Class Order CO 09/425 Share and Interest Purchase Plans (Class Order), which was released by ASIC in June 2009, has increased the value of securities that can be issued to a security holder under an SPP without prospectus or PDS disclosure to $15,000 in a rolling 12-month period. The previous limit was $5,000 per security holder per year.
The Class Order allows custodians who hold securities for multiple underlying beneficiaries to apply for more than $15,000 worth of securities under an SPP, provided that the custodian meets certain conditions (including the provision of a certificate) and applies for no more that $15,000 worth of securities for each beneficiary in the relevant 12-month period.
ASIC Regulatory Guide 125, which accompanies the Class Order, provides that a second level custodian (ie a custodian that is a client of the first-level custodian, such as an investor directed portfolio service (IDPS) operator), cannot accept share purchase plan offers for each of its clients. This is seemingly at odds with a statement in the Explanatory Statement to the Class Order, which indicates that ASIC’s intention was to enable participation by ‘retail investors…who own shares or units through investment platforms (such as master trusts)’. Also, second-level custodians are not expressly dealt with in the Class Order.
Accordingly, a number of recent issuers have obtained what has quickly become a fairly standard ASIC exemption to enable second-level custodians to participate in SPPs. The standard instrument works by largely restating the Class Order, inserting definitions for ‘IDPS’, ‘IDPS contract’ and ‘operator’ and incorporating a paragraph which provides that, in circumstances where an SPP involves a custodian offer and securities are held through an IDPS by a custodian, then the instrument will apply as if:
- the custodian holds the securities on behalf of the IDPS client, and
- an instruction given by the IDPS client to the IDPS operator to acquire securities under the SPP be treated as if the instruction is given to the custodian itself, and
- any shares applied for by the custodian as a result of an instruction from an IDPS client were applied for on behalf of the IDPS client.
ASIC has also recently granted relief to enable the custodian’s certification in respect of an IDPS client to be by conduct of the underlying IDPS client rather than the provision of an actual certificate by the custodian. The granting of relief in this instance is not an indication by ASIC that as a general policy matter ASIC supports the concept of certification by conduct.
We understand that ASIC intends to consider broadening the Class Order to deal with the second level participation issue and to review the broader policy issues around certification by conduct.