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Draft Regulations: Eligible Emissions Units as Financial Products

30 October 2009

What's new?

Eligible emissions units under the Carbon Pollution Reduction Scheme (CPRS) will be included as a financial product for the purpose of the Corporations Act 2001.

Draft Regulations released today by the Government outline the proposed changes to Chapter 7 of the Corporations Act 2001; including whether there is a need to hold an Australian Financial Services Licence (AFSL) if you deal in emissions units.

How does this apply to me?

A liable entity acquiring and disposing of eligible emissions units on its own behalf will not require an AFSL.

A liable entity entering into derivatives will not require an AFSL if the service only involves derivatives over eligible emissions units and is not their principal purpose of business.

Further exemptions from holding an AFSL include:

• if the financial service is an ascending clock auction of Australian emissions units
• if participation consists of bidding on own behalf, for a related body corporate or associated entity

Other amendments in the Draft Regulations include:

• selling a free Australian emissions unit will not be classed as making a market
• will not be classed as dealing if:
• issuing eligible emissions units by the Australian Climate Change Regulatory Authority, Clean Development Mechanism Executive Board or the government of another country
• dealing on behalf of a liable entity within a corporate group
• a financial service will be provided if:
• dealing in derivatives over eligible emissions units and/or dealing in eligible emissions units and the service does not involve making a market for those derivatives or eligible emissions units, or
• dealing is entered into for the purpose of managing the risk of adverse variations in the cost of eligible emissions units and the person does not deal in those derivatives or eligible emissions units as the principal purpose of the persons business
• a PDS will not be issued for this product, however a statement, as mentioned in section 278 of the Carbon Pollution Reductions Scheme Act 2009 (yet to commence), will be required
• short selling provisions will apply

To make a submission on the Draft Regulations

Interested parties are invited to make submissions; the closing date is Friday, 13 November 2009.

Address submissions to:
Manager
Investor Protection Unit
Corporations and Financial Services Division
The Treasury
Langton Crescent
PARKES ACT 2600
Email: emissions.trading@climatechange.gov.au

How can Certainty help?

Certainty Compliance can answer your questions about the Carbon Pollution Reduction Scheme and how any changes to legislation could affect your business. Please contact a Consultant on (02) 9238 8091 or enquiries@certaintycompliance.com.au

For further inofrmation:

See the Draft Regulations on the Treasury website here:www.treasury.gov.au