Document ID: chunk:federal_register_of_legislation:C2025C00182:section:12baa:p1
Version: federal_register_of_legislation:C2025C00182
Segment Type: section
Provision Reference: s 12BAA (pt 1/5)
Character Range: 62609–65338

12BAA  Definition of financial product

General definition of financial product
 (1) Subject to subsection (8), for the purposes of this Division, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:
 (a) makes a financial investment (see subsection (4));
 (b) manages financial risk (see subsection (5));
 (c) makes non‑cash payments (see subsection (6)).
 (2) Subject to subsection (8), for the purposes of this Division, a particular facility that is of a kind through which people commonly make financial investments, manage financial risks or make non‑cash payments is a financial product even if that facility is acquired by a particular person for some other purpose.
 (3) A facility does not cease to be a financial product merely because:
 (a) the facility has been acquired by a person other than the person to whom it was originally issued; and
 (b) that person, in acquiring the product, was not making a financial investment or managing a financial risk.

Meaning of makes a financial investment
 (4) For the purposes of this section, a person (the investor) makes a financial investment if:
 (a) the investor gives money or money's worth (the contribution) to another person and any of the following apply:
 (i) the other person uses the contribution to generate a financial return, or other benefit, for the investor;
 (ii) the investor intends that the other person will use the contribution to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated);
 (iii) the other person intends that the contribution will be used to generate a financial return, or other benefit, for the investor; and
 (b) the investor has no day‑to‑day control over the use of the contribution to generate the return or benefit.
Note 1: Examples of actions that constitute making a financial investment under this subsection are:
(a) a person paying money to a company for the issue to the person of shares in the company (the company uses the money to generate dividends for the person and the person, as a shareholder, does not have control over the day‑to‑day affairs of the company); or
(b) a person contributing money to acquire interests in a registered scheme from the responsible entity of the scheme (the scheme uses the money to generate financial or other benefits for the person and the person, as a member of the scheme, does not have day‑to‑day control over the operation of the scheme).
Note 2: Examples of actions that do not constitute making a financial investment under this subsection are:
(a) a person purchasing real property or bullion (while the property or bullion may generate