CORPORATE LAW ECONOMIC REFORM PROGRAM (AUDIT REFORM AND CORPORATE DISCLOSURE) ACT 2004 NO. 103, 2004 - SCHEDULE 7

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CORPORATE LAW ECONOMIC REFORM PROGRAM (AUDIT REFORM AND CORPORATE DISCLOSURE) ACT 2004 NO. 103, 2004 - SCHEDULE 7

- Disclosure rules

Part 1—Presentation of disclosure documents

Corporations Act 2001

1 After section 715

Insert:

715A Presentation etc. of disclosure documents

(1): The information in a disclosure document must be worded and presented in a clear, concise and effective manner.

Note: If this subsection is contravened, ASIC may make a stop order under section 739.

(2): A contravention of subsection (1) is not an offence.

2 After subsection 719(1)

Insert:

(1A): If the person making the offer becomes aware that information in the disclosure document is not worded and presented in a clear, concise and effective manner, the person may lodge a supplementary or replacement document with ASIC.

3 Subsection 739(1)

Repeal the subsection, substitute:

(1): If ASIC is satisfied that:

(a) information in a disclosure document lodged with ASIC is not worded and presented in a clear, concise and effective manner (see section 715A); or
(b) an offer of securities under a disclosure document lodged with ASIC would contravene section 728;

ASIC may order that no offers, issues, sales or transfers of the securities be made while the order is in force.

Part 2—Product Disclosure Statements for continuously quoted securities

Corporations Act 2001

3A Section 9 (paragraph (a) of the definition of continuously quoted securities )

After "prospectus", insert "or Product Disclosure Statement".

4 Section 111AQA

Before "paragraph 1013F(2)(d)", insert "section 1013FA and".

5 Subsection 1013D(1)

Omit "section 1013F", substitute "sections 1013F and 1013FA".

6 Section 1013E

Omit "section 1013F", substitute "sections 1013F and 1013FA".

7 Paragraph 1013F(2)(d)

After "ED security", insert "that is not a continuously quoted security".

8 After section 1013F

Insert:

1013FA Information not required to be included in PDS for continuously quoted securities

(1): This section applies to a Product Disclosure Statement that relates to a continuously quoted security.
(2): Despite anything in section 1013D, 1013E or 1013F, information is not required to be included in the Product Disclosure Statement if:

(a) the information is included in any of the following documents:

(i): the annual financial report most recently lodged with ASIC by the issuer of the product;
(ii): any half-year financial report lodged with ASIC by the issuer of the product after the lodgment of that annual financial report and before the date of the Product Disclosure Statement;
(iii): any continuous disclosure notices given by the issuer of the product after the lodgment of that annual financial report and before the date of the Product Disclosure Statement; and

(b) the Product Disclosure Statement:

(i): states that as a disclosing entity, the issuer of the product is subject to regular reporting and disclosure obligations; and
(ii): informs people of their right to obtain a copy of any of the documents referred to in paragraph (a).

If the Product Disclosure Statement informs people of their right to obtain a copy of the document, the issuer of the product must give a copy of the document free of charge to anyone who asks for it.

(3): ASIC may determine that this section does not apply to Product Disclosure Statements for continuously quoted securities if ASIC is satisfied that in the previous 12 months:

(a) the issuer of the continuously quoted securities contravened:

(i): the provisions of Chapter 2M; or
(ii): subsection 674(2) or 675(2); or
(iii): subsection 1012DA(9); or
(iv): section 1308 as it applies to a notice under subsection 1012DA(5); or

(b) the responsible person for the Product Disclosure Statement contravened section 1016E, 1021D, 1021E or 1021J.

(4): The determination must be made in writing and ASIC must publish a copy of the determination in the Gazette .

Part 3—Exemptions from disclosure requirements

Corporations Act 2001

9 Section 9 (definition of quoted security )

Repeal the definition, substitute:

"quoted security" means a security that is quoted on a prescribed financial market.

10 Subsection 163(3) (note)

Omit "and 708", substitute ", 708 and 708A".

11 Paragraph 283AA(1)(a)

After "(disclosure document exclusion for debenture roll overs)", insert "or section 708A (sale offers that do not need disclosure)".

12 Subsection 283AA(1) (note)

Omit "and 708", substitute ", 708 and 708A".

13 Section 704

Omit "and 708", substitute ", 708 and 708A".

14 Subsection 707(3)

After "section 708", insert "or 708A".

15 After section 708

Insert:

708A Sale offers that do not need disclosure

Sale offer to which this section applies

(1): This section applies to an offer (the sale offer ) of a body's securities (the relevant securities ) for sale by a person if:

(a) but for subsection (5), (11) or (12), disclosure to investors under this Part would be required by subsection 707(3) for the sale offer; and
(b) the securities were not issued by the body with the purpose referred to in subparagraph 707(3)(b)(i); and
(c) a determination under subsection (2) was not in force in relation to the body at the time when the relevant securities were issued.

Determination by ASIC

(2): ASIC may make a determination under this subsection if ASIC is satisfied that in the previous 12 months the body contravened any of the following provisions:

(a) subsection 283AA(1), 283AB(1) or 283AC(1);
(b) the provisions of Chapter 2M as they apply to the body;
(c) section 674 or 675;
(d) section 724 or 728;
(e) subsection (9) of this section; or
(f) section 1308 as that section applies to a notice under subsection (5) of this section.

(3): The determination must be made in writing and a copy must be published in the Gazette as soon as practicable after the determination is made.
(4): A failure to publish a copy of the determination does not affect the validity of the determination.

Sale offer of quoted securities—case 1

(5): The sale offer does not need disclosure to investors under this Part if:

(a) the relevant securities are in a class of securities that were quoted securities at all times in the 12 months before the day on which the relevant securities were issued; and
(b) trading in that class of securities on a prescribed financial market on which they were quoted was not suspended for more than a total of 5 days in that 12 months; and
(c) no exemption under section 111AS or 111AT covered the body, or any person as director or auditor of the body, at any time in that 12 months; and
(d) no order under section 340 or 341 covered the body, or any person as director or auditor of the body, at any time in that 12 months; and
(e) the body gives the relevant market operator for the body a notice that complies with subsection (6) before the day on which the sale offer is made.

(6): A notice complies with this subsection if the notice:

(a) is given within 5 business days after the day on which the relevant securities were issued by the body; and
(b) states that the body issued the relevant securities without disclosure to investors under this Part; and
(c) states that the notice is being given under paragraph (5)(e); and
(d) states that, as at the date of the notice, the body has complied with:

(i): the provisions of Chapter 2M as they apply to the body; and
(ii): section 674; and

(e) sets out any information that is excluded information as at the date of the notice (see subsections (7) and (8)).

Note 1: A person is taken not to contravene section 727 if a notice purports to comply with this subsection but does not actually comply with this subsection: see subsection 727(5).

Note 2: A notice must not be false or misleading in a material particular, or omit anything that would render it misleading in a material respect: see sections 1308 and 1309. The body has an obligation to correct a defective notice: see subsection (9) of this section.

(7): For the purposes of subsection (6), excluded information is information:

(a) that has been excluded from a continuous disclosure notice in accordance with the listing rules of the relevant market operator to whom that notice is required to be given; and
(b) that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of:

(i): the assets and liabilities, financial position and performance, profits and losses and prospects of the body; or
(ii): the rights and liabilities attaching to the relevant securities.

(8): The notice given under subsection (5) must contain any excluded information only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in a disclosure document.

Obligation to correct defective notice

(9): The body contravenes this subsection if:

(a) the notice given under subsection (5) is defective; and
(b) the body becomes aware of the defect in the notice within 12 months after the relevant securities are issued; and
(c) the body does not, within a reasonable time after becoming aware of the defect, give the relevant market operator a notice that sets out the information necessary to correct the defect.

(10): For the purposes of subsection (9), the notice under subsection (5) is defective if the notice:

(a) does not comply with paragraph (6)(e); or
(b) is false or misleading in a material particular; or
(c) has omitted from it a matter or thing the omission of which renders the notice misleading in a material respect.

Sale offer of quoted securities—case 2

(11): The sale offer does not need disclosure to investors under this Part if:

(a) the relevant securities are in a class of securities that are quoted securities of the body; and
(b) either:

(i): a prospectus is lodged with ASIC on or after the day on which the relevant securities were issued but before the day on which the sale offer is made; or
(ii): a prospectus is lodged with ASIC before the day on which the relevant securities are issued and offers of securities that have been made under the prospectus are still open for acceptance on the day on which the relevant securities were issued; and

(c) the prospectus is for an offer of securities issued by the body that are in the same class of securities as the relevant securities.

Sale offer of quoted securities—case 3

(12): This subsection is satisfied if:

(a) the body offered to issue securities under a prospectus; and
(b) the body issued the relevant securities to:

(i): a person (the underwriter ) named in that prospectus as an underwriter of the issue; or
(ii): a person nominated by the underwriter; and

(c) the relevant securities were issued to the underwriter, or the person nominated by the underwriter, at or about the time that persons who applied for securities under the prospectus were issued with those securities; and
(d) the relevant securities are in a class of securities that were quoted securities of the body.
16 After paragraph 713(6)(aa)

Insert:

(ab) subsection 708A(9);
17 After paragraph 713(6)(c)

Insert:

(d) section 1308 as it applies to a notice under subsection 708A(5);
18 Subsection 727(2) (note)

Omit "and 708", substitute ", 708 and 708A".

19 At the end of section 727

Add:

Circumstances in which a person is taken not to contravene this section

(5): If:

(a) a person relies on subsection 708A(5) to make offers of securities for sale without disclosure to investors under Part 6D.2; and
(b) the notice given under that subsection purported to comply with subsection 708A(6) but did not actually comply with subsection 708A(6);

the person is taken not to contravene this section.

20 Subsection 1012A(4)

After "section 1012D,", insert "1012DA,".

21 Subsection 1012C(10)

After "section 1012D,", insert "1012DA,".

22 After section 1012D

Insert:

1012DA Product Disclosure Statement not required for sale amounting to indirect issue

Product Disclosure Statement not required

(1): In a recommendation situation or sale situation, the regulated person does not have to give the client a Product Disclosure Statement if:

(a) but for subsection (5), (11) or (12), the regulated person would be required by section 1012A or 1012C to give a Product Disclosure Statement for the relevant product; and
(b) the transfer or sale of the financial product (the relevant product ) to the client would take place in circumstances covered by subsection 1012C(6); and
(c) the relevant product was not issued by the issuer with the purpose referred to in subparagraph 1012C(6)(c)(i); and
(d) a determination under subsection (2) was not in force in relation to the issuer of the relevant product at the time when the relevant product was issued.

Determination by ASIC

(2): ASIC may make a determination under this subsection if ASIC is satisfied that in the previous 12 months the issuer of the relevant product contravened any of the following provisions:

(a) the provisions of Chapter 2M as they apply to the issuer (or, if the relevant financial product is an interest in a registered scheme, as those provisions apply to the scheme);
(b) section 674 or 675 as it applies to the issuer (or, if the relevant financial product is an interest in a registered scheme, as that section applies to the scheme);
(c) section 1016E, 1021D, 1021E or 1021J;
(d) subsection (9) of this section;
(e) section 1308 as it applies to a notice under subsection (5) of this section.

(3): The determination must be made in writing and a copy must be published in the Gazette as soon as practicable after the determination is made.
(4): A failure to publish a copy of the determination does not affect the validity of the determination.

Transfer or sale of quoted securities—case 1

(5): The regulated person does not have to give the client a Product Disclosure Statement if:

(a) the relevant product is in a class of financial products that were quoted securities at all times in the 12 months before the day on which the relevant product was issued; and
(b) trading in that class of financial products on a prescribed financial market on which they were quoted was not suspended for more than a total of 5 days in that 12 months; and
(c) no exemption under section 111AS or 111AT covered the issue of the relevant product, or any person as director or auditor of the issuer, at any time in that 12 months; and
(d) no order under section 340 or 341 covered the issuer of the relevant product, or any person as director or auditor of the issuer, at any time in that 12 months; and
(e) the issuer of the relevant product gives the relevant market operator for the issuer a written notice that complies with subsection (6) before the day on which the relevant conduct occurs.

(6): A notice complies with this subsection if the notice:

(a) is given within 5 business days after the day on which the relevant product was issued; and
(b) states that the relevant product was issued without a Product Disclosure Statement for the relevant product being prepared; and
(c) states that the notice is being given under paragraph (5)(e); and
(d) states that, as a disclosing entity, the issuer of the relevant product is subject to regular reporting and disclosure obligations; and
(e) states that, as at the date of the notice, the issuer of the relevant product has complied with:

(i): the provisions of Chapter 2M as they apply to the issuer (or, if the relevant financial product is an interest in a registered scheme, as those provisions apply to the scheme); and
(ii): section 674 as it applies to the issuer (or, if the relevant financial product is an interest in a registered scheme, as that section applies to the scheme); and

(f) sets out any information that is excluded information as at the date of the notice (see subsections (7) and (8)).

Note 1: A person is taken not to contravene section 1021C if a notice purports to comply with this subsection but does not actually comply with this subsection: see subsection 1021C(5).

Note 2: A notice must not be false or misleading in a material particular, or omit anything that would render it misleading in a material respect: see sections 1308 and 1309. The issuer has an obligation to correct a defective notice: see subsection (9) of this section.

(7): For the purposes of subsection (6), excluded information is information:

(a) that has been excluded from a continuous disclosure notice in accordance with the listing rules of the relevant market operator to whom that notice is required to be given; and
(b) that a person would reasonably require for the purpose of making a decision, as a retail client, whether to acquire the relevant product.

(8): The notice given under subsection (5) must contain any excluded information only 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 Product Disclosure Statement.

Obligation to correct defective notice

(9): The issuer of the relevant product contravenes this subsection if:

(a) the notice given under subsection (5) is defective; and
(b) the issuer becomes aware of the defect in the notice within 12 months after the relevant product is issued; and
(c) the issuer does not, within a reasonable time after becoming aware of the defect, give the relevant market operator a notice that sets out the information necessary to correct the defect.

(10): For the purposes of subsection (9), the notice under subsection (5) is defective if the notice:

(a) does not comply with paragraph (6)(f); or
(b) is false or misleading in a material particular; or
(c) has omitted from it a matter or thing the omission of which renders the notice misleading in a material respect.

Transfer or sale of quoted securities—case 2

(11): The regulated person does not have to give the client a Product Disclosure Statement if:

(a) the relevant product is in a class of financial products that are quoted securities of the issuer; and
(b) either:

(i): a Product Disclosure Statement required to be given by section 1012B is lodged with ASIC on or after the day on which the relevant product is issued but before the day on which the relevant conduct occurs; or
(ii): a Product Disclosure Statement required to be given by section 1012B is lodged with ASIC before the day on which the relevant product is issued and, on the day on which the relevant product is issued, the Product Disclosure Statement is still being used by the issuer of the relevant product for offers of financial products in the same class of financial products as the relevant product; and

(c) the Product Disclosure Statement is for a financial product of the issuer of the relevant product that is in the same class of financial products as the relevant product.

Transfer or sale of quoted securities—case 3

(12): The regulated person does not have to give the client a Product Disclosure Statement if:

(a) a Product Disclosure Statement for a financial product was given under section 1012B; and
(b) the relevant product was issued to:

(i): a person (the underwriter ) named in that Product Disclosure Statement as an underwriter of the issue of the financial product; or
(ii): a person nominated by the underwriter; and

(c) the relevant product was issued to the underwriter, or the person nominated by the underwriter, at or about the time that persons who applied for the financial product under that Product Disclosure Statement were issued with that product; and
(d) the relevant product is in a class of financial products that were quoted securities of the issuer.
23 Subsection 1021C(1) (note)

After "sections 1012D", insert ", 1012DA".

24 Subsection 1021C(3) (note)

After "sections 1012D", insert ", 1012DA".

25 At the end of section 1021C

Add:

Circumstances in which a person is taken not to contravene this section

(5): If:

(a) a person does not give another person a Product Disclosure Statement for a financial product because of section 1012DA; and
(b) a notice was given under subsection 1012DA(5); and
(c) the notice purported to comply with subsection 1012DA(6) but did not actually comply with that subsection;

the person is taken not to contravene this section.

26 Subsection 1021D(1) (note)

After "sections 1012D", insert ", 1012DA".

27 Subsection 1021E(1) (note)

After "sections 1012D", insert ", 1012DA".

28 Subsection 1021F(1) (note)

After "sections 1012D", insert ", 1012DA".

29 Subsection 1021H(1) (note)

After "sections 1012D", insert ", 1012DA".

30 Subsection 1021I(1) (note)

After "sections 1012D", insert ", 1012DA".

31 At the end of section 1308

Add:

(9): For the purposes of this section:

(a) a notice under subsection 708A(5) or 1012DA(5) is taken to be a notice required for the purposes of this Act; and
(b) a notice under subsection 708A(5) or 1012DA(5) is taken to be misleading in a material respect if it fails to comply with paragraph 708A(6)(e) or 1012DA(6)(f).
32 At the end of section 1309

Add:

(5): For the purposes of this section:

(a) a notice under subsection 708A(5) or 1012DA(5) is taken to be a notice required for the purposes of this Act; and
(b) a notice under subsection 708A(5) or 1012DA(5) is taken to be misleading in a material respect if it omits information that is excluded information for the purposes of section 708A or 1012DA.
33 Schedule 3 (after table item 229C)

Insert:

229D

Subsection 708A(9)

25 penalty units or imprisonment for 6 months, or both.

34 Schedule 3 (after table item 290C)

Insert:

290D

Subsection 1012DA(9)

25 penalty units or imprisonment for 6 months, or both.

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