Australian securities law
Encyclopedia
Australian securities law relates to securities
issued by corporation
s as well as other securities, including debenture
s, stock
s and bonds
issued by government
s, and interests in managed investment schemes.
Australian securities regulation rests on the principle that "financial markets cannot function effectively unless participants act with integrity and there is adequate disclosure to facilitate informed judgements". As a result, many of the regulatory rules governing dealings in securities are part of a broader framework that governs financial products, financial services
and financial markets.
Mandatory disclosure and conduct regulation underlie much of Australia's securities regulation. False trading, fraudulent dealing, and insider trading
are dealt with to prevent improper practices in connection with securities markets. A licensing system operates to ensure securities markets are fair, orderly and transparent. At the same time, securities law is also facilitative, allocating rights and duties in conjunction with general contract law. It also allows for a degree of self-regulation
, by the operation for example of an independent securities exchange.
Australian securities law has been substantially modernised in recent years. The core of these laws are found in the Corporations Act
2001 (Cth), which contains provisions governing takeover
s, fundraising
, and financial products, services and markets.
about securities is found in the Corporations Act
2001 (Cth), as well as the regulations made under that Act. Whilst much of the law is derived from earlier regulation (especially the bust
in Australian mineral stocks of the late 1960s), the sections relating to securities regulation have been subject to recent amendment. The takeovers provisions were substantially re-written by the Corporation Law Economic Reform Program Act 1999. Changes to financial products, financial markets, and financial services were introduced by the Financial Services Reform Act 2001 (Cth), as a result of the Wallis report.
Elements of securities law are also found in the general law governing contracts, trusts
, and torts. Securities regulation under the Corporations Act operates against the background of other Commonwealth legislation on criminal law
, administrative law
, and statutory interpretation
.
Administration of the legislation is the responsibility of the Commonwealth Treasurer
and the Australian Securities and Investments Commission
(ASIC), according to the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth). The market operator Australia Stock Exchange also has an important regulatory role to play.
The resolution of disputes is confided to the Federal Court
and the Supreme Courts of the States and the Northern Territory, with other courts having some powers to apply the securities legislation.
There is also no law which stipulates that no person in which authority is not given (anyone other the law enforcement or owners of an establishment)may restrict persons entering and leaving a premesis
General common law prohibitions against interfering with the free public market are strengthened by statutory prohibitions against various forms of market misconduct.
One set of statutory prohibitions is upon trading activity which manipulates market prices. There are further prohibitions upon conduct that involves false trading or market rigging.
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
issued by corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s as well as other securities, including debenture
Debenture
A debenture is a document that either creates a debt or acknowledges it. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note...
s, stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
s and bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
issued by government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
s, and interests in managed investment schemes.
Australian securities regulation rests on the principle that "financial markets cannot function effectively unless participants act with integrity and there is adequate disclosure to facilitate informed judgements". As a result, many of the regulatory rules governing dealings in securities are part of a broader framework that governs financial products, financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
and financial markets.
Mandatory disclosure and conduct regulation underlie much of Australia's securities regulation. False trading, fraudulent dealing, and insider trading
Insider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...
are dealt with to prevent improper practices in connection with securities markets. A licensing system operates to ensure securities markets are fair, orderly and transparent. At the same time, securities law is also facilitative, allocating rights and duties in conjunction with general contract law. It also allows for a degree of self-regulation
Self-regulation
The term self-regulation can signify:*Autoregulation*Homeostasis, in systems theory*Self-control, in sociology / psychology*Self-regulated learning, in educational psychology*Self-regulation theory , a system of conscious personal health management...
, by the operation for example of an independent securities exchange.
Australian securities law has been substantially modernised in recent years. The core of these laws are found in the Corporations Act
Corporations Act 2001
The Corporations Act 2001 , sometimes referred to just as the Corporations Act , is an act of the Commonwealth of Australia that sets out the laws dealing with business entities in Australia at federal and interstate level...
2001 (Cth), which contains provisions governing takeover
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
s, fundraising
Fundraising
Fundraising or fund raising is the process of soliciting and gathering voluntary contributions as money or other resources, by requesting donations from individuals, businesses, charitable foundations, or governmental agencies...
, and financial products, services and markets.
Legal and regulatory framework
The main body of substantive lawSubstantive law
Substantive law is the statutory or written law that defines rights and duties, such as crimes and punishments , civil rights and responsibilities in civil law. It is codified in legislated statutes or can be enacted through the initiative process.Substantive law stands in contrast to procedural...
about securities is found in the Corporations Act
Corporations Act 2001
The Corporations Act 2001 , sometimes referred to just as the Corporations Act , is an act of the Commonwealth of Australia that sets out the laws dealing with business entities in Australia at federal and interstate level...
2001 (Cth), as well as the regulations made under that Act. Whilst much of the law is derived from earlier regulation (especially the bust
Boom and bust
A credit boom-bust cycle is an episode characterized by a sustained increase in several economics indicators followed by a sharp and rapid contraction. Commonly the boom is driven by a rapid expansion of credit to the private sector accompanied with rising prices of commodities and stock market index...
in Australian mineral stocks of the late 1960s), the sections relating to securities regulation have been subject to recent amendment. The takeovers provisions were substantially re-written by the Corporation Law Economic Reform Program Act 1999. Changes to financial products, financial markets, and financial services were introduced by the Financial Services Reform Act 2001 (Cth), as a result of the Wallis report.
Elements of securities law are also found in the general law governing contracts, trusts
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
, and torts. Securities regulation under the Corporations Act operates against the background of other Commonwealth legislation on criminal law
Australian criminal law
The criminal law of Australia generally administered by individual jurisdictions in the Commonwealth of Australia. These jurisdictions include the six states, the Commonwealth, and the self-governing territories...
, administrative law
Australian administrative law
Australian administrative law define the extent of the powers and responsibilities held by administrative agencies of the Australian government. It is a common law system, with a highly significant statutory overlay that has shifted focus to generalist tribunals and codified judicial...
, and statutory interpretation
Statutory interpretation
Statutory interpretation is the process by which courts interpret and apply legislation. Some amount of interpretation is always necessary when a case involves a statute. Sometimes the words of a statute have a plain and straightforward meaning. But in many cases, there is some ambiguity or...
.
Administration of the legislation is the responsibility of the Commonwealth Treasurer
Treasurer of Australia
The Treasurer of Australia is the minister in the Government of Australia responsible for government expenditure and revenue raising. He is the head of the Department of the Treasury. The Treasurer plays a key role in the economic policy of the government...
and the Australian Securities and Investments Commission
Australian Securities and Investments Commission
The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...
(ASIC), according to the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act 2001 (Cth). The market operator Australia Stock Exchange also has an important regulatory role to play.
The resolution of disputes is confided to the Federal Court
Federal Court of Australia
The Federal Court of Australia is an Australian superior court of record which has jurisdiction to deal with most civil disputes governed by federal law , along with some summary criminal matters. Cases are heard at first instance by single Judges...
and the Supreme Courts of the States and the Northern Territory, with other courts having some powers to apply the securities legislation.
Definitions
A security is "a thing in action", a claim enforceable by legal proceedings rather than owning some tangible property. To effect regulation the legislation adopts various definitions of "security" and "financial product" that are used.There is also no law which stipulates that no person in which authority is not given (anyone other the law enforcement or owners of an establishment)may restrict persons entering and leaving a premesis
Financial intermediaries
A person who carries on a financial services business in the jurisdiction must hold an Australian financial services licence.Market misconduct
Prevention of fraud and other forms of market misconduct has its foundation in the efficient-market hypothesis.General common law prohibitions against interfering with the free public market are strengthened by statutory prohibitions against various forms of market misconduct.
One set of statutory prohibitions is upon trading activity which manipulates market prices. There are further prohibitions upon conduct that involves false trading or market rigging.