Chapter 1 - Introduction

Chapter 1Introduction

Referral of the inquiry

1.1The Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 (the bill) was introduced in the House of Representatives and read a first time on 27 March 2024.

1.2On 27 March 2024, the Senate referred the provisions of the bill to the Senate Economics Legislation Committee (the committee) for inquiry and report by 30April 2024.

1.3On 30 April 2024, the committee presented a progress report seeking an extension of time to report until 3May 2024.

Purpose of the bill

1.4The bill introduces two broad reforms.

1.5The first reform introduces a crisis management and resolution regime for Australia’s financial market infrastructure. Alongside this, the bill enhances the licencing, supervisory and enforcement powers of the Australian Securities and Investment Commission (ASIC) and the Reserve Bank of Australia (RBA), as well as making changes to roles and responsibilities of the Minister, the RBA and ASIC.[1]

1.6These amendments implement the recommendations of the July 2020 report Financial Market Infrastructure Regulatory Reforms: Advice to Government from the Council of Financial Regulators (CFR Advice to Government report).[2] This report will be discussed further below.

1.7The second reform introduces mandatory climate-related financial disclosures for entities that meet one of the following requirements:

(a)the entity is required to lodge financial reports under Chapter 2M of the Corporations Act 2001 (the Corporations Act) and meets certain size requirements; or

(b)the entity has emissions reporting obligations under the National Greenhouse and Energy Reporting (NGER) scheme.[3]

1.8These new disclosures will require the entities in question to make climate disclosures relevant to the sustainability standards made by the Australia Accounting Standards Board (AASB).[4]


Financial market infrastructure reforms

CFR Advice to Government Report

1.9As mentioned above, this bill implements the recommendations of the CFR Advice to Government report, which was delivered in July 2020.

1.10The Council of Financial Regulators (CFR) is a non-statutory body that is ‘the coordinating body for Australia’s main financial regulatory agencies’.[5] It has four members: ASIC, the RBA, the Department of the Treasury (Treasury) and the Australian Prudential Regulation Authority (APRA); and lists its objectives as supporting effective regulation by Australia’s financial regulatory agencies and promoting the stability of the Australian financial system.[6]

1.11The CFR Advice to Government report noted the increasing importance of Financial Markert Infrastructure (FMI) to the Australian financial system, particularly since the 2008 global financial crisis (GFC). International reforms that were instigated after the GFC have led to a greater number of financial transactions taking place through financial markets, derivative trade repositories, and clearing and settlement facilities.[7]

1.12This report stated further:

Where previously many FMIs were mutually owned and operated by market participants, they are increasingly run as for-profit entities that are exposed to commercial pressures that may create tensions between profitability and resilience. Meanwhile, the sudden outbreak of COVID-19 has highlighted the serious operational and financial risks to which FMIs are exposed. During this event, FMIs had to rapidly transition to remote working at the same time as managing record transaction volumes and responding to highly volatile markets; the mismanagement of any one of these steps could have had catastrophic consequences in a highly stressed market. In addition, the increasing complexity and interconnectedness of systems is also increasing operational risk and FMIs’ exposure to growing cyber security threats.[8]

1.13The CFR Advice to Government report concluded that the current regulatory framework around FMIs required reform; in particular, identifying that there was a need for stronger powers for regulators to monitor and manage risk, that the distribution of powers between ASIC, the RBA and the Minister did not reflect international best practice or their respective legislative mandates, and that the current framework lacked a crisis management power for clearing and settlement facilities.[9]

1.14As such, the report made 16 recommendations which could be broadly summarised as intending to:

introduce a resolution regime for licensed clearing and settlement facilities;

strengthen the Regulators’ supervisory and enforcement powers in relation to FMIs; and

redistribute existing powers between ASIC, the RBA and the Minister to make the regulatory process more efficient and to better distinguish between operational and strategic functions.[10]

1.15Previous reviews had come to similar conclusions about Australia’s financial system, such as the 2014 Financial Systems Inquiry and the International Monetary Fund’s (IMF) Financial Sector Assessment Program completed in 2019.[11]

1.16In December 2022, the Government announced it would implement FMI reforms consistent with the recommendations of the CFR Advice to Government report.[12] The provisions of the bill implement these reforms.

Financial market infrastructure

1.17FMI entities facilitate and support Australia’s financial markets and, when operating correctly, contribute to the effective management, operational efficiency and financial stability of the capital market. By necessity, they are highly regulated entities as failure in any of them could have major repercussions for the financial system and Australia’s economy. FMI entities support trillions of dollars in securities and derivatives transactions each year.[13]

1.18These kinds of entities are supervised by ASIC and, in the case of clearing and settlement facilities, by ASIC and the RBA. All FMI entities have a specific regulatory regime in chapter 7 of the Corporations Act.[14]

1.19Australia’s FMI is made up of the following kinds of entities:

financial market operators;

clearing and settlement facilities (CS facilities);

derivative trade repositories; and

benchmark administrators.[15]

Financial market operators

1.20Financial market operators are entities that provide listing and trading services for financial products on a financial market, facilitate competitive and transparent pricing of those products, and ensure fair and orderly trading. There are currently 51 licenced financial market operators in Australia, of which 37 are foreign bodies corporate.[16] An example of this kind of entity is the Australian Stock Exchange (the ASX).[17]

1.21Part 7.2 of the Corporations Act governs these entities and requires a person operating a financial market to hold an Australian market licence. The Minister has the power to grant these licences and give directions to the licensee to promote compliance with the licensee’s obligations, among other things. The Ministerial Powers (ASIC) Delegations 2021 delegates these powers to ASIC.[18]

Clearing and settlement facilities

1.22CS facilities are essential to the functioning of the financial market system in that they provide post-trade clearing and settlement of financial transactions.[19]

1.23‘Clearing’ is a process that allows financial market trades to occur efficiently and with centrally managed risk. It is effectively a risk management process which occurs after a trade and before settlement, and usually involves novating trades to a central counterparty who becomes the seller to every buyer and the buyer to every seller. ‘Settlement’ provides the final settlement of a securities transaction, with one party taking delivery of the security in question and the other receiving payment as per the terms of the trade.[20]

1.24Facilities that provide clearing and settlement services are regulated by Part 7.3 of the Corporations Act. Operators of these facilities are required to be licensed, with there being separate licencing provisions for domestic and overseas-based CS facilities. Although the Minister has powers in relation to CS facility licensees,[21] these powers are currently delegated to ASIC, as they are with financial market operators.[22]

1.25Licenced CS facilities are required to have operating rules that cover matters prescribed by regulations. Currently, these matters include the operation of the facility, risk management, ‘the requirements of participants in relation to the facility’ and other matters. Participants in a CS facility agree to observe the rules and carry out their obligations in compliance with these rules, with these rules having the same effects as a contract under seal between the various parties involved in transactions. CS facilities are required to advise ASIC of changes to these rules through lodging a notice.[23]

1.26Supervisory responsibilities in relation to CS facilities are split between ASIC and the RBA, with the RBA having responsibility for financial stability and the management of systemic risk and ASIC having responsibility for licencing and conduct of licensees. The RBA does not have enforcement powers in relation to CS facilities but can make Financial Stability Standards that CS facilities are required to comply with. The RBA can also advise the Minister and ASIC if a CS facility is not compliant with these standards.[24]

1.27In Australia, there are four systemically important[25] domestic CS facility licensees and two overseas CS facility licensees currently operating.[26]

Derivative trade repositories

1.28Derivative trade repositories are facilities that can receive reports about over-the-counter derivatives transactions or about positions relating to over-the-counter derivatives transactions. This information is then passed on to regulators to better advise them on the risks and activities in over-the-counter derivatives markets.

1.29The Corporations Act Part 7.5A governs the licensing of these entities and ASIC is empowered to make rules relating to them. These rules can cover the way licensees provide their services, governance of licensees, reporting, handling of data and other matters. There are currently two derivative trade repositories licensees in Australia.[27]

Financial benchmark administrators

1.30According to the Explanatory Memorandum (EM) for the bill:

Financial benchmarks measure the price or performance of certain financial products or classes of financial products. They are used to determine the price of, or payments due under, many financial products.[28]

1.31ASIC licenses administrators of significant financial benchmarks and has the power to declare a certain financial benchmark to be a significant financial benchmark through a legislative instrument. These licensees are regulated under Part 7.5B of the Corporations Act, which also provides ASIC with the power to impose, vary or revoke licence conditions. There are currently two licenced financial benchmark administrators in Australia.[29]

Climate-related financial disclosures

1.32The bill also implements a new regulatory framework for climate-related financial disclosures. This section of the bill forms part of the Government's broader sustainable finance agenda.[30]

1.33As mentioned above, relevant entities will be required to report on their climate-related financial risks and opportunities in relation to the AASB’s proposed sustainability standards. These standards are intended to align as much as possible with the International Sustainability Standards Board (ISSB)’s International Financial Reporting Standards (IFRS) S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, which were finalised in June 2023.[31]

1.34According to the EM:

International alignment with the ISSB standards will also support Australia’s reputation as an attractive destination for international capital and help draw the investment required for the transition to net zero. For example, because investors have clear visibility of the steps entities are taking to reduce their exposure to climate-related risks and embrace relevant opportunities.[32]

Provisions of the bill

1.35The bill is made up of five schedules and makes changes to various pieces of legislation:

Schedule 1 introduces the financial market infrastructure crisis management and resolution regime;

Schedule 2 enhances the licencing, supervisory and enforcement powers of ASIC and the RBA in relation to financial markets;

Schedule 3 streamlines the roles and responsibilities between the Minister, ASIC and the RBA;

Schedule 4 implements the climate-related financial reporting regime; and

Schedule 5 makes various minor and technical amendments.[33]

1.36While a variety of legislation is amended by the bill, the majority of amendments are made to the Corporations Act. Other Acts impacted by the bill include (but are not limited to) the Australian Securities and Investments Commission Act 2001 (the ASIC Act), the Reserve Bank Act 1959 (the RB Act), the Insurance Act 1973 (the Insurance Act) and the Banking Act 1959 (the Banking Act).

1.37As can be seen above, Schedule 4 of the bill deals with one discrete set of reforms (climate change reporting), whereas Schedules 1 to 3 and 5 deal with reforms relating to Australia’s financial market infrastructure. As there is some overlap within the Schedules about which part of the reforms are implemented, these matters will be dealt with thematically.

Establishing a FMI crisis management regime — Schedule 1

1.38Schedule 1 would introduce a crisis management regime for domestic CS facilities. Primarily, this schedule of the bill gives the RBA powers to resolve crises in CS facilities and establishes a funding mechanism in order to resolve these crises.[34] The rules governing this new regime would be inserted in Part 7.3B of the Corporations Act.[35]

When the powers may be used

1.39The RBA could use its new powers of resolution on a domestic CS facility licensee when at least one ‘condition for resolution’ has been met (overseas CS facility licensees are dealt with separately under the bill and will be discussed further below).[36] A condition for resolution is met when:

the RBA reasonably believes that the CS facility licensee will be unable to continue to provide one or more of its services in a way that will be critical to the stability of the Australian financial system;

the CS facility licensee notifies the RBA, or the RBA reasonably believes, that the licensee’s financial viability is at risk, or is likely to be at risk;

the CS facility intends to appoint an external administrator, has already done so, or advises the RBA that it intends to appoint an external administrator; or

the RBA reasonably believes that a person is seeking to have an external administrator appointed to a CS facility licensee.[37]

1.40The following conditions of resolution may be met only in circumstances where the RBA believes that the circumstances are likely to pose a threat to the Australian financial system or the ability of the licensee to continue to provide a service which is critical to the functioning of the Australian financial system:

the CS facility requests the RBA’s assistance;

the CS facility has contravened a direction from the RBA;

the CS facility licensee notifies the RBA that the licensee has ceased, or would cease providing CS facility services without support;

the CS facility is doing, or is omitting to do, an act or thing; or

in relation to a related body corporate of a CS licensee, any of the following has taken place:

an external administrator has been appointed to the related body corporate of the CS facility, or similar has occurred overseas;

the RBA is advised by the related body corporate that it is considering appointing an external administrator or the RBA reasonably believes that a person is seeking to have an external administrator appointed; or

the RBA reasonably believes that the related body corporate is doing an act or a thing, or is omitting to do such an act or a thing, that is causing a threat to the ability of the licensee to provide critical services or a threat to Australia’s financial stability.[38]

Powers available to the RBA

1.41The bill provides the RBA with a variety of powers to use when one of the conditions above is met:

Statutory management: the RBA can appoint itself or a third party as a statutory manager to a CS facility. The appointed manager has the powers of the board of directors and these powers can be used to stabilise a facility and ensure continuity of services for participants. These powers are intended to ensure an orderly resolution of services and could include maintaining some of the entity, facilitating recapitalisation or facilitating a transfer of the business of the entity to another entity.[39]

Transfer: this power allows the RBA to compulsorily transfer some or all of an entity’s shares or business to another consenting entity. This could include assets and liabilities, data and systems, and legal rights and obligations.[40]

Directions: the RBA is provided with directions powers to allow the RBA to act in a timely manner to a CS facility in crisis. These powers allow the RBA to compel a CS facility to take, or refrain from taking, an action to address issues of concern. These powers are coupled with specific immunity provisions for a body corporate and its directors that protect these entities from liability for actions taken as a result of the RBA using this power. This is intended to prevent questions around potential conflicts in obligations which may give rise to delays during a crisis event. The RBA may also provide its directions in a confidential manner in certain circumstances.[41]

Stays and moratorium provisions: these provisions allow the RBA to prevent counterparties of a CS facility’s body corporate from exercising contractual rights simply on the basis of the RBA exercising its powers in relation to the facility. This allows the RBA to implement an orderly resolution to the potential crisis without being impeded by the counterparties’ actions. These stays and moratorium provisions are not intended to prevent a party to a CS facility’s transactions from being able to close out their position with the facility. The provisions of the Payments Systems and Netting Act 1998 (PSN Act) prevail over the stays and moratorium powers that are proposed by the bill.[42]

1.42In addition to the above, the RBA is also empowered by the bill to apply to the Court to wind up a body corporate that is a CS facility licensee or a related body corporate of the licensee incorporated in Australia (or such a related body corporate before the transfer of shares or business while it is still incorporated in Australia). ASIC must be advised as soon as possible of this application for winding up.[43]

Overseas CS facilities

1.43The bill also provides for situations where overseas CS facilities (which are licensed separately to domestic CS facilities) are facing a crisis event. Overseas CS facility licensees are regulated by their ‘home’ country regulator and, as such, this ‘home regulator’ will be primarily responsible for dealing with the facility. Provisions of the bill allow for the RBA to cooperate with the home regulator’s actions if requested.[44]

1.44However, the RBA does not have the power to appoint a statutory manager to an overseas CS facility, wind up a CS facility licensee or conduct a transfer of shares.[45]

Funding for crisis resolution

1.45The bill states that funds shall be made available from the Commonwealth in situations where a crisis has occurred and the RBA has decided that resolution powers must be used in order to protect the stability of the Australian financial system.[46]

1.46The maximum appropriation for use in these circumstances is $5 billion per event, which can be activated by the Treasurer with written approval of the Minister for Finance. These funds are to be used to maintain the functions of a CS facility during a crisis where at least one resolution condition (see above) has been triggered. The initial appropriation may be less than the $5 billion maximum amount with the Treasurer and Finance Minister being able to provide additional funds up to the maximum amount.[47]

1.47These public funds are intended to be used as a last resort in situations where the CS facility in question’s resources are insufficient to address losses or where the RBA considers that the use of other methods may pose a threat to financial stability or could compromise resolution objectives. It is expected that the funds used would be recovered after the crisis has been resolved and the bill allows for recovery mechanisms to be included in funding agreements.[48]

1.48The authorisation is a legislative instrument that is not subject to disallowance. This is due to the importance of funding being available during a crisis event and the need for that funding to be provided with maximum certainty. The authorisation cannot be revoked.[49]

Interactions between regulators during a crisis

1.49According to the EM, it is intended that the RBA’s crisis management powers will take priority over any powers ASIC has in regards to CS facilities and, in some circumstances, over some Australian market licensees.

1.50These sections of the bill are intended to ensure close coordination between the RBA and ASIC so resolution actions on a CS facility can be undertaken in an efficient and effective matter. Although in this instance the powers of the RBA take precedence over those of ASIC, the EM states that this should not limit the communications of ASIC and the RBA regarding crisis resolution.[50]

1.51ASIC is required to act in a way that supports resolution of a CS facility licensee and may only exercise its directions or rule-making powers in respect of the CS facility in question at the RBA’s request.[51] This also extends to CS facility licensee body corporates if the entity has been placed under statutory management, is subject to a resolution direction or is subject to a potential transfers of business or shares.[52]

Crisis prevention — Schedules 1 and 2

1.52Schedules 1 and 2 provide the RBA with enforcement powers in respect of its role supervising CS facilities in order to mitigate the risk of a crisis event.[53] The powers contained in Schedule 2 give the RBA increased general powers which can be used at any time and are intended to enhance supervision over CS facilities to prevent a crisis event.[54]

1.53These powers, discussed in more detail below, are:

imposing notification requirements;

issuing directions, including the power to request information;

resolution planning; and

setting resolvability standards.[55]

1.54The bill would also provide the RBA with powers that mirror ASIC’s current powers in relation to CS facilities, such as the power to compel access to a facility or exempt a CS facility from certain obligations.[56]

Notification requirements

1.55In order to increase the RBA’s awareness of pre-crisis, or potentially distressed, CS facilities (and, as such, to mitigate the risk of crisis), the bill contains amendments that require a CS facility to advise the RBA of any material changes in circumstances.[57] A CS facility is required to notify the RBA of the following events:

breaches of the obligation to do all things necessary to reduce risk;

failure (or likely failure) of resolvability standards or the Financial Stability Standards;

the facility is no longer able to, or is likely to no longer be able to, provide critical CS facility services;

the facility’s financial viability is at risk, including if the financial viability is at risk without external support; or

a participant in the CS facility has met one or more of the default event conditions under the CS facility’s operating rules.[58]

1.56Failure to notify the RBA of one of these material changes of circumstances is a strict liability criminal offence with a penalty of imprisonment for two years. The strict liability nature of the offence is considered appropriate due to the potential impact an offence under this part of the bill would have on Australia’s financial system.[59]

Directions powers

1.57According to the EM, ‘[t]he RBA will be equipped with powers to issue a direction to a CS facility at any time with the aim of preventing a crisis from crystalising’.[60] These powers include the ability of the RBA to direct a CS facility to:

provide the RBA with information to assist the RBA in performing one of its functions;

comply with the CS facility’s obligations;

preserve stability in the financial system; and

increase compliance or reduce risk.[61]

1.58The power to reduce risk has been transferred to the RBA from ASIC while remaining largely the same. This is part of the move towards streamlining and clarifying the RBA’s role as the agency with oversight over CS facilities.[62]

1.59Under the current law, a CS facility is required to comply with the Financial Stability Standards ‘to the extent that it is reasonably practicable to do so’. This qualifier has been removed by the bill in order to ensure that the RBA can effectively exercise its powers when making a direction.[63]

1.60A CS facility can request that a direction from the RBA to increase compliance or reduce systemic risk be referred to the Minister. If appropriate, the Minister can then require the RBA to revoke or vary its direction.[64]

1.61For all directions, apart from directions issued to preserve the stability of the financial system, a CS facility may make an application for review to the Administrative Review Tribunal.[65]

Resolution planning and resolvability standards

1.62These powers exist to complement the RBA’s new powers to intervene in a crisis by allowing it to have the powers needed to ensure an orderly resolution of a CS facility.[66]

1.63Under the bill, the RBA is empowered to make a resolution plan for a CS facility and set resolvability standards in order to facilitate a resolution.[67]

Enhancing and streamlining ASIC’s licencing and supervisory powers – Schedules 2 and 3

1.64As mentioned above, the CFR Advice to Government report found that there was a need for enhanced powers for regulators in order to effectively manage the risks associated with FMI entities and also found that some of the powers of the Minister were operational in nature and that it would be more appropriate if they sat with regulators. The report also found that some of ASIC’s powers would be more appropriate sitting with the RBA.[68]

1.65Parts of Schedule 2 strengthen and enhance the regulatory and enforcement powers for regulators in relation to FMI entities. Schedule 3 of the bill redistributes powers of the Minister to ASIC which have already been delegated to ASIC through Ministerial Powers (ASIC) Delegations 2021.[69]

1.66The amendments in Schedule 2:

introduce a registration requirement for domestic CS facility licensees;

for ASIC-declared widely held market bodies, ensure Ministerial approval is required for changes in control;

increase the threshold for the Minister needing to approve proposals to acquire from more than 15 per cent to 20 per cent of the voting rights of a widely held market body; and

for individuals performing certain roles and functions in licenced entities, introduce a fit, proper, capable and competent standard.[70]

1.67This schedule also provides ASIC with a range of new powers to:

determine whether a CS facility or another overseas financial market has a material connection with Australia, as well as the power to request information to make such a determination, in order to provide certainty for stakeholders about the scope of the Australian licencing regime;

take licencing action to safeguard the integrity of the licencing regime;

make declarations, such as whether an entity is a widely held market body or a declared financial market;

require an expert report in relation to licenced entities;

make banning orders against individuals who do not meet the fit, proper and competent person standards;

approve proposals to acquire more than 20 per cent of the voting rights in a domestically incorporated licensee (other than a widely held market body); and

make rules in respect of operators of licenced CS facilities and the participants of those facilities, including emergency rules.[71]

1.68Schedule 2 also streamlines ASIC’s existing directions powers and removes the limits on the period during which certain directions issued by ASIC are effective.[72]

1.69Certain supervisory and licencing powers that have previously sat with the Minister would be officially moved to ASIC and the RBA. As mentioned above, these powers are largely already delegated to ASIC through a Ministerial delegation instrument. A full list of the powers delegated, the relevant sections of the Corporations Act and which agency the powers are delegated to is included in the EM on pages 89 to 92.[73]

Climate-related financial disclosures – Schedule 4

1.70Schedule 4 contains the new climate-related financial disclosures regime.

1.71As mentioned above, this regime would require entities of a certain size that lodge Corporations Act Chapter 2M financial reports, or have emissions reporting obligations under the NGER scheme, to also make climate disclosures in accordance with the sustainability standards set out by the AASB. These new obligations will be phased in over a four-year period.[74]

1.72As at the time of writing, the sustainability standards had not been finalised. The AASB has released an Exposure Draft of its proposed sustainability standards: Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information. This Exposure Draft was open for public comment until 1March2024.[75]

Details of new disclosure requirements

1.73The bill introduces several new definitions to the Corporations Act while also leaving some terms to be defined by the AASB sustainability standards. Of particular note are the new definitions of ‘greenhouse gas emissions’ which are divided into four categories by the AASB standards:

Scope 1 greenhouse gas emissions – direct emissions that occur from sources owned or controlled by the entity.

Scope 2 greenhouse gas emissions – indirect emissions that occur from the generation of purchased or acquired electricity, steam, heating or cooling consumed by an entity. These emissions occur at the facility where the electricity is generated.

Scope 3 greenhouse gas emissions – indirect emissions that occur within the value chain of the entity, including both upstream and downstream emissions and financed emissions.

Financed emissions – ‘the portion of emissions of an investee or counterparty attributed to the loans and investments made by an entity to the investee or counterparty’.[76]

1.74As mentioned above, companies that are required to provide a financial report under Chapter 2M of the Corporations Act will now be required to also make climate disclosures, called a sustainability report. This report will be considered part of the entity’s annual general meeting (AGM).[77]

1.75An entity’s sustainability report will consist of the following:

the year’s climate statement and notes to this statement;

any statements as required by the regulations and any notes to these required statements; and

a director’s declaration about the compliance of the statement and its notes with the relevant sustainability standards.[78]

1.76The requirement to prepare a sustainability report will be phased in for different sizes of entity. The definitions of different kinds of entities and when they are required to begin sustainability reports are included in the table below.

Table 1.1Sustainability reporting entities

Entity type


Time for reporting

Group 1

The entity meets two of the following three criteria:

Consolidated revenue equal or greater than $500m

Consolidated gross assets equal or greater than $1b

500 or more employees;


The entity is a registered corporation under the NGER Act.[79]

Must prepare a sustainability report in the first transitional period (see below).

Group 2

The entity meets two of the following criteria:

Consolidated revenue equal or greater to $200m

Consolidated gross assets equal or greater than $500m

250 or more employees


The entity is a registered corporation under the NGER Act


The entity is an asset owner with a value of assets is equal to or greater than $5b.

Must prepare a sustainability report in the second transitional period.

Group 3

The entity meets two of the following criteria

Consolidated revenue equal or greater than $50m

Consolidated gross assets equal or greater than $25m

100 or more employees

On or after 1 July 2027.

Source: EM, pp.168–170. Note: use of ‘m’ is reference to millions and ‘b’ is to billions.

1.77Due to the potential for different starting dates for the bill, start dates for the transitional periods are as follows:

First transitional period: 1 January 2025 or 1 July 2025 (depending on commencement of the bill) to 30 June 2026. If the bill has not commenced by 1 July 2025 there will be no first transitional period.

Second transitional period: 1 July 2026 to 30 June 2027.[80]

1.78The bill includes a modified liability approach for the commencement of sustainability reporting for the first three years of the scheme. This will ‘ensure that reporting entities, auditors and directors are allowed time to develop experience and practice to report in line with the required standards’.[81]

1.79Under the bill, liability for misleading, deceptive and other conduct in relation to uncertain parts of the climate statement within the sustainability report are temporarily protected and are called ‘protected statements’. A protected statement is any statement in a sustainability report made within the first three years of the scheme, or in an auditor’s report or in another review of such a sustainability report that is about any of the following matters:

Scope 3 greenhouse gas emissions, including financed emissions;

a transition plan; or

sustainability analysis made in those sustainability reports.[82]

1.80During this three-year period, no legal action is able to be brought against a person or entity in relation to these protected statements. This will not prevent ASIC from taking action for misleading and deceptive conduct during this time or other criminal proceedings being brought.[83]

Audit and Assurance

1.81The bill makes amendments to the ASIC Act to allow the AASB to make sustainability standards. These standards are then given legal effect by amendments to the Corporations Act.[84]

1.82As with the requirements relating to financial reports under the Corporations Act, sustainability reports will be subject to audit. The auditor of these reports will have the same obligations as the auditor of the financial reports of an entity.[85] The EM states that, for the avoidance of doubt, even where an entity’s climate statement is only a statement that the company has no climate risks or opportunities, that statement will also require auditing.[86]

1.83The auditor is required to come to an opinion about whether an entity’s sustainability report complies with the Corporations Act, with sustainability standards and with the climate statement disclosure requirements. The auditor must also form an opinion about whether they have been given all the information and assistance necessary, and whether the entity has kept sufficient records for the audit.[87]

1.84The Auditing and Assurance Standards Board (AUASB) maintains the function to formulate auditing and assurance standards for sustainability.[88]


1.85As soon as practicable after 1 July 2028, a review of the legislation must be completed and a report on this review tabled in both Houses of Parliament.[89]

Schedule 5

1.86Schedule 5 contains consequential and transitional amendments to the bill.


1.87As mentioned above, the FMI regulatory framework reforms contained in the bill have been recommended by various reports to Government going back to 2014.[90] The EM has collected the executive summaries and recommendations of these reports and included them as Attachment 1 to that document.[91]

1.88In addition, Treasury completed a consultation process on the FMI reforms, including an exposure draft of the legislation and regulations. This consultation received 15 submissions, 12 of which were public submissions.[92]

1.89Treasury has also completed several consultations for the climate-related financial disclosures regime contained in Schedule 4 of the bill. The most recent of these was the consultation on the exposure draft legislation, which was completed on 9February 2024 and received 128 submissions, including seven confidential submissions.[93]

1.90Previous consultations were:

Climate-related financial disclosure, completed between 12 December 2022 and 17 February 2023 and receiving 194 submissions;[94] and

Climate-related financial disclosure: Second consultation, completed between 27June 2023 and 21 July 2023 and receiving 146 submissions.[95]


Financial market infrastructure regime

1.91There is some variation of the commencement dates for each schedule of the bill that implements the new FMI regime, as shown in the table below:

Table 1.2Commencement dates for the FMI regime


Commencement date



7 days after Royal Assent

Sections 60–66 (commencement of these sections is contingent on the passage of other Acts)


Parts 1–10, 12 and 13: 7 days after Royal Assent

Part 11: 6 months after Royal Assent

Part 14 (commencement is contingent on the passage of another Act)


7 days after Royal Assent



The day after Royal Assent


Source: EM, p. 3.

Climate-related financial disclosures

1.92Schedule 4 would commence the day after Royal Assent of the bill. The entities affected by the provisions of the bill would be required to begin reporting from financial years on or after 1 January 2025. Smaller affected entities not initially required to report will be phased in over a number of years.[96]

Financial impact

1.93According to the EM, the bill will have a nil financial impact.

Legislative scrutiny

1.94As at the time of writing, the Senate Standing Committee on the Scrutiny of Bills had not commented on the bill.

Human rights implications

1.95The Parliamentary Joint Committee on Human Rights made no comment on the bill in its Scrutiny Report 3 of 2024.

1.96That said, the EM includes a discussion of the human rights implications of the bill.

Schedules 1 to 3 and 5: FMI reforms

1.97The EM states that Schedules 1 to 3 (the schedules dealing with FMI infrastructure) engage the following human rights matters as set out in the guidance of the Parliamentary Joint Committee on Human Rights’ Guidance note 2: Offence Provisions, civil penalties and human rights:

the right to a fair trial (articles 14 and 15 of the International Covernant on Civil and Political Rights (ICCPR));

the imposition of strict liability in relation to some criminal offences;

the right against self-incrimination (article 14(3) of the ICCPR);

the right to work (article 6(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR));

the right to protection from arbitrary or unlawful interference with privacy (article 17 of the ICCPR); and

the right to freedom of expression and to seek information (article 19(2) of the ICCPR).[97]

Right to a fair trial, imposition of strict liability and the right against self-incrimination

1.98The FMI reforms in Schedules 1 and 2 engage the right to a fair trial as they contain civil and criminal offences for breaches and place an evidentiary burden on the defendant.[98]

1.99Although there is a domestic distinction between civil and criminal offences in Australia, a ‘criminal’ offence is defined differently under international law. It is therefore important to determine whether a civil penalty under domestic law amounts to a criminal penalty for the purposes of determining whether the offence in question engages human rights matters.[99]

1.100The EM states the civil penalties contained within Schedules 1 to 3 do not amount to criminal offences under international law as the provisions are regulatory and disciplinary in nature, rather than punitive, and aim to encourage compliance. The judiciary also has discretion about the imposition of penalties, taking into account various factors such as the nature of the contravening conduct and the size of the organisation involved. The civil penalties available to be imposed are also relatively small in size and there is no sanction of imprisonment for non-payment.[100]

1.101The EM also states that the criminal penalties in Schedules 1 and 2 are compliant with international human rights law due to their consistency with other Australian criminal laws, the fact that an impartial court will preside over criminal proceedings brought, and the need for criminal sanctions due to the large impacts on the Australian finance system and broader economy that contravention of these provisions would cause.[101]

1.102Proposed section 821K(2) of the Corporations Act introduces a strict liability offence for individuals who do not provide the RBA with written notice prior to the appointment of an external administrator to a body corporate. The EM states that this strict liability offence is appropriate due to the serious nature of the offence and the need to deal with such offences expeditiously in order to maintain public confidence in the financial system.[102]

1.103The EM goes on to state that this section meets the requirements of the Attorney-General’s Guide to Framing Commonwealth Offences as:

the maximum penalty for the offence does not exceed the maximum allowable penalty for strict liability offences;

the harm caused by breach of this section is so significant to financial stability that fault should not be an element of the offence; and

the offence is not punishable by imprisonment.[103]

1.104As the offence is of strict liability rather than absolute liability, the defence of honest and reasonable mistake of fact is still open to the defendant in such a proceeding.[104]

1.105In Schedules 1 and 2, there are several offences that place the burden of proof on a defendant who wishes to raise a defence to these offences. Many of these offences relate to disclosing information or not implementing directions from the Regulators. This engages with the human rights protected by article 14(2) of the ICCPR, the right of presumed innocence.[105]

1.106The EM states that the reversal of burden of proof in relation to these offences is appropriate, proportionate and reasonable because:

in the case of the listed offences, it will be within the defendant’s knowledge about whether they received the information which was disclosed or how the conduct was authorised;

it would be more difficult for the prosecution to disprove these matters rather than for the defendant to establish them;

it ensures that directions given by a Regulator subject to secrecy are not disclosed in a way that causes harm; and

the public benefit of the maintenance of financial infrastructure outweighs the right to silence in these situations.[106]

Merits review

1.107Within Schedules 1 and 2 (proposed Part 7.3B of the Corporations Act), there are some decisions that are exempt from merits review, engaging with article 14 of the ICCPR, being the right to procedural fairness and due judicial process. The exempt decisions are those which are consistent with the Administrative Review Council’s publication What Decisions Should be Subject to Merits Review?[107]

1.108These decisions do not engage the human rights contained in article 14. The EM states that these decisions are within the crisis management regime and, as such, relate to financial decisions with a significant impact on the Australian financial system and the public interest. These sections require the RBA, the Minister and ASIC to be able to act efficiently and efficiently to protect the financial system, and as such are an allowable exemption from merits review.[108]

Right to work

1.109Article 6 of the ICESCR guarantees the right to work, and provides that ‘everyone must be able to freely accept or choose their work and includes a right not to be unfairly deprived of work’.[109]

1.110Within Schedule 2, proposed sections 853H, 853K, 853L and 852M engage with this right. These sections relate to banning individuals from taking part in FMI institutions, including for failing a fit and proper person test. The EM states that these sections are appropriate and do not limit the operation of article 6 of the ICESCR for the following reasons:

participation in the Australian financial market is a privilege and not a right;

the inclusion of a fit and proper person test for financial market licensees is necessary to protect Australia’s financial system stability; and

a person entering employment with an FMI entity will do so with the knowledge that ASIC, acting in a regulatory capacity, will have regard to matters relating to non-compliance.[110]

Information gathering and sharing

1.111Article 14(3) of the ICCPR relates to the right against self-incrimination. This right is potentially engaged by the RBA’s new information-gathering powers contained in the bill. These powers may also engage article 17 of the ICCPR, being the right to protection from unlawful or arbitrary interference with privacy.[111]

1.112Under the bill, the RBA can request CS facility licensees to provide critical information about the operations of domestic CS facilities. While this provision may engage the right against self-incrimination, it is balanced by the limitation that any incriminating information obtained by the RBA with these powers cannot be used against an individual in criminal proceedings.[112]

1.113The EM also notes that any information sharing between ASIC and the RBA during a crisis will be ‘protected information’ and will be subject to strict confidentiality protections.[113]

1.114Schedule 1’s powers also engage the rights to freedom of expression and freedom to seek information under the ICCPR due to the secrecy provisions in the bill, which allow persons to disclose protection information that would normally be subject to secrecy determinations. The EM states that these sections are proportionate to the objectives of preserving the stability of the Australian financial system and resolving a crisis in FMI.[114]

Schedule 4 — Climate change reporting regime

1.115 The EM states that this schedule is compatible with human rights and freedoms. The strict liability offences contained within the bill may engage with the right to a fair trial (ICCPR articles 14 and 15).

1.116All strict liability offences contained within this schedule meet conditions listed in the Attorney-General’s Department’s Guide to Framing Commonwealth Offences, Infringement Notices and Enforcement Powers. As mentioned above, the imposition of strict liability offences, as opposed to absolute liability offences, still preserves some defences for the accused. This provides some checks and balances on these provisions.[115]

1.117The EM also states that the imposition of strict liability offences is appropriate and necessary in order to deter misconduct and reduce non-compliance. In turn, this will maintain public confidence in the regime.[116]

Regulatory impact

1.118The EM offered no discussion about a Regulatory Impact Statement of the amendments contained within the bill.

Conduct of the inquiry

1.119The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by 11April2024.

1.120The committee received 25 submissions as well as answers to questions on notice, which are listed at Appendix 1.

1.121The committee held one public hearing for the inquiry. The names of witnesses who appeared at the hearing can be found at Appendix 2.


1.122The committee thanks all individuals and organisations who assisted with the inquiry, especially those who made written submissions and participated in the public hearing.

Note on references

1.123In this report, references to the Committee Hansard are to the Proof Hansard and page numbers may vary between Proof and Official Hansard transcripts.


[1]Explanatory Memorandum (EM), p. 1.

[2]EM, p. 1.

[3]EM, p. 5.

[4]EM, p. 5.

[5]Council of Financial Regulators (CFR), About, (accessed 3April2024).

[6]Council of Financial Regulators (CFR), About, (accessed 3 April 2024).

[7]Council of Financial Regulators (CFR), Financial Market Infrastructure Regulatory Reforms: Advice to Government from the Council of Financial Regulators, July 2020, p. 5.

[8]Council of Financial Regulators (CFR), Financial Market Infrastructure Regulatory Reforms: Advice to Government from the Council of Financial Regulators, July 2020, p. 5.

[9]Council of Financial Regulators (CFR), Financial Market Infrastructure Regulatory Reforms: Advice to Government from the Council of Financial Regulators, July 2020, p. 5.

[10]Council of Financial Regulators (CFR), Financial Market Infrastructure Regulatory Reforms: Advice to Government from the Council of Financial Regulators, July 2020, p. 2.

[11]Council of Financial Regulators (CFR), Financial Market Infrastructure Regulatory Reforms: Advice to Government from the Council of Financial Regulators, July 2020, p. 6.

[12]The Hon Dr Jim Chalmers MP, Treasurer, and the Hon Steven Jones MP Assistant Treasurer and Minister for Financial Services, ‘Modernising Australia’s Financial System’ Media release, 14December 2022.

[13]EM, p. 8.

[14]EM, p. 8.

[15]EM, p. 8.

[16]EM, p. 9.

[17]Australian Securities and Investments Commission (ASIC), Licensed domestic financial markets operating in Australia, (accessed 4April2024)

[18]EM, p. 9.

[19]EM, p. 9.

[20]EM, pp. 9–10.

[21]To do things such as granting licences, giving directions and promoting compliance, etc.

[22]EM, p. 10.

[23]EM, p. 11.

[24]EM, p. 11.

[25]The RBA categorises CS facilities as either systemically important, important, or neither. More stringent reporting is required from systemically important CS facilities.

[26]EM, p. 10.

[27]EM, p. 11.

[28]EM, p. 11.

[29]EM, p. 11.

[30]The Hon Dr Jim Chalmers MP, Treasurer, House of Representatives Hansard, 27 March 2024, p. 2.

[31]EM, pp. 138–139.

[32]EM, p. 138.

[33]EM, p. 1.

[34]EM, p. 7.

[35]EM, p. 14.

[36]EM, p. 18.

[37]EM, p. 18.

[38]EM, pp. 18–19.

[39]EM, pp. 15–16.

[40]EM, p. 16.

[41]EM, pp. 16–17.

[42]EM, p. 17.

[43]EM, p. 22.

[44]EM, p. 21.

[45]EM, p. 22.

[46]EM, p. 22.

[47]EM, pp. 22–23.

[48]EM, p. 23.

[49]EM, p. 23.

[50]EM, p. 65.

[51]EM, p. 63.

[52]EM, p. 64.

[53]EM, p. 69.

[54]EM, p. 70.

[55]EM, p. 70.

[56]EM, p. 84.

[57]EM, p. 70.

[58]EM, pp. 70–71.

[59]EM, p. 74.

[60]EM, p. 70.

[61]EM, p. 74.

[62]EM, p. 75.

[63]EM, p. 75.

[64]EM, p. 79.

[65]EM, p. 79.

[66]EM, p. 71

[67]EM, p. 81.

[68]EM, p. 88.

[69]EM, p. 88.

[70]EM, pp. 88–89.

[71]EM, p. 89.

[72]EM, p. 89.

[73]EM, pp. 89–92.

[74]EM, p. 137.

[75]AASB, Exposure Draft SR1Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information, October 2023, (accessed 19 April 2024).

[76]EM, p. 141.

[77]EM, pp. 141–142.

[78]EM, p. 139.

[79]Registered schemes, registrable superannuation entities and retail CCIV entities are not Group 1 entities even if they meet these requirements: EM, p. 169.

[80]EM, pp. 168–170

[81]EM, p. 140.

[82]EM, pp. 171–172.

[83]EM, p. 171.

[84]EM, p. 165.

[85]EM, p. 159.

[86]EM, p. 160.

[87]EM, pp. 160–161.

[88]EM, p. 166.

[89]EM, p. 174.

[90]EM, pp. 3–4.

[91]See EM, pp. 189–258.

[92]The Treasury, Financial market infrastructure regulatory reforms, 9 February 2024, (accessed 19 April 2024).

[93]The Treasury, Climate-related financial disclosure: exposure draft legislation, 9 February 2024, (accessed 19 April 2024).

[94]The Treasury, Climate related financial disclosure, 17 February 2023, (accessed 19 April 2024).

[95]The Treasury, Climate related financial disclosure: Second consultation, 21 July 2023, (accessed 19 April 2024).

[96]EM, p. 5.

[97]EM, p. 178.

[98]EM, pp. 178–179.

[99]EM, p. 179.

[100]EM, pp. 179–180

[101]EM, p. 180.

[102]EM, p. 181.

[103]EM, p. 181.

[104]EM, p. 181.

[105]These offences and the proposed sections of the Corporations Act they are contained in are listed in the EM, pp. 181–182.

[106]EM, p. 182.

[107]EM, p. 182; Administrative Review Council, ‘What Decisions Should be Subject to Merits Review?’ 1999, available at: (accessed 18 April 2024)

[108]EM, pp. 182–183.

[109]EM, p. 183.

[110]EM, p. 183.

[111]EM, pp. 183–184.

[112]EM, p. 184.

[113]EM, p. 104.

[114]EM, p. 184.

[115]EM, p. 186.

[116]EM, pp. 186–187.