Under the Corporations Act 2001 (Cth) (Corporations Act) ASIC has the power to exempt or modify the application of particular financial services provisions. ASIC has similar relief powers under the National Consumer Credit Protection Act 2009 (Cth) (National Credit Act) relating to credit licensing and responsible lending.
The report, which follows on from Report 557, analyses ASIC’s use of exemption and modification powers and increases transparency surrounding ASIC’s decisions to exercise discretionary powers to grant relief.
The report states that ASIC received 762 applications for relief during the report period. The outcome of all relief applications received in the report period are as follows:
Decided outside report period
ASIC’s report analyses the types of relief applications received, and the basis for approving or refusing some of the applications.
AFS licencing relief
ASIC approved 52% of AFS licensing relief applications; 30% were withdrawn and 19% were refused.
The approved applications included relief from certain AFS license requirements for a not-for-profit entity and for an electronic funds transfer payment gateway.
The electronic funds transfer payment gateway allowed consumers to pay for goods and services through electronic devices. The operator of the gateway then acted on the consumer’s behalf to initiate the payment from an account held with the consumer’s financial institution.
ASIC considered the facility to be a non-cash payment. ASIC also accepted the operator’s view that the facility may not fall within the ‘operator of a payment system’ exception under the Corporations Act, and so provided discretionary relief to the operator, subject to conditions which included that the operator:
have an internal dispute resolution procedure;
becoming a member of an ASIC-approved external dispute resolution scheme; and
giving consumers information on terms and conditions, and procedures for dealing with unauthorised or mistaken transactions.
ASIC stated that it refused to declare certain foreign exchange products not to be financial products, on the basis that the proposed foreign exchange products were structured to allow a consumer to:
lock in an exchange rate up to one month before the date of collection, with the option of collecting the currency at the locked-in rate or on the spot rate when collected; and
refund some or all of their remaining currency within 50 days at the original exchange rate or the spot rate on the day of refund.
ASIC refused relief in this instance because it found that the lapse in time between the reservation and collection dates of the ordered physical currency was material to the purpose and operation of the products.
ASIC also granted relief to a responsible entity and custodian who applied for relief to extend the time the responsible entity could rely on the auditor’s report from 16 months to 17 months. This was because the custodian has recently changed its financial year-end to 30 September and the financial statements for the current year would not be available until 30 November 2017.
ASIC approved 63% of conduct relief applications; 31% withdrew and 6% were refused.
In one case, relief was granted by ASIC to enable a stapled entity to present combined financial statements that combined the financial statements of each of the entities within the stapled group. For financial reporting purposes,ASIC was satisfied that the unreasonable burden precondition in the Corporations Act was met because the additional cost of providing combined financial statements would be outweighed by the benefits of the stapled entity meeting the needs of those using the financial reports.
Relief was also given to two foreign companies registered in New Zealand and listed on the ASX, one being a wholly-owned subsidiary of the other, from the requirement to lodge an annual balance sheet, cash flow and profit and loss statement.
However, ASIC declined to provide confirmation to a number of companies who were seeking to continue relying on the grandfathered company financial reporting exception, because they had not lodged the required Form 373 Notification by large proprietary company that is exempt from lodging annual reports within the required time frame with ASIC. This Form 373 is an important prerequisite for relying on this exception.
During the report period, nine applications seeking credit relief were granted, one was refused and one application was withdrawn. Conditional relief was granted to an authorised deposit-taking institution (ADI) from the responsible lending obligations, allowing the ADI to provide limited credit assistance in the course of promoting to its customers a dual-branded credit card from a non-ADI credit provider. This relief was granted because ASIC was satisfied that:
the ADI would have been entitled to rely on a statutory exemption from the responsible lending obligations for its credit assistance activities, except for the fact that the new dual-branded card was to be provided by a non-ADI credit card provider; and
the ADI would only carry out limited credit assistance activities.