Corporations Regulations 2001 (consolidated as of March 31, 2015), Australia, WIPO Lex

Corporations Regulations 2001

Prepared by the Office of Parliamentary Counsel, Canberra

Corporations Regulations 2001

Statutory Rules No. 193, 2001

made under the

Corporations Act 2001

Compilation No. 113

Compilation date: 31 March 2015

Includes amendments up to: SLI No. 39, 2015

Registered: 9 April 2015

This compilation is in 7 volumes

Volume 1: regulations 1.0.01–6D.5.02

Volume 2: regulations 7.1.02–7.6.08E

Volume 3: regulations 7.7.01–8.4.02

Volume 4: regulations 9.1.01–12.9.03

Volume 5: Schedules 1, 2 and 2A

Volume 6: Schedules 3–12

Volume 7: Endnotes

Each volume has its own contents

Federal Register of Legislative Instruments F2015C00303

About this compilation

This compilation

This is a compilation of the Corporations Regulations 2001 that shows the text

of the law as amended and in force on 31 March 2015 (the compilation date).

This compilation was prepared on 31 March 2015.

The notes at the end of this compilation (the endnotes) include information

about amending laws and the amendment history of provisions of the compiled

law.

Uncommenced amendments

The effect of uncommenced amendments is not shown in the text of the

compiled law. Any uncommenced amendments affecting the law are accessible

on ComLaw (www.comlaw.gov.au). The details of amendments made up to, but

not commenced at, the compilation date are underlined in the endnotes. For

more information on any uncommenced amendments, see the series page on

ComLaw for the compiled law.

Application, saving and transitional provisions for provisions and

amendments

If the operation of a provision or amendment of the compiled law is affected by

an application, saving or transitional provision that is not included in this

compilation, details are included in the endnotes.

Modifications

If the compiled law is modified by another law, the compiled law operates as

modified but the modification does not amend the text of the law. Accordingly,

this compilation does not show the text of the compiled law as modified. For

more information on any modifications, see the series page on ComLaw for the

compiled law.

Self-repealing provisions

If a provision of the compiled law has been repealed in accordance with a

provision of the law, details are included in the endnotes.

Federal Register of Legislative Instruments F2015C00303

Corporations Regulations 2001 i

Compilation No. 113 Compilation date: 31/3/15 Registered: 9/4/15

Contents

Chapter 7—Financial services and markets 1

Part 7.1—Preliminary 1

Division 1—General 1

7.1.02 Participant .........................................................................1

7.1.03 Prescribed CS facility ........................................................1

7.1.03A Basic deposit products.......................................................1

7.1.03B Self managed superannuation funds ..................................1

7.1.04 Derivatives ........................................................................2

7.1.04A Meaning of kind of financial products

(section 1012IA of the Act) ...............................................4

7.1.04B Meaning of class of financial products (managed

investment schemes)..........................................................5

7.1.04C Meaning of class of financial products

(superannuation products) .................................................5

7.1.04CA Kinds of financial products ...............................................5

7.1.04D Meaning of issuer for certain derivatives ..........................6

7.1.04E Issue of a new interest in a superannuation fund ...............6

7.1.04F Meaning of class of financial services

(subsections 917A(3), 917C(2) and 917C(3) of the

Act)....................................................................................7

7.1.04G Meaning of issuer for a foreign exchange contract............7

7.1.04N Specific things that are financial products—

litigation funding schemes and arrangements....................7

7.1.05 Specific things that are not financial products:

superannuation interests ....................................................8

7.1.06 Specific things that are not financial products:

credit facility .....................................................................8

7.1.06A Arrangements for certain financial products that

are not credit facilities .....................................................11

7.1.06B Specific things that are not financial products:

superannuation interests ..................................................11

7.1.07 Specific things that are not financial products:

surety bonds ....................................................................11

7.1.07A Specific things that are not financial products:

rental agreements.............................................................12

7.1.07B Specific things that are not financial products:

bank drafts .......................................................................12

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7.1.07C Specific things that are not financial products:

insurance under an overseas student health

insurance contract............................................................13

7.1.07D Specific things that are not financial products:

funeral expenses policy ...................................................13

7.1.07E Specific things that are not financial products:

rights of the holder of a debenture...................................13

7.1.07F Specific things that are not financial products:

money orders ...................................................................14

7.1.07G Specific things that are not financial products:

electronic funds transfers.................................................14

7.1.07H Specific things that are not financial products:

ACT insurance.................................................................15

7.1.07I Specific things that are not financial products—

Australian carbon credit units and eligible

international emissions units ...........................................15

7.1.07J Specific things that are not financial products—

carbon abatement.............................................................15

7.1.08 Meaning of financial product advice: exempt

document or statement.....................................................15

7.1.08A Modification of section 766D of the Act—free

carbon units .....................................................................17

7.1.09 Obligations related to clearing and settlement

facility .............................................................................17

7.1.10 Conduct that does not constitute operating a

clearing and settlement facility........................................18

Division 2—Retail clients and wholesale clients 20

7.1.11 Meaning of retail client and wholesale client:

motor vehicle insurance product......................................20

7.1.12 Meaning of retail client and wholesale client:

home building insurance product ....................................21

7.1.13 Meaning of retail client and wholesale client:

home contents insurance product ....................................22

7.1.14 Meaning of retail client and wholesale client:

sickness and accident insurance product .........................23

7.1.15 Meaning of retail client and wholesale client:

consumer credit insurance product ..................................24

7.1.16 Meaning of retail client and wholesale client:

travel insurance product ..................................................25

7.1.17 Meaning of retail client and wholesale client:

personal and domestic property insurance product..........26

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7.1.17A General insurance products: medical indemnity

insurance products...........................................................28

7.1.17B Retail clients and wholesale clients: aggregation of

amounts for price or value of financial product...............28

7.1.17C Retail clients: traditional trustee company services .........29

7.1.18 Retail clients and wholesale clients: price of

investment-based financial products................................29

7.1.19 Retail clients and wholesale clients: value of

investment-based financial products................................31

7.1.19A Retail clients and wholesale clients: price of

margin lending facilities ..................................................35

7.1.20 Retail clients and wholesale clients: price of

income stream financial products ....................................36

7.1.21 Retail clients and wholesale clients: value of

income stream financial products ....................................38

7.1.22 Retail clients and wholesale clients: value of

derivatives .......................................................................41

7.1.22A Retail clients and wholesale clients: value of

foreign exchange contracts ..............................................42

7.1.23 Retail clients and wholesale clients: price of

non-cash payment financial products ..............................43

7.1.24 Retail clients and wholesale clients: value of

non-cash payment products .............................................44

7.1.25 Retail clients and wholesale clients: life risk

insurance and other risk-based financial products ...........46

7.1.26 Superannuation-sourced money ......................................46

7.1.27 Retail clients and wholesale clients: effect of

wholesale status...............................................................47

7.1.28 Retail clients and wholesale clients: assets and

income.............................................................................48

Division 3—When does a person provide a financial service? 50

7.1.28A Circumstances in which a person is taken to be

provided a traditional trustee company service ...............50

7.1.29 Circumstances in which a person is taken not to

provide a financial service...............................................50

7.1.29A Self-managed superannuation funds................................54

7.1.30 Information and advice about voting...............................55

7.1.31 Passing on prepared documents.......................................56

7.1.32 Remuneration packages...................................................56

7.1.33 Handling insurance claims ..............................................57

7.1.33A Allocation of funds available for investment...................58

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7.1.33B General advice.................................................................58

7.1.33D Investment-linked life insurance products.......................59

7.1.33E Advice about the existence of a custodial or

depository service............................................................59

7.1.33F School banking................................................................60

7.1.33G Certain general advice that does not attract

remuneration etc. .............................................................60

7.1.33H Certain general advice given by a financial product

issuer ...............................................................................61

Division 4—Dealings in financial products 63

7.1.34 Conduct that does not constitute dealing in a

financial product..............................................................63

7.1.35 Conduct that does not constitute dealing in a

financial product..............................................................63

7.1.35A Conduct that does not constitute dealing in a

financial product—lawyers acting on instructions ..........64

7.1.35B Conduct that does not constitute dealing in a

financial product—issuing carbon units, Australian

carbon credit units or eligible international

emissions units ................................................................65

7.1.35C Conduct that does not constitute dealing in a

financial product—carbon units, Australian carbon

credit units or eligible international emissions

units.................................................................................65

Division 5—Custodial or depository services 67

7.1.40 Conduct that does not constitute the provision of a

custodial or depository service ........................................67

Division 6—Operating a financial market 70

7.1.50 Operating a financial market ...........................................70

Part 7.2—Licensing of financial markets 71

Division 1—Market licensees’ obligations 71

7.2.01 Obligation to inform ASIC of certain matters:

contraventions of licence or Act ......................................71

7.2.02 Obligation to inform ASIC of certain matters:

becoming director, secretary or executive officer

of market licensee............................................................71

7.2.03 Obligation to inform ASIC of certain matters:

ceasing to be director, secretary or executive

officer of market licensee ................................................72

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7.2.04 Obligation to inform ASIC of certain matters:

voting power in market licensee ......................................72

7.2.05 Giving ASIC information about a listed disclosing

entity................................................................................73

7.2.06 Annual report of market licensee.....................................74

Division 2—The market’s operating rules and procedures 75

7.2.07 Content of licensed market’s operating rules ..................75

7.2.08 Content of licensed market’s written procedures.............76

Division 3—Powers of the Minister and ASIC 78

7.2.09 Agencies for compliance assessment...............................78

Division 4—The Australian market licence: applications

(general) 79

7.2.10 Application of Division 4 ................................................79

7.2.11 Information......................................................................79

7.2.12 Documents.......................................................................80

Division 5—The Australian market licence: applications

(financial market in foreign country) 83

7.2.13 Application of Division 5 ................................................83

7.2.14 Information......................................................................83

7.2.15 Documents.......................................................................84

Division 6—The Australian market licence: other matters 85

7.2.16 Potential conflict situations .............................................85

Part 7.2A—Supervision of financial markets 90

Division 7.2A.1—Enforceable undertakings 90

7.2A.01 Enforceable undertakings ................................................90

Division 7.2A.2—Infringement notices 92

7.2A.02 Purpose of Division .........................................................92

7.2A.03 Definitions for Division 7.2A.2.......................................93

7.2A.04 When infringement notice can be given ..........................93

7.2A.05 Statement of reasons must be given ................................94

7.2A.06 Contents of infringement notice ......................................94

7.2A.07 Amount of penalty payable to the Commonwealth .........96

7.2A.08 Compliance with infringement notice .............................96

7.2A.09 Extension of compliance period ......................................97

7.2A.10 Effect of compliance with infringement notice ...............98

7.2A.11 Application to withdraw infringement notice ..................99

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7.2A.12 Withdrawal of infringement notice by ASIC.................100

7.2A.13 Notice of withdrawal of infringement notice.................100

7.2A.14 Withdrawal of notice after compliance..........................101

7.2A.15 Publication of details of infringement notice.................101

Part 7.3—Licensing of clearing and settlement facilities 104

Division 1—Regulation of CS facility licensees: licensees’

obligations 104

7.3.01 Obligation to inform ASIC of certain matters:

becoming director, secretary or executive officer

of CS facility licensee....................................................104

7.3.02 Obligation to inform ASIC of certain matters:

ceasing to be director, secretary or executive

officer of CS facility licensee ........................................105

7.3.03 Obligation to inform ASIC of certain matters:

voting power in CS facility licensee ..............................105

7.3.04 Annual report of CS facility licensee.............................106

Division 2—Regulation of CS facility licensees: the facility’s

operating rules and procedures 107

7.3.05 Content of licensed CS facility’s operating rules ..........107

7.3.06 Content of licensed CS facility’s written

procedures .....................................................................108

Division 3—Regulation of CS facility licensees: powers of the

Minister and ASIC 109

7.3.07 Agencies for compliance assessment.............................109

7.3.08 Agencies for compliance assessment.............................110

Division 4—The Australian CS facility licence: applications

(general) 111

7.3.09 Application of Division 4 ..............................................111

7.3.10 Information....................................................................111

7.3.11 Documents.....................................................................113

Division 5—The Australian CS facility licence: applications

(overseas clearing and settlement facility) 116

7.3.12 Application of Division 5 ..............................................116

7.3.13 Information....................................................................116

7.3.14 Documents.....................................................................117

Part 7.4—Limits on involvement with licensees 118 7.4.01 Widely held market body ..............................................118

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7.4.02 Record-keeping: market licensee...................................118

7.4.03 Record-keeping: CS facility licensee.............................119

7.4.04 Information for widely held market body......................119

Part 7.5—Compensation regimes for financial markets 120

Division 1—Preliminary 120

7.5.01 Definitions for Part 7.5..................................................120

7.5.01A Modification of Act: compensation regimes .................123

7.5.02 Meaning of becoming insolvent.....................................124

7.5.03 Meaning of dealer .........................................................125

7.5.04 Meaning of excluded person .........................................125

7.5.06 Meaning of sale and purchase of securities ..................127

7.5.07 Meaning of securities business: general ........................128

7.5.08 Meaning of securities business: Subdivision 4.9...........129

7.5.09 Meaning of security.......................................................129

7.5.10 Meaning of transfer of securities...................................129

7.5.13 Effect of contravention of Part 7.5 ................................130

Division 2—When there must be a compensation regime 131

7.5.14 Application for Australian market licence:

information about compensation arrangements .............131

Division 3—Approved compensation arrangements 132

7.5.15 Application for approval of compensation

arrangements after grant of Australian market

licence: information about compensation

arrangements .................................................................132

7.5.16 Notification of payment of levies ..................................133

7.5.17 Amount of compensation ..............................................133

Division 4—NGF Compensation regime 134

Subdivision 4.1—Preliminary 134

7.5.18 Application of Division 4 ..............................................134

Subdivision 4.2—Third party clearing arrangements 134

7.5.19 Clearing arrangements...................................................134

Subdivision 4.3—Contract guarantees 136

7.5.24 Claim by selling client in respect of default by

selling dealer: ASTC-regulated transfer ........................136

7.5.25 Claim by selling client in respect of default by

selling dealer: transaction other than

ASTC-regulated transfer ...............................................138

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7.5.26 Claim by buying client in respect of default by

buying dealer: ASTC-regulated transfer........................139

7.5.27 Claim by buying client in respect of default by

buying dealer: transaction other than

ASTC-regulated transfer ...............................................141

7.5.28 Cash settlement of claim: ASTC-regulated transfer ......142

7.5.29 Cash settlement of claim: transfer other than

ASTC-regulated transfer ...............................................143

7.5.30 Making of claims...........................................................144

Subdivision 4.7—Unauthorised transfer 145

7.5.53 Application of Subdivision 4.7......................................145

7.5.54 Claim by transferor........................................................146

7.5.55 Claim by transferee or sub-transferee............................146

7.5.56 How and when claim may be made...............................147

7.5.57 How claim is to be satisfied...........................................148

7.5.58 Discretionary further compensation to transferor ..........149

7.5.59 Nexus with Australia .....................................................149

Subdivision 4.8—Contraventions of ASTC certificate cancellation

provisions 150

7.5.60 Claim in respect of contravention of ASTC

certificate cancellation provisions .................................150

7.5.61 How and when claim may be made...............................150

7.5.62 How claim is to be satisfied...........................................152

7.5.63 Discretionary further compensation ..............................152

Subdivision 4.9—Claims in respect of insolvent participants 153

7.5.64 Claim in respect of property entrusted to, or

received by, dealer before dealer became insolvent ......153

7.5.65 Cash settlement of claims if property unobtainable.......154

7.5.66 Ordering of alternative claims and prevention of

double recovery .............................................................156

7.5.67 No claim in respect of money lent to dealer ..................157

7.5.68 Nexus with Australia .....................................................158

7.5.69 No claim in certain other cases......................................158

7.5.70 Making of claims...........................................................158

7.5.71 Limits of compensation .................................................159

Subdivision 4.10—General 161

7.5.72 Power of SEGC to allow and settle claim .....................161

7.5.73 Application of Fund in respect of certain claims ...........161

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7.5.74 Discretion to pay amounts not received etc

because of failure to transfer securities .........................161

7.5.75 Reduction in compensation ...........................................162

7.5.76 Claimant may be required to exercise right of

set-off ............................................................................163

7.5.77 Effect of set-off on claim...............................................163

7.5.78 Claimant entitled to costs and disbursements ................165

7.5.79 Interest...........................................................................166

7.5.80 SEGC to notify claimant if claim disallowed ................167

7.5.81 Arbitration of amount of cash settlement of certain

claims ............................................................................167

7.5.82 Instalment payments......................................................169

7.5.83 Notification of payment of levies ..................................170

7.5.84 Notification of payment of levies ..................................170

Subdivision 4.11—Other provisions relating to compensation 171

7.5.85 Prescribed body corporate with arrangements

covering clearing and settlement facility support ..........171

Division 5—Provisions common to both kinds of compensation

arrangements 172

7.5.86 Excess money in National Guarantee Fund...................172

7.5.87 Excess money in fidelity fund .......................................172

7.5.88 Minister’s arrangements for use of excess money

from compensation funds ..............................................173

7.5.89 Payment of excess money from NGF............................174

7.5.90 Use of excess money from NGF....................................174

7.5.91 Payment of excess money from fidelity fund ................175

7.5.92 Use of excess money from fidelity fund........................175

7.5.93 Qualified privilege.........................................................176

Part 7.5A—Regulation of derivative transactions and

derivative trade repositories 177

Division 2—Regulation of derivative transactions: derivative

transaction rules 177

Subdivision 2.1—Power to make derivative transaction rules 177

7.5A.30 Meaning of reporting requirements...............................177

7.5A.50 Persons on whom requirements cannot be imposed ......178

Subdivision 2.2—Enforceable undertakings 179

7.5A.101 Enforceable undertakings ..............................................179

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Subdivision 2.3—Infringement notices 180

7.5A.102 Infringement notices......................................................180

7.5A.103 Definitions for Subdivision ...........................................181

7.5A.104 When infringement notice can be given ........................181

7.5A.105 Statement of reasons must be given ..............................182

7.5A.106 Contents of infringement notice ....................................182

7.5A.107 Amount of penalty payable to the Commonwealth .......184

7.5A.108 Compliance with infringement notice ...........................184

7.5A.109 Extension of compliance period ....................................185

7.5A.110 Effect of compliance with infringement notice .............186

7.5A.111 Application to withdraw infringement notice ................187

7.5A.112 Withdrawal of infringement notice by ASIC.................188

7.5A.113 Notice of withdrawal of infringement notice.................188

7.5A.114 Withdrawal of notice after compliance..........................188

7.5A.115 Publication of details of infringement notice.................189

Division 5—Regulation of licensed derivative trade repositories:

other obligations and powers 191

7.5A.150 Obligations and powers—confidential information.......191

7.5A.150A European Union requests for derivative trade data ........191

7.5A.150B Other requests for derivative trade data.........................192

7.5A.151 Obligations relating to derivative trade data..................194

7.5A.200 ASIC may assess licensee’s compliance .......................194

Division 7—Regulation of prescribed derivative trade

repositories 195

7.5A.250 Obligations and powers—confidential information.......195

Division 8—Other matters 196

7.5A.270 Record-keeping .............................................................196

Part 7.6—Licensing of providers of financial services 197 7.6.01 Need for Australian financial services licence:

general ...........................................................................197

7.6.01AAA Particular financial products not exempted ...................210

7.6.01AA Persons taken to hold financial services licences

covering First Home Saver Accounts ............................210

7.6.01AB Obligation on persons providing exempt financial

service ...........................................................................211

7.6.01A Providing financial services on behalf of a person

who carries on a financial services business..................213

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7.6.01B Need for Australian financial services licence:

financial product advice provided by the media ............213

7.6.01BA Modification of section 912A of the Act .......................215

7.6.01C Obligation to cite licence number in documents............218

7.6.02 Alternative dispute resolution systems ..........................219

7.6.02AAA Compensation arrangements if financial services

provided to persons as retail clients (Act s 912B) .........220

7.6.02AA Modification of section 912B of the Act:

professional indemnity insurance and security

instead of compensation arrangements ..........................223

7.6.02AB Modification of section 761G of the Act: meaning

of retail client and wholesale client...............................226

7.6.02AC Modification of section 761G of the Act: meaning

of retail client and wholesale client...............................226

7.6.02AD Modification of section 761G of the Act: meaning

of retail client and wholesale client...............................227

7.6.02AE Modification of section 9 of the Act: Definition of

professional investor .....................................................228

7.6.02AF Modification of section 761G of the Act: renewal

period for accountants’ certificates................................228

7.6.02AG Modification of section 911A of the Act .......................229

7.6.02AGA Further modification of section 911A of the Act...........231

7.6.02AH Modification of paragraph 911B(1)(e) of the Act..........237

7.6.02AI Obligations to provide information about relevant

providers and controllers of body corporate

licensees ........................................................................237

7.6.02A Obligation to notify ASIC of certain matters.................237

7.6.03 Applying for Australian financial services licence ........238

7.6.03A Australian financial services licence—

requirements for a foreign entity to appoint local

agent ..............................................................................239

7.6.03B Foreign entity must continue to have local agent ..........239

7.6.04 Conditions on Australian financial services licence ......240

7.6.04A Exemptions to notification of authorised

representatives...............................................................246

7.6.05 Register of financial services licensees and register

of authorised representatives of financial services

licensees ........................................................................247

7.6.06 ASIC register relating to persons against whom

banning order or disqualification order is made ............248

7.6.06A Relevant provider number .............................................249

7.6.06B Register of relevant providers .......................................249

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7.6.06C Correcting registers .......................................................252

7.6.07 Restriction on use of certain words or expressions........252

Part 7.6A—Authorised representatives 253 7.6.08 Authorised representatives ............................................253

Part 7.6B—Provision of information to APRA about contracts

of insurance 255 7.6.08A Definitions.....................................................................255

7.6.08B Application....................................................................255

7.6.08C Modification of section 912CA of the Act ....................255

7.6.08D Information about general insurance products...............256

7.6.08E Information about general insurance products—

unauthorised foreign insurers ........................................257

Federal Register of Legislative Instruments F2015C00303

Financial services and markets Chapter 7

Preliminary Part 7.1

General Division 1

Regulation 7.1.02

Corporations Regulations 2001 1

Compilation No. 113 Compilation date: 31/3/15 Registered: 9/4/15

Chapter 7—Financial services and markets

Part 7.1—Preliminary

Division 1—General

7.1.02 Participant

For subparagraph (b)(vi) of the definition of participant in

section 761A of the Act, section 792A of the Act is prescribed.

7.1.03 Prescribed CS facility

For the definition of prescribed CS facility in section 761A of the

Act, ASX Settlement and Transfer Corporation Pty Limited (also

known as ‘ASTC’) is a prescribed CS facility.

7.1.03A Basic deposit products

(1) For subparagraph (d)(ii) of the definition of basic deposit product

in section 761A of the Act, this regulation applies in relation to

ADIs entitled under the Banking Act 1959 to use any of the

following expressions in relation to their financial business:

(a) credit union;

(b) credit society;

(d) building society.

(2) The prior notice requirement is a period not more than 7 days

before a withdrawal or transfer of funds from a facility made

available by the ADI.

7.1.03B Self managed superannuation funds

In this Chapter:

Federal Register of Legislative Instruments F2015C00303

Chapter 7 Financial services and markets

Part 7.1 Preliminary

Division 1 General

Regulation 7.1.04

2 Corporations Regulations 2001

Compilation No. 113 Compilation date: 31/3/15 Registered: 9/4/15

self managed superannuation fund has the same meaning as in

the SIS Act.

7.1.04 Derivatives

(1) For paragraph 761D(1)(b) of the Act, the prescribed period is:

(a) for a foreign exchange contract—3 business days; and

(b) in any other case—1 business day.

(2) For subsection 761D(2) of the Act, and subject to this regulation,

an arrangement is declared to be a derivative if the following

conditions are satisfied in relation to the arrangement:

(a) the arrangement is not a foreign exchange contract;

(b) under the arrangement, a party to the arrangement must, or

may be required to, provide at some future time (which may

be less than 1 day after the arrangement is entered into)

consideration of a particular kind or kinds to someone;

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.

(4) An arrangement under which:

(a) a party has, or may have, an obligation to buy tangible

property (other than Australian or foreign currency) at a price

and on a date in the future; and

(b) another party has, or may have, an obligation to sell that

property; and

wholly settled by cash, or by set-off between the parties,

rather than by delivery of the property; and

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(d) 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;

is not an arrangement to which subregulation (2) applies to the

extent only that the arrangement deals with that purchase and sale.

(5) An arrangement under which:

(a) a party has an obligation to buy property; and

(b) another party has an obligation to sell the property;

is not an arrangement to which subregulation (2) applies merely

because the arrangement provides for the consideration to be

varied by reference to a general inflation index (for example, the

Consumer Price Index).

(6) A contract for the future provision of services is not an

arrangement to which subregulation (2) applies.

(7) A thing that is described in subsection 764A(1) of the Act, other

than paragraph 764A(1)(c), is not an arrangement to which

subregulation (2) applies.

(8) For paragraph 761D(3)(d) of the Act, each of the following is

declared not to be a derivative for Chapter 7 of the Act:

(a) tradeable water rights;

(b) an arrangement:

(i) under which a person (the seller) has, or may have, an

obligation to sell tradeable water rights at a future date;

and

(ii) under which another person (the buyer) has, or may

have, an obligation to buy the tradeable water rights, or

replacement water rights, at a future date; and

(iii) that does not permit the seller’s obligations to be wholly

settled by cash, or by set-off between the seller and the

buyer, rather than by transfer of ownership of the

tradeable water rights or replacement water rights; and

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(iv) in relation to which neither usual market practice, nor

the rules, allow the seller’s obligations to be closed out

by matching up the arrangement with another

arrangement of the same kind under which the seller has

offsetting obligations to buy the tradeable water rights

or replacement water rights;

Note: For carbon abatement contract, see subregulation 1.0.02(1).

(9) Subregulations (4) to (8) apply whether or not a matter mentioned

in those subregulations is described in subsection 761D(1) of the

Act.

(10) In subregulation (8):

replacement water rights means tradeable water rights that are

granted, issued or authorised as a replacement for the seller’s

tradeable water rights, including as a result of transformation

arrangements mentioned in subsection 97(1) of the Water Act

2007.

rules means the rules of:

(a) a licensed market; or

(b) a licensed CS facility.

tradeable water rights has the same meaning as in the Water Act

2007.

7.1.04A Meaning of kind of financial products (section 1012IA of the

Act)

(1) For section 761CA of the Act, this regulation applies in relation to

paragraph (a) of the definition of custodial arrangement in

subsection 1012IA(1) of the Act.

(2) Each of the following is a kind of financial product:

(a) for interests in a managed investment scheme, all the

interests in that managed investment scheme;

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(b) in any other case, all the financial products issued by a

person or the person’s related bodies corporate.

7.1.04B Meaning of class of financial products (managed investment

schemes)

(1) For section 761CA of the Act, this regulation applies in relation to

paragraph 1017F(4)(d) of the Act.

(2) An interest in a managed investment scheme is in the same class as

another interest in a managed investment scheme if they are both

interests in the same managed investment scheme.

7.1.04C Meaning of class of financial products (superannuation

products)

(1) For section 761CA of the Act, this regulation applies in relation to

paragraph 1017F(4)(d) of the Act.

(2) A superannuation product is in the same class as another

superannuation product if they are both issued by the same

superannuation entity.

7.1.04CA Kinds of financial products

(1) For section 761CA of the Act, this regulation applies in relation to

paragraph 917C(3)(ba) of the Act.

(2) The following are kinds of financial product:

(a) motor vehicle insurance;

(b) home building insurance;

(d) sickness and accident insurance;

(e) consumer credit insurance;

(f) travel insurance.

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7.1.04D Meaning of issuer for certain derivatives

(1) This regulation applies in relation to a financial product that:

(a) is a derivative; and

(b) is entered into, or acquired through a facility conducted in

accordance with:

(i) the Corporations (Exempt Futures Market—National

Wholesale Electricity) Declaration 1999; or

(ii) the Corporations (Exempt Futures Market)

Declaration 2001.

(2) For paragraph 761E(7)(a) of the Act, each person who is a party to

the financial product is taken to be an issuer of the financial

product.

(3) For paragraph 761E(7)(a) of the Act, subsections 761E(5) and (6)

of the Act do not apply to the financial product.

7.1.04E Issue of a new interest in a superannuation fund

(1) This regulation applies if a member of a superannuation fund, who

has a superannuation interest in the growth phase, elects to receive

a pension in relation to that interest or part of that interest.

(2) For paragraph 761E(7)(a) of the Act, the superannuation fund is

taken to issue a new financial product when:

(a) it acknowledges receipt of the member’s election; or

(b) it makes the first payment of the pension;

whichever occurs first.

(3) For this regulation:

growth phase has the meaning given by regulation 1.03AB of the

SIS Regulations.

pension has the meaning given by subregulation 1.06(1) of the SIS

Regulations.

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Regulation 7.1.04F

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7.1.04F Meaning of class of financial services (subsections 917A(3),

917C(2) and 917C(3) of the Act)

(1) For section 761CA of the Act, this regulation applies for

subsections 917A(3), 917C(2) and 917C(3) of the Act.

(2) Each of the following is a class of financial services:

(a) the provision of financial product advice relating to a general

insurance product;

(b) the provision of financial product advice relating to an

investment life insurance product;

insurance product;

(d) dealing in a financial product that is a general insurance

product;

(e) dealing in a financial product that is an investment life

insurance product;

(f) dealing in a financial product that is a life risk insurance

product.

7.1.04G Meaning of issuer for a foreign exchange contract

(1) This regulation applies to a financial product that is a foreign

exchange contract that is not entered into, or traded, on a financial

market.

(2) For paragraph 761E(7)(a) of the Act, each party to the foreign

exchange contract is an issuer of the product.

7.1.04N Specific things that are financial products—litigation

funding schemes and arrangements

For paragraph 764A(1)(m) of the Act:

(a) an interest in a litigation funding scheme mentioned in

regulation 5C.11.01 is a financial product; and

(b) an interest in a litigation funding arrangement mentioned in

regulation 5C.11.01 is a financial product.

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7.1.05 Specific things that are not financial products:

superannuation interests

For paragraph 765A(1)(q) of the Act, an exempt public sector

superannuation scheme within the meaning of the SIS Act is

prescribed.

7.1.06 Specific things that are not financial products: credit facility

(1) For subparagraph 765A(1)(h)(i) of the Act, each of the following is

a credit facility:

(a) the provision of credit:

(i) for any period; and

(ii) with or without prior agreement between the credit

provider and the debtor; and

(iii) whether or not both credit and debit facilities are

available; and

(iv) that is not a financial product mentioned in

paragraph 763A(1)(a) of the Act; and

(v) that is not a financial product mentioned in

paragraph 764A(1)(a), (b), (ba), (f), (g), (h) or (j) of the

Act; and

(vi) that is not a financial product mentioned in

paragraph 764A(1)(i) of the Act, other than a product

the whole or predominant purpose of which is, or is

intended to be, the provision of credit;

(b) a facility:

(i) known as a bill facility; and

(ii) under which a credit provider provides credit by

accepting, drawing, discounting or indorsing a bill of

exchange or promissory note;

course of a pawnbroker’s business (being a business which is

being lawfully conducted by the pawnbroker);

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(d) the provision of credit by the trustee of the estate of a

deceased person by way of an advance to a beneficiary or

prospective beneficiary of the estate;

(e) the provision of credit by an employer, or a related body

corporate of an employer, to an employee or former

employee (whether or not it is provided to the employee or

former employee with another person);

(f) a mortgage:

(i) that secures obligations under a credit contract (other

than a lien or charge arising by operation of any law or

by custom); and

(ii) that is not a financial product mentioned in

paragraph 763A(1)(a) of the Act; and

(iii) that is not a financial product mentioned in

paragraph 764A(1)(a), (b), (ba), (f), (g), (h) or (j) of the

Act; and

(iv) that is not a financial product mentioned in

paragraph 764A(1)(i) of the Act, other than a product

the whole or predominant purpose of which is, or is

intended to be, the provision of credit;

(g) a guarantee related to a mortgage mentioned in paragraph (f);

(h) a guarantee of obligations under a credit contract.

(2) The provision of consumer credit insurance that includes a contract

of general insurance for the Insurance Contracts Act 1984 is not a

credit facility.

(2A) A litigation funding scheme mentioned in regulation 5C.11.01 is

not a credit facility.

(2B) A litigation funding arrangement mentioned in regulation 5C.11.01

is not a credit facility.

(3) In this regulation:

credit means a contract, arrangement or understanding:

(a) under which:

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10 Corporations Regulations 2001

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(i) payment of a debt owed by one person (a debtor) to

another person (a credit provider) is deferred; or

(ii) one person (a debtor) incurs a deferred debt to another

person (a credit provider); and

(b) including any of the following:

(i) any form of financial accommodation;

(ii) a hire purchase agreement;

(iii) credit provided for the purchase of goods or services;

(iv) a contract, arrangement or understanding for the hire,

lease or rental of goods or services, other than a

contract, arrangement or understanding under which:

(A) full payment is made before or when the goods

or services are provided; and

(B) for the hire, lease or rental of goods—an

amount at least equal to the value of the goods

is paid as a deposit in relation to the return of

the goods;

(v) an article known as a credit card or charge card;

(vi) an article, other than a credit card or a charge card,

intended to be used to obtain cash, goods or services;

(vii) 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;

(viii) a liability in respect of redeemable preference shares;

(ix) a financial benefit arising from or as a result of a loan;

(x) assistance in obtaining a financial benefit arising from

or as a result of a loan;

(xi) issuing, indorsing or otherwise dealing in a promissory

note;

(xii) drawing, accepting, indorsing or otherwise dealing in a

negotiable instrument (including a bill of exchange);

(xiii) granting or taking a lease over real or personal property;

(xiv) a letter of credit.

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Regulation 7.1.06A

Corporations Regulations 2001 11

Compilation No. 113 Compilation date: 31/3/15 Registered: 9/4/15

7.1.06A Arrangements for certain financial products that are not

credit facilities

(1) This regulation applies in relation to a financial product that would

be a credit facility in accordance with regulation 7.1.06 if

subparagraphs 7.1.06(1)(a)(iv), (v) and (vi), and 7.1.06(1)(f)(ii),

(iii) and (iv) did not apply.

(2) For paragraph 761E(7)(a) of the Act, and in relation to the financial

product:

(a) the credit provider is not taken to be the issuer of the

financial product; and

(b) the debtor is taken to be the issuer of the financial product.

(3) For paragraph 766A(2)(b) of the Act, and in relation to the

financial product:

(a) the provision of financial product advice to the debtor, or the

debtor’s representative, is taken not to be the provision of a

financial service; and

(b) a dealing in the credit facility by the credit provider, or the

credit provider’s representative, is taken not to be the

provision of a financial service.

(4) In this regulation:

credit, credit provider and debtor have the same meanings as in

subregulation 7.1.06(3).

7.1.06B Specific things that are not financial products:

superannuation interests

For paragraph 765A(1)(q) of the Act, an exempt public sector

superannuation scheme within the meaning of the SIS Act is

prescribed.

7.1.07 Specific things that are not financial products: surety bonds

(1) This regulation applies to an arrangement between 2 persons

(person 1 and person 2) made in the following circumstances:

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(a) person 1 enters into the arrangement in order to meet a

requirement of another arrangement between person 1 and a

person other than person 2 (person 3);

(b) under the arrangement, person 2 undertakes to make a

payment to, or perform an obligation for the benefit of,

person 3 in circumstances specified as part of the

arrangement;

payments made, or liabilities, costs or expenses incurred, by

person 2 in making the payment to, or performing the

obligation for the benefit of, person 3;

(d) the arrangement does not constitute a financial product under

section 764A of the Act, other than a derivative.

(2) For paragraph 765A(1)(y) of the Act, the arrangement is not a

financial product.

7.1.07A Specific things that are not financial products: rental

agreements

(1) This regulation applies to an arrangement between 2 persons

(person 1 and person 2) made in the following circumstances:

(a) person 1 leases or rents something from person 2;

(b) under the arrangement, person 1 makes a payment to person

2 to reduce the amount that person 1 would otherwise have to

pay to person 2 under the leasing or rental agreement;

eventuality affecting the thing that is being leased or rented.

Example: Collision damage waiver insurance for a rental car.

(2) For paragraph 765A(1)(y) of the Act, the arrangement is not a

financial product.

7.1.07B Specific things that are not financial products: bank drafts

For paragraph 765A(1)(y) of the Act, a bank draft, including (but

not limited to):

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(a) a cheque drawn by a financial institution on itself; or

(b) a cheque drawn by a financial institution on a financial

institution other than itself;

is not a financial product.

7.1.07C Specific things that are not financial products: insurance

under an overseas student health insurance contract

(1) For paragraph 765A(1)(y) of the Act, insurance under an overseas

student health insurance contract is not a financial product.

(2) In this regulation:

overseas student health insurance contract has the same meaning

as in regulation 48 of the National Health Regulations 1954.

7.1.07D Specific things that are not financial products: funeral

expenses policy

(1) For paragraph 765A(1)(y) of the Act, a funeral expenses policy is

not a financial product.

(2) In this regulation:

funeral expenses policy means a scheme or arrangement for the

provision of a benefit consisting of the payment of money, payable

only on the death of a person, for the sole purpose of meeting the

whole or part of the expenses of, and incidental to the person’s:

(a) funeral; and

(b) burial or cremation.

7.1.07E Specific things that are not financial products: rights of the

holder of a debenture

(1) This regulation applies to a facility that consists of the rights of the

holder of a debenture against a trustee under a trust deed entered

into under:

(a) section 283AA of the Act; or

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(b) Chapter 2L or Division 4 of Part 7.12 of the old Corporations

Law.

(2) For paragraph 765A(1)(y) of the Act, the facility is not a financial

product.

7.1.07F Specific things that are not financial products: money orders

For paragraph 765A(1)(y) of the Act, a money order issued as a

money order by, or for, Australia Post is not a financial product.

7.1.07G Specific things that are not financial products: electronic

funds transfers

For paragraph 765A(1)(y) of the Act, a non-cash payment facility

is not a financial product if:

(a) the issuer is:

(i) a body corporate that is an ADI (within the meaning of

the Banking Act 1959); or

(ii) an operator of a payment system; and

(b) under the facility, as instructed by the client, the issuer makes

money available (or causes it to be made available) to a

person nominated by the client:

(i) within 2 business days of receiving the client’s

instruction; or

(ii) within the time reasonably required to complete the

transaction subject to any constraints imposed by law;

and

means for collection by, or for the credit of, the payer or

another person; and

(d) the issuer and the payer do not have a standing arrangement

to transfer funds in this manner.

Example: Telegraphic transfers and international money transfers offered by

banks and remittance dealers.

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7.1.07H Specific things that are not financial products: ACT

insurance

For paragraph 765A(1)(y) of the Act, Australian Capital Territory

insurance, including insurance entered into by the Australian

Capital Territory and another insurer as joint insurers, is not a

financial product.

7.1.07I Specific things that are not financial products—Australian

carbon credit units and eligible international emissions

units

(1) For paragraph 765A(1)(y) of the Act:

(a) an Australian carbon credit unit is not a financial product;

and

(b) an eligible international emissions unit is not a financial

product.

(2) On 1 July 2012:

(a) subregulation (1) ceases to apply; and

(b) Australian carbon credit units and eligible international

emissions units become financial products.

7.1.07J Specific things that are not financial products—carbon

abatement

For paragraph 765A(1)(y) of the Act, a carbon abatement contract

is declared not to be a financial product.

Note: For carbon abatement contract, see subregulation 1.0.02(1).

7.1.08 Meaning of financial product advice: exempt document or

statement

(1) For subparagraph (a)(ii) of the definition of exempt document or

statement in subsection 766B(9) of the Act, the following

documents and statements are prescribed (and so excluded from

the definition):

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(a) a Product Disclosure Statement that:

(i) contains personal advice; or

(ii) contains general advice about a financial product other

than a financial product to which the Statement relates;

(b) a Financial Services Guide that contains personal advice;

be an exempt document or statement only because it is

prepared or given in accordance with section 1018A of the

Act;

(d) a record of advice mentioned in subsection 946B(3A) of the

Act.

(2) For subregulation (1), if a person:

(a) acquires a financial product (product 1); and

(b) will be able, by acquiring product 1, to give the product

issuer an instruction to acquire a particular financial product

or a financial product of a particular kind (within the

meaning of section 1012IA of the Act) under a custodial

arrangement (within the meaning of section 1012IA of the

Act);

the Product Disclosure Statement for product 1 is taken to relate to

the other financial product.

(3) For paragraph (b) of the definition of exempt document or

statement in subsection 766B(9) of the Act, documents,

information and statements that:

(a) do not contain personal advice; and

(b) are required by, and prepared as a result of, a requirement

under an Australian law; and

statements specified by ASIC in a list published in the

Gazette for this subregulation;

are prescribed (and so included in the definition).

(4) For paragraph (b) of the definition of exempt document or

statement in subsection 766B(9) of the Act:

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(a) an assessment under subsection 985E(1) of the Act that a

margin lending facility will not be unsuitable for the person

to whom the margin lending facility is to be issued is

prescribed (and so excluded from the definition); and

(b) an assessment under subsection 985E(1) of the Act that a

margin lending facility whose limit is proposed to be

increased will not be unsuitable for the person for whom the

limit of the margin lending facility is to be increased is

prescribed (and so excluded from the definition).

Note: The effect of paragraph (b) of the definition of exempt document or

statement in subsection 766B(9), is that a prescribed document or

statement is an exempt document or statement.

7.1.08A Modification of section 766D of the Act—free carbon units

For paragraph 926B(1)(c) of the Act, Part 7.6 of the Act applies in

relation to free carbon units (within the meaning of the Clean

Energy Act 2011) as if section 766D of the Act were modified by

inserting after subsection 766D(2) the following subsection:

(3) A person who holds a free carbon unit (within the meaning of the

Clean Energy Act 2011) that has been issued to the person by the

Clean Energy Regulator is taken not to be making a market for a

financial product if the person states the price of the free carbon

unit.

7.1.09 Obligations related to clearing and settlement facility

(1) For paragraph 768A(1)(b) of the Act, the following obligations are

prescribed:

(a) each obligation arising from a contract to transfer a financial

product mentioned in paragraph 764A(1)(a) of the Act;

(b) each obligation arising from a contract to transfer a financial

product mentioned in paragraph 764A(1)(b) of the Act;

financial product mentioned in paragraph 764A(1)(c) of the

Act;

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(d) each obligation arising from a contract to transfer a financial

product mentioned in paragraph 764A(1)(j) of the Act;

(e) each obligation arising from a contract to transfer a financial

product mentioned in paragraph 764A(1)(ba) of the Act;

(f) each obligation arising from a contract to transfer a financial

product mentioned in paragraph 764A(1)(k) of the Act;

(fa) each obligation arising from a contract to transfer a carbon

unit, an Australian carbon credit unit or an eligible

international emissions unit;

Note: See paragraphs 764A(1)(ka) and (kb) of the Act.

(g) each obligation arising from a contract to transfer a right that

includes an undertaking by a body to repay, as a debt, money

deposited with or lent to the body;

(h) each obligation arising from the entry into a repurchase

agreement.

(2) In this regulation, repurchase agreement means a repurchase

transaction, in relation to a financial product, entered into pursuant

to:

(a) The Bond Market Association and the International

Securities Market Association Global Master Repurchase

Agreement (known as the TBMA/ISMA Global Master

Repurchase Agreement); or

(b) another commonly used master agreement for repurchase

transactions.

7.1.10 Conduct that does not constitute operating a clearing and

settlement facility

(2) For paragraph 768A(2)(i) of the Act, the conduct of:

(a) National Stock Exchange of Australia Limited, or an agent of

that body; or

(b) a participant of the National Stock Exchange of Australia

Limited, or an agent of the participant; or

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(d) a participant of the Bendigo Stock Exchange Limited, or an

agent of the participant;

in operating a facility in accordance with the operating rules of a

licensed market does not constitute operating a clearing and

settlement facility if the requirements of subregulation (3) are met.

(3) For subregulation (2), the requirements are:

(a) the market licensee must have, and must be responsible for

enforcing, operating rules that apply to a participant of the

licensed market in relation to the participant’s obligations

arising from transactions carried out on the licensed market;

and

(b) a participant mentioned in paragraph (a), or an agent of the

participant appointed in accordance with the operating rules

of the licensed market, must be responsible for fulfilling the

obligations owed to another participant or agent arising from

transactions carried out on the licensed market; and

and settlement facility; and

(d) each participant of the licensed market is not the operator of

any other clearing and settlement facility; and

(e) each agent of a participant of the licensed market is not the

operator of any other clearing and settlement facility.

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Division 2 Retail clients and wholesale clients

Regulation 7.1.11

20 Corporations Regulations 2001

Compilation No. 113 Compilation date: 31/3/15 Registered: 9/4/15

Division 2—Retail clients and wholesale clients

7.1.11 Meaning of retail client and wholesale client: motor vehicle

insurance product

(1) For subparagraph 761G(5)(b)(i) of the Act, a motor vehicle

insurance product is a contract or part of a contract that provides

insurance cover (whether or not the cover is limited or restricted in

any way) in respect of one or more of the following:

(a) loss of, or damage to, a motor vehicle;

(b) liability for loss of, or damage to, property caused by or

resulting from impact of a motor vehicle with some other

thing.

(2) A motor vehicle insurance product does not include:

(a) insurance to or in relation to which the Marine Insurance Act

1909 applies; or

(b) insurance entered into, or proposed to be entered into, for the

purposes of a law (including a law of a State or Territory)

that relates to:

(i) workers’ compensation; or

(ii) compulsory third party compensation.

(3) In this regulation:

motor vehicle means a vehicle that is designed:

(a) to travel by road; and

(b) to use volatile spirit, steam, gas, oil, electricity or any other

power (not being human power or animal power) as its

principal means of propulsion; and

and includes a motor cycle.

(4) However, a motor vehicle does not include:

(a) an omnibus; or

(b) a tram; or

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tonnes.

7.1.12 Meaning of retail client and wholesale client: home building

insurance product

(1) For subparagraph 761G(5)(b)(ii) of the Act, a home building

insurance product is a contract or part of a contract that provides

insurance cover (whether or not the cover is limited or restricted in

any way) in respect of destruction of or damage to a home

building.

(2) A home building insurance product does not include insurance

entered into, or proposed to be entered into, for the purposes of a

law (including a law of a State or Territory) that relates to building

or construction work in relation to a home building.

(3) In this regulation:

home building means:

(a) a building used, or intended to be used, principally and

primarily as a place of residence; and

(b) out-buildings, fixtures and structural improvements used for

domestic purposes, being purposes related to the use of the

principal residence;

on the site and, without limiting the generality of the expression,

includes:

coverings (other than carpets); and

(d) services (whether underground or not) that are the property of

the insured or that the insured is liable to repair or replace or

pay the cost of repairing and replacing; and

(e) fences and gates wholly or partly on the site.

site, in relation to a building, means the site specified in the

relevant contract of insurance as the site on which the building is

situated.

(4) A home building does not include:

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(a) a hotel; or

(b) a motel; or

(d) a building that:

(i) is in the course of construction; and

(ii) is being constructed by the insured, or an intending

insured, in the course of a construction business; or

(e) a temporary building or structure or a demountable or

moveable structure; or

(f) a caravan (whether fixed to the site or not).

7.1.13 Meaning of retail client and wholesale client: home contents

insurance product

(1) For subparagraph 761G(5)(b)(iii) of the Act, a home contents

insurance product is a contract or part of a contract that provides

insurance cover (whether or not the cover is limited or restricted in

any way) in respect of loss of or damage to the contents of a

residential building.

(2) A home contents insurance product does not include:

(a) insurance to or in relation to which the Marine Insurance Act

1909 applies; or

(b) insurance entered into, or proposed to be entered into, for the

purposes of a law (including a law of a State or Territory)

that relates to:

(i) workers’ compensation; or

(ii) compulsory third party compensation.

(3) In this regulation:

contents, in relation to a residential building, means any of the

following items:

(a) furniture, furnishings and carpets (whether fixed or unfixed);

(b) household goods;

(d) a picture;

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(e) a work of art;

(f) a fur;

(g) a piece of jewellery;

(h) a gold or silver article;

(i) a document of any kind;

(j) a collection of any kind;

(k) swimming pools that:

(i) are not fixtures; and

(ii) are owned by the insured or by a member of the

insured’s family ordinarily residing with the insured;

but does not include an article or thing to which the

definition of residential building applies.

residential building means:

(a) a building used principally and primarily as a place of

residence on the site; and

(b) out-buildings used for domestic purposes, being purposes

related to the use of the principal residence on the site.

(4) A residential building does not include:

(a) a hotel; or

(b) a motel; or

(d) a building that is in the course of construction; or

(e) a temporary building or structure or a demountable or

moveable structure.

7.1.14 Meaning of retail client and wholesale client: sickness and

accident insurance product

(1) For subparagraph 761G(5)(b)(iv) of the Act, a sickness and

accident insurance product is a contract or part of a contract that

has either of the following characteristics:

(a) the contract provides insurance cover (whether the cover is

limited or restricted in any way) in respect of the insured

person contracting a sickness or disease or a specified

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sickness or disease or sustaining an injury or a specified

injury;

(b) if the insured person dies as a result of the sickness, disease

or injury, the contract provides insurance cover (whether the

cover is limited or restricted in any way) in respect of the

death.

(2) A sickness and accident insurance product does not include:

(a) sickness and accident policies which are guaranteed

‘renewable’ at the option of the insured or where the insurer

guarantees not to cancel the policy in response to a change in

the risk where such a policy has been effected for a

predetermined period of years in excess of 1 year; or

(b) insurance to or in relation to which the Marine Insurance Act

1909 applies; or

purposes of a law (including a law of a State or Territory)

that relates to:

(i) workers’ compensation; or

(ii) compulsory third party compensation; or

(d) insurance that:

(i) provides cover for the death of, or injury to, a driver of a

motor vehicle which is caused by the fault of that person

when driving; and

(ii) is provided only in conjunction with, and at no extra

cost to, insurance mentioned in subparagraph (c)(ii).

Note: See also regulation 7.9.14B.

7.1.15 Meaning of retail client and wholesale client: consumer credit

insurance product

(1) For subparagraph 761G(5)(b)(v) of the Act, a consumer credit

insurance product is a contract or part of a contract that has the

following characteristics:

(a) the contract provides insurance cover (whether the cover is

limited or restricted in any way) in respect of:

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(i) the death of the insured person; or

(ii) the insured person contracting a sickness or disease; or

(iii) the insured person sustaining an injury; or

(iv) the insured person becoming unemployed;

(b) the amount of the liability of the insurer under the contract is

to be ascertained by reference to a liability of the insured

person under a specified agreement to which the insured

person is a party.

(2) A consumer credit insurance product does not include:

(a) insurance to or in relation to which the Marine Insurance Act

1909 applies; or

(b) insurance entered into, or proposed to be entered into, for the

purposes of a law (including a law of a State or Territory)

that relates to:

(i) workers’ compensation; or

(ii) compulsory third party compensation.

7.1.16 Meaning of retail client and wholesale client: travel insurance

product

(1) For subparagraph 761G(5)(b)(vi) of the Act, a travel insurance

product is a contract or part of a contract that provides insurance

cover (whether or not the cover is limited or restricted in any way)

in respect of one or more of the following:

(a) financial loss in respect of:

(i) fares for any form of transport to be used; or

(ii) accommodation to be used;

in the course of the specified journey in the event that the

insured person does not commence or complete the specified

journey;

(b) loss of or damage to personal belongings that occurs while

the insured person is on the specified journey;

insured person while on the specified journey;

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(d) loss, damage or compensation for an event occurring to the

insured person during a specified journey that ordinarily

forms a part of insurance commonly regarded as travel

insurance, including

(i) loss of cash or credit cards; and

(ii) legal liability; and

(iii) hijack; and

(iv) kidnap; and

(v) ransom.

(2) A travel insurance product does not include:

(a) insurance to or in relation to which the Marine Insurance Act

1909 applies; or

(b) insurance entered into, or proposed to be entered into, for the

purposes of a law (including a law of a State or Territory)

that relates to:

(i) workers’ compensation; or

(ii) compulsory third party compensation.

(3) In this regulation:

specified journey means a journey in relation to which insurance

cover is provided by the contract.

7.1.17 Meaning of retail client and wholesale client: personal and

domestic property insurance product

(1) For subparagraph 761G(5)(b)(vii) of the Act, a personal and

domestic property insurance product is a contract or part of a

contract that provides insurance cover (whether or not the cover is

limited or restricted in any way) in respect of loss or damage to

property that is:

(a) wholly or predominantly used for personal, domestic or

household purposes by:

(i) the insured; or

(ii) a relative of the insured; or

(iii) any person with whom the insured resides; and

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(b) ordinarily used for that purpose.

(2) A personal and domestic property insurance product does not

include:

(a) insurance to or in relation to which the Marine Insurance Act

1909 applies; or

(b) insurance entered into, or proposed to be entered into, for the

purposes of a law (including a law of a State or Territory)

that relates to:

(i) workers’ compensation; or

(ii) compulsory third party compensation.

(3) In this regulation:

property includes any of the following:

(a) moveables;

(b) valuables;

(d) an on-site mobile home;

(e) a trailer;

(f) a marine pleasure craft;

(g) a horse;

(h) a domestic pet;

(i) a mobile phone.

relative means any of the following relatives of an insured person:

(a) mother;

(b) step-mother;

(d) step-father;

(e) brother;

(f) half-brother;

(g) sister;

(h) half-sister;

(i) spouse (including defacto spouse);

(j) son;

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(k) step-son;

(l) adopted son;

(m) daughter;

(n) step-daughter;

(o) adopted daughter;

(p) grandparent;

(q) grandchild;

(r) nephew;

(s) niece;

(t) uncle;

(u) aunt;

(v) mother-in-law;

(w) father-in-law.

(4) For paragraph (1)(a), property is taken to be wholly or

predominantly used for personal, domestic or household purposes

if the insured gives the insurer a statement, before the insurance

product is issued, that the property is intended to be used wholly or

predominantly for 1 or more of those purposes.

7.1.17A General insurance products: medical indemnity insurance

products

For subparagraph 761G(5)(b)(viii) of the Act, a medical indemnity

insurance product is prescribed.

7.1.17B Retail clients and wholesale clients: aggregation of amounts

for price or value of financial product

(1) For paragraph 761G(10)(a) of the Act, this regulation applies in

relation to a class of financial products that:

(a) are provided by the same product issuer to:

(i) a particular person; or

(ii) an associate of the person; or

(iii) a body corporate controlled and wholly owned by the

person; and

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(b) are provided at or about the same time.

(2) The price for the provision of the financial products may be

calculated by:

(a) calculating the total price for the provision of all of the

financial products in the class; and

(b) treating the total price as the price for the provision to the

particular person of a single financial product.

(3) The value of the financial products may be calculated by:

(a) calculating the total value of all of the financial products in

the class; and

(b) treating the total value as the value of a single financial

product provided to the particular person.

7.1.17C Retail clients: traditional trustee company services

For subsection 761G(6A) of the Act, a traditional trustee company

service is not provided to a person as a retail client if:

(a) the service is provided to the person for use in relation to a

business that is not a small business; or

(b) the person to whom the service is provided is a professional

investor.

Note: Small business is defined in subsection 761G(12) of the Act and

professional investor is defined in section 9 of the Act.

7.1.18 Retail clients and wholesale clients: price of investment-based

financial products

(1) This regulation makes arrangements about the price for the

provision of an investment-based financial product.

Note: Under paragraph 761G(7)(a) of the Act, 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

financial product or financial service is provided to the person as a

retail client unless 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 the amount specified in regulations made for

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the purposes of that paragraph as being applicable in the

circumstances.

Under paragraph 761G(10)(a) of the Act, the regulations may also

deal with how a price or value referred to in that paragraph is to be

calculated, either generally or in relation to a specified class of

financial products.

In general, the ‘price’ of a product will be the amount that is paid to

acquire or be issued with the financial product. The test for the price

of the product in paragraph 761G(7)(a) of the Act will be determined

at or before the time the client acquires, or is issued with, the financial

product. If a client pays over $500 000 to acquire or be issued with the

financial product, the client will be a wholesale client in respect of the

product.

Price

(2) For paragraph 761G(7)(a) of the Act, the amount applicable in

relation to an investment-based financial product is $500 000.

Working out price: general rule

(3) For paragraph 761G(10)(a) of the Act, the price of an

investment-based financial product:

(a) is the amount that is paid or payable to acquire or purchase

the investment-based financial product; and

(b) does not include any amount paid for or in respect of the

investment-based financial product following its issue or

acquisition unless the issue or acquisition would not have

taken place without an arrangement to pay the amount.

Note: An amount deposited in a deposit account will not generally be

regarded as part of the ‘price’ paid to acquire or purchase the financial

product.

(4) For subregulation (3), in calculating any amount payable or paid to

acquire or purchase the investment-based financial product:

(a) disregard any amount payable to the extent to which it is to

be paid out of money lent by:

(i) the person offering the investment-based financial

product; or

(ii) an associate of that person; and

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(b) disregard any amount paid to the extent to which it was paid

out of money lent by:

(i) the person offering the investment-based financial

product; or

(ii) an associate of that person; and

(i) fees or charges that are paid to the issuer or any other

person that relates to the issue of the investment-based

financial product; and

(ii) fees or charges that are paid to the issuer or any other

person that relates to the issue of the investment-based

financial product; and

(d) despite paragraph (c), disregard any amount of remuneration

or other benefits paid or payable to a person for the provision

of financial product advice or other related services provided

directly to:

(i) the client; or

(ii) another person acting on behalf of the client.

Group products

(5) If the investment-based financial product is a group product

covered by section 1012H of the Act:

(a) the amount in subregulation (2) is to be used to determine the

status of each person who elects, or may elect, to be covered

by the investment-based financial product; and

(b) subregulation (3) is to be used to determine the amount to be

paid for the person to be covered by the investment-based

financial product.

7.1.19 Retail clients and wholesale clients: value of investment-based

financial products

(1) This regulation makes arrangements about the value of an

investment-based financial product to which a financial service

relates.

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Division 2 Retail clients and wholesale clients

Regulation 7.1.19

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