investors. A prospectus that refers to, rather than setting out in full, information that has been lodged with ASIC as a means of satisfying the content requirements in ss 710, 711 and 713 must do so in the manner set out in s 712, explained below.

Two-part simple corporate bond prospectus 5.6 If the offer involves simple corporate bonds, then under Corporations Act s 709(1A)–(1C) a two-part simple corporate bonds prospectus will be required.3 Corporations Act Pt 7.9 was amended in December 2014 to include an abridged disclosure regime for ‘simple corporate bonds’ as defined. The disclosure regime requires the issuing body to issue a two-part simple corporate bonds prospectus (as outlined in s 713B). The two-part simple corporate bonds prospectus consists of a base prospectus (as outlined in s 713C) and an offer-specific prospectus (as outlined in s 713D). The content requirements for each part are set out in the Corporations Regulations 2001 (Cth) (Corporations Regulations) and are discussed in 5.25 below.

The circumstances in which the two-part simple corporate bond prospectus can be used are set out in s 713A, and are limited. It is intended to apply to relatively low risk and less complex bonds,4 and is only available to listed entities and their subsidiaries. To that end, the legislation creates numerous ‘conditions’ that the issuer, the offer, and the bonds themselves, must meet to come within the regime, contained in s 713A(2)–(20).5 The securities must be debentures that are quoted on a prescribed financial market; are denominated in Australian currency; and are for a fixed term not exceeding 15 years. The principal and any accrued interest must be repaid to the holder at the end of the fixed term of the security. The interest rate must be either a fixed rate, or a floating rate that is comprised of a reference rate (over which the issuer has no direct control) and a fixed margin. The bonds can be subject to an increase in the fixed rate or the fixed margin in respect to the interest payable, but cannot be subject to a decrease in the interest payable. Interest payments under the bonds must be paid periodically and cannot be deferred or capitalised by the issuing [page 199] body. The face value for the bonds cannot exceed $1000. The bonds can only be redeemable (other than at the end of the fixed term) in limited circumstances, set out in s 713A(13). The issuer’s debt to the bond holders cannot be subordinated to debts to unsecured creditors, and the bonds must not be convertible. Importantly, the issuing body must have continuously quoted securities, or be a wholly-owned subsidiary of a body corporate that has continuously quoted securities. The trading in those continuously quoted securities must not have been suspended for more than a total of five days during the 12month period preceding the offer (or if the securities have been quoted for less than 12 months, during the period which the securities have been quoted). If at a particular time, there is no prospectus, to determine whether a body has continuously quoted securities, it can be assumed that a prospectus exists and the date of that prospectus is the first day of the offer made under that prospectus. If the issuing body is a wholly-owned

subsidiary of a body corporate, the body corporate must guarantee, or agree to guarantee, the repayment of any money deposited or lent to the borrower under the securities, and must also guarantee, or agree to guarantee, the repayment of interest payable on the securities. The most recent auditor’s report on the most recent financial statements (either the yearly or half-yearly statements) for the issuer (and if the bonds are issued by a wholly-owned subsidiary of a body corporate which has continuously quoted securities, for the parent) cannot include: a statement that the auditor is of the opinion that the report is not in accordance with this Act; or a description of a defect or an irregularity in the financial report; or a description of a deficiency, failure or shortcoming in respect of certain matters; or an ‘emphasis of matter’ paragraph related to the going concern.6 ASIC has power to exclude a body from the regime under s 713A(21)– (23).

Profile statement 5.7 Under s 709(2) a profile statement for an offer may be prepared in addition to (but not instead of) a prospectus. This is only allowed if the making of offers of that kind by the dissemination of a profile statement (instead of a full or short-form prospectus or offer information statement) has been approved by ASIC. To date, profile statements have not been used in Australia. They are unpopular with issuers as they impose additional information burdens that are thought to outweigh any reduction in the dissemination burden. Use of a profile statement requires ASIC approval. [page 200]

Offer information statement 5.8 An offer information statement may be used instead of a prospectus if the amount raised from issues of securities made by way of an offer information statement is $10 million or less: Corporations Act s 709(4).

The amount raised includes amounts previously raised by the body, a related body corporate, or an entity controlled by a person who controls the body or an associate of that person. In calculating the amount raised, the following must be included: the amount payable for the securities at the time of issue; any amount payable at a future time if a call is made (for partly-paid securities); any amount payable on the exercise of options (if the securities are options); and any amount payable on the exercise of a right to convert the securities into other securities (if such a right exists): Corporations Act s 709(5). Offer information statements were introduced by CLERP Act as one of a series of measures designed to address concerns over access to capital for small and medium enterprises (SMEs). The Explanatory Memorandum to the CLERP Bill states that ‘access to capital has been a concern for SMEs, as they may find that the cost of preparing and lodging a prospectus can be excessive having regard to the amount of capital which is sought to be raised’: see Explanatory Memorandum, [8.44]. The content requirements (and, hence, the information burden imposed on issuers) for offer information statements are more limited than for prospectuses: see 5.27 below.

CONTENT REQUIREMENTS FOR PROSPECTUSES 5.9 The disclosure requirements that apply in relation to each type of disclosure document are contained in Corporations Act Pt 6D.2 Div 4. In the case of a prospectus (other than a two-part simple corporate bonds prospectus), the requirements are contained in s 710, which contains the general disclosure test, and s 711, which prescribes specific information that must be included in the prospectus. The operation of s 710 is modified in relation to offers involving continuously quoted securities by s 713. The information included in a prospectus must be worded and presented in a clear, concise and effective manner: Corporations Act s 715A. ASIC has issued extensive guidance on disclosure, in particular in ASIC RG 254.

General disclosure 5.10 The general disclosure requirement for prospectuses (other than two-part simple corporate bonds prospectuses) is contained in Corporations Act s 710. Section 710(1) provides that, subject to the limiting factors in s 710(1)(a) and (b), a prospectus must contain ‘all the information that investors and their professional advisers would reasonably require to make an informed assessment’ of the various matters set out in the table in s 710. The table is reproduced below. (The table continues to refer to offers of interests in a managed investment scheme, but this is an anomaly as Pt 6D.2 no longer applies to such offers which now attract the disclosure requirements in Corporations Act Pt 7.9: see 4.4 above.) [page 201] Table 5.2: Disclosures (operative) 1

Offer Offer to issue (or transfer) shares, debentures or interests in a managed investment scheme

2

Offer to grant (or transfer) a legal or equitable interest in securities or grant (or transfer) an option over securities

Matters The rights and liabilities attaching to the securities offered the assets and liabilities, financial position and performance, profits and losses and prospects of the body that is to issue (or issued) the shares, debentures or interests the rights and liabilities attaching to: – the interest or option; or –

the underlying securities

for an option — the capacity of the person making the offer to issue or deliver the underlying securities if the person making the offer is: – the body that issued or is to issue the underlying securities; or

–

a person who controls that body; the assets and liabilities, financial position and performance, profits and losses and prospects of that body

if s 707(3) or (5) applies to the offer — the assets and liabilities, financial position and performance, profits and losses and prospects of the body whose securities are offered Note: Section 713 makes special provision for prospectuses for continuously quoted securities.

5.11 The general disclosure obligation is subject to two important limitations, contained in s 710(1)(a) and (b). The first is that the prospectus must contain the information ‘only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus’. The second is that the prospectus must contain the information ‘only if a person whose knowledge is relevant (see s 710(3), explained in 5.12): (i) actually knows the information; or (ii) in the circumstances ought reasonably to have obtained the information by making enquiries’. The requirement that a prospectus contain all information that investors and their professional advisers ‘expect to find’ in such a document is intended to limit, rather than expand, the disclosure test: see Explanatory Memorandum to the CLERP Bill, [8.5]. For example, investors would not expect to find trade secrets disclosed in a prospectus. 5.12 Section 710(2) provides further guidance on what information should be included in the prospectus. In deciding what to include, the offeror should have regard to the nature of the securities and of the body; the matters that likely investors may reasonably be expected to know; and the fact that certain matters may reasonably be expected to be known to their professional advisers. The general disclosure test requires disclosure of anything relevant that is known to, or ought to be known to, a person named in s 710(3): see s 710(1)(b). Section 710(3) includes for this purpose:

the person offering the securities; if the person offering the securities is a body — a director of the body; [page 202] for a primary offer, any proposed director of the body whose securities will be issued under the offer; a person named in the prospectus as an underwriter of the issue or sale; a person named in the prospectus as a financial services licensee involved in the issue or sale; a person (such as an expert) named in the prospectus with their consent as having made a statement that is included in the prospectus or on which a statement made in the prospectus is based (the person’s consent to be named is required under Corporations Act s 716); and a person (such as an investment bank or a lawyer) named in the prospectus with their consent as having performed a particular professional or advisory function (that person’s consent to be named is required under Corporations Act s 716). If there is a defect in the prospectus, these people are potentially liable to investors under Corporations Act s 729: see 9.7 below. Accordingly, it is customary for them to be included in the offeror’s due diligence process: see 5.34 below.

General disclosure — continuously quoted securities 5.13 Rights issues of, and some (otherwise regulated) sale offers in relation to, quoted securities do not need disclosure to investors under Pt 6D.2 because of ss 708AA and 708A: see 4.29 and 4.30 above. Other offers of quoted securities may, however, require disclosure to investors through a prospectus. Where this is so, the level of disclosure required by Corporations Act s 710 may be lower than for other types of offers

because of s 713. ASIC refers to these types of prospectuses as ‘transactionspecific prospectuses’. The legislation does this by saying that a prospectus for continuously quoted securities, or options to acquire continuously quoted securities, satisfies s 710 if it complies with s 713(2), (3) and (4). ASIC has issued extensive guidance and relief in relation to this form of disclosure in ASIC RG 254, Section C. Section 713 reflects the policy distinction made in fundraising law between quoted and non-quoted securities: see 4.3 above. The issuer of quoted securities is subject to ongoing periodic disclosure obligations under Corporations Act Ch 2M and to the continuous disclosure obligations in Corporations Act s 674 and stock exchange listing rules. For this reason, up-to-date information about the assets and liabilities, financial position and performance, profits and losses and prospects of the issuer (other than confidential information carved out from the continuous disclosure obligation) is assumed to be in the public domain, and to be reflected in the price at which already issued securities in that class are being traded on the exchange. Section 713 works so that the offeror is not required to reproduce that information in the prospectus in order to satisfy the general disclosure obligation in s 710. Instead the emphasis is on disclosing the effect that the offer or sale of securities will have on the issuer, and making public any material information about the issuer the disclosure of which has not been required under the continuous disclosure laws but which is required under the prospectus laws: see s 713(5), discussed below. [page 203] Subject to s 713(6), the reduced disclosure obligation in s 713 applies to offers of continuously quoted securities of a body, and to options to acquire continuously quoted securities of a body. ‘Continuously quoted securities’ is defined in Corporations Act s 9; it means securities that are in a class of securities that were ‘quoted ED securities’ at all times in the three months before the date of the prospectus and that are issued by a body that satisfies certain criteria in the lead-up to the offer. The issuer does not satisfy the criteria if, ‘during the shorter of the period during which the

class of securities were quoted, and the period of 12 months before the date of the prospectus’, it (or its director or auditor) was the subject of an order made by ASIC under s 111AS, s 111AT, s 111AV, s 340, s 341 or s 741(1). Securities are not treated as being in different classes merely because of a temporary difference in the dividend, or distribution rights, attaching to the securities or because different amounts have been paid up on the securities. An offeror cannot take advantage of the reduced disclosure obligations in s 713 if ASIC has made a determination in respect of it under s 713(6). ASIC may make such a determination if it is satisfied that, in the previous 12 months, certain key disclosure requirements set out in the section were contravened in relation to the issuer. 5.14 As noted, s 713(1) deems a prospectus to satisfy s 710 if it complies with s 713(2), (3) and (4). Section 713(2) substitutes a more limited general content requirement for the one that would otherwise apply by virtue of s 710(1), while s 713(3) and (4) prescribe additional statements that must be included in the prospectus to take advantage of this reduced disclosure obligation. Under the general disclosure obligation in s 713(2), the prospectus must contain ‘all the information investors and their professional advisers would reasonably require to make an informed assessment of’ the effect of the offer on the body, the rights and liabilities attaching to the securities offered and, if the securities are options, the rights and liabilities attaching to the options themselves and the underlying securities. The prospectus must contain this information ‘only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus’. Under subs (3) the prospectus must draw attention to the body’s regular reporting and disclosure obligations as a ‘disclosing entity’: as defined in Corporations Act Pt 1.2A. The prospectus must also state that potential investors may inspect or obtain a copy of the documents lodged with ASIC. Subsection (4) requires the prospectus either to inform people of their right to obtain certain specified documents, or to include (or be accompanied by) those documents.

5.15 Certain information which is excluded from the continuous disclosure requirements must be set out in the prospectus, by operation of s 713(5). For issuers relying on the modified content test in s 713, the key focus of their due diligence inquiries in preparing the prospectus will be to discover whether any information that is required by s 713(2) has not been disclosed to the market because the issuer has relied on one of the exemptions from the requirement to disclose contained in [page 204] Australian Securities Exchange Listing Rule (ASX LR) 3.1A. Specifically, s 713(5) states that the prospectus must include information that: has been excluded from a continuous disclosure notice in accordance with the listing rules of the prescribed financial market whose operator was given the notice; and is information that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of the assets and liabilities, financial position and performance, profits and losses and prospects of the body, and the rights and liabilities attaching to the securities being offered. In preparing a prospectus in accordance with s 713, the issuer must ascertain whether any information has been withheld from the market on the basis of these carve-outs in ASX LR 3.1A, that must be included in the prospectus because of s 713(5). The prospectus must contain this information only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in the prospectus. A listed entity’s continuous disclosure obligations are discussed in Chapter 7 below. The general rule under ASX LR 3.1 is that once a listed entity becomes aware of any information that a reasonable person would expect to have a material effect on the price or value of its securities, it must immediately tell the Australian Securities Exchange (ASX) that information. However, the entity is not required to tell the ASX the information if the following three conditions are satisfied: 1.

a reasonable person would not expect the information to be

disclosed; and 2.

the information is confidential; and

3.

if any one or more of the following applies: a)

it would be a breach of the law to disclose the information;

b)

the information concerns an incomplete proposal or negotiation;

c)

the information comprises matters of supposition or is insufficiently definite to warrant disclosure;

d)

the information is generated for the internal management purposes of the entity; and

e)

the information is a trade secret.

Specific disclosure 5.16 In addition to the general requirements of the ‘reasonable investor’ test in s 710, the Corporations Act contains specific disclosure requirements in s 711 that apply to all prospectuses other than two-part simple corporate bonds prospectuses. Under Corporations Act s 711, the terms and conditions of the offer must be disclosed. The prospectus must contain information about the nature and extent of the interests (if any) of certain people (associated with the offer) in the issuer and the offer, and the fees and benefits paid or provided to persons associated with the offer. If the prospectus states or implies that the securities will be quoted, certain statements must be included: s 711(5). The prospectus must be dated and set out [page 205] the expiry date: ss 716(1) and 711(6). Statements relating to its lodgment with ASIC must also be included: s 711(7). These specific disclosure obligations are explained below.

Terms and conditions of the offer 5.17 Under s 711(1), the prospectus must set out the terms and conditions of the offer. This will include details of the number of securities offered and the price, details of any underwriting, arrangements for allocation of securities among applicants, and the proposed arrangements for allotment and issue (or transfer) of the securities.

Disclosure of interests and fees 5.18 Under s 711(2), the prospectus must set out the nature and extent of the interests (if any) that each person referred to in s 711(4) holds, or held at any time during the two years leading up to the date of the prospectus, in: the formation or promotion of the body; property acquired or proposed to be acquired by the body in connection with its formation or promotion, or the offer of the securities; or the offer of the securities. Section 711(3) provides that the prospectus must disclose ‘the amount that anyone has paid or agreed to pay, or the nature or value of any benefit anyone has given or agreed to give’ to a director or proposed director to induce them to become, or qualify as, a director of the body. Similarly, disclosure is required for fees or benefits for services provided by a person referred to in s 711(4) in connection with the formation or promotion of the body or the offer of the securities. It is not sufficient for this purpose merely to state in the prospectus that a person has been paid or will be paid ‘normal, usual or standard fees’ — details of the actual fee or benefit (or the basis for calculating it) must be included. The people referred to in s 711(4) are: any directors or proposed directors; any person named in the prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of the prospectus; a promoter of the body;

an underwriter to the issue or sale (but not a sub-underwriter); or a financial services licensee named in the prospectus as a financial services licensee involved in the issue or sale.

Quotation of securities 5.19 Additional disclosure is required if the prospectus states or implies that the securities offered will be capable of being traded on an Australian or foreign financial market: s 711(5). If the securities are already admitted to quotation on the relevant market, the prospectus should include a statement to that effect. If not, the prospectus must state either that an application for admission of the securities to quotation on that financial market has been made, or will be made within seven days [page 206] after the date of the prospectus. If the application is not made, or is not accepted within three months of the date of the prospectus, s 723(3) applies and the issue cannot proceed. Extension of time is possible: see 5.50 below.

Expiry date 5.20 The prospectus must be dated as at the date it is lodged with ASIC: see s 716(1). Under s 711(6), the prospectus must contain an expiry date which is no later than 13 months after the date of the prospectus, and state that no securities will be issued on the basis of the prospectus after the expiry date. If the prospectus is replaced, the replacement prospectus must expire on the same date as the original. Applications received after the expiry date must be dealt with in accordance with s 725.

Lodgment 5.21 The prospectus must also include a statement to the effect that the prospectus has been lodged with ASIC and that ASIC takes no responsibility for the content of the prospectus: s 711(7).

Debenture prospectuses 5.22 Special restrictions apply under Ch 2L of the Corporations Act to the terminology that can be used, in disclosure documents and elsewhere, to describe debentures. Section 283BH sets out how debentures may be described. Table 5.3: How debentures may be described Item 1

Description Mortgage debenture

2

Debenture

3

Unsecured note or unsecured deposit note

When description may be used only if the circumstances set out in subs (2) are satisfied only if the circumstances set out in subs (2) or (3) are satisfied in any other case

The circumstances in s 283BH(2) are: the repayment of all money that has been, or may be, deposited or lent under the debentures is secured by a first mortgage given to the trustee over land vested in the borrower or in any of the guarantors; and the mortgage has been registered, or is a registrable mortgage that has been lodged for registration, in accordance with the law relating to the registration of mortgages of land in the place where the land is situated; and the total amount of that money and of all other liabilities (if any) secured by the mortgage of that land ranking equally with the liability to repay that money does not exceed 60% of the value of the borrower’s or guarantor’s interest in that land as shown in the valuation included in the disclosure document for the debentures. [page 207]

The circumstances in s 283BH(3) are: the repayment of all money that has been, or may be, deposited or lent under the debentures has been secured by a charge in favour of the trustee over the whole or any part of the tangible property of the borrower or of any of the guarantors; and the tangible property that constitutes the security for the charge is sufficient and is reasonably likely to be sufficient to meet the liability for the repayment of all such money and all other liabilities that have been or may be incurred and rank in priority to, or equally with, that liability. 5.23 ASIC has in place special policy in relation to debenture prospectuses, under ASIC Regulatory Guide 69 — Debentures and Notes: Improving Disclosure for Retail Investors, February 2012. ASIC has developed eight benchmarks against which retail investors can assess the suitability of unlisted debentures (referred to as ‘unlisted notes’) for them, and requires issuers to address the benchmarks in the prospectus on an ‘if not, why not’ basis.

Short-form prospectuses 5.24 A short-form prospectus may be used for any offer. The requirements for a short-form prospectus are discussed in ASIC RG 254.34–RG 254.43. Under Corporations Act s 712, information which has been lodged with ASIC can simply be referred to in the prospectus, rather than being repeated. The reference to that information must identify the document, or relevant part of it, and state that people can obtain a copy of the document (or relevant part). The reference in the prospectus must contain enough information about the document to enable offerees to decide whether or not to obtain it. If the document is mainly of interest to professional analysts, advisers, or investors with equivalent needs for specialist information, the prospectus must describe the contents of the document (or part) and state that it is primarily of interest to those people. Section 712(3) deems the lodged document (or part) to form part of the prospectus, for the purpose of determining whether the prospectus satisfies the content requirements. It is possible for a person to use a short-form

prospectus by lodging a document with ASIC even if the Corporations Act does not require the document to be lodged: Corporations Act s 712(4). A document (or part) deemed to form part of the prospectus must be given, without charge, to any person who asks for it during the application period of the prospectus: s 712(5).

Two-part simple corporate bonds prospectuses 5.25 The content requirements in Corporations Act ss 710–713 do not apply to a two-part simple corporate bonds prospectus. Instead the content of the prospectus is prescribed by Corporations Act ss 713C and 713D and Corporations Regulations regs 6D.2.04 and 6D.2.05. These requirements are discussed in ASIC RG 254.118–RG 254.125. A two-part simple corporate bonds prospectus consists of: (a) a base prospectus with a life of three years, which must include general information about the issuer [page 208] that is unlikely to change over the three-year life of the document (and that may be released in advance of an actual offer of simple corporate bonds); and (b) an offer-specific prospectus for each offer, which must include details of the offer and may update information contained in the base prospectus. Under the Regulations, the base prospectus must contain a table of contents and sections dealing with the following matters: Section 1: What you need to know; Section 2: About the bonds; Section 3: About the issuer; Section 4: Risks; Section 5: Other information you should consider; and Section 6: Glossary. The offer-specific prospectus must contain a table of contents and

sections dealing with the following matters: Section 1: What you need to know; Section 2: Key dates and offer details; and Section 3: Offer-specific information you should consider. The required disclosures include certain key financial ratios, which must be calculated in accordance with Corporations Regulations reg 6D.2.06.

CONTENT REQUIREMENTS FOR OTHER DISCLOSURE DOCUMENTS Profile statements 5.26 The Corporations Act allows for an offer to be made by disseminating a profile statement (rather than a full prospectus) if ASIC has approved the making of offers of that kind by profile statement: s 709(2). However, a prospectus must still be prepared and lodged with ASIC. Where a profile statement is used, a copy of the prospectus must be provided, free of charge, to any person who asks for it: s 721. The contents of a profile statement are prescribed in s 714. The profile statement must identify the body. It must state the nature of the securities and of the risks involved in investing in them. Specific disclosure of the risks involved in investing in securities is not expressly required in a prospectus, so in this respect s 714 imposes an additional disclosure obligation.7 The profile statement must refer to a person’s right to obtain the prospectus free of charge and state that a copy of the statement has been lodged with ASIC (and that ASIC takes no responsibility for it). Other information may be required by the Corporations [page 209] Regulations or as a condition of ASIC approval under s 709(3). The requirements regarding the expiry date of the profile statement are the

same as for a prospectus: s 714(2). Like all disclosure documents, a profile statement must present the information in a way that is clear, concise and effective: s 715A. It must be dated as at the date on which it was lodged with ASIC: s 716(1). Profile statements are discussed in ASIC RG 254.15–RG 254.17, which indicates that as at March 2016 there were no ASIC approved uses for profile statements.

Offer information statements 5.27 Section 709(4) of the Corporations Act states that an offer to issue securities may be made using an offer information statement instead of a prospectus, if the amount raised from issuing securities is $10 million or less. On how to calculate the amount raised, see s 709(5). The contents of an offer information statement are prescribed by s 715. The offer information statement must set out information regarding the body and the nature of the securities offered. Both must be identified. The offer information statement must describe the business and the use to which the funds raised by issuing securities will be put. Risks associated with the securities must be disclosed, as well as any amounts payable in respect of the securities. The express requirement to disclose risks is not found in the prospectus disclosure requirements.8 The offer information statement must also disclose that a copy of the statement has been lodged with ASIC (and that ASIC takes no responsibility for it). It must be made clear to potential investors that the statement is not a prospectus and that the disclosure is not as full as that which would be found in a prospectus. The statement must recommend that potential investors seek legal advice about the offer. Further disclosure may be required by the Corporations Regulations. A copy of a financial report must be included in the statement: s 715(1) (i). The balance date of the report must not be more than six months prior to offers first being made under the statement. The report must comply with the accounting standards and be audited: s 715(2). ASIC has granted relief in relation to the form and content of the financial reports to be included in an offer information statement, under ASIC RG 254, Section

D. The requirements regarding the expiry of the statement are the same as those discussed above in relation to prospectuses and profile statements: s 715(3). Information in an offer information statement must be worded and presented in a clear, concise and effective manner: s 715A. The document must be dated as at the date on which it was lodged with ASIC: s 716(1).

CLEAR CONCISE AND EFFECTIVE 5.28 The information in a disclosure document (including a prospectus) must be worded and presented in a ‘clear, concise and effective manner’: s 715A(1). [page 210] Contravention of this requirement is not an offence, but may result in ASIC making a stop order in relation to the prospectus: see 5.57 below. The requirement in s 715A(1) was introduced in 2004, to mirror a similar requirement in relation to Product Disclosure Statements: see Corporations Act s 1013C(3). 5.29 In ASIC Regulatory Guide 228 — Prospectuses: Effective Disclosure for Retail Investors, March 2016, ASIC says (at RG 228.22– 228.24): The requirement for ‘clear, concise and effective’ disclosure should be read as a compound phrase so that each word qualifies the other. This means that it is inappropriate to focus on one word in the phrase at the expense of others … For example, complex information should not be omitted to make your prospectus more clear and concise because then your prospectus may not be effective. We consider that your prospectus will generally be ‘clear, concise and effective’ if it: (a) highlights key information (e.g. through an investment overview as explained in Section C); (b) uses plain language (see Table 3); (c) is as short as possible (see RG 228.30–RG 228.40); (d) explains complex information, including any technical terms (see Table 3); and (e) is logically ordered and easy to navigate (see Table 4).

POSITIVE DISCLOSURE OBLIGATIONS UNDER GENERAL LAW 5.30 Supplementing the statutory disclosure requirements are those positive disclosure requirements that arise at general law. These general law requirements also potentially apply to an information memorandum or other document produced in relation to an offer of securities in cases where disclosure to investors under Pt 6D.2 of the Corporations Act is not required. The general law developed by courts of common law provided a remedy of damages against a person who, by a wrong of commission, induced investment in securities by a misrepresentation which the victim could prove to be fraudulent. But as a general rule at common law, in the absence of some positive statutory obligation to disclose, silence is not misrepresentation. In a contract of purchase the principle at common law has been caveat emptor: let the buyer beware. However, the courts have developed general law doctrine to the point where in some situations silence or non-disclosure would be a ground for legal relief. A person may be required to disclose information additional to that required by the statute where non-disclosure results in a half-truth, or in situations of supervening falsity, or where the person is (by virtue of special facts) in a fiduciary relationship with the person to whom securities are offered. However, it seems unlikely that Australian courts would go beyond this, for example, by treating a contract for the issue or sale of securities as a contract of utmost good faith. [page 211]

Statements needing qualification: half-truths and supervening falsity 5.31 One of those situations where, under unenacted law, silence can be a misrepresentation is where a positive representation is only a half-truth. An example is a statement that a company has paid dividends regularly but

the truth is that the latest dividend was paid from reserves of profits from previous years. Another category is where the maker of a statement that is correct when it is made learns of a change that makes it incorrect and fails to correct the statement to the person to whom it was made where the circumstances give rise to an obligation to correct.9 These situations are discussed in 8.51ff below.

Fiduciary relationship 5.32 A further situation in which disclosure is required under unenacted law — in equity rather than common law — is where a fiduciary relationship exists between the contracting parties. If X has placed himself or herself in relation to Y so that Y necessarily reposes confidence in X and as a result X has influence over Y, X and Y may be in a fiduciary relationship. If X abuses the confidence or exerts the influence to gain an advantage at Y’s expense, X will not be allowed to retain the advantage.10 If X were to sell securities to Y while having a relevant influence arising from the relationship, without telling Y the information about the securities that X possesses, the transaction could be set aside or Y could be entitled to monetary compensation by way of equitable damages. Two examples of fiduciary relationships are trustee and beneficiary, and agent and principal. If a broker were employed to purchase shares on behalf of a client and the broker sold to the client shares that it owned, the broker would be under a duty not to withhold from the client any material facts about the shares of which it was aware and which it could not reasonably assume to be within the client’s knowledge already. The ‘fiduciary duty to disclose’ is perhaps more accurately described as a defence against a claim by the client that the fiduciary placed itself in a position of conflict, or profited from the relationship, without the fully informed consent of the client.11 In some circumstances, proprietors of a company can owe a fiduciary duty to an interested purchaser of the company. Their duty will be important where the investor who is misled cannot recover from the company. The case can attract the jurisdiction of a court of equity to

award equitable monetary compensation12 for the breach of fiduciary duty.13 The award is restitutionary in character. [page 212] Directors who invite subscription without providing adequate disclosure can be held liable to indemnify the investor against loss where the relationship is fiduciary in character.14 It may be that company directors will only be held to be in a fiduciary relationship to investors who are, in effect, being invited to invest as proprietors in a quasi-partnership company. In situations where the relationship is simply a commercial one, in which the parties are at arm’s length and on an equal footing, it is unlikely that a fiduciary duty could be said to arise.15

Contracts of utmost good faith 5.33 Another situation where silence is improper at common law is where the parties are making one of the class of contracts known as contracts uberrimae fidei: that is to say, contracts of the utmost good faith. The two classes of contracts of utmost good faith are contracts of insurance and family arrangements such as a contract between members of a family to divide property. Contracts of insurance occupy that special position because courts were impressed by the fact that a person seeking insurance possessed full knowledge of all the material facts and the insurer was at a disadvantage. Given that reason for treating contracts of insurance as giving rise to a duty on the part of the insured to disclose known facts, one might have expected courts to extend the category of contracts of utmost good faith to sales of securities, so that the seller would have a duty of disclosure. In the second half of the 19th century it looked as if the courts were slowly moving in that direction.16 However, the inadequacy of the unenacted law for dealing with company frauds led to the enactment of legislation imposing a positive duty of disclosure on persons selling securities to the public, and it is unlikely that a contract for the issue or sale of securities would now be treated as a contract of utmost good faith.17

DUE DILIGENCE Purpose of due diligence 5.34 In preparing a prospectus the issuer will generally undertake a formal process of collecting, reviewing and verifying the information to be included in the prospectus that is referred to commercially as ‘due diligence’. The function of due diligence is three-fold: to determine the contents of the prospectus; to avoid misleading and deceptive statements in, and omissions from, the prospectus; and to establish defences to civil and criminal liability. [page 213] In July 2016 ASIC released its Report 484: Due Diligence Practices in Initial Public Offerings, which provides an analysis of the due diligence process in initial public offerings. Due diligence in Australia is predominantly led by the issuer, rather than by another ‘gatekeeper’ such as an underwriter as is the case in other jurisdictions.

Determining prospectus content 5.35 The first function of due diligence is to discover and verify all the information that must be included in the prospectus, and ensure that it is included. The general disclosure test for prospectuses in Corporations Act s 710 requires that relevant information be included if it is known to one of the people responsible for or involved in the preparation or issue of the prospectus and referred to in s 710(3) or if, in the circumstances, that person ought reasonably to have obtained the information by making enquiries. A properly structured due diligence process involves making the enquiries necessary to discover this information.18

Avoiding defects

5.36 We will see in Chapter 8 below that an issuer, its directors and various advisers have potential civil and criminal liability for any defects in the prospectus. The second function of due diligence is to ensure, as far as possible, that there are no such defects. Section 728(1) of the Corporations Act provides that a person must not offer securities under a prospectus if the prospectus contains a misleading or deceptive statement or omits material required by the Corporations Act (including s 710) to be included in the prospectus, or if a new circumstance arises after lodgment of the prospectus and information about that new circumstance would have been required to be included if it had arisen before lodgment of the prospectus. The due diligence process is the means by which those persons specifically referred to in s 729(1) of the Corporations Act, along with those involved in the preparation and issue of the prospectus, seek to ensure that there are no misleading or deceptive statements in the prospectus and that the prospectus does not omit material required by the Corporations Act to be included in the prospectus. A person who offers securities in breach of s 728(1) of the Corporations Act in circumstances where the misleading or deceptive statement, omission or new circumstance is materially adverse from the point of view of an investor commits a criminal offence: s 728(3). However, in relation to new circumstances arising after lodgment of the prospectus, an offence is not committed if the person proves that they were not aware of the matter. Further, an investor who suffers loss or damage because an offer of securities under a prospectus contravenes Corporations Act s 728(1) is entitled, under s 729(1), to recover the amount of the loss or damage from those involved in the preparation of the prospectus (even if the person from whom the amount of the loss or damage is recoverable did not commit, and was not involved in, the contravention). [page 214] Section 1041H of the Corporations Act prohibits a person (which would include an issuer and its directors, employees, advisers and consultants)

from engaging in conduct that is misleading or deceptive, or that is likely to mislead or deceive, in connection with any dealing in securities. Section 1041H no longer applies to misleading or deceptive statements in or omissions from a prospectus. However, it continues to apply to any statement relating to an offer of securities which is not contained in a prospectus; for example, roadshows and advertisements for securities. The equivalent prohibitions on misleading and deceptive conduct contained in s 12DA of the Australian Securities and Investments Act 2001 (Cth) (ASIC Act) and in s 18 of the Australian Consumer Law (ACL) applied by state fair trading legislation apply to dealings in securities other than conduct that contravenes s 728 or s 670A or would but for the availability of a defence under those sections. Section 728(2) of the Corporations Act provides that a person is taken to make a misleading statement about a future matter (including the doing of, or refusing to do, an act) if the person does not have reasonable grounds for making that statement. For this reason, particular attention should be paid to any predictions, forecasts or statements of intent contained in the prospectus.

Establishing defences 5.37 The third function of the due diligence process is to provide those persons specifically referred to in s 729(1) of the Corporations Act, along with those involved in the preparation and issue of the prospectus, to the maximum extent possible, with defences to civil and criminal liability for breach of certain provisions of the Corporations Act. The reasonable inquiries and related defences to liability are discussed in 8.25 below.

Structuring due diligence 5.38 Having regard to the three functions of due diligence described above, it is important that a due diligence process is structured and documented appropriately. In Australia, the practice has developed of delegating the due diligence process to a committee established for that purpose by the board of the

offeror.19 The due diligence committee generally consists of representatives of those whose knowledge is relevant to the content of the prospectus (s 710(3)) or who may be liable in respect of it: s 729. So, a typical due diligence committee for an initial public offering may include: one or more of the issuer’s directors; some members of the issuer’s senior management; representatives of the issuer’s lawyers and accountants; representatives of corporate advisers; and representatives of the underwriters. [page 215] If the issuer and its directors are to be able to take advantage of the work done by a due diligence committee,20 it is important that the committee is properly established and instructed by the board. If the due diligence process is to achieve its objectives, it is necessary to ensure that a proper system is established and carried into effect, and that the system is adequately supervised. The board’s key responsibilities include deciding on the composition of the committee, determining the terms of reference of the committee (including the due diligence process), and setting procedures for reporting by the committee.

Carrying out due diligence 5.39 Once the due diligence committee has been established, it will generally adopt a planning memorandum that sets out the process to be undertaken by the committee. Often the planning memorandum will assign to individual members of the committee responsibility for collecting and verifying information to be included in different parts of the prospectus. Materiality thresholds will be set and agreed. The committee will meet several times while the prospectus is being prepared and (depending on the length of the offer period) at least once after the prospectus has been issued and before securities are allotted pursuant to it. The minutes of the meetings will record the steps taken to obtain and

verify information for inclusion in the prospectus. This may include questioning people who have provided information to the committee about that information, or undertaking independent inquiries to ascertain the completeness or accuracy of information. The minutes will also record the basis on which decisions were taken to include or omit information from the prospectus (for example, because information is considered by the committee not to be material). Minutes of meetings held during the offer period will confirm that no information has come to light that would require the preparation of a supplementary or replacement prospectus. The scope and extent of the due diligence process in each case will depend on considerations specific to each individual offer. Small or relatively straightforward offers may require only limited due diligence. More complex offers or businesses may require more extensive due diligence, particularly where information relevant to the issuer that must be included in the prospectus is widely dispersed throughout the issuer.21 Generally, at the end of the due diligence process the committee will obtain from those responsible for the preparation of different parts of the prospectus a sign-off to the effect that the relevant part complies with law. Committee members will often also provide written confirmation to each other, the issuer and the board that they are satisfied with the adequacy of the due diligence process, having regard to the functions described above. [page 216] Conduct at a due diligence committee meeting may be ‘in trade or commerce’ for the purposes of s 12DA of the ASIC Act and s 18 of the ACL: see New Cap Reinsurance Ltd v Daya (2008) 66 ACSR 95; [2008] NSWSC 64 at [52] and [53].

OFFER PROCESS 5.40 The requirements for conducting a regulated securities offer are set out in Corporations Act s 717. Section 717 contains the following table, which ‘summarises what a person who wants to offer securities must do to

make an offer of securities that needs disclosure to investors under [Pt 6D.2] and gives signposts to relevant sections’. Table 5.4: Offering securities (disclosure documents and procedure) 1

2

3

Action required

Sections Comments and related sections Prepare disclosure document, 710 Section 728 prohibits offering making sure that it: 711 securities under a disclosure document sets out all the information 712 713 that is materially deficient required; 714 Section 729 deals with the does not contain any 715 liability for breaches of this misleading or deceptive 716 prohibition statements; and Sections 731, 732 and 733 set is dated, out defences and that the directors consent to the disclosure document Lodge the disclosure 718 Section 727(3) prohibits document with ASIC processing applications for non-quoted securities for seven days after the disclosure document is lodged Offer the securities, making 721 Sections 727 and 728 make it sure that the offer and any an offence to: application form is either offer securities without a included in or accompanies: disclosure document; or the disclosure document; or offer securities if the a profile statement if ASIC disclosure document is has approved the use of a materially deficient. profile statement for offers Section 729(3) deals with of that kind liability on the prospectus if a profile statement is used The securities hawking provisions (s 736) restrict the way in

4

If it is found that the disclosure document lodged was deficient or a significant new matter arises, either: lodge a supplementary or replacement document under s 719; or return money to applicants under s 724

719 724

5

Hold application money received on trust until the securities are issued or transferred or the money returned

722

which the securities can be offered Section 728 prohibits making offers after becoming aware of a material deficiency in the disclosure document or a significant new matter Section 730 requires people liable on the disclosure document to inform the person making the offer about material deficiencies and new matters Investors may have a right to have their money returned if certain events occur: see ss 724, 737 and 738

[page 217] 6

Issue or transfer the securities, 723 making sure that: the investor used an application form distributed with the disclosure document; and the disclosure document is current and not materially deficient; and any minimum subscription condition has been satisfied

Section 721 says which disclosure document must be distributed with the application form Section 729 identifies the people who may be liable if: – securities are issued in response to an improper application form; or –

the disclosure document is not current or is materially deficient

Sections 731, 732 and 733 provide defences for the contraventions Section 737 provides remedies for an investor

Lodgment with ASIC 5.41 Once the disclosure document has been prepared, the first step of the offer is to lodge the disclosure document with ASIC before the offer commences. Lodgment is discussed in ASIC RG 254, Section F.

ASIC’s role 5.42 Disclosure documents used for offers of securities must be lodged with ASIC under Corporations Act s 718. Unless a disclosure document has been lodged with ASIC, the offer of securities and the distribution of application forms are prohibited: s 727(1). 5.43 Note that ASIC does not register the disclosure document. Generally, there is no pre-vetting of documents, but ASIC conducts select compliance reviews of disclosure documents that are lodged with it. ASIC’s role is explained in ASIC RG 254, Section L. Its review may occur during or after the exposure period. If ASIC discovers defects in the disclosure document, it may extend the exposure period (see below) to 14 days and attempt to resolve the issue, or if the exposure period has finished, issue an interim or final stop order: see 5.57 below.

Exposure period 5.44 Applications for non-quoted securities under an offer that needs a disclosure document must not be processed until seven days after the disclosure document is lodged: Corporations Act s 727(3). The Explanatory Memorandum to the CLERP Bill 1998 explains the lodgment requirement in the following terms (at 8.68): A person offering securities will be able to distribute the disclosure document immediately

after it has been lodged with ASIC. However, a person offering non-quoted securities will not be allowed to accept an application for the issue or transfer of securities until 7 days after lodgment of the disclosure document with ASIC. ASIC may extend this 7 day period to a maximum of 14 days. The 7 to 14 day period gives ASIC and the market an opportunity to consider the disclosure document before the commencement of subscriptions for the securities on offer. Where the disclosure document was defective, the market could draw it to the

[page 218] attention of ASIC or aggrieved parties could, if appropriate, seek injunctions preventing the fundraising.

ASIC RG 254, Section G sets out the offeror’s obligations during the seven-day exposure period. The disclosure document must be made generally available throughout this period; this can be done in most cases by the offeror posting the disclosure document on a website and providing paper copies when requested.

Consents required for lodgment 5.45 In order to lodge a disclosure document with ASIC, the consent of various people is required. The consents that need to be obtained vary depending on the type of offer being made. The persons whose consent is required are set out in the following table in s 720; ASIC provides specific guidance in ASIC Regulatory Guide 55 — Statements in Disclosure Documents and PDSs: Consent to Quote, March 2016. Table 5.5: Consents required for lodgment (operative) 1

Type of offer People whose consent is required Issue offers Offer of securities for every director of the body issue every person named in the document as a proposed director of the body if securities interests in a managed investment scheme made available by a body — every director of that body if securities interests in a managed investment

scheme made available by an individual — that individual 2



3



4

Sale offers (sale by controller) Offer of securities for if seller an individual — that individual sale that needs a if seller a body — every director of the body disclosure document because of s 707(2) Sale offers (sale amounting to indirect issue) Offer of securities for every director of the body whose securities are sale that needs a offered for sale disclosure document if seller an individual — that individual because of s 707(3) if seller a body — every director of the body Sale offers (sale amounting to indirect sale by controller) Offer of securities for if seller an individual — that individual sale that needs a if seller a body — every director of the body disclosure document if individual controls the body whose securities because of s 707(5) are offered for sale — that individual if body controls the body whose securities are offered for sale — every director of the controlling body

Like all other documents lodged with ASIC, disclosure documents must be signed by a director or secretary of the offeror: s 351(1). In the case of a foreign company, [page 219]

the document may be signed by its local agent or a director or secretary of the local agent (if the agent is a company). The disclosure document must include a statement that it has been lodged with ASIC and that ASIC takes no responsibility for its contents: see ss 711(7) (prospectuses), 714(1)(e) (profile statements) and 715(1)(f) (offer information statements).

Application forms 5.46 Section 727(2) prohibits a person from making a regulated offer of securities, or distributing an application form in connection with a regulated offer, unless the offer and the form are included in or accompanied by the required disclosure document. The law requires the application form to be attached to or included in the disclosure document as a way of ensuring that the investor receives the disclosure document. Further, s 723(1) says that if an offer of securities needs a disclosure document, the securities may only be issued or transferred in response to an application form. The securities may only be issued or transferred if the person issuing or transferring them has reasonable grounds to believe that the form was included in, or accompanied by, the disclosure document (or, if s 721(2) allows a profile statement to be used — the prospectus or the profile statement) when the form was distributed by the person issuing or transferring the securities; or that the form was copied, or directly derived, by the person making the application from such a form. ASIC has granted relief to allow the use of electronic application forms in certain circumstances: see ASIC Regulatory Guide 107 — Fundraising: Facilitating Electronic Offers of Securities, March 2014.

Subscription moneys must be held on trust 5.47 By operation of Corporations Act s 722, all application and other moneys received from people applying for securities under a disclosure document must be held on trust for the applicants until the securities are issued or transferred (as the case may be), or the money is returned to the

applicant. In Re Elsmore Resources Ltd [2016] NSWSC 856, Black J points out (at [16]) that: … the creation of a separate account in accordance with [section 722] and a declaration of trust would generally be sufficient to establish a statutory trust over the relevant funds: Re Lehman Brothers International (Europe) (in admin) [2012] UKSC 6; [2012] 3 All ER 1 at [2]–[3]; Re MF Global Australia Ltd (in liq) [2012] NSWSC 994 at [28]–[29]. General principles of trust law will be applicable to such a trust: Re Lehman Brothers International (Europe) (in admin) [2010] EWCA Civ 917 at [65]; Re MF Global Australia Ltd above at [102]. The Federal Court of Australia treated ss 722 and 723 of the Corporations Act as giving rise to a statutory trust in G8 Communications Ltd [2016] FCA 297 at [51]–[55], where Barker J observed that relevant monies were held on trust up to the point at which shares were issued.

Circumstances in which moneys must be returned to the applicant include under ss 723(3) and 724(2): see 5.56 below. Where application moneys must be returned, that must be done as soon as practicable: s 722(2).22 [page 220]

Issue or transfer of securities 5.48 In the ordinary course, once applications are received, the offeror can proceed to issue or transfer the securities, subject to the restrictions in s 723. If the disclosure document states that the offer will follow particular procedures (for example, in relation to the allocation of securities if the offer is oversubscribed), these must be followed. The offeror cannot proceed to issue or transfer securities unless it has received an application form which it reasonably believes was included in or accompanied by a disclosure document: see s 723(1) discussed at 5.46 above. It cannot accept an application after the expiry date set out in the disclosure document without taking certain corrective action: see s 725. If the disclosure document sets out a minimum subscription condition, or states or implies that the securities will be listed for quotation on an exchange, the offeror ordinarily cannot issue or transfer the securities without those conditions being met: see ASIC RG 254, Section I.

Minimum subscription conditions

5.49 Although there is no requirement to do so, some disclosure documents state that the issue of securities will proceed only if a specified minimum amount is raised by the offer. Section 723(2) is to the effect that, if a disclosure document for an offer of securities states that the securities will not be issued or transferred unless applications for a minimum number of the securities are received, or a minimum amount is raised by the offer, those securities must not be issued or transferred until that condition is satisfied. For the purpose of working out whether the condition has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities. Where the minimum subscription is not reached within four months after the date of the disclosure document, the offeror has certain options open to it under Corporations Act s 724. First, it may decide not to go ahead with the offer, and repay any application money already received. Second, the offeror can provide additional disclosure (in the form of a supplementary or replacement disclosure document varying the terms of the offer) and give the applicant one month to withdraw their application and be repaid. Third, the offeror can issue or transfer the securities to the applicant, provide the applicant with this additional disclosure, and give the investor one month to withdraw their application and be repaid.

Quotation conditions 5.50 If a disclosure document for an offer of securities states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere), certain requirements apply under Corporations Act s 723(3). They are that: an application for the admission of the securities to quotation must be made within seven days after the date of the disclosure document; and the securities must be admitted to quotation within three months after the date of the disclosure document. Section 723(3)(c) and (d) provide that, if these two requirements are not met, an issue or transfer of securities in response to an application made under the

[page 221] disclosure document is void, and the person offering the securities must return the money received by the person from the applicants as soon as possible. It may be that the word ‘void’ here should be read as ‘voidable at the election of the applicant for the securities, and that [subsequent onsale] of the securities by that party would constitute an election to affirm the transaction’.23 The requirement to return applicants’ money would appear not to apply where securities are yet to be issued, because s 724(1) (b) contemplates that the offeror can take the steps set out in s 724(2). The offeror may decide not to go ahead with the offer, and repay the money. Alternatively, the offeror can provide additional disclosure (in the form of a supplementary or replacement disclosure document varying the terms of the offer) and give the applicant one month to withdraw their application and be repaid. As a third option, the offeror can issue or transfer the securities to the applicant, provide the applicant with this additional disclosure, and give the investor one month to withdraw their application and be repaid. Courts have been willing to exercise their powers to validate issues of securities that would otherwise be void by operation of s 723(3) in a number of cases.24 In Re Wave Capital Ltd (2003) 47 ACSR 418; [2003] FCA 969 at [29], French J said that s 1322: … may be taken to reflect a broad legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of noncompliance with its requirements where such non-compliance is the product of honest error or inadvertence and where the court can avoid its effects without prejudice to third parties or to the public interest in compliance with the law. That broad policy does not authorise the court lightly to set aside the requirements of the Act where they have not been observed. Each application for the exercise of the court’s relieving power will require consideration of all the circumstances of the case to ensure that the indulgence sought is appropriate and does not undermine the requirements of the Act. Like the discretion to validate invalid share issues under s 254E, the power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Corporations Act and any other relevant statutes whose application may be in issue. It must also be exercised having regard to the interests of all parties affected and the public interest in ensuring compliance with the statute law and company constitutions. Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief. The provision is, however, remedial in character and should be given a liberal construction. [Citations omitted.]

For example, in Re Solco Ltd [2015] FCA 635; (2015) 106 ACSR 591, the court granted relief under s 1322(4) to cure a failure to observe time limits for admission to quotation on the ASX in respect of shares issued following the publication of a prospectus. In that case, the court was persuaded, on the evidence, that the making of the orders sought would not cause, or be likely to cause any substantial injustice to any person, but rather would fulfil the expectations and commercial interests of all persons concerned. [page 222]

Expired disclosure documents 5.51 Prospectuses and offer information statements must specify an expiry date which is no later than 13 months after the date of the document. They must state that no securities will be issued on the basis of the document after the expiry date. If the document is replaced, the replacement must expire on the same date as the original: see ss 711(6) and 715(3). If an application for securities is received after the expiry date of a disclosure document, the person who offered the securities must act in accordance with s 725(3). Under that section the person can: 1.

return the applicant’s money;

2.

provide the applicant with a new disclosure document and give them one month to withdraw their application and be repaid; or

3.

issue or transfer the securities to the applicant, giving them a new disclosure document and one month to withdraw their application and be repaid.

A failure to follow one of these courses of action amounts to an offence of strict liability: s 725(1A).

CORRECTING AND UPDATING

DISCLOSURE 5.52 It is possible that, during the offer period, a defect in the disclosure document may arise or be discovered. In particular, the disclosure document may be, or become, defective in that: a statement in the disclosure document is misleading; or there is an omission from the disclosure document of material required by s 710, s 711, s 712, s 713, s 714 or s 715; or a new circumstance has arisen that, had it arisen before the disclosure document was lodged, would have been required by s 710, s 711, s 712, s 713, s 714 or s 715. Where this situation arises, various statutory provisions are triggered: A person named in s 729 who becomes aware of the situation must disclose it to the offeror: s 730. The offer cannot proceed unless and until the defect is dealt with: s 728(1). A person who offers securities while there is a defect in the disclosure document which is ‘materially adverse from the point of view of an investor’ commits an offence: s 728(3). If the offeror is aware that there is such a defect and the defect is materially adverse from the point of view of an investor, the offeror must deal with any applications for securities it receives in accordance with s 724. It cannot, without more, proceed to issue or transfer the securities. The offeror has the option of curing the defect by the lodgment of a supplementary or replacement disclosure document, under Corporations [page 223] Act s 719. ASIC’s policy on updating disclosure is set out in ASIC Regulatory Guide 254 — Offering securities under a disclosure document, Section H.

Supplementary and replacement disclosure documents 5.53 Where, during the time that applications for securities can be made on the basis of a disclosure document that has been lodged, there is a significant change affecting something in the disclosure document or a significant new matter arises, the offeror may lodge a supplementary disclosure document or a replacement disclosure document: Corporations Act s 719. The requirements for a supplementary or replacement disclosure document correcting a deficiency or providing information about a new occurrence appear in s 719. A deficiency could be a material statement that is misleading or a material omission. An example is where it becomes apparent that a profit forecast made in the prospectus will not be achieved. The significant new matter referred to in s 719 is one about which information would have been required in the disclosure document. If a person is aware of a deficiency, it is an offence to continue making offers unless the deficiency of the disclosure document has been corrected: s 728. Note that supplementary and replacement prospectuses can also be issued in circumstances not covered by s 719.

Form of supplementary or replacement document 5.54 Under s 719(2) and (3), at the beginning of the document there must be a statement that it is a supplementary or replacement document, respectively. The disclosure document that it supplements or replaces must be identified. In the case of a supplementary document, any previous supplementary documents lodged with ASIC must be identified and the document must state that it is to be read in conjunction with the disclosure document(s) that it supplements. A supplementary or replacement document must be dated. The relevant date is the date on which the document was lodged with ASIC.

Consequences of lodging a supplementary or replacement document

5.55 After the lodgment of a supplementary disclosure document, the disclosure document is taken to be the disclosure document together with the supplementary document for the purpose of applying Ch 6D to events occurring after the lodgment of the supplementary document: s 719(4). A replacement document is taken to be the disclosure document for the purpose of applying Ch 6D to events occurring after the replacement document is lodged: s 719(5). If a supplementary disclosure document is used, then it must be capable of being read with the original disclosure document so as to provide ‘clear concise and effective’ disclosure for the purposes of s 715A.25 [page 224]

Dealing with applications 5.56 In the ordinary course, defects in disclosure that are discovered during the offer period are dealt with by the offeror issuing a supplementary or replacement disclosure document under s 719. Where a completed application form is submitted by an investor who has not received the benefit of that supplementary disclosure (for example, because they applied before, or relied on a disclosure document distributed before, the defect arose or was discovered) the Corporations Act allows the offeror to deal with their application in one of three ways: 1.

The offeror can repay the money.

2.

The offeror can provide additional disclosure and give the applicant one month to withdraw their application and be repaid.

3.

The offeror can issue or transfer the securities to the applicant, provide the applicant with additional disclosure, and give the investor one month to withdraw their application and be repaid. This is provided for in s 724(2). The additional disclosure must be a supplementary or replacement disclosure document that corrects the deficiency: s 724(3).

The obligation to deal with outstanding applications in the manner

prescribed by s 724(2) arises, in connection with defective disclosure, if the offeror is aware of the defect and the defect is ‘materially adverse’ from the point of view of the investor. In Roadships Logistics Ltd v Tree (2007) 64 ACSR 671; [2007] NSWSC 1084 at [8], a director of the offeror ceased to hold office before securities were issued pursuant to a prospectus. The investor argued that this triggered the application of s 724(3) in relation to its application for securities, which had been lodged but not yet acted upon by the issuer (it was acted upon on that day). Barrett J took the view that: … the ‘investor’ referred to in the expression ‘is materially adverse from the point of view of an investor’ is, if you like, a hypothetical reasonable investor, not a particular idiosyncratic investor. In other words, the test is an objective test: see, in a comparable context, the reference to ‘[t]he shareholder whom I should hypothesise for the purpose of materiality’.26

The question of whether s 724(3) was triggered by the change in office holder ‘depended upon objective assessment in two areas’. The first concerned ‘the significance, from the point of view of disclosure under prospectus content requirements, of a statement about who holds in the company the positions [the person] held in this particular case’. The second concerned ‘the capacity of the newly emerged information about the occupancy of such a position to affect the decision of the ordinary wouldbe investor whether or not to make the investment, this being the test of materiality which has long been applied in this area of the law’.27 In his Honour’s view, for s 724(1) to be activated, it would have to be found that any such capacity was adverse, in the sense of turning the would-be investor [page 225] away rather than making him or her more willing to invest. This requires a close consideration of the relevant facts.

STOP ORDERS 5.57 Section 739 of the Corporations Act gives ASIC the power to issue ‘stop orders’ in relation to offers of securities that need disclosure to

investors under Pt 6D.2. The stop order may be triggered by a defect in a disclosure document or in an advertisement relating to a regulated offer. Ordinarily, a stop order can be issued only after ASIC has held a hearing giving interested persons an opportunity to be heard, but ASIC can issue interim stop orders without a hearing in certain circumstances. To be effective, a stop order or interim stop order must be in writing and must be served on the person to whom it applies: s 739(5). ASIC keeps a register of stop orders on its website, as part of the OFFERlist facility. ASIC’s decision to issue a stop order is reviewable on its merits by the Administrative Appeals Tribunal, in the manner explained in 2.22–2.25 above. ASIC may make a stop order at any time until it is no longer possible for the person who is offering the securities to issue or transfer the securities. This is so even if the offer has closed. In Thompson v Australian Securities and Investments Commission (2002) 117 FCR 159; 41 ACSR 456; [2002] FCA 512, an offer of securities had been fully subscribed and the issuer had announced to the market that no further applications would be processed. After the announcement but before the securities were issued, ASIC issued a stop order. Branson J concluded (at [39]): In considering the proper interpretation of s 739, it is appropriate to start from the premise that the section is a provision designed for the protection of potential investors. It seems to me that its inclusion in the Act reflects an appreciation by the legislature that s 724 may provide ineffective protection to an applicant for securities where the relevant disclosure document contains a material misstatement or omission. It would therefore seem logical for the ambit of s 739 to be at least co-extensive with that of s 724. Further, in my view, the terms of s 739(1) indicate that the power given by s 739 to ASIC in respect of an offer of securities under a disclosure statement lodged with it is not intended to come to an end until it becomes impossible for any stop order made by ASIC to operate according to its terms. That is, until it is no longer possible for any relevant offers, issues, sales or transfers of the relevant securities to be made.

Grounds for issuing a stop order Stop orders in relation to defective disclosure documents 5.58 Under s 739(1)(a) and (b) of the Corporations Act, ASIC is empowered to make a stop order if it is satisfied either that ‘information in a disclosure document lodged with ASIC is not worded and presented in a

clear, concise and effective manner (see section 715A)’, or ‘an offer of securities under a disclosure document lodged with ASIC would contravene section 728’. The effect of the stop order is that no offers, issues, sales or transfers of the securities be made while the order is in force. [page 226]

Stop orders in relation to defective advertisements 5.59 Section 739(1)(c) of the Corporations Act empowers ASIC to make a stop order if ‘an advertisement or publication of a kind referred to in s 734(5) or (6) that relates to securities is defective’. Section 739(6) provides that such an advertisement or statement is defective if: there is a misleading or deceptive statement in the advertisement or publication; there is an omission from the advertisement or publication of material required by the relevant subsection to be included in the advertisement or publication; or if the advertisement or publication relates to an offer of securities in a class that is not already quoted, and is published before a disclosure document in relation to the offer is lodged — the advertisement or publication includes material that is not referred to in s 734(5)(b). A person is taken to make a misleading statement about a future matter (including the doing of, or refusing to do, an act) if they do not have reasonable grounds for making the statement: s 730(7). (This does not limit the circumstances in which a statement may be misleading for this purpose.) A stop order made in these circumstances may prohibit specified conduct in respect of the securities to which the advertisement or publication relates (such as the issue or transfer of those securities): s 739(1A)(b). It may also include a statement that specified conduct engaged in contrary to the order

will be regarded as not complying with the requirements of a specified provision of Ch 6D: s 739(1B).

Obligation to hold a hearing 5.60 Before making an order under s 739(1A), ASIC must hold a hearing and give a reasonable opportunity to any interested people to make oral or written submissions to ASIC on whether an order should be made. This is provided for in s 739(2). ASIC hearings are discussed in 2.62–2.66 above.

Interim stop orders 5.61 Under s 739(3) of the Corporations Act, if ASIC considers that any delay in making an order under s 739(1A) pending the holding of a hearing would be prejudicial to the public interest, ASIC may make an interim order prohibiting offers, issues, sales or transfers of the securities that lasts for up to 21 days. Interim orders can also be made during a hearing, under s 739(4). An interim order made during a hearing lasts until ASIC makes a final order after the conclusion of the hearing, or the interim order is revoked, whichever happens first. ASIC may only make an interim stop order if it is satisfied of the matters set out in s 739(1): that is, that the disclosure document or advertisement is defective. In Thompson v Australian Securities and Investments Commission (2002) 117 FCR 159; 41 ACSR 456; [2002] FCA 512, Branson J rejected a submission [page 227] by ASIC that s 739(3) empowered it to make orders in circumstances in which it would not be authorised to make an order under s 739(1): that is, in circumstances in which ‘it holds a suspicion falling short of satisfaction’ as to the relevant matters. Her Honour considered that ‘if the legislature intended that ASIC should be able to exercise, even on an interim basis, the significant power of intervention in fundraising given to it by s 739 in

circumstances less restrictive than those provided for by s 739(1), it would have said so explicitly’. ___________________________ 1.

This is the expression used by ASIC to describe a prospectus for an offer of continuously quoted securities, that is prepared in accordance with Corporations Act s 713. See ASIC RG 254, Section C.

2.

The table in s 705 does not separately describe transaction specific prospectuses, unlike ASIC RG 254.

3.

There is a transition period during which a full prospectus can still be used, ending in December 2016.

4.

Explanatory Memorandum to the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2014, [1.40].

5.

In addition to satisfying the conditions in s 713A(2)–(20), the bonds, the offer, the issuer, and if the issuer body is a wholly-owned subsidiary of a body corporate which has continuously quoted securities, that body corporate, must comply with any other conditions or requirements as set out in the regulations: s 713A(24)–(27).

6.

An auditor is required to include an ‘emphasis of matter’ paragraph if they conclude that a material uncertainty exists that leads to significant doubt about the ability of the company to continue as a going concern and that uncertainty has been adequately disclosed in the financial reports. The purpose of the inclusion of an ‘emphasis of matter’ paragraph is to draw the readers’ attention to the relevant disclosures relating to the particular matters.

7.

Woodcroft-Brown v Timbercorp Securities Ltd (2011) 253 FLR 240; [2011] VSC 427 at [125].

8.

Woodcroft-Brown v Timbercorp Securities Ltd (2011) 253 FLR 240; [2011] VSC 427 at [125].

9.

See, for example, Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 68 ACSR 595; [2008] NSWCA 206 at [736], [766].

10.

Tate v Williamson (1866) 2 Ch App 55 at 61.

11.

See, for example, Blackmagic Design Pty Ltd v Overliese (2011) 191 FCR 1; [2011] FCAFC 24 [105]– [108].

12.

See generally I E Davidson, ‘The Equitable Remedy of Compensation’ (1982) 13 MULR 349; W Gummow, ‘Compensation for Breach of Fiduciary Duty’ in Youdan (ed), Equity, Fiduciaries and Trusts, Carswell, Toronto, 1989; L Aitken, ‘Developments in Equitable Compensation: Opportunity or Danger’ (1993) 67 ALJ 596; P McDermott, Equitable Damages, Butterworths, Sydney, 1994.

13.

Nocton v Lord Ashburton [1914] AC 932; cf Commonwealth Bank of Australia v Smith (1991) 102 ALR 453.

14.

Hill v Rose [1990] VR 129. P Finn, ‘Good Faith and Non-disclosure’ in P Finn (ed), Essays on Torts, Law Book Co, Sydney, 1989, p 150 at pp 166–70.

15.

Eighty-Second Vocation Pty Ltd v Parere Investments Pty Ltd [2005] FCA 844.

16.

Central Rly Co of Venezuela (Directors etc) v Kisch (1867) LR 2 HL 99 at 120.

17.

J H Farrar, ‘Good Faith and Dealing with Dissent in Prospectuses’ (1999) 1 U Notre Dame Austl L Rev 27.

18.

Woodcroft-Brown v Timbercorp Securities Ltd (2011) 253 FLR 240; [2011] VSC 427 at [154].

19.

See, for example, Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 68 ACSR 595; [2008] NSWCA 206.

20.

For a discussion of the principles relating to delegation and reliance by company directors generally, see J H Farrar and P F Hanrahan, Corporate Governance, LexisNexis Butterworths, Sydney, 2016, Ch 9.

21.

See generally S Minns and G Golding, ‘Prospectus Due Diligence — A Focussed Approach’ (1993) 11 C&SLJ 542; D Croker, Prospectus Liability under the Corporations Act, CCLSR, Melbourne, 1998, pp 59–63.

22.

The basis on which funds must be returned is discussed below.

23.

Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659; [2004] FCA 1119.

24.

See, for example, Re Golden Iron Resources (2010) 79 ACSR 159; [2010] FCA 693 at [19]–[21].

25.

See, for example, Re Wright Patten Shakespeare Capital Ltd and Australian Securities and Investments Commission (2007) 99 ALD 335; [2007] AATA 2101.

26.

Referring to Bryson J in ICAL Ltd v County Natwest Securities Australia Ltd (1988) 13 ACLR 129.

27.

See, for example, Cackett v Keswick [1902] 2 Ch 456.

[page 229]

Chapter 6 OFFERING MANAGED INVESTMENTS, DERIVATIVES and OTHER FINANCIAL PRODUCTS Introduction Structure of Pt 7.9 Scope of Pt 7.9 Application to arrangements with different ‘components’ Requirement to Provide a PDS When a PDS is required Retail and wholesale clients Jurisdictional connection Exemptions from the PDS requirement Product Disclosure Statements PDS must be prepared by the issuer or seller Manner of providing the PDS Contents Requirements for the PDS Evolution of the PDS content requirements Determining PDS contents Main disclosure requirements for a full PDS Limits on the disclosure obligation Modified PDS content requirement for quoted financial products Modified PDS content requirement for simple managed investment schemes Modified PDS content requirement for margin loans Conducting the Offer Lodgment with ASIC Application forms

6.1 6.2 6.5 6.11 6.12 6.12 6.17 6.26 6.27 6.33 6.33 6.34 6.39 6.39 6.42 6.45 6.52 6.55 6.56 6.57 6.58 6.58 6.59

[page 230] Dealing with application money Quotation conditions Minimum subscription condition Transaction confirmation Cooling off Correcting and updating disclosure Additional information Stop Orders Controls on the Sale Process Restrictions on advertising financial products Hawking financial products Impact of the AFS licensing laws

6.60 6.61 6.62 6.63 6.64 6.65 6.66 6.67 6.68 6.68 6.72 6.73

INTRODUCTION 6.1 Not all instruments acquired through or traded on Australian financial markets are ‘securities’ for the purposes of Ch 6D of the Corporations Act 2001 (Cth) (Corporations Act). The offer and issue of these other instruments (including interests in managed investment schemes, and derivatives) are subject to a separate regulatory regime, contained in Ch 7 of the Corporations Act. This includes, in Corporations Act Pt 7.9, a mandatory disclosure requirement that arises where financial products are offered to ‘retail clients’. This chapter discusses the requirements of Pt 7.9, focusing particularly on the rules of general application and on the specific rules that apply in connection with the offer of interests in listed and unlisted managed investment schemes, derivatives and similar financial products, and margin lending facilities. The disclosure requirements that apply to offers of general insurance and life insurance products, superannuation products, retirement savings accounts (RSAs), and deposits with Australian authorised deposit-taking institutions (ADIs) are not discussed here.1

STRUCTURE OF PT 7.9 6.2 Like the regime for securities offerings contained in Ch 6D of the Corporations Act and described in Chapters 4 and 5 above, the regulatory regime in Pt 7.9 aims to protect members of the public who acquire financial products other than securities, by requiring the disclosure of certain material information in connection with the issue or sale of financial products, and ensuring as far as possible that the [page 231] information is provided in written form before the decision to acquire the product is made. Part 7.9 also: encourages the presentation of that information in a way that enables those acquiring financial products to compare functionally similar products; provides for ongoing disclosure to holders of products; restricts advertising and certain sales activities, including hawking; and allows for ‘cooling off’ in connection with the acquisition of certain financial products. Although there are parallels in Pt 7.9 with the securities disclosure regime in Ch 6D of the Corporations Act, the required disclosure is different. This may reflect a greater emphasis in Pt 7.9 on the use of disclosure to facilitate individual product selection, rather than to provide corporate information to enable the market to set an informed price. In many respects, acquirers of financial products to which the disclosure regime in Pt 7.9 applies are ‘consumers’, rather than investors in the true sense.2 With the exception of interests in listed managed investment schemes and some derivatives, most of the financial products covered by Pt 7.9 are not traded in organised markets. In the Revised Explanatory Memorandum to the Financial Services Reform Bill 2001, the intentions and policy considerations guiding the disclosure regime in Pt 7.9 are explained: at [14.71]–[14.98]. Unlike Ch

6D, Pt 7.9 takes a ‘directed disclosure approach to point of sale disclosure’. The Explanatory Memorandum says (at [14.71]) that this approach: … seeks to balance the need for the purchaser to have sufficient information to make an informed decision and compare products against the concern that they may be provided with more information than they can comprehend. In so doing, it takes a middle ground between the full due diligence approach in the fundraising provisions of the Corporations Law and the Key Features Statement approach taken in relation to superannuation. That is, the provisions take a directed disclosure approach supplemented by other information known to the issuer or seller that might materially influence a retail client’s decision to acquire the product.

The product disclosure regime in Pt 7.9 applies to offers of all types of financial products other than securities and government bonds: Corporations Act s 1010A. The definition of financial product is discussed in Chapter 2 above. It includes any ‘facility through which, or through the acquisition of which, a person … makes a financial investment’ within the meaning of s 763B. It also extends to a facility through which, or through the acquisition of which, a person manages financial risk (see s 763C) or makes non-cash payments (s 763D). A person ‘manages financial risk’ if they ‘manage the financial consequences to them of particular circumstances happening’ or ‘avoid or limit the financial consequences of fluctuations in, or in the value of, receipts or costs (including prices and interest rates)’. The notes to s 763C [page 232] give as an example of managing financial risk ‘hedging a liability by acquiring a futures contract or entering into a currency swap’. The breadth of the definition of financial product contained in Corporations Act Ch 7 means that the disclosure regime in Pt 7.9 applies across a range of financial arrangements that have little or no functional equivalence. In addition to interests in managed investment schemes and derivatives, the definition includes general insurance, risk life insurance, superannuation products, bank deposits, margin loans, debit cards, stored value cards and travellers’ cheques. The disclosure requirements in Pt 7.9 are complex, and highly specific in their application. They vary significantly depending on the type of financial

product on offer. The principal statutory requirements have been extensively modified, both by regulations and by ASIC legislative instruments; the effect of these modifications is, on occasions, to make substantive amendments to the principal law. In any particular offer, close attention to the actual wording of the requirements and careful research of relevant ASIC policy is required. 6.3 To achieve the regulatory aims explained above, Pt 7.9 contains the following requirements that are applicable, in certain circumstances, to the issue and sale of financial products other than securities and government bonds.3 Table 6.1: Pt 7.9 Requirements for offers of financial products The requirement relating to … Product Disclosure Statements Additional disclosure Ongoing disclosure Periodic reporting Dealing with application moneys Transaction confirmation Dispute resolution

requires a person (generally the issuer) to … under …

prepare and provide disclosure in the form of a Pt 7.9 Div 2 (s Product Disclosure Statement in connection 1011A and with issue or sale of a financial product following) provide additional disclosure on request to a s 1017A person interested in acquiring a financial product provide ongoing disclosure of material changes s 1017B or significant events while a person holds a financial product provide periodic reporting to holders of ss 1017C, certain financial products3 1017D and 1017DA hold moneys in a trust account pending issue s 1017E of a financial product provide confirmation of transactions (such as acquisitions and disposals) in respect of financial products establish dispute resolution procedures

s 1017F

s 1017G

Advertising Cooling off

observe certain restrictions on advertising financial products allow a customer 14 days to return a financial product and obtain a refund

ss 1018A and 1018B ss 1019A and 1019B [page 233]

6.4 Part 7.9 also contains the statutory restrictions on short selling of securities, interests in registered schemes, and government bonds (ss 1020B, 1020C and 1020D); the requirements that apply where an unsolicited offer to purchase financial products (including securities) is made otherwise than on a licensed market (ss 1019C–1019K); and the prohibition on offering interests in managed investment schemes that ought to be registered under Ch 5C but are not (s 1020A). Prohibitions on hawking financial products other than securities are contained in ss 992A and 992AA, which appear in Pt 7.8 of the Act. Section 1020F of the Corporations Act gives ASIC power to modify or grant exemptions from all or specified provisions of Pt 7.9. Exemptions and modifications may also be made by regulation under s 1020G of the Act — this power has been exercised extensively. ASIC’s exemption and modification power is explained at 2.31ff above.

Scope of Pt 7.9 6.5 The requirements of Pt 7.9 potentially apply to conduct in relation to all financial products as defined. However, this is subject to two important limitations, contained in ss 1010A and 1010B. The first limitation is that, except for s 1017F (transaction confirmation) and Div 5A (unsolicited offers) and Div 6 (the prohibition on short selling), Pt 7.9 does not apply to securities (as defined in s 761A) or to government bonds: s 1010A. The definitions of ‘securities’ and of ‘debentures, stocks or bonds issued or proposed to be issued by a government’ are explored at some length in 3.5ff above. The dividing line between Ch 6D (which

regulates offers of securities) and Pt 7.9 (which regulates offers of other financial products) of the Corporations Act is explained at 6.6–6.9 below. The second limitation is that, because of s 1010B, Pt 7.9 only applies to financial products issued in the course of a business of issuing financial products: see 6.10 below.

Financial products other than securities 6.6 The Corporations Act contains two separate disclosure regimes that apply in connection with the offer of financial products: the ‘disclosure document’ regime in Ch 6D and the ‘Product Disclosure Statement’ regime in Pt 7.9. The regimes are quite different: different conduct triggers the obligation to disclose, different exemptions from the disclosure requirements exist, the form and content of the required disclosure is different, and the process in accordance with which offers must be made is different.4 Because different disclosure obligations apply under the two regimes, understanding whether Ch 6D or Pt 7.9 applies to a particular instrument or arrangement is important. This can be difficult for some products, such as options, [page 234] hybrid products, and stapled securities. It may be in some cases (particularly stapled securities) that both regimes apply, and must be accommodated in a single offer. The problems in differentiating classes of financial instruments is exemplified by Sydney Futures Exchange Ltd v Australian Stock Exchange Ltd (1995) 16 ACSR 148 (the LEPO case), discussed at 1.48 above. The issue before the court in the LEPO case was whether particular financial instruments were ‘securities’ or ‘futures contracts’ for the purposes of the (former) Corporations Law; its significance lay in the fact that different regulatory regimes applied under that law to the two classes of instruments. In response to the LEPO case, the Companies and Securities Advisory Committee (CASAC) recommended to government in 1997 that

a ‘core regulatory approach’ be adopted for all financial markets and the instruments traded on those markets, including securities and derivatives. CASAC argued that such an approach: … could clarify and simplify the law, thereby reducing uncertainties and compliance costs; avoid regulatory overlaps or gaps; facilitate the development of new products by eliminating unnecessary differences in the way products are regulated; reduce regulatory arbitrage: that is, artificially designing products to take advantage of different regulatory regimes; and increase the compatibility of Australian and overseas financial markets regulatory regimes’.5

Although government adopted the spirit of this recommendation in the approach to the regulation of financial intermediaries and the provision of financial advice taken in the Financial Services Reform Act 2001 (Cth) (FSR Act), by which the Corporations Act Ch 7 was enacted, it did not do so in relation to disclosure in connection with the offer of financial products. Instead it maintained two conceptually separate disclosure regimes. Therefore, the problems identified in the CASAC Report remain in relation to product disclosure, because as the discussion in Chapter 3 makes clear, it can sometimes be difficult to determine where in the schema of financial products a particular arrangement sits.6 Options and warrants 6.7 Some options and warrants are securities, and therefore are subject to the disclosure regime in Ch 6D of the Corporations Act. Others are derivatives and are therefore potentially subject to the disclosure regime in Pt 7.9. Options to acquire shares or debentures by way of issue are within the definition of a security7 and therefore are covered by Ch 6D. Depending on their type, options over issued shares can be either securities or derivatives. To fall within para (c) of the definition of a security in s 761A of the Corporations Act, the instrument must confer a legal or equitable interest in issued [page 235] shares or debentures. Covered warrants may fall within this category. The

proper characterisation depends on the terms of the product. Although some warrants are securities, they are expressly excluded from the operation of Ch 6D by Corporations Regulations reg 6D.5.01, discussed in 4.4 above. Offers of warrants (as defined in reg 1.0.02) are covered by the disclosure requirements in Corporations Act Pt 7.9 rather than the requirements in Ch 6D. Special rules apply in relation to the offer of warrants, under Corporations Regulations Pt 7.9 Div 2A. Hybrid securities 6.8 Hybrid securities, including subordinated notes, capital notes and convertible preference shares, have been described by ASIC as combining: … both ‘equity-like’ and ‘debt-like’ characteristics. While their legal form remains a debenture or a share (most often a preference share), this mix of characteristics places them on a spectrum between ‘pure’ equity and bonds.8

These products are covered by Ch 6D, rather than Ch 7. As the Full Federal Court noted in ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; 99 ACSR 336 [2014] FCAFC 65 at [658] (Jacobson, Gilmour and Gordon JJ): The effect of s 761D(3)(c) when read with s 764A(1)(a) and (c) is that a financial product which is a derivative is not treated as a derivative for the purposes of Ch 7 if it also amounts to a debenture … The regulatory regime, including its disclosure requirements, in Ch 6D therefore applies to hybrid securities which have the characteristics of both a debenture and a derivative.

Stapled securities 6.9 Where an offer relates to a stapled entity, and the components of the staple include (say) both shares in a company and interests in a registered managed investment scheme, it may be necessary for the disclosure provided to investors to satisfy both Ch 6D and Ch 7.9

Issued in the course of a business 6.10 An important limitation on the scope of Pt 7.9 is contained in s 1010B(1). It provides that, apart from Div 5A (unsolicited offers), nothing in Pt 7.9 applies in relation to ‘a financial product that is not or was not issued, or that will not be issued, in the course of a business of issuing financial products’. For this purpose, the issue of an interest in a registered

scheme10 is taken to occur in the course of a business of issuing financial products: Corporations Act s 1010B(2). [page 236] Note that the test is whether the product was issued in the course of a business of issuing financial products, not whether it was issued in the course of a financial services business (probably a wider concept). Section 19 provides that a reference to a business of a particular kind includes a reference to a business of that kind that is part of, or is carried on in conjunction with, any other business. For there to be a ‘business’ of issuing financial products, it seems likely that there must be elements of system, repetition and continuity; a one-off issue of financial products is unlikely to be caught.11

Application to arrangements with different ‘components’ 6.11 Financial products can consist of a number of separate components or parts, in some cases provided by different providers. In some situations, different components will be aggregated to form a financial product — this is contemplated by s 761B of the Corporations Act. In others, a financial product may be a component of a broader facility that also includes other components — this is contemplated by ss 762B and 763E. Section 761B of the Corporations Act provides that if it is reasonable to assume that the parties to a series of separate arrangements regard them as constituting a single scheme, and together those separate arrangements would constitute a financial product, they should be viewed as such. Conversely, a financial product can be part of a broader facility. Section 762B provides for this when it says that if a financial product is a component of a facility that also has other components, the requirements of Ch 7 (including, for example, the PDS requirements) only apply in relation to the facility to the extent that it consists of the component that is the financial product. So, for example, a person offering a facility that

comprised a loan to acquire derivatives would be required to comply with Ch 7 in relation to the offer of the derivatives, but not the offer of the loan. However, where the component in the nature of a financial product is only incidental to the broader facility, the operation of Ch 7 may be excluded by s 763E, which states that the component is not to be considered a financial product in these circumstances (provided that the financial product is not one specifically included in the definition by s 764A).12 [page 237] The scope of the ‘incidental’ exclusion in s 763E was considered by the New South Wales Court of Appeal in International Litigation Partners Pte Ltd v Chameleon Mining NL (2011) 82 ACSR 517; [2011] NSWCA 50.13 Having decided that a litigation funding agreement was a facility for managing financial risk within the scope of s 763C, the court was asked whether the risk management ‘component’ of the arrangement was sufficiently incidental to trigger the operation of s 763E. The court divided on this point. Giles and Young JJA held (at [91], [209]) that the financial product aspect of the funding agreement is not an incidental component of the facility; it is a main purpose of the agreement that is not separable. Hodgson JA (dissenting) considered that the management of existing and future risks was incidental to the financial risks of the litigation; those risks were dependent on the litigation proceeding: at [125]. In his Honour’s view, s 763E(1)(b) and (2)(b) directs attention to whether it is ‘reasonable to assume’ that the main purpose of the funding agreement was not managing financial risk. The assumption in question need not be objectively true, so long as it is reasonable. In terms of the statute, it is ‘reasonable to assume’ that the main purpose of the funding agreement was not managing financial risk: at [126]. The relationship between ss 762B and 763E also arose in argument in International Litigation Partners, above: at [165]–[183]. Both sections apply in circumstances where a financial product is a component of a facility that has other components. Section 763E applies where the financial product component is ‘incidental’ to the facility, suggesting that s

762B is to apply when it is not. Where the financial product component is incidental, none of the facility is regulated as a financial product. Where the financial product component is not incidental, only the financial product component of the facility is regulated as a financial product. Section 1012K gives ASIC the power to make certain anti-avoidance determinations, aggregating the transactions of closely related bodies or treating transactions by a body as transactions of its controller. The effect of these determinations is that, in effect, the statutory obligations contained in Pt 7.9 become obligations of all of the bodies the subject of the determination.

REQUIREMENT TO PROVIDE A PDS When a PDS is required 6.12 Part 7.9 Div 2 requires, in broad terms, that a PDS be provided to a person before they acquire a financial product, where the person is acquiring the product as a retail client. The PDS contains information about the financial product, including the identity of the issuer, any significant benefits or risks attaching to the product, and the costs of acquiring and holding the product. At least in the context of managed [page 238] investments, the PDS ‘is designed to facilitate informed investment decisions and investments effected with proper protection’.14 Subject to the overriding exceptions in ss 1012D–1012G and 1014E,15 the circumstances in which a retail client must be given a PDS before acquiring a financial product are described in the legislation as a recommendation situation, an issue situation and a sale situation. They are: recommendation situation: where, in the course of providing personal financial advice to the client, a regulated person has recommended that the client acquire the financial product, and the

acquisition is either by way of issue to the client, or by way of transfer to the client under a regulated secondary sale to which the PDS requirements apply: s 1012A; issue situation: where a regulated person offers to issue, or arrange the issue of, or issues a financial product to the client: s 1012B; or sale situation: where a regulated person offers to sell, or sells a financial product to the client in circumstances amounting to an offmarket sale by a controller of the issuer, a sale amounting to an indirect issue of the financial product, or a sale amounting to an indirect off-market sale by the controller of the issuer: s 1012C. In the context of Pt 7.9, ‘offer’ and ‘sale’ have the extended meanings in Corporations Act s 1010C. If a regulated person offers an option over a financial product (other than a security), s 1011C applies. It states that, for the purposes of the PDS requirements, an offer of an option over a financial product is not to be taken to be an offer of the underlying financial product. It also provides that the grant of an option without an offer of the option is taken to be an offer of the option, and an offer to grant an option is taken to be an offer to issue the financial product constituted by the option. Section 1011C corresponds to s 702, which deals with offers of options over securities: see 4.4 above. The PDS requirement is triggered only where the recommendation, issue or sale is to a retail client, and has the requisite nexus with the jurisdiction. It does not apply where s 1012D (as modified by Corporations Regulations regs 7.9.07D, 7.9.07E, 7.9.07F, 7.9.07FA and 7.9.07FB), s 1012DA, s 1012E, s 1012F, s 1012G or s 1014E provide otherwise.

Regulated persons 6.13 The obligation to provide a PDS is triggered only where the conduct is engaged in by a ‘regulated person’ as defined in s 1011B. This includes the issuer of the financial product, or the seller of the financial product (in a sale amounting to an off-market sale by a controller of the issuer, a sale amounting to an indirect issue of the financial product, or a sale amounting to an indirect off-market sale by the controller of the issuer). It also includes certain financial intermediaries who may be involved in the transaction, including any Australian financial services (AFS)

[page 239] licensee, any authorised representative of an AFS licensee, any person who is exempt from the requirement to be licensed by s 911A(2)(j) or exemptions granted by the regulations or by ASIC, and any person who is required to hold an AFS licence but who does not. The obligation to provide a PDS can arise in a recommendation situation, an issue situation or a sale situation: see below. In a recommendation situation, the obligation to provide a PDS falls on the regulated person who is providing the advice. In an issue situation, the obligation can fall on a regulated person offering to issue the financial product, offering to arrange the issue of the financial product, or issuing the financial product. In a sale situation, the obligation arises where a regulated person offers to sell the financial product, or where a client makes an offer to a regulated person to acquire the financial product that the regulated person proposes to accept. The person who provides the PDS to the client may not be the person required to prepare it: see s 1013A, discussed at 6.33 below. In many situations the obligation to provide a PDS could fall on more than one person. In particular, a broker or adviser recommending a particular product, and the issuer of that product, could be under separate obligations as part of the one acquisition by the client. This is dealt with by s 1012D(1), which is intended to resolve these overlapping obligations.

Recommendation situation 6.14 Section 1012A of the Corporations Act imposes on a regulated person an obligation to supply a PDS when the person provides personal advice to a retail client that includes a recommendation that the client acquire a particular financial product. ‘Personal advice’ is discussed in Chapter 14 below. Section 1012A is primarily directed at ensuring that, when a financial adviser recommends particular products to its clients, those clients receive the PDSs for the products as part of the advice process. The PDS will be prepared and supplied to the adviser by the issuer (or seller) of the products, to be handed over by the adviser.

Issue situation 6.15 Section 1012B imposes an obligation on a regulated person to provide a PDS in connection with a primary offer or issue of a financial product to a retail client. The obligation arises where the person: offers to issue the financial product to the client: s 1012B(3)(a)(i); offers to arrange for the issue of the financial product to the client: s 1012B(3)(a)(ii); issues the financial product to the client: s 1012B(3)(a)(iii); or accepts an offer from the client to acquire the financial product by way of issue: s 1012B(4). If the regulated person reasonably believes that the client has already received an up-to-date PDS for the product (for example, from their adviser under s 1012A), the regulated person is not required to provide it again: s 1012D(1). [page 240] The circumstances in which a person is treated as having issued a financial product are explained in s 761E. A product is issued to a person when it is first issued, granted or otherwise made available to the person: s 761E(2). The issuer of the product is the person who is responsible to the holder of the product from time to time ‘for the obligations owed, under the terms of the facility that is the product’: s 761E(4). In the case of an interest in a registered scheme, this will be the scheme’s responsible entity: see s 601FB(1). Special provisions specify who is the ‘issuer’ of a derivative: see Corporations Act ss 761E(5) (over-the-counter derivatives), 761E(6) (market traded derivatives) and Corporations Regulations reg 7.1.04D (derivatives traded on certain exempt markets) and reg 7.9.07A (warrants), discussed at 6.33 below.

Sale situation

6.16 As is the case in relation to most secondary sales of securities under Ch 6D (see 4.8 above), most secondary sales of financial products do not require disclosure to investors in the form of a PDS. There are three exceptions to this general principle: 1.

where the seller controls the issuer of the financial product, and the sale is not made on a licensed market (either because the product is not quoted or because the offer is made off-market): s 1012C(5);

2.

where financial products issued without a PDS are offered for sale within 12 months of issue, and they were either issued or acquired for the purpose of the subscriber ‘selling or transferring the product, or granting, issuing or transferring interests in, or options or warrants, over the product’: s 1012C(5). The purpose of the person issuing or acquiring the financial product is ascertained in accordance with s 1012C(6); and

3.

where financial products sold by a controller off-market without a PDS are offered for resale within 12 months, and the financial products were sole or acquired with the purpose of the acquirer ‘selling or transferring the product, or granting, issuing or transferring interests in, or options or warrants, over the product’: s 1012C(8). The purpose of the person issuing or acquiring the financial product is ascertained in accordance with s 1012C(9).

The secondary sale provisions have been significantly modified in their operation in relation to specific transactions by ASIC policy, including to protect the viability of the placements market: see ASIC Regulatory Guide 173 — Disclosure for On-sale of Securities and Other Financial Products, March 2016.

Retail and wholesale clients 6.17 The obligation to provide a PDS is triggered only if the person to whom the recommendation or offer is made is a retail client. The question of whether a person is a retail client in respect of a particular financial product depends first on the nature of the product. A person may be

treated as a retail client when they acquire one type of one financial product (say, a general insurance product) but not another (say, a managed investment product). [page 241] Sections 761G and 761GA of the Corporations Act contain the statutory definition of ‘retail client’, supported by regs 7.1.11–7.1.28 of the Corporations Regulations. These sections are modified (that is, amended) in their application to Corporations Act Pts 7.6–7.9 by Corporations Regulations regs 7.6.02AB, 7.6.02AC, 7.6.02AD, 7.6.02AE and 7.6.02AF, which were introduced as part of the ‘FSR Refinement Project’ in December 2005. The amendments made by Corporations Regulations regs 7.6.02AB–7.6.02AF are made pursuant to the following sections of the Corporations Act that allow for exemptions and modifications to be made to the Act by the regulations: ss 926B (for Pt 7.6), 951C (for Pt 7.7), 992C (for Pt 7.8) and 1020G (for Pt 7.9). The definition is summarised in Table 6.2. Table 6.2: Who is a retail client? For this financial product … Certain defined classes of general insurance products (motor vehicle, home building, home contents, sickness and accident, consumer credit, travel, and personal and domestic property) Superannuation and RSA products

a client is retail …

see …

if the person is an s 761G(5), (11) and (12) and individual or the Corporations Regulations regs product is for use in a 7.1.11–7.1.17 small business (that is, a business employing less than 20 people or, in the case of a manufacturing business, 100 people) in all cases

s 761G(6)

All other financial products

unless: the price of the product exceeds the prescribed amount the product is provided for use in connection with a business that is not a small business the client is certified by a qualified accountant as high net worth the client is a professional investor, or the client is certified by an AFS licensee as a sophisticated investor

Pt 7.1 Div 2 ss 761G(7) and 761GA and Corporations Regulations regs 7.1.11–7.1.28 The price threshold is, generally, $500,000. Superannuation sourced money is excluded A client can be certified as a high net worth investor if they have assets of $2.5 million and income of $250,000 Professional investor is defined in CA s 9 A client can be certified as sophisticated if they are dealing with a licensee who is satisfied they have adequate experience to assess the offer

6.18 A person who is not a retail client is a wholesale client: s 761G(4). As Table 6.2 indicates, if a financial product is not, or a financial service provided to a person does not relate to, a general insurance product, a superannuation product or an RSA product, the product or service is provided to the person as a retail client unless one or more of s 761G(4A) or s 761G(7)(a)–(d) or s 761GA applies. [page 242] 6.19 It is important to note that the onus for establishing that a person was not a retail client in relation to a particular financial product or financial service falls on the provider of the product or service rather than the client. Therefore, if an issuer chooses to limit its activities to dealings

with wholesale clients it would need to have in place a procedure for ensuring that the clients met the relevant criteria (for example, by having them sign a declaration confirming the relevant matters, or provide copies of their accounts).

Transaction over $500,000 6.20 A product or service is not provided to a person as a retail client if the price for the provision of the financial product, or the value of the financial product to which the financial service relates, equals or exceeds $500,000: see s 761G(7)(a) and Corporations Regulations regs 7.1.18 (price of investment-based financial products), 7.1.19 (value of investmentbased financial products), 7.1.22 (value of derivatives) and 7.1.22A (value of foreign exchange contracts). The price or value of a number of financial products acquired in the same transaction can be aggregated for this purpose: Corporations Regulations reg 7.1.17B. In most cases, ‘superannuation-sourced money’ as defined cannot be counted in assessing price or value under s 761G(7)(a) if the financial service being provided to the person is either financial product advice or, if the person is a retail client, the issue or sale of a financial product to the person in circumstances requiring the giving of a PDS: Corporations Regulations reg 7.1.26. Superannuation-sourced money is money that the financial services provider knows or ought reasonably to know is being paid to a person as a superannuation lump sum by the trustee of a regulated superannuation fund, or has been paid as an eligible termination payment or superannuation lump sum within the previous six months: Corporations Regulations reg 1.0.20.

Large business 6.21 If the financial product, or the financial service, is provided for use in connection with a business that is not a small business (a small business being a business employing less than 100 people if the business is or includes the manufacture of goods, or less than 20 people if it is not), the person is not a retail client: see s 761G(7)(b) and (12).

High net worth investor

6.22 This category applies where a financial product, or financial service, is not provided for use in connection with a business. A person is not a retail client if they provide a copy of a certificate given within the preceding two years by a qualified accountant (as defined), that states that the person has net assets of at least $2.5 million, or has a gross income for each of the last two financial years of at least $250,000: s 761G(7)(c) and Corporations Regulations regs 7.1.28 and 7.6.02AF. The person’s net assets and income may include those of a company or trust controlled by them: ss 761G(7A) and 761G(7B) inserted by Corporations Regulations reg 7.6.02AC. A company or trust controlled by such a person is also a wholesale client: s 761G(7)(ca) inserted by Corporations Regulations reg 7.6.02AB. [page 243]

Experienced investor dealing with an AFS licensee 6.23 An experienced investor dealing with an AFS licensee is treated as wholesale if the conditions in s 761GA are met. The person providing the product or service must be an AFS licensee; the product must not be a general insurance product, a superannuation product or a retirement savings account product; and the product or service must not be provided for use in connection with a business. In these circumstances, a person may be treated as wholesale if the licensee is satisfied on reasonable grounds that the client has previous experience in using financial services and investing in financial products that allows the client to assess the merits of the product or service, the value of the product or service, the risks associated with holding the product, the client’s own information needs, and the adequacy of the information given by the licensee and the product issuer. The licensee must give the client a written statement of its reasons for being satisfied as to these matters ‘before, or at the time when, the product or advice is provided’, and the client must sign a written acknowledgment. This imposes a significant burden on the licensee to satisfy itself of the relevant matters.16

Professional investor

6.24 A person who is a professional investor is not a retail client for the purposes of Ch 7, because of s 761G(7)(d). ‘Professional investor’ is defined in the Corporations Act s 9 (modified by Corporations Regulations reg 7.6.02AE). It includes a financial services licensee; a body regulated by the Australian Prudential Regulation Authority (APRA) (other than the trustee of a superannuation entity);17 the trustee of a superannuation entity that has net assets of at least $10 million; a person who has or controls gross assets of at least $10 million (including any assets held by an associate or under a trust the person manages); a body registered under the Financial Corporations Act 1974 (Cth); a listed entity, or a related body corporate of a listed entity; an exempt public authority,18 and an investment company.19 It also includes any foreign entity that, if established or incorporated in Australia, would fall within one of these categories.

Related body corporate of a wholesale investor 6.25 If a financial product or a financial service is or would be provided to, or acquired by, a body corporate as a wholesale client, related bodies corporate of the [page 244] client are taken to be wholesale clients in respect of the provision or acquisition of that financial product or financial service: s 761G(4A) inserted by Corporations Regulations reg 7.6.02AD.

Jurisdictional connection 6.26 The obligation to provide a PDS does not apply unless the offers or recommendations referred to in ss 1012A, 1012B and 1012C have the requisite jurisdictional nexus with Australia. The jurisdictional scope of Pt 7.9 is set out in s 1011A. For the Part to apply, the offer or recommendation must ordinarily be received in Australia: s 1011A(1). Section 1011A(2) says that the obligation in s 1012B on the product issuer to provide a PDS in connection with an issue of a financial product to a

person ‘in circumstances in which there are reasonable grounds to believe that the person has not been given a PDS for the product’ also applies where the product is issued in Australia. However, note that Corporations Regulations reg 7.9.07FB expressly provides that a PDS is not required ‘if the client is not in this jurisdiction’.

Exemptions from the PDS requirement 6.27 The obligation to provide a PDS cannot arise unless the financial product was or will be issued ‘in the course of a business of issuing financial products’: see s 1010B, discussed at 6.10 above. Further, a regulated person is not required to provide a PDS in a recommendation situation described in s 1012A, an issue situation described in s 1012B or sale situation described in s 1012C unless the person with whom they are dealing is a retail client: see 6.17 above. This means that a recommendation, issue or sale to a wholesale client does not require a PDS. Even where the product is or was issued in the course of a business of issuing financial products, and the person to whom it is offered is a retail client, the regulated person may be relieved of the obligation to provide a PDS by s 1012D (as modified by Corporations Regulations regs 7.9.07D, 7.9.07E, 7.9.07F, 7.9.07FA and 7.9.07FB), s 1012DAA, s 1012DA, s 1012E, s 1012F, s 1012G or s 1014E. The relevant exemptions from the disclosure requirement are discussed below.20 6.28 The key exemptions for our purposes are contained in ss 1012D, 1012DAA, 1012DA and 1012E. Section 1012D contains particular exemptions that apply in specific situations, such as where financial products are being issued to existing holders or for no consideration, or where the offeree is related to the offeror. Section 1012DAA covers rights issues for quoted securities, s 1012DA covers certain secondary sales of quoted securities, and s 1012E contains an exemption for small-scale personal offers of interests in registered managed investment schemes. [page 245]

General exemptions 6.29 The key exemptions in s 1012D are as follows: Client has already received a PDS: Because the obligation to provide a PDS can arise in connection with a recommendation situation, issue situation or sale situation, it may be that a client has already been provided with a PDS by their adviser or broker in connection with a recommendation, and does not require another copy when they apply for or buy the product. Section 1012D(1) deals with this situation by saying that a PDS need not be provided if the client has already received one from another source, or the regulated person believes on reasonable grounds that this has occurred. All relevant information is already known to offerees: Section 1012D(2B) provides that a regulated person does not have to provide a PDS if ‘because of s 1013F, no information would be required to be included in’ the PDS. Section 1013F is discussed at 6.54 below. Client is not in the jurisdiction: A PDS is not required if the client is not in the jurisdiction: s 1012(8A) inserted by Corporations Regulations reg 7.9.07FB. Offer is declined: A PDS is not required in an issue situation or a sale situation if the offer of the financial product is declined: s 1012D(9J) and (9K) inserted by Corporations Regulations reg 7.9.07E. Existing holders: A PDS need not be provided where a client already holds a financial product of the same kind, and the regulated person believes on reasonable grounds that the client has received, or has and knows they have access to, the information required to be disclosed through a PDS and information provided in accordance with the continuous disclosure and reporting requirements: s 1017B, s 1017C or s 1017D or Ch 6CA. This is provided for in s 1012D(3). A financial product is of the same kind if it falls within s 1012D(10).21 In a recommendation or issue situation involving distribution reinvestment or switching by a client who already holds a financial product of the same kind, a PDS is not required because of s 1017D(3). No consideration: Under s 1012D(5), a PDS is not required for a

recommendation, issue or sale situation involving the issue or sale of interests in a registered scheme (other than options) for no consideration. Also, where options are issued or sold for no consideration, and no consideration is payable to exercise the option, a PDS is not required, under s 1012D(6). Takeovers: Where interests in registered schemes, or options to acquire shares or debentures by way of transfer, are offered as part of the consideration in a [page 246] takeover bid, and the offer is accompanied by a bidder’s statement prepared in accordance with Ch 6 of the Act, a PDS is not required: s 1012D(7). Exempt bodies: Recommendations, issues and sales of interests in unregistered managed investment schemes operated by exempt bodies generally do not require a PDS, because of s 1017D(8). ‘Exempt body’ is defined in s 66A, which provides that a body corporate is an exempt body of a state or territory if, and only if, it is not a company, and is incorporated by or under a law of the state or territory.22 For example, an offer to participate in an unregistered scheme operated by an incorporated association for the benefit of its members will not attract the PDS requirements because of this exemption. Client associated with a registered scheme: A recommendation, issue or sale situation in relation to interests in a registered scheme does not require a PDS where the client is a ‘senior manager’ of the scheme’s responsible entity or a related body corporate, is a close relative of such an officer, or is a body corporate controlled by any such person: s 1012D(9A) and (9B). The meaning of ‘senior manager’ is modified for this purposed by ASIC Class Order 04/899.

Rights issue of quoted financial products 6.30 Like s 708AA (which applies to rights issues of quoted securities), s

1012DAA provides an exemption from the mandatory disclosure requirements in relation to certain offers made in connection with a rights issue of financial products that are quoted on a prescribed financial market, such as the Australian Securities Exchange (ASX). Section 708AA is discussed at 4.29 above. The exemption is only available if the various conditions set out in s 1012DAA(2) are met, and ASIC has not made a determination (that the body has contravened certain disclosure and other requirements contained in the Corporations Act) under s 1012DAA(3). A body cannot rely on the exemption in Corporations Act s 1012DAA unless it has complied with the periodic and continuous disclosure requirements contained in the Corporations Act and the applicable listing rules. Nor can it do so if the securities have been suspended for quotation for more than five days in the 12 months leading up to the date of the offer. Section 1012DAA(2)(f) provides for the issuer of the product to give the market operator a notice that complies with s 1012DAA(7) within the 24hour period before the offer is made. Among other things, the notice must state that the body has complied with the provisions of Corporations Act Ch 2M (accounts and audit) that apply to the body, as well as the continuous disclosure requirements of Corporations Act s 674: see Chapter 7 below. The notice must state the potential effect of the rights issue on control of the body, and the consequences of that effect. Importantly, as with a notice given under s 708AA, the notice provided in accordance with s 1012DAA(7) must include any information that is ‘excluded [page 247] information’ as defined. The definition of ‘excluded information’ in s 1012DAA is different from that in s 708AA, reflecting the fact that a different general disclosure test applies for PDSs from that which applies to disclosure documents given under Pt 6D.2: see 6.51 below. Excluded information is information that a person would reasonably require for the purpose of making a decision, as a retail investor, whether to acquire the

relevant product that has not been disclosed by the body under the continuous disclosure rules. For example, this may comprise information that a body listed on the ASX has not disclosed because the information falls within ASX Listing Rule (LR) 3.1A: see 7.9 below. That said, excluded information need only be disclosed ‘to the extent to which it is reasonable for a person considering, as a retail client, whether to acquire the relevant product to expect to find the information in a PDS’: s 1012DAA(9).

Sale offers of quoted financial products 6.31 Section 1012DA contains specific exemptions covering certain offers of quoted financial products for sale, made by persons who have acquired securities either from the issuer or from a person who controls the issuer, that might otherwise require disclosure to investors under Corporations Act s 1012B(6) (sale amounting to indirect issue) or s 1012B(8) (sale amounting to indirect off-market sale by a controller). The exemption is similar to that provided for in relation to the on-sale of listed securities under Pt 6D.2, by Corporations Act s 708A. In broad terms, Corporations Act s 1012DA allows for the sale of quoted securities, without a PDS, by a person who has acquired them (either from the body or from a person who controls the body) in three circumstances. The first is where the financial products are quoted on a financial market and the issuer or the controller has provided the market operator with information in what is sometimes referred to as a ‘cleansing notice’, containing material information not disclosed under the continuous disclosure regime. The second is where a PDS relating to financial products in the relevant class has been lodged with ASIC and is still extant. The third is where the issue of the financial products was covered by a PDS, and the financial products had been issued to an underwriter or person nominated by the underwriter. ASIC offers certain relief in connection with on-sale of interests in listed managed investment schemes, on the terms of ASIC RG 173. A person who has acquired securities from the issuer or its controller in circumstances covered by s 1012D(6) or s 1012D(8) cannot rely on s 1012DA if the financial products were issued by the issuer, or sold by the

controller, for a purpose set out in s 1012DA(6)(c)(i) or s 1012DA(8)(d)(i); for example, for the purpose of on-sale. Nor can it rely on s 1012DA if a determination made by ASIC under s 1012DA(2) (to the effect that the issuer had contravened certain disclosure or other requirements) was in force at the time the relevant securities were issued.

Small scale personal offers of interests in managed investment schemes 6.32 Section 1012E contains a ‘less than 20/less than $2 million’ exemption in relation to registered managed investment schemes that corresponds to the ‘small-scale personal offers’ exemption for securities offers under s 708(1). Section 708(1) is [page 248] discussed in 4.18 above. The exemption provided by s 1012E is extended to the offer of interests in unregistered managed investment schemes by Corporations Regulations reg 7.9.16A. Broadly, the section provides that a PDS is not required for an offer of interests in a scheme where the offer is made personally to the offeree, and: in the case of an offer to issue interests, the total number of subscribers does not exceed 20 and the total amount subscribed does not exceed $2 million in a 12-month period; and in the case of a sale offer, the total number of purchasers does not exceed 20 and the total aggregate purchase price does not exceed $2 million in a 12-month period. Section 1012E includes provisions for its interpretation, including setting out the basis on which the various amounts and numbers are to be calculated. The person seeking to rely on the exemption must establish that the required conditions exist.23 These are: that all of the financial products are issued by the same person; that each offer is a ‘personal offer’ as defined in s 1012E(5); that none of the offers results in a breach of the ‘20

purchasers’ ceiling; and that none of the offers results in a breach of the $2 million ceiling. Certain offers are disregarded in deciding whether the ceilings are reached. Offers that did not require a PDS (for example, because they were made to professional investors) and those that were made under a PDS are disregarded, because of s 1012E(8). Under s 1012E(9), issues and sales that resulted from an offer made by a managed investment scheme that was ‘a body’ that was not then a registered scheme are disregarded if the body became a registered schcme within 12 months after that offer was made and the offer would not have required a PDS (otherwise than because of s 1012E) if the managed investment scheme had been a registered scheme at the time the offer was made.

PRODUCT DISCLOSURE STATEMENTS PDS must be prepared by the issuer or seller 6.33 The obligation to provide a PDS falls on any relevant regulated person (as defined in s 1011B) who engages in the relevant conduct. This may be an adviser, an intermediary such as a broker or dealer, the issuer of the product or, in the case of regulated secondary sales, the seller. However, the obligation to prepare (as distinct from provide) a PDS is fixed by s 1013A. In the case of primary offers, issues, and recommendations that result in issues, the PDS must be prepared by the issuer of the financial product. A PDS relating to a secondary sale must be prepared by the person making the offer to sell the financial product. The person who is required to prepare the PDS is referred to as the ‘responsible person’: s 1013A(3). The distinction between [page 249] the ‘regulated person’ and the ‘responsible person’ is important, particularly in determining who is liable and on what basis if a PDS is required but not provided.24

Except where the product is jointly issued, the PDS may be prepared by, or on behalf of, only one responsible person: s 1013A(3A) inserted by Corporations Regulations reg 7.9.07J. Under Corporations Act s 761E(5), over-the-counter derivatives are taken to be issued by both parties to the derivative; and exchange-traded derivatives are taken to be issued either by the intermediary (for example, a broker) where one is involved, or the market operator. Corporations Regulations reg 7.1.04D deals with derivatives traded on certain exempt markets, and reg 7.9.07A treats warrant issuers as the issuer of the financial product.

Manner of providing the PDS Timing 6.34 As a general rule, the PDS must be provided to the client before the financial product is acquired. This is consistent with the underlying policy of the disclosure regime: that the information in the PDS should inform the retail client’s decision whether to acquire the product. Section 1012A says that, where a PDS is required in a recommendation situation, it must be given at or before the time when the regulated person provides the advice. Section 1012B says that, in an issue situation, the PDS must be given at or before the time when the regulated person makes the offer, or issues the financial product, to the person. In a sale situation, the PDS must be given at or before the time when the regulated person makes the offer: s 1012C. Special arrangements apply for providing PDSs at a later time in relation to some financial products (such as superannuation) not discussed in this book. A PDS can be provided later for a financial product for which an application form is not required under s 1016A, to which the cooling-off period applies: s 1012G inserted by Corporations Regulations reg 7.9.15H.

Form of the PDS 6.35 The PDS may consist of two or more separate documents given to a person at the same time. Where a PDS comprises separate documents, the

statutory requirements in s 1013L must be met. All parts must be dated, with the date of the PDS being the most recent. The legislation and ASIC policy allows for the delivery of PDSs in electronic form in certain circumstances: see ASIC Regulatory Guide 221 — Facilitating Digital Financial Services Disclosure, March 2016. The electronic delivery of PDSs is governed by s 1015C, regs 7.9.02A and 7.9.02B and ASIC Corporations (Facilitating Electronic Delivery of Financial Services Disclosure) Instrument 2015/647 and Corporations (Removing Barriers to Electronic Disclosure) Instrument 2015/649. ASIC’s view is that most disclosures required under Corporations Act Pts 7.6–7.9 [page 250] (including PDSs) can be delivered digitally. In most cases it will be clear from the context that a client has provided or nominated their electronic address for the purpose of receiving disclosure under the Corporations Act, and no higher standard of consent is required to send to an electronic address compared to non-electronic methods. Section 1015C sets out how a PDS or Supplementary PDS (see below) is to be given to the client. As modified, the legislation requires that a PDS be: given personally to the person; or sent to the person at an address (including an email address) or a fax number nominated by the person; or otherwise made available to the person as agreed; or published electronically and notified in accordance with the ASIC instrument. If it is sent to an address, the envelope or container must be addressed to the person or the accompanying message must be addressed to the person. If the document is provided in electronic form, it must be presented in a way that as far as practicable allows the person to keep a copy and access it in the future; and clearly identifies the information that is part of the document.25

Incorporation by reference 6.36 Regulation 7.9.15DA allows for incorporation by reference of information into a full PDS. A responsible person is not required to include a statement or information mentioned in Pt 7.9 in a full PDS if the statement or information is in writing and is publicly available in a document other than the PDS, and the responsible person includes the certain statements in the PDS and makes the incorporated information available on request. The statement or information is taken to be included in the PDS for all purposes: Corporations Regulations reg 7.9.15DA.

Short-form PDSs 6.37 Regulation 7.9.61AA and Sch 10BA of the Corporations Regulations are intended to allow for the use of a short-form PDS (as defined) by a regulated person. Schedule 10BA inserts a new Pt 7.9 Div 3A into the Corporations Act. The use of a short-form PDS reduces the dissemination burden (but not the information burden) on the regulated person, by allowing the regulated person to provide an abridged disclosure document to the client, and requiring the regulated person to provide the full PDS only if it is requested. Therefore, the policy underlying the use of short-form PDSs is similar to that for short-form prospectuses: see 5.5 above. Section 1017H(1) of the Act (inserted by Pt 3 Sch 10BA to the Corporations Regulations) provides that ‘if a regulated person is required or obliged by this Act to give a [PDS] to another person, the regulated person may instead provide a Short-Form PDS for the product’. Section 1017H(2) goes on to provide that ‘if the [page 251] responsible person is requested by the other person to provide the [full PDS] the regulated person must provide’ the PDS. The short-form PDS provided for in Pt 7.9 Div 3A is not the same as the ‘shorter PDS’ regimes for some managed investment products and for

margin loans introduced by Corporations Amendment (No 5) Regulations 2010, discussed at 6.56 and 6.57 below.

Authorisation 6.38 There is no express requirement for a PDS to be signed by the issuer or seller (as the case may be) or any or all of its directors. However, for a PDS that must be lodged with ASIC, that requires the consent of all of the directors of the responsible person.26 A lodged PDS must also meet the requirements for lodgment contained in Pt 9.12 of the Act and the corresponding regulations.

CONTENTS REQUIREMENTS FOR THE PDS Evolution of the PDS content requirements 6.39 When Corporations Act Pt 7.9 was enacted in 2001, it was intended that adopting a ‘directed disclosure’ approach to prescribing PDS content would result in disclosure that was tailored for and appropriate to the particular type of financial product being offered, and assisted retail clients in making good choices in acquiring financial products. The revised explanatory memorandum to the Financial Services Reform Bill 2001, referred to in 6.2 above, contains an extensive explanation of the intentions and policy considerations guiding the new regime for disclosure in relation to financial products; it goes on to say that: The other key feature of the [directed disclosure] approach taken is that it has been drafted in such a way that it is capable of applying flexibly across the full range of financial products that are subject to the regime. It is envisaged that a Product Disclosure Statement for a banking product will be very different from a Product Disclosure Statement for a managed investment product in terms of the detail provided. However, there will, through the directed disclosure approach, be sufficient similarity between the documents to enable a consumer to compare them if they so wish.27

6.40 However, soon after the transition period for the FSR Act finished in 2004, it became apparent that the PDSs being produced in accordance with Pt 7.9, even for quite straightforward financial products, were not the clear and informative documents that the legislature had hoped for. Beginning in 2005 various attempts were made to address this problem;

generally by providing more prescriptive and targeted content requirements for particular financial products. This has been done largely through the making of regulations and by way of ASIC legislative instruments, [page 252] but PDS content requirements are also influenced by (non-binding) statements of ASIC regulatory policy on matters such as ‘good practice’ in disclosure for retail clients, either generally or in relation to particular products. The end result is that the content requirements for the PDS are both highly specific for particular products, and extremely difficult to locate and follow. It should not pass without comment that legislation and regulatory rules intended to produce the clear, concise and effective communication of information utterly fail to demonstrate it. 6.41 After numerous attempts to fix the poor quality disclosure being produced by responsible persons in accordance with Pt 7.9, we have now arrived at what is essentially a bifurcated disclosure regime, with some managed investment products and margin loans covered by ‘shorter PDS’ regimes introduced in 2010 (not to be confused with the ‘short-form PDS’ regime described at 6.37 above) and all other financial products28 subject to the full PDS regime as (extensively) modified by the Corporations Regulations and ASIC policy. In the discussion that follows, we begin by looking at the content requirements for relevant financial products29 that attract the full PDS disclosure obligation in Pt 7.9. We then consider the specific content requirements for shorter PDSs for simple managed investment schemes30 (at 6.56) and margin lending facilities: at 6.57.

Determining PDS contents 6.42 Various sections of the Corporations Act prescribe the form and contents of the PDS. Further detailed content requirements are contained in the Corporations Regulations. In each case, the extent of the required disclosure is limited by reference to factors such as the state of the

responsible person’s knowledge, the likely information needs of retail clients, the nature of the financial product offered and the circumstances of the offer, by ss 1013C, 1013FA and 1013F: see below. The PDS content requirements are subject to an overriding legislative requirement that ‘the information included in the Product Disclosure Statement must be worded and presented in a clear, concise and effective manner’: s 1013C(3). The meaning of ‘clear, concise and effective’ is discussed at 5.28 above. Unlike prospectuses, which have a fixed life of up to 13 months, PDSs are ‘evergreen’ and do not expire. However, s 1012J as modified by ASIC Class Order 03/0237 requires that the information in a PDS be up-to-date as at the time it is given to the client. A PDS that becomes out-of-date can be withdrawn and replaced, [page 253] or updated by way of a supplementary PDS under Pt 7.9 Div 2 Subdiv D: see 6.65. Otherwise, material alterations require the PDS to be re-dated.31 The main form and content requirements for a full PDS (for a product that is not a continuously quoted security: see s 1013FA) are summarised in Table 6.3. In addition to the prescribed contents, a full PDS may include other information or refer to other information that is set out in another document: s 1013C(1)(b). Table 6.3: Form and content requirements — full PDSs Title and abbreviation Specific disclosure requirements

Requirements Section Document must be titled a ‘Product Disclosure s 1013B Statement’. The abbreviation PDS can be used elsewhere. PDS must disclose information about (where s 1013D of the applicable) the issuer, any significant risks or benefits associated with holding the product, costs, fees, expenses and charges,

commissions, significant characteristics and features of the product, dispute resolution, tax implications, cooling off, environmental, social and ethical considerations in investment, and certain other specific information for particular products.

Act and Pt 7.9 Divs 2, 2A, 2B, 4 and 4A of the Regulations

General disclosure obligations

PDS must include any other information ‘that s 1013E might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire the product’. Date PDS must be dated. The date is the date of s 1013G preparation or, where it is required to be lodged with ASIC, of lodgment. Listed PDS must contain prescribed disclosures about s 1013H products whether the product can be traded on a market or whether application has or will be made to the operator of the market. Registered PDS must contain prescribed information s 1013I schemes that about the scheme’s continuous disclosure are ED obligations and the availability of copies of securities disclosed information. PDSs lodged PDS must state that the document has been s 1013J with ASIC lodged and that ASIC takes no responsibility under s 1015B for its contents. Experts Where a PDS contains a statement by a person s 1013K statements or a statement said to be based on a statement made by a person, the person must consent and the PDS must disclose that consent. 6.43 ASIC has issued detailed policy guidance on the full PDS requirements: see generally ASIC Regulatory Guide 168 — Disclosure: Product Disclosure Statements (and Other Disclosure Obligations),

October 2011. The guidance includes the ASIC ‘Good Disclosure Principles for PDSs’ in RG 168, Section C — that disclosure should: (a) be timely; (b) be relevant and complete; (c) promote product understanding; [page 254] (d) promote product comparison; (e) highlight important information; and (f) have regard to consumers’ needs. 6.44 Specific ‘if not, why not’ disclosure policies are applied by ASIC in relation to particular types of financial products — these require issuers to disclose whether their financial product meets certain benchmarks (that is, legal or business characteristics) and if not, why not, and what the effect of divergence from the benchmark means for investors. Importantly, these policies include: ASIC Regulatory Guide 45 — Mortgage Schemes: Improving Disclosure for Retail Investors, May 2012; ASIC Regulatory Guide 46 — Unlisted Property Schemes: Improving Disclosure for Retail Investors, March 2012; ASIC Regulatory Guide 227 — Over-the-Counter Contracts for Difference: Improving Disclosure for Retail Investors, August 2011; ASIC Regulatory Guide 231 — Infrastructure Entities: Improving Disclosure for Retail Investors, January 2012; ASIC Regulatory Guide 232 — Agribusiness Managed Investment Schemes: Improving Disclosure for Retail Investors, January 2012; and ASIC Regulatory Guide 240 — Hedge Funds: Improving Disclosure, October 2014 PDSs for these products are usually prepared in accordance with these guides.

Main disclosure requirements for a full PDS Specific disclosure 6.45 A long list of specific disclosure requirements for PDSs is contained in Corporations Act s 1013D. The document must be called a ‘Product Disclosure Statement’ (s 1013B) and it must be dated (s 1012G). It must include the name and contact details of the issuer (and, if the PDS relates to a sale, the seller): s 1013D(1)(a). Subject to the limitations in ss 1013D,

1013C(2), 1013F and 1013FA (see 6.52 below) the PDS must include such of the prescribed information as a person would reasonably require for the purposes of making a decision, as a retail client, whether to acquire the financial product. In deciding what a ‘retail client’ would reasonably require, it is has been said that: The ‘retail client’ concept is central to the operation of s 1013D in particular. That person will typically be reasonably intelligent; at a minimum, the decision-maker should not assume the retail investor is obtuse, unusually stupid, or prone to behave like a ‘moron in a hurry’ … While not expert in matters of finance, the retail client will exercise ordinary common sense and be reasonably diligent and reflective when deciding whether to make an investment. He or she may be less interested in technical details than regulators sometimes assume. The retail client can read what is plainly explained without drawing unlikely or off-beat conclusions. He or she has a reasonable tolerance for risk, especially where the investment opportunity in question involves financing property development. I do not suggest the individual will be incautious, but he or she is unlikely to approach a document with the lawyer’s forensic eye for nuance and heightened sensitivity to risks, both real and imagined.32

[page 255] The prescribed information is: information about any significant benefits to which a holder of the product will or may become entitled, the circumstances in which and times at which those benefits will or may be provided, and the way in which those benefits will or may be provided (s 1013D(1)(b)) or disclosed as a dollar amount unless the regulations provide otherwise (s 1013D(1)(m)); information about any significant risks associated with holding the product (s 1013D(1)(c)); information about: the cost of the product; any amounts that will or may be payable by a holder of the product in respect of the product after its acquisition, and the times at which those amounts will or may be payable; and if the amounts paid in respect of the financial product and the amounts paid in respect of other financial products are paid into a common fund — any amounts that will or may be deducted from the fund by way of fees, expenses or charges (s 1013D(1)(d)) or disclosed as a dollar amount unless the regulations

provide otherwise (s 1013D(1)(m)). The presentation, structure and format of the fees and costs disclosure must comply with Corporations Regulations reg 7.9.16N and ASIC has issued relevant guidance in ASIC Regulatory Guide 97 — Disclosing Fees and Costs in PDSs and Periodic Statements, November 2015; if the product will or may generate a return to a holder of the product — information about any commission, or other similar payments, that will or may impact on the amount of such a return (s 1013D(1)(e)), disclosed as a dollar amount unless the regulations provide otherwise (s 1013D(1)(m)); information about any other significant characteristics or features of the product or of the rights, terms, conditions and obligations attaching to the product (s 1013D(1)(f)); information about the dispute resolution system that covers complaints by holders of the product and about how that system may be accessed (s 1013D(1)(g)); general information about any significant taxation implications of financial products of that kind (s 1013D(1)(h)); information about any cooling-off regime that applies in respect of acquisitions of the product (whether the regime is provided for by a law or otherwise) (s 1013D(1)(i)): see 6.64 below; if the product issuer (in the case of an issue statement) or the seller (in the case of a sale statement) makes other information relating to the product available to holders or prospective holders of the product, or to people more generally — a statement of how that information may be accessed (s 1013D(1)(j)); if the product has an investment component (including managed investment products —the extent to which labour standards or environmental, social [page 256] or ethical considerations are taken into account in the selection, retention or realisation of the investment (s 1013D(1)(l) and (2A)); and

any other statements or information required by the regulations (s 1013D(1)(k)). Under s 1013D(1)(m) as modified by Corporations Regulations reg 7.9.15A, information that is required to be included in the PDS because of s 1013D(1)(b) (benefits), (d) (costs) and (e) (commissions), must be stated as amounts in dollars. This is so unless ASIC has determined otherwise in accordance with Corporations Regulations reg 7.9.15B or reg 7.9.15C. ASIC’s detailed policy on dollar disclosure is set out in ASIC Regulatory Guide 182 — Dollar Disclosure, June 2008. The particular requirements of s 1013D(1)(b), (c), (d) and (f) are modified for market traded derivatives by Corporations Regulations reg 7.9.07B. Significant risks 6.46 Section 1013D(1)(c) requires the disclosure of such ‘information about any significant risks associated with holding the product’ as a person would reasonably require for the purposes of making a decision, as a retail client, whether to acquire the financial product. The fact that the issuer must disclose any significant risks associated with holding the financial product is one of the things that differentiates the disclosure required in a PDS from the disclosure required in connection with an offer of securities regulated under Corporations Act Ch 6D. ‘Significant risk’ was considered at length by Judd J at first instance in Woodcroft-Brown v Timbercorp Securities Ltd (in liq) 2011) 85 ACSR 551; [2011] VSC 427, and by the Court of Appeal in Woodcroft-Brown v Timbercorp Securities Ltd (in liq) (2013) 96 ACSR 307; [2013] VSCA 284 (Warren CJ, Buchanan JA and Macaulay AJA). Noting that the risk must be significant to the investor in making a decision, the Court of Appeal concluded (at [130]) that: Significant risk involves both probability and consequence. ‘Significant’ means important or notable and ‘risk’ means exposure to chance of hazard or loss. It would constitute an incorrect approach to look only at consequence when the very definition of risk involves the notion of chance, meaning probability.

It is appropriate to take into account ‘the elements of probability, consequence and the perspective of the investor’: at [131]. Ultimately,

whether a particular circumstance is judged to be a ‘significant risk’ will involve a consideration of a range of issues. The concept is (at [132]): … intended to be a flexible requirement tailored to the type of product involved and its particular circumstances. Among the constellation of issues in weighing ‘significant risk’, there is the probability of the occurrence, the degree of impact upon investors, the nature of the particular product and the profile of the investors together with other matters. The constellation or group of issues is not closed and will vary depending upon particular circumstances.

[page 257] The Court of Appeal expressed the view (at [160]) that: On its proper construction, s 1013D requires the disclosure of a risk with important consequences to the investor as considered from the perspective of the investor. When there is a low probability of occurrence, but none the less its consequences are sufficiently serious, then a risk may require disclosure. The fact that such a risk is capable of management or being managed does not obviate the need to disclose the risk unless the likelihood is that management will not prevent the risk materialising.

Dispute resolution 6.47 Many financial product issuers (including all responsible entities of registered managed investment schemes) are required to hold an AFS licence: see 6.73 below. Licensees and non-licensees that issue financial products to retail clients must have appropriate alternative dispute resolution arrangements, under ss 912A(1)(g) and 1017G respectively. Information about the dispute resolution system that covers complaints by holders of the product, and about how that system may be accessed, must be included in the PDS, under s 1013D(1)(g). Cooling off 6.48 Where cooling-off arrangements (which allow retail clients acquiring certain types of financial products to cancel and receive a refund within 14 days) exist, these must be disclosed in the PDS under s 1013D(1) (i). Cooling off is required under s 1019A for certain registered managed investment schemes: see 6.64 below. Environmental, social or ethical considerations

6.49 If the product has an investment component, then s 1013D(1)(l) requires that the PDS disclose ‘the extent to which labour standards or environmental, social or ethical considerations are taken into account in the selection, retention or realisation of the investment’. Detailed disclosure requirements for this item are prescribed, under s 1013D(4), by Corporations Regulations reg 7.9.14C. ASIC has developed guidelines for the disclosure requirement in s 1013DA, in ASIC Regulatory Guide 65 — Section 1013DA Disclosure Guidelines, November 2011. Products with an investment component include registered managed investment schemes: s 1013D(2A). Additional requirements 6.50 Part 7.9 Div 2 Subdiv B also includes provisions requiring that additional prescribed statements be included in the PDS where: the PDS states or implies that the financial product will be able to be traded on a financial market: s 1013H; the PDS relates to interests in a registered managed investment scheme that are ED (enhanced disclosure) securities as defined in Pt 1.2A: s 1013I; the PDS has been lodged with ASIC: s 1013J; and the PDS includes statements made by others, such as experts: s 1013K. [page 258]

General disclosure obligation 6.51 In addition to the specific disclosure required under s 1013D, and subject to ss 1013C(2), 1013F and 1013FA, a PDS must also contain ‘any other information that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire the product’: s 1013E. Sections 1013D and 1013E are complimentary ‘in that s 1013E is designed to enhance the disclosure obligation by approaching disclosure from a different perspective’.33 A particular piece of information may need

to be disclosed under s 1013D or 1013E or both. Thus in WoodcroftBrown v Timbercorp Securities Ltd (in liq) (2011) 85 ACSR 551; [2011] VSC 427 at [120]; aff’d Woodcroft-Brown v Timbercorp Securities Ltd (2013) 96 ACSR 307; [2013] VSCA 284, Judd J concluded that: … both provisions have scope to operate. They have different work to ensure that investors are given sufficient information. Just because it is unlikely that, where disclosure of risks are concerned, s 1013E will not add anything to the requirements of s 1013D(1) (c), does not in my view limit the scope of its potential operation.

Section 1013E draws attention to the notion of the ‘retail client’ and what might reasonably be expected to have a ‘material influence’ on their decision in relation to the particular financial product. As with the specific disclosure items in s 1013D, the general disclosure obligation is subject to the various limitations in ss 1013C and 1013F that it must be information that is actually known to a relevant person, and that it need not be included if it would not be reasonable for a person considering, as a retail client, whether to acquire the product to expect to find the information in the PDS: see 6.52 below.

Limits on the disclosure obligation 6.52 As noted, the disclosure obligations in the full PDS are limited by ss 1013C(2) and 1013F. These sections perform a similar limiting function to s 710(2) and (3) of the Act in relation to prospectuses, although they are in different terms.

Matters actually known to the responsible person 6.53 The specific obligation in s 1013D and the general obligation in s 1013E are limited by the actual knowledge of the person preparing the PDS and certain others involved in its preparation, by s 1013C(2). It provides that the information required by those sections need only be included in the PDS to the extent to which it is actually known to: the responsible person; in the case of a PDS issued in connection with a secondary sale, the issuer of the financial product; any person named in the PDS as underwriter of the issue or sale of

the financial product; [page 259] any person named in the PDS as an AFS licensee providing services in relation to the issue or sale of the financial product and who participated in the preparation of the PDS; any person who has given the consent contemplated by s 1013K; any person named in the PDS with their consent as having performed a particular professional or advisory function; and if any of them is a body corporate, any director of that body corporate. The fact that the disclosure obligation is limited to those things within the actual knowledge of those involved in the preparation of the PDS is significant: cf s 710(1) which requires the inclusion in a prospectus of information that people involved in the preparation of a prospectus ‘in the circumstances ought reasonably to have obtained … by making inquiries’. The absence of this extended disclosure requirement is intended to remove the need for extensive due diligence on the part of the person preparing the PDS.34 However, some due diligence is still appropriate in light of ss 1021E(4) and 1022B(7): see 8.49 below. Note that in the context of a secondary sale (that is, the on-sale of an already issued financial product in circumstances requiring the provision of a PDS under s 1012C) the knowledge of the product issuer, as well as the seller, will be relevant: s 1013C(2)(b). Thus, the co-operation of the product issuer would appear to be required in the preparation of the sale statement.

Only reasonably expected information required 6.54 The disclosure obligations in ss 1013D and 1013E are further limited by s 1013F. It provides that information is not required to be included in a PDS if it would not be reasonable for a person considering, as a retail client, whether to acquire the product to expect to find the

information in the PDS. Relevant factors to be taken into account in determining this include the nature of the product (including its risk profile), the extent to which the product is well understood by the market, the kinds of things people can reasonably be expected to know, the effect of continuous disclosure in relation to ED securities, and the way in which the product is promoted, sold or distributed. There is a further regulationmaking power to specify additional factors, under s 1013F(2)(f). The fact that particular information is already publicly available is likely to be relevant. There is: … nothing conceptually wrong in the approach … of examining the availability in public documents of detailed financial data. It is difficult to contemplate how, as a matter to be taken into account in determining what a retail investor would reasonably expect to find in the PDS, it would not be relevant that the very information is available in the annual report, which itself is publicly available.35

[page 260]

Modified PDS content requirement for quoted financial products 6.55 Section 1013FA further limits the amount of disclosure required in a PDS for financial products that are ‘continuously quoted securities’ as that phrase is defined in Corporations Act s 9: see 5.12 above. The PDS need not reproduce information that is included in the most recent annual financial report, half-year financial report and continuous disclosure notices provided by the issuer. The PDS must refer to the information and it must be made available on request. ASIC may make a determination that s 1013FA is not to apply to an issuer if it has contravened certain disclosure and other obligations in the preceding 12 months: s 1013FA(3).

Modified PDS content requirement for simple managed investment schemes 6.56 Changes to the Corporations Regulations introduced by the Corporations Amendment (No 5) Regulations 2010 (as further modified

by the Corporations Legislation Amendment Regulations (No 2) 2011) substituted new content requirements for PDSs for simple managed investment schemes.36 Transitional arrangements allowed for issuers with existing PDSs to remain in the old regime until 22 June 2012 and to continue to issue supplementary PDSs until that date, or to opt in to the new, shorter PDS regime from mid-2011. A simple managed investment scheme is defined in Corporations Regulations reg 1.0.02; it is intended to cover managed funds invested in liquid financial instruments such as short-term bank deposits or transferrable securities. The definition refers to a registered scheme ‘which is or was offered because it meets 1 of the following requirements’: that it invests at least 80% of its assets: in money in an account with a bank on the basis that the money is available for withdrawal immediately during the bank’s normal business hours or at the end of a fixed period that is no longer than three months; in money on deposit with a bank on the basis that the money is available for withdrawal immediately during the bank’s normal business hours or at the end of a fixed period that is no longer than three months; or under one or more arrangements by which the responsible entity can reasonably expect to realise the investment, at the market value of the asset, within 10 days. The regime does not apply to registered managed investment schemes that are, or are intended to be, quoted on a financial market, are part of a stapled security, are property, mortgage or agricultural schemes, or are platforms (that is, registered schemes that operate as investor-directed portfolio services). Subdivision 4.2C of Pt 7.9 Div 4 of the Corporations Regulations determines the new content requirements for PDSs for these products. The regulations substitute new ss 1013C(1) and 1013L that apply to PDSs for simple managed investment [page 261]

schemes, and omit ss 1013D, 1013E and 1015D(3): see Pt 5C of Sch 10A to the Corporations Regulations. The effect of the modifications is to require that a PDS for a simple managed investment scheme instead meet the content requirements in Sch 10E to the Corporations Regulations. Under Sch 10E the matters such as the page length and font size for the PDS are prescribed. Specific information must be provided in the PDS under prescribed section headings; these must be numbered and titled as follows: 1.

About [name of responsible entity]

2.

How [name of simple managed investment scheme] works

3.

Benefits of investing in [name of simple managed investment scheme]

4.

Risk of managed investment schemes

5.

How we invest your money

6.

Fees and costs

7.

How managed investment schemes are taxed

8.

How to apply.

Schedule 10E goes on to set out specific instructions about matters to be disclosed under each of those headings. Additional information can be included but must not cause the PDS to exceed the maximum page limit. A ‘matter contained in writing’ may be applied, adopted or incorporated in the PDS in accordance with reg 7.9.11X. This would have the effect of treating the issuer as having provided the incorporated information, even though it exceeded the page limit and was not actually placed before the client, in determining the adequacy of disclosure.

Modified PDS content requirement for margin loans 6.57 The content requirements for PDSs for margin lending facilities are also modified by the Corporations Regulations; the relevant provisions are in Subdiv 4.2A of Div 4, Pt 7.9. A ‘margin loan’ for this purpose is a standard margin lending facility as defined in Corporations Act s 791EA(2), discussed in Chapter 3 above. Part 5A of Sch 10A modifies ss 1013C(1) and 1013L and omits ss 1013D and 1013E, Div 2 Subdiv 2, and s 1015D(3). Instead, the PDS must

comply with the content requirements in Sch 10C to the Corporations Regulations. It must include certain prescribed information under the following seven headings: 1.

About [name of provider of the margin loan] and [name of margin loan product]

2.

Benefits of [margin loan product]

3.

How [margin loan product] works

4.

What is a margin call?

5.

The risk of losing money

6.

The costs

7.

How to apply.

Schedule 10C goes on to prescribe the information to be provided under each heading. As with a PDS for a simple managed investment scheme discussed at 6.56, [page 262] a ‘matter contained in writing’ may be applied, adopted or incorporated in the PDS in accordance with reg 7.9.11E.

CONDUCTING THE OFFER Lodgment with ASIC 6.58 Most PDSs are not lodged with ASIC. The exception is PDSs relating to registered managed investment schemes that are or are to be listed must be lodged with ASIC: s 1015B. In this (limited) case the issuer or seller (as the case may be) and, if it is a body corporate, all its directors, must consent to the lodgment. Information that has been included by reference in a PDS in accordance with Corporations Regulations reg 7.9.15DA must be lodged with ASIC under Corporations Regulations reg 7.9.15DC. Where the PDS has been lodged with ASIC in accordance with this requirement and the product is not yet able to be traded on a financial

market, an exposure period of seven days is prescribed by s 1016B. It provides that the responsible person must not issue or sell a financial product to which the PDS applies until the period of seven days (or longer if extended by ASIC) after lodgment of the PDS has ended. PDSs relating to products other than listed schemes need not be lodged with ASIC. Instead, s 1015D imposes an obligation on the person responsible for preparing the statement to notify ASIC that the PDS is in use as soon as practicable, and in any event within five business days, after a copy of the PDS is first given to someone in a recommendation, issue or sale situation. This is done by lodging an electronic ‘in-use notice’ with ASIC in the prescribed form. A copy of the PDS must be retained for seven years, and provided to ASIC and others on request: s 1015D and Corporations Regulations reg 7.9.15DB.

Application forms 6.59 Generally, the issue or sale of financial product in circumstances that require a PDS can only be made in response to an eligible application: that is, one that is made by the applicant on an application form attached to, accompanying or derived from an up-to-date PDS: s 1016A. In ASIC’s view, in the case of electronic disclosure, ‘the requirement in s 1016A that an application form be included in or accompanied by a PDS is wide enough to enable a provider to incorporate an application form into a digital PDS, or give the application at the same time as the PDS’.37 ASIC has granted relief from s 1016A to facilitate the operation by ASX of an exempt market38 through which requests for the issue or redemption of interests in unlisted managed investment schemes that are registered to use the service can be made, and clients’ holdings recorded through CHESS.39 ASIC Class Order 13/1621 exempts responsible entities of managed investment schemes available through [page 263] the service from only issuing interests in response to an application form

that was included in or accompanied a PDS, and allows instead for the issue of interests on the basis of an electronic message through the service indicating that the investor has been given the current version of the PDS.

Dealing with application money 6.60 Application moneys must be dealt with in accordance with s 1017E. Section 1017E is supplemented and amended by Divs 3 and 5A of the Corporations Regulations. The requirements apply to money paid to an issuer of financial products, or to a seller of financial products in relation to which the seller has prepared a PDS, to acquire the financial product in circumstances where the product is not issued or transferred immediately upon receipt of the moneys. In broad terms, the money must be paid into a designated trust account held with an Australian ADI (or other account prescribed under Corporations Regulations reg 7.9.08) used solely for that purpose, on the day it is received or on the next business day. Interest paid on the account can go to the product provider if the requirements of reg 7.9.08A are met. The requirements in s 1017E apply regardless of whether the person paying the money is a retail client or not. In the case of money paid to a product issuer, the requirements apply regardless of whether or not a PDS was required and produced. However, they only apply to a product seller if the sale is made pursuant to a PDS. Although it is derived from s 722, which requires that application moneys be held on trust pending the issue of securities, it is both more prescriptive and extensive in operation than that section. In particular, s 1017E allows for money to be withdrawn from the account only in the prescribed circumstances. Also, s 1017E requires that the money be dealt with in one of the ways specified in the section within one month, or longer if that is reasonable in the circumstances. Under s 1017E(2A), subject to subs (2C), the money paid is taken to be held in trust by the issuer for the benefit of the applicant. The money must only be taken out of that account, relevantly, if it is taken out for the purpose of return to the person by whom it was paid; the product is issued to or transferred to, in accordance with the instructions of that person; or

is taken out for a purpose specified by the regulations: s 1017E(3). That statutory trust terminates in the circumstances identified in s 1017E(4) of the Corporations Act.40 Section 1017E(4) obliges the issuer either to return the application money to the applicant, or issue the financial product applied for, before the end of one month starting on the day on which the money was received. However, if it is not ‘reasonably practicable’ to do so within that month, this must be done ‘by the end of such longer period as is reasonable in the circumstances’. In this case, the first of the two alternatives (issuing the products or returning the money) that can be [page 264] done, must; ‘the application money must be returned with a month unless it is not reasonably practicable either to issue the product or return the application money’.41 Once the one-month period expires, the application moneys are held by the issuer on trust for return to the applicants under s 1017E(2A) of the Corporations Act. The issuer is obliged to return the money to each applicant.42

Quotation conditions 6.61 If the PDS states that the product will be listed for quotation on a financial market, application must be made within seven days of the date of the PDS, and listing must be achieved within three months, otherwise any subscription moneys must be returned: ss 1016D and 1017E. The provision corresponds in broad terms to s 723(3) which applies to the offer of securities: see the discussion in 5.44 above. If an application for quotation is not made within seven days, and trading does not commence within three months, s 1016E applies, giving the offeror certain alternatives (in relation to outstanding applications) set out in s 1016E(2).43

Minimum subscription condition 6.62 If the PDS contains a minimum subscription condition, the minimum subscription must be received before the products are issued or sold: s 1016C. The provision corresponds in broad terms to s 723(2) which applies to the offer of securities: see the discussion in 5.49 above. Again, if the condition is not met, the offeror has available to it the options set out in s 1016E(2), which include returning the money, issuing a supplementary PDS and giving applicants up to one month to withdraw their applications.

Transaction confirmation 6.63 Where there is a transaction by which a person acquires a financial product as a retail client or that occurs while the person holds the financial product (including a full or partial disposal of the product), confirmation of the transaction must be provided (unless an exception applies) in the manner prescribed by s 1017F. There are several significant exceptions to the confirmation requirement, contained in s 1017F(4) and Corporations Regulations reg 7.9.62. These relate to, among others, transactions involving regular contributions (such as pursuant to a regular savings plan or from an employee’s wages into a superannuation fund), some transactions involving superannuation products and RSAs, and certain transactions [page 265] involving deposit accounts (such as processing cheques, debiting fees and charges, and involving direct credit or direct debit arrangements). The person required to provide the confirmation is set out in reg 7.9.63A, which modifies s 1017F(2). In most cases the obligation to provide confirmation falls on the issuer of the product; however, where the transaction is a secondary sale made in circumstances requiring a PDS the seller is responsible for confirming the transaction. Acquisitions (other than by way of issue) and disposals made through an AFS licensee are generally confirmed by the licensee.

Detailed requirements relating to the content of the confirmation and the form in which it may be given are contained in Pt 7.9 Divs 5B and 6 of the Corporations Regulations. In general terms, the confirmation can be given on a transaction-by-transaction basis or by means of a standing facility which allows the holder of the product to obtain for themselves confirmation of the transaction (for example, through accessing a website). A standing facility, if used, must meet the requirements of s 1017F(5A) or s 1017F(5B).44 The content of the confirmation is also prescribed. Mandatory requirements are set out in s 1017F(8) and regs 7.9.63B– 7.9.63G. The confirmation may be provided in various ways, including electronically.

Cooling off 6.64 Part 7.9 Div 5 allows for ‘cooling off’ in connection with the issue, or sale pursuant to a PDS, to a retail client of certain financial products. The cooling-off right allows the client, within 14 days of the earlier of receiving the confirmation required under s 1017D or the end of the fifth day after the issue or sale, to return the product and obtain a refund. Section 1019A(1)(a) provides that cooling off is potentially available in respect of interests in registered managed investment schemes. However, the availability of the right is limited by Corporations Regulations reg 7.9.64; for example, cooling off is not available in relation to interests in registered managed investment schemes that are or are to be listed, or that are not liquid for the purposes of s 601KA of the Corporations Act at the time of issue. It is also not available in relation to financial products offered or issued under a distribution reinvestment plan or switching facility, or following an additional contribution made under an existing agreement or contract. Financial products issued as consideration for an offer made under a takeover bid under Ch 6 are also excluded. The unsatisfactory nature of the definition of ‘liquid’ in s 601KA means that a registered managed investment scheme can change from being liquid at the time the client applied for the product to being illiquid at the time it is issued. This may impact on a client’s ability to exercise cooling-off rights.45

[page 266] Where the right to return the product is available, the provisions of s 1019B and Corporations Regulations regs 7.9.64A–7.9.70 apply. In particular, these sections impose procedural requirements for the exercise of the cooling-off right and allow for the adjustment of the amount to be returned to the client to allocate market risk and take account of taxes and charges.

Correcting and updating disclosure 6.65 Part 7.9 Div 2 Subdiv D provides for the preparation and distribution of supplementary or replacement PDSs. These documents can be used to: correct a misleading or deceptive statement in the PDS; correct an omission from the PDS of information it is required to contain; update, or add to, the information contained in the PDS; or change a statement about minimum subscription requirements or a proposal to list. The effect of a supplementary PDS is that, when provided with the original PDS or to a person who has received the original PDS, the original PDS is taken to contain (or be corrected by) the information in the supplementary document, for the purpose of determining whether the required disclosure has been provided to investors.

Additional information 6.66 A person who has obtained, or should have been given, a PDS in relation to a financial product and who is not an existing holder of that product can request additional information from the person who has prepared the PDS, under s 1017A. So too can certain intermediaries, including AFS licensees and their authorised representatives. The responsible person must provide the information within one month (or

earlier if practicable) if the requisite jurisdictional nexus is made out and the following conditions are met: the responsible person has previously made the information generally available to the public; the information might reasonably influence a person’s decision, as a retail client, whether to acquire the financial product; it is reasonably practicable for the responsible person to provide the information; and the person requesting it pays a charge not exceeding the responsible person’s reasonable costs incurred in providing the information.

STOP ORDERS 6.67 ASIC has power under s 1012E(2) to issue stop orders, in circumstances where a ‘disclosure document or statement’ is defective within the meaning of s 1020E(11) or is not worded and presented in a clear, concise or effective manner. A ‘disclosure document or statement’ has the meaning set out in s 1022A(1) — it includes a PDS, and a supplementary PDS. A stop order can also be made where an advertisement or statement of a kind referred to in s 1018A(1) or (2) (see 6.68 below) is defective, or [page 267] where an issuer does not have in place the dispute resolution arrangements required by s 1017G. Ordinarily, a stop order can be issued only after ASIC has held a hearing giving interested persons an opportunity to be heard, but ASIC can issue interim stop orders without a hearing in certain circumstances. ASIC’s stop order power is explained in 5.54 above.

CONTROLS ON THE SALE PROCESS Restrictions on advertising financial products

6.68 Like offers of securities (see 4.35 above), offers of financial products cannot be advertised in some circumstances. More broadly, where advertising is permitted it can only occur where certain information is included. The restrictions on advertising financial products are contained in ss 1018A and 1018B. These restrictions apply where a financial product is available for acquisition by persons as retail clients (see 6.17 above) either by way of issue or pursuant to sale offers to which s 1012C applies. The thrust of the legislative controls on advertisements is to require them to identify the issuer of the financial product (and the seller, in the case of a regulated secondary sale) and to direct the attention of readers, listeners and viewers to a PDS. Section 1018A(1) contains the advertising requirements that apply where financial products are currently on offer to retail clients. Section 1018A(2) applies where the financial products are not yet available but it is reasonably likely that they will become available for acquisition by retail clients in the future. A person who publishes an advertisement or statement that contravenes s 1018A(1) or s 1018A(2) in the ordinary course of a media business, and who does not know, and had no reason to suspect, that its publication would amount to a contravention, does not themselves contravene the section, by virtue of s 1018A(5). ‘Media’ is defined for this purpose in s 1018A(6).

Advertising personal offers 6.69 Offers of interests in managed investment schemes that are made without a PDS under the ‘20 issues in 12 months’ exception contained in s 1012E must not be advertised: s 1018B.

Advertising offers that require a PDS 6.70 Section 1018A is triggered where a person advertises a financial product, or publishes a statement that is reasonably likely to induce people to acquire the financial product. Offers that require a PDS must not be advertised unless the advertisement contains the information required by s 1018A(1) or s 1018A(2) (as the case may be). However, certain publications in the nature

of corporate and media reports do not contravene s 1018(1) or s 1018(2) (even if they do not contain the information required by s 1018A(1) or s 1018A(2)), because of s 1018A(4). The burden of proving that the advertisement is authorised by that subsection is on the defendant. [page 268] A person who advertises an offer in contravention of s 1018A(1) or s 1018A(2) commits an offence by virtue of s 1311(1). Unlike the corresponding s 734, which regulates securities advertising, the offence is not expressed to be one of strict liability.

Other permitted advertisements 6.71 As with the restrictions on advertising offers of securities, contained in Pt 6D.2, there are exceptions to the prohibitions on advertising financial products. The availability of financial products can be advertised in accordance with s 1018A(1). The advertisement must identify the issuer of the product and, if it relates to a sale offer, the seller. It must indicate that a PDS is available for the product and state where it can be obtained. Further, it must indicate that a person should consider the PDS in deciding whether to acquire, or continue to hold, the product. Accordingly, it is not possible to meet the requirements of s 1018A(1) until a PDS is available. Section 1018A(2) allows the advertising and publicising of an offer before the product is released or becomes available. The advertisement or statement must identify the issuer and, where relevant, the seller of the product; state that a PDS will be made available when the product is released or otherwise becomes available, and indicate when and where the PDS is expected to be made available; and indicate that a person should consider the PDS in deciding whether to acquire, or continue to hold, the product. Section 1018A(3) allows dissemination of a PDS (other than a PDS subject to a stop order) without contravening the prohibition.

Section 1018A(4) provides general exceptions that mirror, in many respects, s 734(7): see 4.42 above. ASIC has a range of powers in relation to advertisements, including the power to require an issuer to substantiate claims made in its marketing materials.46 These powers are discussed in Chapter 15.

Hawking financial products 6.72 Hawking of financial products (other than securities and interests in registered managed investment schemes) is prohibited by s 992A. Hawking of managed investment products is prohibited by s 992AA. For a general discussion of hawking, see 4.43 and 14.86 above. Section 992A(1) prohibits the ‘offer of financial products for issue or sale in the course of, or because of, an unsolicited meeting with another person’. This refers to a face-to-face meeting with the person. Section 992A(3) limits telephone canvassing; it prohibits a person from making an offer to issue or sell a financial product in the course of, or because of, an unsolicited telephone call unless the call complies with various requirements set out in s 992A and the regulations. Section 992A is [page 269] supplemented and modified by Corporations Regulations regs 7.8.21A, 7.8.22, 7.8.22A, 7.8.23, 7.8.24 and 7.8.25. Hawking of interests in registered managed investment schemes is prohibited by s 992AA. Offers made in the course of unsolicited meetings and unsolicited telephone calls are both prohibited. However, the prohibition does not apply if the offer is not to a retail client, the offer is an offer of interests in a listed scheme made by telephone by an AFS licensee, the offer is made by an AFS licensee to a client with whom it has dealt in interests in the previous year, or the offer is made under an eligible employee share scheme. ASIC has published extensive guidance on the hawking provisions, in

ASIC Regulatory Guide 38 — The Hawking Provisions, May 2005.

Impact of the AFS licensing laws 6.73 As Chapter 13 below explains, a person who carries on a financial services business in the jurisdiction must hold an AFS licence authorising it to carry on that business. The licensing requirement may impact on the offer and issue of financial products other than securities, most notably if the offeror is: (i) the responsible entity of a registered scheme; (ii) carrying on a business of issuing financial products; or (iii) carrying on a business of providing financial product advice in relation to those products.

Dealing in financial products 6.74 The responsible entity of a registered managed investment scheme is always required to be licensed, because of s 601FA. The issuers of other financial products may be required to be licensed, for example, if they carry on a business of dealing in financial products or providing financial product advice. ‘Dealing’ is defined in s 766C, and includes issuing, varying or disposing of a financial product. As to who is the issuer of a financial product, see s 761E and Corporations Regulations reg 7.1.04D, discussed at 6.33 above. A body corporate (other than an investment company) that issues shares or debentures in itself is not ‘dealing’, because of s 766(4). The carve-out from the definition of dealing also extends to governments, local government authorities, public authorities and agencies and instrumentalities of the Crown. However, when a body issues another type of financial product, it is treated as dealing in that product. If it is carrying on a business of doing so,47 it may be required by s 911A to hold a licence.

Providing financial product advice 6.75 ‘Financial product advice’ is defined in s 766B as: … a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or persons in making a decision

[page 270] in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or (b) could reasonably be regarded as being intended to have such an influence.

The definition is interpreted broadly by ASIC: see ASIC Regulatory Guide 36 — Licensing: Financial Product Advice and Dealing, June 2016. However, it does not include statements made in a document prepared, or a statement given, in accordance with the requirements of Corporations Act Ch 7 (other than a Statement of Advice): s 766B(1A). An exemption covers the publication by a product issuer of certain communications in the media that (technically) amount to financial product advice. The issuer does not require a licence to provide general advice about its own products, provided it includes the prescribed ‘small print’ in the publication: reg 7.6.01(1)(o) of the Corporations Regulations. The publication must include the following information: (a) the advice has been prepared without taking account of the client’s objectives, financial situation or needs; (b) for that reason, the client should, before acting on the advice, consider the appropriateness of the advice, having regard to the client’s objectives, financial situation and needs; and (c) if the advice relates to the acquisition, or possible acquisition, of a particular financial product, the client should obtain a PDS relating to the product and consider the statement before making any decision about whether to acquire the product. The provision of advice about its products by an issuer to a financial services licensee (such as a financial planner, adviser or broker) is also covered by an exemption, allowing the issuer to provide guidance to advisers on their products. Regulation 7.6.01(1)(s) of the Corporations Regulations says that a licence is not required for the provision of general advice to a financial services licensee that is itself authorised to provide such advice, where the advice is provided by the issuer or a related body corporate of the issuer. General advice provided in certain documents required under the Corporations Act is covered by a licensing exemption granted by ASIC in ASIC Corporations (Financial Product Advice — Exempt Documents)

Instrument 2016/356. The exemption covers general advice given in, among others, financial reports, takeover documents, and continuous disclosure notices. ___________________________ 1.

Special Product Disclosure Statement (PDS) content requirements for superannuation products, RSA products, annuity products, and margin loans are contained in Pt 7.9 Div 4 of the Corporations Regulations 2001 (Cth) (Corporations Regulations).

2.

The overlap between the notion of investors and consumers of financial products is explored further in Chapter 15.

3.

Additional information requirements apply to certain superannuation products, under Corporations Act ss 1017BA–1017BE and 1017DA.

4.

See Woodcroft-Brown v Timbercorp Securities Ltd (2011) 85 ACSR 354; [2011] VSC 427 at [123]–[126]; upheld Woodcroft-Brown v Timbercorp Securities Ltd (2013) 96 ACSR 307; [2013] VSCA 284.

5.

CASAC Regulation of On-Exchange and OTC Derivatives Markets, July 1997, 3.9, discussed in Chapter 1, above.

6.

See also J Donnan, ‘Debentures, Derivatives and Managed Investment Schemes — the Characterisation and Regulation of Investment Instruments’ (2002) 13 JBFLP 28.

7.

See para (d) of the definition of security in s 761A, which defines security for the purposes of Corporations Act Ch 7, and s 700(1) which defines securities for the purposes of Corporations Act Ch 6D: see s 92(4).

8.

ASIC Report 365 — Hybrid Securities, August 2013, [13].

9.

See ASX Guidance Note 2 — Stapled Securities, March 2000. There is clearly a case for law reform in this area, to bring listed managed investment schemes (and probably, all other closed-end managed investment schemes) back under the Ch 6D disclosure regime from which they were removed by the FSR Act.

10.

Section 1010B(2) refers to ‘a managed investment product’, which is defined in s 761A as ‘a financial product described in paragraph 764(1)(b)’.

11.

Cf Explanatory Memorandum to the Financial Services Reform Bill 2001, [6.108]. In Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd (2005) 54 ACSR 111; [2005] NSWSC 544 at 1191–2, Barrett J notes that ‘carrying on a business generally involves conducting some form of commercial enterprise, systematically and regularly with a view to profit … although as a number of cases emphasise, there may be a finding that the business is carried on even where some of the usual elements are missing’. His Honour cites with approval the judgment of Gibbs J in Smith v Capewell (1979) 142 CLR 509, which explains the circumstances in which a single transaction may amount to the carrying on of a business. See also Commissioner of Taxation v Murry (1998) 193 CLR 605; 155 ALR 67; [1998] HCA 42 at [54]; Re Idylic Solutions Pty Ltd: Australian Securities and Investments Commission v Hobbs [2012] NSWSC 1276.

12.

See, for example, Samuel Holdings Pty Ltd v Securities Exchange Guarantee Corporation Ltd (2010) 80 ACSR 706; [2010] QSC 450.

13.

Reversed International Litigation Partners Pte Ltd v Chameleon Mining NL (2012) 246 CLR 455; (2012) 292 ALR 233; (2012) 86 ALJR 1289; (2012) 91 ACSR 473; [2012] HCA 45 [2012] HCA 45. The

High Court concluded that the litigation funding agreement was a credit facility and therefore outside the definition of a financial product; accordingly the application of s 763E was not in issue. 14.

Australian Securities and Investments Commission v West (2008) 66 ACSR 143; [2008] SASR 111 at [187].

15.

The exceptions to the requirement to provide a PDS are discussed in 6.27ff below.

16.

See Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (2005) 55 ACSR 544; [2005] NSWSC 1065 at [10]–[11]; Australian Securities and Investments Commission v Maxwell (2006) 59 ACSR 373; [2006] NSWSC 1052; Australian Securities and Investments Commission v Australian Investors Forum Pty Ltd (No 2) (2005) 53 ACSR 305; [2005] NSWSC 267 at [98]–[99], discussed at 4.21 above.

17.

That is, a superannuation fund, an approved deposit fund, a pooled superannuation trust, or a public sector superannuation scheme within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth).

18.

The meaning of ‘exempt public authority’ is discussed in 4.28 above.

19.

An investment company is a body corporate, or an unincorporated body, that: (i) carries on a business of investment in financial products, interests in land or other investments; and (ii) for those purposes, invests funds received (directly or indirectly) following an offer or invitation to the public, within the meaning of s 82, the terms of which provided for the funds subscribed to be invested for those purposes: see para (h) of the definition of professional investor in Corporations Act s 9.

20.

Many of the specific exemptions relate to the offer of particular financial products (such as insurance or superannuation products) that are not discussed in this book. The discussion that follows is restricted to those exemptions that may apply to offers of interests in managed investment schemes and other financial products that are or may be capable of being traded on financial markets.

21.

A financial product other than an interest in a registered managed investment scheme or regulated superannuation fund is of the same kind as another only if they are both issued by the same issuer on the same terms and conditions (other than price). If the product is an interest in a registered scheme or regulated superannuation fund, the product is of the same kind if it is an interest in the same scheme or fund.

22.

For the application of the Corporations Act to bodies corporate formed under state and territory law, see Pts 1.1 and 1.1A of the Act.

23.

Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249 at 257–9; 95 ALR 481 at 486–8; Australian Securities & Investments Commission v Cyclone Magnetic Engines Inc (2009) 71 ACSR 1; [2009] QSC 058 at [37] and [39]–[40]; Australian Securities and Investments Commission v Great Northern Developments Pty Ltd (2010) 79 ACSR 684; [2010] NSWSC 1087 at [44].

24.

See Stoyeff v Masu Financial Management Pty Ltd (2008) 66 ACSR 585; [2008] FCA 897 at [17].

25.

Corporations Act s 1015C; Corporations Regulations regs 7.9.02A and 7.9.02B; ASIC Corporations (Facilitating Electronic Delivery of Financial Services Disclosure) Instrument 2015/647.

26.

Only PDSs for listed managed investment schemes need be lodged with ASIC: see s 1015B.

27.

Revised Explanatory Memorandum to the Financial Services Reform Bill 2001, [14.72]. The Explanatory Memorandum is discussed in Woodcroft-Brown v Timbercorp Securities Ltd (in liq) (2011) 85 ACSR 354; [2011] VSC 427 at [125]ff.

28.

Other than the particular financial products which do not require a PDS because of Corporations Regulations Pt 7.9 Div 2C, such as basic deposit products, non-cash payment facilities related to

deposit product, or travellers’ cheques. 29.

For present purposes, this does not include superannuation products or RSA, insurance products or deposits with ADIs.

30.

The distinction between ‘simple’ managed investment schemes and managed investment schemes that attract the full PDS requirement is explained at 6.56 below.

31.

Section 1015E prohibits a person from providing a PDS that has been altered without the authority of the issuer or seller (as the case may be). It also prohibits a person from providing a PDS that has been altered in a material respect, unless the date of the document has been changed.

32.

Re Wright Patton Shakespeare Capital Ltd and Australian Securities and Investments Commission [2008] AATA 1068 at [15] (McCabe SM); quoted with approval by Sifris J in Almond Investors Ltd v Emanouel (2012) 91 ACSR 220; [2012] VSC 413 at [41].

33.

Woodcroft-Brown v Timbercorp Securities Ltd (2011) 85 ACSR 551; [2011] VSC 427 at [119]; aff’d Woodcroft-Brown v Timbercorp Securities Ltd (2013) 96 ACSR 307; [2013] VSCA 284.

34.

See Revised Explanatory Memorandum to the Financial Services Reform Bill 2001, [14.74]; Woodcroft-Brown v Timbercorp Securities Ltd (2011) 85 ACSR 551; [2011] VSC 427 at [154]; aff’d Woodcroft-Brown v Timbercorp Securities Ltd (2013) 96 ACSR 307; [2013] VSCA 284.

35.

Woodcroft-Brown v Timbercorp Securities Ltd (2013) 96 ACSR 307; [2013] VSCA 284 at [156].

36.

For a detailed discussion of the PDS content requirements for simple managed investment schemes, see P F Hanrahan, Managed Investments Law & Practice, CCH Australia, Sydney, looseleaf, ¶63-200.

37.

ASIC RG 221.92.

38.

This facility is known as mFund Settlement Service.

39.

mFund is not a trading facility.

40.

Basis Capital Funds Management Ltd v BT Portfolio Services Ltd [2008] 219 FLR 157; 67 ACSR 297; [2008] NSWSC 766 at [119]; Re Parbery (as liquidators of Trio Capital Ltd (in liq)) (2012) 88 ACSR 700; [2012] NSWSC 597 at [14].

41.

Re Parbery (as liquidators of Trio Capital Ltd (in liq)) (2012) 88 ACSR 700; [2012] NSWSC 597 at [14]; Basis Capital Funds Management Ltd v BT Portfolio Services Ltd (2008) 67 ACSR 297; [2008] NSWSC 766 at [129].

42.

Re Parbery (as liquidators of Trio Capital Ltd (in liq)) (2012) 88 ACSR 700; [2012] NSWSC 597; Basis Capital Funds Management Ltd v BT Portfolio Services Ltd (2008) 67 ACSR 297; [2008] NSWSC 766; Samuel Holdings Pty Ltd v Securities Exchange Guarantee Corporation Ltd (2010) 80 ACSR 706; [2010] QSC 450.

43.

It is possible for the issuer to apply to the court for what is, in effect, an extension of time to meet this condition, under Corporations Act s 1322 which deals with procedural irregularities see, for example, Re Solco Ltd (2015) 106 ACSR 591; [2015] FCA 635; Re G8 Communications Ltd (2016) 112 ACSR 22; [2016] FCA 297 and the cases referred to therein.

44.

Section 1017F(5B) is inserted into the Corporations Act by reg 7.9.61D.

45.

See, for example, Basis Capital Funds Management Ltd v BT Portfolio Services Ltd (2008) 67 ACSR 297; [2008] NSWSC 766 at [148]–[149].

46.

Under Pt 2 Div 2 Subdiv GC of the Australian Securities and Investments Commission Act 2001 (Cth).

47.

See Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd (2005) 54 ACSR 111; [2005]

NSWSC 544 at [38]–[39].

[page 271]

Chapter 7 CONTINUOUS DISCLOSURE Introduction Scope of this chapter Policy and history of the statutory continuous disclosure regime ASX Listing Rules Disclosure requirements under the ASX Listing Rules Exceptions to the disclosure requirement under ASX Listing Rules Statutory Continuous Disclosure Requirements Continuous disclosure by listed disclosing entities Continuous disclosure by other disclosing entities Liability for Contravention of Ch 6CA Criminal penalty for contravention Civil penalty liability for contravention Civil penalty liability of person involved in contravention Infringement notice regime Other remedies for continuous disclosure breaches

7.1 7.1 7.2 7.4 7.4 7.9 7.13 7.13 7.18 7.19 7.19 7.22 7.25 7.26 7.27

INTRODUCTION Scope of this chapter 7.1 This chapter deals with the continuous disclosure obligations of listed entities, arising under Australian Securities Exchange Listing Rule (ASX LR) 3.1 and Ch 6CA of the Corporations Act 2001 (Cth) (Corporations Act).1 We first address the policy [page 272]

and history of the continuous disclosure regime: 7.2–7.3. We then turn to disclosure obligations under the ASX Listing Rules (7.4–7.12) and deal with the statutory reinforcement of those obligations under Ch 6CA: 7.13–7.18. Last, we deal with liability for contraventions of Ch 6CA, including criminal and civil penalty liability (7.19–7.25); the application of the infringement notice regime (7.26); and other remedies for breach of the continuous disclosure provisions: 7.27.

Policy and history of the statutory continuous disclosure regime 7.2 Continuous disclosure involves prompt disclosure of new information concerning a listed company as it becomes available, by contrast with periodic disclosure such as annual and half-year accounts.2 The continuous disclosure regime is intended, among other things, to allow investors to make informed decisions and to prevent selective disclosure of market-sensitive information.3 Continuous disclosure is one of several forms of disclosure provided under the Corporations Act, including periodic accounting disclosure under Pt 2M.3; transaction-based disclosure in respect of major transactions such as takeovers; product-related disclosure, such as prospectuses and product disclosure statements under Ch 6D and Pt 7.9 (see Chapter 4), and disclosure about financial services under Ch 7: see Chapter 14. The continuous disclosure regime, together with those other forms of disclosure, seek to promote informed investor decision-making and investor protection and ensure that markets are fair, efficient and transparent.4 However, the effectiveness of disclosure [page 273] regimes may be limited, at least to some extent, by limitations on investors’ capacity to absorb complex information and biases in decision-making5; see also 15.5. The Companies and Securities Advisory Committee (CASAC) Report, An Enhanced Statutory Disclosure System, September 1991, recommended

the introduction of a statutory continuous disclosure regime. CASAC identified various purposes of a continuous disclosure regime, including overcoming the inability of general market forces to guarantee adequate and timely disclosure by disclosing entities; encouraging greater securities research by investors and advisers, thereby ensuring that securities prices more closely and quickly reflected underlying economic values; ensuring that equity and loan resources were more effectively channelled into appropriate investments and that funds were withheld or withdrawn from poorly performing disclosing entities, promoting capital market efficiency; lessening possible distorting effects of rumour on securities prices; and minimising opportunities for insider trading and similar market abuses. The report of the House of Representatives Standing Committee on Legal Constitutional Affairs, Corporate Practices and the Rights of Shareholders, November 1991, also recommended that a statutory continuous disclosure regime be introduced. The initial continuous disclosure provisions in ss 1001A–1001D of the Corporations Law, introduced by the Corporate Law Reform Act 1994 (Cth), were limited to intentional, reckless or negligent non-disclosure. These were replaced by Ch 6CA of the Corporations Act, introduced by the Financial Services Reform Act 2001 (Cth) with effect from 11 March 2002, which applied the civil penalty regime to continuous disclosure. The continuous disclosure regime was further amended by the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9 Act) to introduce civil penalty liability for involvement in a breach of the continuous disclosure provisions (see 7.22–7.25) and the infringement notice regime: see 7.26. The Explanatory Memorandum to the CLERP 9 noted (at [4.219]): … continuous disclosure is fundamental to the integrity of Australian securities markets. It is important that all investors should have equal and timely access to price sensitive information released by disclosing entities. Inadequate disclosure has the potential to discourage investor participation in securities markets. This in turn could reduce the liquidity of these markets and hence the efficiency of the price discovery process.

[page 274] 7.3 The policy underlying the continuous disclosure regime has also been

recognised in the case law. In Jubilee Mines NL v Riley (2009) 253 ALR 673; 69 ACSR 659; [2009] WASCA 62 at [87], Martin CJ (with whom Le Miere AJA agreed) observed: … the evident purpose of each of the listing rule [3.1] and the relevant statutory provisions is to ensure an informed market in listed securities. Put another way, the legislative objective is to ensure that all participants in the market for listed securities have equal access to all information which is relevant to, or more accurately, likely to, influence decisions to buy or sell those securities.

In James Hardie Industries NV v Australian Securities and Investments Commission (2010) 274 ALR 85; 81 ACSR 1; [2010] NSWCA 332 at [355], the Court of Appeal of the Supreme Court of New South Wales noted: The continuous disclosure regime, contained in s 674 and the Listing Rules, is designed to enhance the integrity and efficiency of Australian capital markets by ensuring that the market is fully informed. The timely disclosure of market sensitive information is essential to maintaining and increasing the confidence of investors in Australian markets, and improving the accountability of company management. It is also integral to minimising incidences of insider trading and other market distortions.

The Court of Appeal also noted that s 674 is ‘remedial legislation to enhance the public interest and to protect individual investors’ and should be construed beneficially so as to give the fullest relief that the fair meaning of its language will allow: at [356].

ASX LISTING RULES Disclosure requirements under the ASX Listing Rules 7.4 ASX LR 3.1 is the starting point for the statutory continuous disclosure regime. Under this rule, a listed entity is required immediately to notify the ASX of any information concerning the entity of which it is or becomes aware and which a reasonable person would expect to have a material effect on the price or value of the entity’s securities. ASX Guidance Note 8 (revised 17 August 2015) deals with ASX LR 3.1 and listed entities’ continuous disclosure requirements. 7.5 Several issues arise from the terms of that rule, namely when a listed entity is ‘aware’ of a matter, what is required by ‘immediate’ notification

and when a matter is ‘material’ for the purposes of that rule. The definition of the term ‘aware’ in ASX LR 19.12 has the effect that an entity is treated as having become aware of information if an officer of the entity (or, in the case of a trust, an officer of the responsible entity) has or ought reasonably to have come into possession of that information in the course of the performance of his or her duties as an officer of that entity; and the notion of awareness in ASX LR 3.1 extends to constructive awareness of information which an officer has, or ought reasonably to have, come into possession of in the course of performing their duties.6 [page 275] 7.6 A question also arises as to what is meant by the requirement for ‘immediate’ notification of information within the scope of the rule. ASX Guidance Note 8 indicates the ASX’s view that the concept of ‘immediately’ requires that disclosure be made ‘as quickly as it can be done in the circumstances (acting promptly) and not deferring, postponing or putting it off to a later time (acting without delay)’. That Guidance Note recognises that one of the matters relevant to the time taken to make disclosure will be the need for a company to ensure that an announcement is accurate, complete and not misleading. The Guidance Note also indicates that a trading halt may be used to assist with uncertainties as to disclosure; that the ASX does not expect a listed entity to request a trading halt until it has assessed whether particular information is market sensitive so as to require disclosure under ASX LR 3.1 and that the ASX expects a listed entity will seek a trading halt where price movements indicate that confidential information may have leaked, but the entity is not yet in a position to make a market announcement. 7.7 A further critical issue is, of course, when information is material for the purposes of the rule. In Jubilee Mines NL v Riley, above, Martin CJ (with whom Le Miere AJA agreed; McLure JA to the contrary) held that the reference to ‘material’ effect on the price or value of securities in ASX LR 3.1 should be read together with the concept of materiality in the statutory continuous disclosure requirement, now contained in s 677, so

that information would fall within the scope of ASX LR 3.1 if it would or would be likely to influence investors. The majority view in Jubilee Mines was followed by Gilmour J in Australian Securities and Investments Commission v Fortescue Metals Group Ltd (No 5) (2009) 264 ALR 201; 76 ACSR 506; [2009] FCA 1586 at [238]7 and the Full Court of the Federal Court of Australia took the same view in Grant-Taylor v Babcock & Brown Ltd (2016) 330 ALR 642; [2016] FCAFC 60. Information is material for the purposes of s 677 if the information would, or would be likely to, influence persons who commonly invest in securities in deciding whether to acquire or dispose of the securities: see 7.15 below. The scope of the information which is required to be disclosed under ASX LR 3.1 will depend upon the circumstances of the particular company.8 7.8 A note to LR 3.1 sets out a number of examples of transactions that could be notifiable under that rule. For example, a listed entity could be required to notify the ASX of, among other things, a transaction that will lead to a significant change in the nature or scale of the entity’s activities, a material mineral or hydro-carbon discovery, a material acquisition or disposal, the fact that the entity’s earnings will be materially different from market expectations, the appointment of a liquidator, receiver or administrator or an event of default under a material financing facility, the giving or receipt of a notice of intention to make a takeover offer or the giving of a rating to or a change in a rating applied to an entity or its securities. ASX Guidance Note 8 also indicates that the ASX will expect disclosure of changes in [page 276] earnings if the company becomes aware that its earnings differ ‘materially’ from market expectations, determined by reference to any published earnings guidance by the company; otherwise, analysts’ earnings forecasts; or otherwise, earnings for the prior corresponding period.

Exceptions to the disclosure requirement under ASX

Listing Rules 7.9 The disclosure requirement under ASX LR 3.1 does not apply if specified requirements are and remain satisfied, as set out below: ASX LR 3.1A. ASX Guidance Note 8 notes that the intention of the exception in ASX LR 3.1A is to balance the legitimate commercial interests of listed entities with the legitimate expectations of investors and regulators concerning the timely release of market sensitive information, and ensure information is not disclosed prematurely where it could misinform or mislead the market. It is necessary to satisfy at least one limb of the first requirement noted below and each of the latter two requirements in order to establish the exception. ASX LR 3.1B deals with information required to be disclosed to correct or prevent a false market. 7.10 The first requirement for this exception is that it would be a breach of a law to disclose the information; or the information concerns an incomplete proposal or negotiation; or the information comprises matters of supposition or is insufficiently definite to warrant disclosure; or the information is generated for the internal management purposes of the entity; or the information is a trade secret. 7.11 The second requirement for this exception is that the information is confidential and the ASX has not formed the view that the information has ceased to be confidential. The concept of ‘confidentiality’ adopted here appears to be directed to confidentiality, as a matter of fact, and should permit a listed entity to continue to satisfy the confidentiality exception, although it has provided information to its advisers, service providers or regulatory authorities on a confidential basis, in the ordinary course of its business and activities, so long as that information remains confidential in fact. On the other hand, that requirement for the exception is not likely to be satisfied if the relevant information becomes publicly known, or known to a sufficient number of persons that its confidentiality is lost, regardless of how that occurred. 7.12 The third requirement for this exception is that a reasonable person would not expect the information to be disclosed. The question whether a reasonable person would expect information to be disclosed must be

considered in the context of the particular listed company9 and the expectations of a reasonable person may vary depending upon the circumstances and on the particular matters to be disclosed. [page 277]

STATUTORY CONTINUOUS DISCLOSURE REQUIREMENTS Continuous disclosure by listed disclosing entities 7.13 Section 674(2) of the Corporations Act has the effect that, if: (1) a listed disclosing entity10 has information that a listing rule of a listed market requires it to notify to the market operator; and (2) that information is not generally available; and (3) a reasonable person would expect that information, if it were generally available, to have a material effect on the price or value of ED (enhanced disclosure) securities11 of the listed entity, the entity must notify the market operator of that information in accordance with that rule. This provision applies to an entity listed on the ASX, since the provisions of the ASX Listing Rules applicable to that entity (ASX LR 3.1) require it to notify the market operator of information about specified events or matters as they arise for the purpose of that operator making that information available to participants in the market: s 674(1). In the case of a registered scheme, the obligation to notify the ASX of the relevant information is imposed on the responsible entity: s 674(3).

Whether information is generally available 7.14 A contravention of s 674 will only be established if information that a listed entity fails to notify to the ASX, in breach of ASX LR 3.1, is not generally available. Information is treated as generally available if it: consists of readily observable matter; has been made known in a manner likely to bring it to the attention of those who commonly invest in the relevant securities, and a reasonable period has elapsed; or it consists of deductions, conclusions or inferences from such information: s 676. These

concepts correspond to those used in s 1042C of the Corporations Act in relation to insider trading: see Chapter 17. The exception in s 676(2)(a) for readily observable matter recognises that a listed company should not be exposed to liability for a failure to disclose