Statutory Rules 2003 No. 48

Issued by the Parliamentary Secretary to the Treasurer

Corporations Act 2001

Corporations Amendment Regulations 2003 (No. 2)

Section 1364 of the Corporations Act 2001 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act.

A market practice had developed whereby persons approach shareholders off-market and make offers to purchase shares well below market value, essentially trading on the potential ignorance of those shareholders. In the past, the Financial Services Reform Act 2001 (FSRA) has not imposed conditions or restrictions upon the practice of such businesses.

The purpose of the Regulations is to expand the definition of a financial service under the Act to include the making of unsolicited off-market offers to purchase financial products from investors, by persons in the business of acquiring financial products. Defining these offers as financial services ensures that persons involved in this practice would need to become licensed under the Financial Services Reform Act 2001 (FSRA) licensing regime. A licensing exemption would, however, be available if the person discloses the current market value of the financial product they wish to purchase when making the offer.

The Regulations would support the reforms to the regulation of the financial services industry, which were included in the FSRA and associated legislation, by promoting disclosure and protecting inexperienced financial product holders from businesses that offer to purchase financial products off-market at grossly undervalued prices.

The Regulations commence upon Gazettal.