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Brief Counsel

Financial Markets Conduct Bill – the fine print

13 December 2012

​A discussion paper outlining the regulations which will underpin the Financial Markets Conduct Bill is now out for consultation.

This is an important step in the process because a lot of the practical detail which will affect the Bill’s implementation was left to regulation.

Submissions close on 1 March 2013.

Timeline for Bill

The Bill is part way through its second reading and is expected to be passed by mid-2013. 
On current timeframes, the regulations will be made and the registers (one for offers of financial products, the other for managed investment schemes) finalised in February 2014 and the new Act will come into force in April 2014. 
But these timelines are recognised as ambitious so there may be some slippage.  Also, there will be a two-year transition period during which issuers can choose to comply with current securities law.

Scope of regulations

The primary areas for regulation under the Bill are the content and presentation of the Product Disclosure Document (PDS) and the licensing regime.  This is reflected in the 243-page discussion document, well over half of which is dedicated to these two topics.
Other matters covered include the proposed exceptions regime and additional governance rules for some financial products including:
  • procedures for meetings of product holders
  • lock-in rules for superannuation schemes
  • implied terms in trust deeds, such as those relating to auditor reporting
  • requirements to end reports to supervisors and the regulator, and
  • rules for reporting and correcting pricing errors.

PDS

The objective is that the PDS will be short (generally in the range of six to 20 pages), headed by a two-page summary, tailored for different types of product, and highly prescribed for mainstream products to assist comparability. 
Officials propose setting a minimum font size (probably 8 or 9 point after the Australians).  Their current inclination is to allow some corporate branding, provided it is not distracting and does not obscure the text, but to restrict the PDS to information required to meet statutory requirements.

Licensing

Licensing will cover: funds managers, derivatives dealers, providers of discretionary investment management services, independent trustees of restricted schemes and regulated intermediaries – including person-to-person lending services and crowd-funding platforms.
The regulations prescribe:
  • eligibility criteria and conditions
  • the specific objectives which licensing is expected to achieve, and
  • various record keeping and reporting requirements and (for some derivatives issuers), capital adequacy and liquidity requirements.

Chapman Tripp will be commenting in detail on aspects of the discussion paper in the New Year.  Our commentaries on the Financial Markets Conduct Bill are available here

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