Bills Digest no. 31 2007–08
Corporations (National Guarantee Fund Levies) Amendment
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Corporations (National Guarantee
Fund Levies) Amendment Bill 2007
21 June 2007
House: House of Representatives
28 days after royal
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
in this Bill proposes to impose a cap on levies for the benefit of
the National Guarantee Fund (the NGF), which are payable in a
This amendment is supported by an amendment in
the Financial Sector Legislation Amendment (Discretionary Mutual
Funds and Direct Offshore Foreign Insurers) Bill 2007, which
proposes to direct readers to the cap on levies.
Under the Corporations Act 2001
(Corporations Act), financial market operators such as the
Australian Stock Exchange (ASX), must have compensation
arrangements, which are adequate to protect retail clients (defined
in sections 761G and 761GA of the Corporations Act). 
The NGF is administered by the Securities
Exchanges Guarantee Corporation (the SEGC),  which is a subsidiary of the ASX, and
provides this compensation for ASX. 
The SEGC may impose levies on the market
operator and participants if the amount in the NGF is less than the
minimum amount provided in section 889I of the Corporations Act.
 Currently, these
levy requirements are uncapped.
The Corporations (National Guarantee Fund
Levies) Act 2001 contains provisions for the imposition and
amounts of these levies.
On 21 June 2007, the Bill was introduced into
the House of Representatives by the Parliamentary Secretary to the
Treasurer, the Hon. Mr Chris Pearce, MP and was referred to the
Senate Standing Committee on Economics (the Committee) for inquiry
and report. 
Submissions to the Committee s inquiry were
made by: 
Both organisations supported the proposed
amendments in the Bill. 
However, it is noted that there are no
submissions from consumer groups.
Capping liabilities for levies in relation to
the NGF ensures that market participants would no longer have
unlimited exposure to pay levies into the NGF.
There is also the suggestion that placing a
cap on these levies may remove obstacles on institutions, such as
banks, participating directly in ASX markets (these institutions
currently participate through subsidiaries).
In addition, protection for investors is said
to remain largely unaffected. 
However, this begs the question of what
happens in the event that the total amount payable in relation to
claims exceeds the minimum amount available in the NGF at the
Would capping liabilities for levies have the
potential to result in a situation where there are inadequate funds
available as compensation?
Item 1 of Schedule
1 of this Bill proposes to insert a new provision into
section 5 of the Corporations (National Guarantee
Fund Levies) Act subsection 5(4).
Subsection 5(4) proposes that
levy amounts (and methods of determining levy amounts) that are
specified in determinations referred to in subsection
889J(1) of the Corporations Act are capped to the extent
that the total amount of levies payable to the SEGC in a financial
year does not exceed the NGF s minimum amount (pursuant to section
889I of the Corporations Act), which is in force at the time the
determinations are made.
This amendment would allow for greater clarity
in relation to market participants liability to pay levies for the
purposes of the NGF and it is argued that it does not appear to
derogate from investor protection in the short term.
However, capping liability to pay levies does
create a situation where the NGF may only be at the minimum amount
provided by legislation, which may not allow for sufficient funds
in the event of a particularly large claim or series of large
Act 2001 Pt 7.5 Divs 2 and 3.
 ibid., sections
889J and 889K.
 Senate Standing
Committee on Economics, Financial Sector Legislation Amendment
(Discretionary Mutual Funds and Direct Offshore Foreign Insurers)
Bill 2007 and Corporations (National Guarantee
Fund Levies) Amendment Bill 2007, report to the
Senate, 1 August 2007.
 See ibid., p. 15
and Appendix 1. See also AFMA, Submission to the Senate
Standing Committee on Economics, 9 July 2007 at:
ASX, Submission to the Senate Standing Committee on
Economics, 12 July 2007 at http//
 See Senate
Standing Committee on Economics, op cit, p. 15; AFMA, op cit; ASX,
Law and Bills Digest Section
14 August 2007
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