Insurance commission arrangements
The review did not find any evidence of the kind of systemic abuses uncovered in the United States recently. However, ASIC did identify some deficiencies in relation to Australian brokers' management of conflicts of interest and disclosure of remuneration. The review also highlighted the inherent conflict in the practice of paying volume bonuses or other types of contingent remuneration to brokers.
Fit and proper persons
The Australian Prudential Regulation Authority (APRA) has released for consultation revised draft “fit and proper” standards and guidance notes for authorised deposit taking institutions, general insurance and life insurance institutions.
The package outlines proposals for APRA-regulated institutions to:
- be responsible for assessing the fitness and propriety of persons to act as a director, senior manager, auditor or actuary;
- develop and document appropriate policies for making fit and proper assessments;
- require responsible persons to co-operate in the process of gathering information for such assessments; and
- inform APRA of changes in responsible persons.
APRA’s Chairman, Dr John Laker, said that the proposed standards make clear that it is the responsibility of each APRA‑regulated institution to ensure that persons who fill positions of responsibility are fit and proper. APRA will only become involved when it has specific concerns about an individual and the institution concerned cannot or will not take action to overcome the problem.
Comments close on 24 August 2005.
Whistleblowers in the public health sectorThe Bundaberg Hospital Commission of Inquiry has released a Discussion Paper on Whistleblowers in the Queensland Public Health Sector. Whilst not forming a final view it calls for comments on allowing QH employees to comment on matters of public interest and protecting whistleblowers who provide information to parliamentarians or the media.
Inquiry into corporate responsibility
The Parliamentary Joint Committee on Corporations and Financial Services will inquire into Corporate Responsibility and Triple-Bottom-Line reporting, for incorporated entities in Australia, with particular reference to:
In inquiring into these matters, the Committee will consider both for profit and not-for-profit incorporated entities under the Corporations Act. It will report on 29 November.
Special general meetings: abolition of 100 member rule
The draft Corporations Amendment Bill (No2) 2005 has now passed through the parliamentary joint committee on corporations and financial services inquiry. The Committee has released its report on the exposure draft and recommended the abolition of the 100-member rule in favour of the 5 percent requirement.
The key majority quote:
The Committee remains of the view that the 100 member rule should be abolished. While there is little history of the rule being abused, its potential for abuse remains clear. In the Committee's view, it is not necessary for parliament to wait until some quota of abuses is observed, before reforming the provision. The Committee considers that sufficient other mechanisms exist for smaller shareholders to question company directors and influence company policy. Furthermore, the Committee is aware that any vexatious use of the 100 member rule will result in substantial costs to the company, and that these must be reflected in poorer investment returns for shareholders.
The Committee notes the proposals for reforming the rule rather than repealing it. However, the Committee considers that the 5% rule alone is sufficient to ensure that, in the extraordinary circumstances which would justify an extraordinary meeting, shareholders could requisition a meeting. This would probably (for practical purposes) require the recruitment of at least one institutional shareholder – and this in itself provides a safeguard against frivolous use of s. 249D.
If adopted by the Government, it will mean that anyone wanting a special general meeting must have at least 5 percent of the total voting shares of the company.
For mutuals the committee recommends the number of members required to call a meeting be 1% not 5%.(Para 2.23)
The committee also considered the number of members required to list a resolution at a general meeting. The draft Bill reduces the number to 20. The Committee thought the number was too low but proposed that if the number was enacted that it be reviewed after one year.
Trade promotions: misrepresenting prizes
What Does "100 Grand" Mean to You? (via Blawg Review) recounts the story of a woman who entered a US radio competition for "100 grand" and who in fact won a chocolate bar with that title and not cash...she sued. The article also refers to the Pepsi Harrier jet competition and the Toy Yoda (not Toyota) case.
The basic principle is that if you are running a competition you must be very careful to ensure there aree no ambiguities in what a person is required to do to win and that the prizes to be won are accurately described.
The most hard fought court battle was McDonald's 1999 'Monopoly McMatch & Win' promotion which resulted in a lengthy trial won by McDonalds over whether 1998 vouchers were valid in the 1999 competition.
FSR dollar disclosure relief extended
ASIC has extended transitional relief from the
dollar disclosure requirements for issuers of deposit products and
general insurers from 1 July 2005 to 1 July 2006. The extension of the
relief is provided under ASIC Class Order [CO 05/683].
The extension follows the Government review of product disclosure statement (PDS) requirements for basic deposit products and general insurance products as part of the Refinements to Financial Services Regulation Proposals Paper released in May 2005.
ASIC has also provided transitional relief until 1 July 2006 from two other specific disclosure requirements in Part 7.9 of the Corporations Act 2001 (the Act) affecting deposit products – interest rates in PDSs and termination values in periodic statements. This relief is provided in Class Order [CO 05/681].
ASIC has provided transitional relief for disclosure of interest rates to issuers of deposit products to allow for the changes that may arise from the Government's Refinements Package and the finalisation of ASIC policy in the area.
Credit card fraud update: will Australia get security breach notification laws?
As the impact of the credit card security fraud on Australian cardholders becomes clearer (see The Age today), questions are being asked why Australians do not deserve the same kind of protection against data theft as Americans.
A number of US States have adopted security breach notification laws which force companies to tell customers of the theft of their personal data. This June 2005 Alert from Proskauer Rose gives a good overview of the US position.
The argument that banks should instantaneously report to the customer all security breaches is a matter the industry will continue to consider, but any automatic reporting requirement must be evaluated against the need for customer convenience, materiality and system integrity.
UPDATE 28 June: The Australian Bankers’ Association (ABA) is establishing an Information Security Taskforce to examine whether the current arrangements with respect to advice on breaches of security
of customer information can be improved.
The review will commence by 1 July and the ABA will be making a further statement about outcomes towards the end of 2005.
Credit card security breach
According to ZDNet the largest ever data security breach has hit MasterCard and Visa:
MasterCard International on Friday said information on more than 40 million credit cards may have been stolen.
Of those exposed accounts, about 13.9 million are for MasterCard-branded cards, the company said in a statement. Some 20 million Visa-branded cards may have been affected and the remaining accounts were other brands, including American Express and Discover.
MasterCard and Visa both say they have notified their member banks of the specific accounts involved so the banks can take action to protect cardholders...
The breach occurred at CardSystems Solutions in Tucson, Arizona, a third-party processor of payment data, according to a MasterCard statement. An intruder was able to use security vulnerabilities to infiltrate the CardSystems network and access the cardholder data, MasterCard said.
UPDATE 21 June: ABC News says 120,000 Australians affected
Superannuation trustee licensing
Since 1 July 2004 persons or bodies corporate must obtain a licence before acting as a trustee of an APRA regulated superannuation entity. Persons or bodies corporate that were trustees at 30 June 2004 have until 30 June 2006 to obtain a licence.
As the transition period comes to a close APRA has issued FAQ's.