Updated as at 1/8/2001.

1. ASIC

The Australian Securities and Investments Commission (ASIC) regulates securities markets, futures markets and financial services in Australia as follows:

(a) Superannuation Funds, Life and General Insurance Companies, Deposit Taking by Banks, Credit Unions, Building Societies, Friendly Societies

These entities are regulated by ASIC:

* Setting standards about what they tell their customers
* Monitoring their sales practices and compliance with codes of practice
* Checking customer complaints systems
* Co-operating with statutory bodies and taking action against misconduct

(b) Investment Advisers and Insurance Agents and Brokers

These entities are regulated by ASIC:

* Setting standards for their education, training and operations
* Licensing them before they start operating
* Recording their details and the names of their authorised representatives on a public register
* Monitoring the quality of advice and taking action against misconduct

(c) Australian Stock Exchange (ASX) and other securities:

These entities are regulated by ASIC:

* Advising the Minister on changes to the rules of the exchange
* Investigating and taking action against misconduct of listed companies, brokers and traders that the exchange tells the Commission about or that otherwise comes to ASIC’s attention
* Monitoring what ASX says and does as a listed company
* Monitoring trading in ASX shares

(d) Sydney Futures Exchange and Other Markets Authorised by the Minister

These entities are regulated by ASIC:

* Advising the Minister on whether to approve new markets
* Advising the Minister on changes to market rules
* Taking action against misconduct

(e) Managed Investments

Managed investments are regulated by ASIC:

* Setting standards for their operations
* Licensing them before they start operating
* Recording their details and names on a public register
* Receiving prospectuses before money is raised
* Monitoring their sales practices and operations
* Taking action against misconduct

(f) Companies

Companies are regulated by ASIC:

* Registering each company with a unique number
* Recording the company’s number, names, directors and other information on a public register
* Granting or refusing their requests for relief from the law
* Receiving prospectuses before money is raised
* Inspecting and taking action against misconduct

(g) Company Auditors and Liquidators

These entities are regulated by ASIC:

* Registering them before they start operating
* Monitoring their work
* Investigating and taking action against misconduct

2. Registering a Company and Lodging Documents Electronically

High volume lodging agents (for example, accountants) may electronically lodge annual returns and make changes to company data using ASIC’s EDGE system.

All processes involved with registering a company can be done online through ASIC’s Electronic Company Registration (ECR) system. ECR uses smart cards and public key infrastructure (PKI) to generate and authenticate digital signatures and includes an electronic payment facility.

Company directors, secretaries and small lodging agents may view company details and make changes to them, lodge annual returns, and pay relevant fees using ASIC’s eRegisters. PINs are used for authentication.

ASIC provides a public index on its website of all fundraising documents lodged including those at the public exposure stage or currently on the market. Companies may enter or change details on their disclosure document. The service may soon extend to full electronic lodgment of fundraising disclosure documents.

3. No securities offer without a disclosure document

Subject to certain exceptions, a person must not offer securities or issue invitations to subscribe for securities unless a disclosure document complying with the Corporations Act 2001 has been lodged with ASIC (1). An offer may be made in any form, whether oral or written and whether on paper or electronic.(2)

Requirement applies to offers received in Australia, regardless of place of incorporation of the issuer and may apply to offers of securities:

* made by email to an Australian investor, and
* on a foreign internet site accessible in Australia where the overseas issuer intends to accept applications from Australian investors.(3)

4. Offers generally requiring a disclosure document

* initial public offerings with a view to seeking listing of the issuer on the ASX;
* offers by continuous issuers of debentures and interests in managed investment schemes; and
* offers that will be advertised in metropolitan daily newspapers or on the internet.(4)

5. Form of disclosure document

A disclosure document may be in the form of a prospectus, a short form prospectus, a profile statement or an offer information statement depending on the nature of the securities offer.(5)

6. Application form accompanied by a disclosure document

Application forms to purchase securities must only be issued if attached to, or accompanied by a current disclosure document.(6)

7. Advertising and securities hawking restrictions

Advertising - subject to certain exceptions, a person must not advertise or publish a statement directly or indirectly relating to an offer of securities that requires a disclosure document.(7)

Securities hawking – subject to specific exceptions, a person must not offer securities for issue or sale by unsolicited meeting or phone call.(8)

8. Information update requirements

Investors must receive any necessary updating information before their investment decision is finalised.(9)

9. Civil liability provisions

Investors have various remedies if they invest pursuant to defective disclosure document information.(10)

10. Disclosure document to be made generally available

An offerer of securities must make a disclosure document generally available to the public during the 7 to 14 day period (Exposure Period) after lodgment with ASIC. Applications for shares cannot be accepted during the Exposure Period.(11)

ASIC considers a disclosure document will have been made generally available to the public during the Exposure Period if posted on an internet site accessible to the public and made available in paper copy or facsimile on request to members of the public.(12)

ASIC recommends disclosure documents displayed on the internet during the Exposure Period contain a jurisdictional disclaimer clarifying where the offer will be available once the Exposure Period has run its course.(13)

11. Electronic disclosure documents

ASIC allows an offerer of securities to distribute an electronic disclosure document to potential investors for the purpose of issuing securities provided an informed investment decision can be made on the basis of the electronic document and it contains all material and relevant information about the securities being offered and about the issuer. Permission is subject to the following conditions:(14)

(a) a paper disclosure document attached to an application form is lodged with ASIC (including the internet site address on which it will be made available);

(b) the issuer and any other person who passes on an application form takes reasonable steps to ensure the investor receives an application form attached to, or accompanied by, a disclosure document (or a paper print out) before applying for securities;

(c) the issuer takes reasonable steps to ensure the disclosure document received by the investor is complete and protected from alteration or tampering;

(d) the issuer does not accept an application for securities if it has reason to believe the investor did not receive an application form attached to, or accompanied by, the electronic disclosure document or the electronic disclosure document was incomplete or altered;

(e) the electronic disclosure document received by the investor contains the same information in the same sequence as the paper disclosure document lodged with ASIC except for differences allowed by ASIC;

(f) the issuer provides a free paper copy of the disclosure document lodged with ASIC to a requesting person who has previously received an electronic disclosure document;

(g) the electronic disclosure document and any promotional material must be made available in a way that encourages investors to make decisions on the basis of the disclosure document and not on the basis of promotional material or pressure selling; and

(h) the investor receives any necessary updating information before the investment decision is finalised.

12. Offering investment advice on the internet may require a licence

Internet advice may include investment advice on a homepage or investment advice sent by email.

A person who places information about securities on the internet may require a dealer’s licence or an investment adviser’s licence if that person is in the business of providing direct or indirect securities recommendations, general securities advice or publishing analysis or reports on securities.(15)

A person is considered to be carrying on a security or an investment advice business if the common law requirements of system, continuity and repetition are satisfied, which is a question of fact.(16) A licence may be required despite the fact that:(17)

* the business has no profit motive;(18)
* the internet adviser does not get paid for giving the advice;(19)
* the business is not wholly carried out on the internet; and
* the activities on the internet are just one part of the overall securities or investment advice business.

13. When does ASIC consider a dealer’s licence or an investment adviser’s licence IS required?

A person who is in the business of providing investment advice or reports or analysis on securities on the internet may need a dealer’s licence instead of an investment adviser’s licence if the internet adviser receives commissions or other benefits from product providers for providing that advice, recommendation or report.(20)

If a person holds themselves out on the internet to be an investment adviser or to be carrying on a securities business (regardless of whether or not they are in fact carrying on a business), they must have a licence.(21)

14. When does ASIC consider a dealer’s licence or an investment adviser’s licence is NOT required?

A person publishing purely factual information about securities on the internet does not have to be licensed. To come within this exception, such a person must:(22)

(a) not provide any direct or implicit advice or opinion on securities; and

(b) provide specified warnings.

15. Can an internet adviser avoid a licence under the media advice exemption?

ASIC suggests it will be difficult for an internet adviser to avoid acquiring a licence under the media advice exemption.(23)

16. Internet host publishing offerer’s electronic disclosure document

ASIC will not take enforcement action against a website host dedicated to the publication of electronic disclosure documents (without holding an investment adviser’s licence) provided the website host:

(a) does not accept any financial reward for providing access to any electronic disclosure documents through the website which is attributable in whole or in part to the level of subscription in the securities the subject of that prospectus (fees based on volumes of data or numbers of hits may be charged);

(b) does not promote by any method investment in any specific securities to which the electronic disclosure documents relate or provide any opinion or advice in relation to investment in those securities, whether directly or implicitly (advertising the availability of current electronic disclosure documents without reference to specific disclosure documents is permitted);

(c) does not promote by any method the website as being a means by which investment in particular securities may be promoted or by which opinions or advice in relation to investment in securities may be given;

(d) does not make any representations about the commercial prospects of any issuer whose securities are the subject of an electronic disclosure document accessible through the website;

(e) does not publish any notice on the website contrary to the Corporations Act 2001 unless permitted by Class Order;(24)

(f) does not assume any responsibility for determining the information contained in the paper counterpart of any electronic disclosure document accessible through the website or the sequence in which that information is presented; and

(g) includes a prominently displayed warning on the website to the effect that:

* the information contained on the website is not suitable to be acted upon as investment advice; and
* it may be advisable to obtain investment advice before making any investment decisions relying on the information provided.

17. Other licencing requirements

An internet adviser is required to comply with:(25)

* the conduct of business rules when making personal securities recommendation on the internet;(26)

* ASIC’s retail investor protection requirements such as providing an Advisory Services Guide and warnings when general securities advice is given.(27)

An internet adviser providing general securities advice should provide a warning to the effect:

* that the advice has not been prepared taking into account the particular investment objectives, financial situation and needs of any particular investor; and

* as a result, investors using the internet advice should assess whether it is appropriate in light of their own individual circumstances before acting on the advice.

18. ASIC’s enforcement policy on cross border transactions on the Internet

ASIC will apply the licensing provisions to:

* investment advice sent by overseas internet advisers using email addresses of Australian investors;

* investment advice provided on an internet site outside Australia that is accessible in Australia; and

* persons who place investment advice on the internet in Australia for use by persons outside Australia.

19. Which internet offers of securities will ASIC regulate?

ASIC will not regulate offers, invitations and advertisements of securities accessible in Australia on the internet if:(28)

* not targeted at persons in Australia; or

* the offer or invitation contains a meaningful jurisdictional disclaimer; or

* the offer, invitation or advertisement has little or no impact on investors in Australia; and

* there is no misconduct.

20. When does ASIC consider an offer is not targeted at persons in Australia?

The offerer takes precautions reasonably designed to exclude subscriptions being accepted from persons in Australia and actively checks the precautions are effective by monitoring the number of applications made (if any) by persons in Australia.(29)

The offering material or advertisement must not be published, distributed or made available in ways or locations which are calculated to draw it to the attention of persons in Australia (30).

The offering material or advertisement must not contain material specifically relevant to persons in Australia (eg provision of Australian tax treatments details or rates or information in Australian dollars).(31)

The offer to which the offering material or advertisement relates must not be made in Australia by any other means unless exempted by Class Order.(32)

The offering material must contain a statement that the offer to which it relates is not available to persons in Australia. The statement must be prominently displayed with the offering material.

Whether the internet offer, invitation or advertisement has a significant impact on consumers or markets in Australia, is measured by reference to the number of securities enquiries by Australian investors, the number of Australian investors who are issued those securities and complaints ASIC receives from Australian investors.

Misconduct may involve significant non-compliance with Australian or overseas laws, such as fraudulent, misleading or deceptive conduct, or failure to abide by other regulatory requirements, such as inadequately disclosing the jurisdictions in which the offer is intended to be made.

21. Electronic Applications for Securities

Subject to certain conditions, securities may be issued or transferred in response to an electronic application form provided the issuer or transferor has reasonable grounds to believe that the form was included in, or accompanied by, the electronic disclosure document when distributed by them, or copied or directly derived by the investor from that form.(33)

Subject to certain conditions, securities may be issued or transferred in response to an electronic dealer personalised form provided the issuer or transferor has reasonable grounds to believe the form on which the application was made was copied from the issuer original and personalised by a dealer with the authority of the applicant.(34)

Subject to certain conditions, securities may be issued or transferred in response to an electronic dealer created application form provided the issuer or transferor has reasonable grounds to believe all reasonable measures were taken to make sure the investor was given access to the disclosure document before they applied.(35)

22. Internet Discussion Sites (IDS)

Under a strict reading of the Corporations Act 2001, an IDS allowing people to exchange or disseminate information, opinions and advice about securities with system, repetition and continuity may be considered an investment advice business requiring a licence.

ASIC will allow an Australian IDS (that is, one which targets people in Australia or operates within Australia) to operate without a licence if it complies with the following guidelines:(36)

(a) the IDS is operated to enable people who are not securities market professionals to exchange information that may include opinions and advice about securities;

(b) postings on the IDS are clearly identified and kept separate from commercial material on the site; and

(c) people who use the IDS receive adequate disclosures and warnings including that the material posted on the IDS is not professional investment advice.(37)

An interactive site or membership-based site may operate without a licence if it complies with the above guidelines.(38)

Newsgroups and sites whose main purpose is to provide advice about securities are not within the guidelines and must operate under a licence.(39) Internet facilities used for private communications between individuals (such as exchange of emails or private real time chat sessions) are not IDS.(40)

To avoid the risk of investors being misled, licencees who also operate an IDS must carry on the IDS as a licensed activity.

If the IDS is not intended to operate outside Australia, the inclusion of an additional disclosure should be included that the facility is not intended for people outside Australia. Despite this disclaimer, if the IDS is targeting people in other jurisdictions it may become subject to regulatory controls in those jurisdictions.

23. General Issues

Many provisions of the Corporations Act 2001 require a document to be signed by a person. An electronic signature is now recognised in some jurisdictions as equivalent to a handwritten one provided the electronic signature identifies the person, indicates the person’s approval of the information communicated and is reliable for the purposes for which the information was communicated, at the time the method was used. (See Electronic Transactions Act Fact Sheet) Notice provisions for members’ meetings may now be delivered electronically. A replaceable rule provides for when a message sent by these methods is taken to be received.(41)

A directors’ meeting may be held using any technology consented to by all the directors.(42)

A company may hold a meeting of its members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.(43)

There is no prohibition on voting by electronic means in the Corporations Act 2001, either by a member or by a proxy appointed in advance of the meeting.

A proxy may be delivered electronically to the electronic address specified for the purpose in the notice of meeting.(44)

A book may be kept or prepared by recording or storing the matters by means of a mechanical or electronic device or in any other manner approved by ASIC, as long as the contents are capable of being reproduced in written form or a reproduction is kept in a written form approved by ASIC.(45) However, ASIC require a paper copy of all electronically lodged documents to be signed and kept.



Other relevant Fact Sheets:

Sources of Law
Corporations Act 2001
End Notes
1. Corporations Act 2001 Section 727
2. ASIC Policy Statement 107
3. Corporations Act 2001 Section 700 , ASIC Policy Statement 107
4. ASIC Policy Statement 152
5. Corporations Act 2001 Section 705
6. Corporations Act 2001 Sections 721, 723, 727
7. Corporations Act 2001 Section 734
8. Corporations Act 2001 Section 736
9. Corporations Act 2001 Sections 725, 730
10. Corporations Act 2001 Part 6D.3
11. Corporations Act 2001 Section 727(3)
12. ASIC Policy Statement 152
13. ASIC Policy Statement 152
14. ASIC Policy Statement 107
15. Corporations Act 2001 Sections 780, 781
16. ASIC Policy Statement 118
17. ASIC Policy Statement 118
18. Corporations Act 2001 Section 18
19. ASIC Policy Statement 116
20. ASIC Policy Statement 116, 118
21. ASIC Policy Statement 118
22. ASIC Policy Statement 118
23. Corporations Act 2001 Section 77, ASIC Policy Statement 118)
24. ASIC Class Order 99/790
25. ASIC Policy Statement 118
26. Corporations Act 2001 Section 849-852
27. ASIC Policy Statement 121
28. ASIC Policy Statement 141
29. ASIC Policy Statement 141
30. ASIC Policy Statement 141
31. ASIC Policy Statement 141
32. ASIC Class Order 94/1285
33. ASIC Policy Statement 150
34. ASIC Policy Statement 150
35. ASIC Policy Statement 150
36. The guidelines are set out in greater detail in ASIC’s Interim Policy Statement 162
37. ASIC Policy Statement 162
38. ASIC Policy Statement 162
39. ASIC Policy Statement 162
40. ASIC Policy Statement 162
41. Corporations Act 2001 Section 249J
42. Corporations Act 2001 Section 248D
43. Corporations Act 2001 Section 249S
44. Corporations Act 2001Section 250B
45. Corporations Act 2001 Section 1306