Law firm calls for control test to be restricted
Despite the Australian Securities and Investments Commission (ASIC) Enforcement Review Taskforce considering whether the regulator should broaden the concept of control, the Fold Legal has called for its definition to be restricted.
The Taskforce suggested in its third position and consultation paper on strengthening ASIC’s licensing powers that ‘control’ could be broadened to include groups of controllers, in contradiction of section 50AA of the Corporations Act.
Fold Legal said, however, that “introducing the concept of group control over a licensee raises a lot more issues that it solves.”
It said that it could be unfair to individuals who are fit and proper to exercise control, but are part of groups wherein one individual is not.
The legal firm also flagged long-discussed issues in determining practical control. ASIC had suggested changing notification regarding changes of control to be based on when control actually shifts, rather than when a licensee becomes aware of it.
This could be problematic though, as it was difficult to determine when practical control changes. It also could change often.
“It’s not appropriate to issue multiple change of control notifications. It’s also an inefficient use of ASIC’s resources to assess compliance with the fit and proper test each time practical control shifts,” said the firm.
Fold Legal said that restricting the definition of control, when it comes to assessing whether a controller is a fit and proper person, should be limited to shareholders. It said that this would bring the Australian regime in-line with the UK, Hong Kong and Singapore.
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