Australian Regulatory Compliance Review

ACCC authorises direct marketing code

The ACCC has announced that it has authorised the latest version of the Australian Direct Marketing Association (ADMA) Code of Practice.

The Code contains standards of marketing by ADMA members in respect of telemarketing, ecommerce and privacy. It also establishes an independent complaints body.to hear consumer complaints about members.

Review of Franchising Code of Conduct

The Minister for Small Business and Tourism has announced that the Australian Government will review the disclosures section of the Franchising Code of Conduct.

The disclosures section includes information requirements that franchisors must disclose to prospective franchisees, before deciding to purchase a franchise. The review will consider all available evidence and make any necessary recommendations to improve the Code.

The mandatory Franchising Code of Conduct was introduced in 1998 to improve fair trading in the franchising sector. The Code is supported by the Office of the Mediation Adviser to ensure speedy resolution of disputes.

Submissions should be made by August 15 and can be sent to Review of Franchising Code, c/o Office of Small Business, GPO Box 9839 CANBERRA ACT 2601.

Spam Act review

The Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, has tabled in Parliament a report on the review of the Spam Act 2003.

The review found that the Australian Communications and Media Authority (ACMA) has undertaken effective and appropriate enforcement of the Spam Act.

Key findings include:

• the percentage of worldwide spam originating from Australia has decreased since the enactment of the Spam Act;
• The Spam Act has been actively enforced by ACMA and the first prosecution under the legislation was successfully undertaken in the Federal Court in April 2006 (against Clarity1). In addition, ACMA has issued 10 formal warnings and thirteen fines and infringement notices of more than $20, 000 to businesses for email and SMS marketing in contravention of the Spam Act. ACMA has required more than 600 businesses to make changes to their email and SMS marketing practices to comply with the Act;
• Despite Australia’s activity against spam, it remains a problem. It is estimated that between 60 per cent and 80 per cent of worldwide email traffic is spam, and spam sent through other media, such as SMS, is on the rise.
• The majority of spam received in Australia is of overseas origin, and it has become apparent that spam has become increasingly malicious—either attempting financial fraud, or carrying viruses, trojans or other code to compromise computer security.
• The review found that the current coverage of the Spam Act, as it applies to commercial messages, is appropriate. There is no need to extend the prohibition to capture all unsolicited messaging.
• The Government will consult on extending regulation to faxes.

ALSO SEE: Internet Industry Spam Code of Practice

Technology for regulatory compliance processes

Microsoft has published a Regulatory Compliance Planning Guide which maps processes to the key regulatory obligations of a business and then suggests Microsoft technology (of course) for performing those processes.

It identifies the key processes as follows:
•    Document Management
•    Business Process Management
•    Project Management
•    Risk Assessment
•    Change Management
•    Network Security
•    Host Control
•    Malicious Software Prevention
•    Application Security
•    Messaging and Collaboration
•    Data Classification and Protection
•    Identity Management
•    Authentication, Authorization, and Access Control
•    Training
•    Physical Security
•    Vulnerability Identification
•    Monitoring and Reporting
•    Disaster Recovery and Failover
•    Incident Management and Trouble-Tracking

Even though it refers to US laws and uses Microsoft resources and products only this is a useful framework for IT managers and compliance officers.

Wind farms and parrots: environmental law and business

The recent decision by Federal Environment Minister Ian Campbell to veto a $220million wind farm in Victoria's Gippsland because it posed a risk to the small (total of 200) orange-bellied parrot population seemed like a developer's worst dream: a combination of regulation gone mad, environmental extremists and political intrigue.

But what was the legal basis for the decision? This post by ozelaw explains the Environment Protection and Biodiversity Conservation Act.

Consumer Credit Code ecommerce amendments

The Consumer Credit and Trade Measurement Amendment Act 2006 was passed by Queensland Parliament on 21 April 2006. Please note that the e-commerce amendments commence on proclamation and this has not yet occurred. The commencement of the e-commerce amendments is likely to occur in early August to allow sufficient time for all States to complete their necessary processes.

FSR compensation arrangement relief extended

ASIC has extended the transitional compensation arrangements applying under s 912B of the Corporations Act 2001 from 30 June 2006 to 31 December 2006.[CO 06/495]

Section 912B of the Corporations Act requires an Australian financial services licensee who provides financial services to retail clients to have in place arrangements to compensate those persons for loss or damage suffered because of breaches of obligations under Chapter 7 of the Corporations Act.

The Government is still considering what measures are needed to assist with implementation of s912B.

The current transitional arrangements are:

• professional indemnity insurance requirements continue to apply to most responsible entities of managed investment schemes;
• dealers and advisers in investment products remain subject to security deposit requirements;
• insurance brokers remain subject to the professional indemnity insurance requirements that applied under the superseded Insurance (Agents and Brokers) Act 1984; and
• market operators continue to maintain fidelity fund style compensation arrangements (and ASX continues to operate the National Guarantee Fund).

ACMA setting up Do Not Call Register

The Australian Communications and Media Authority (ACMA) has announced it is setting up a Do Not Call Register to protect individuals from unsolicited telemarketing phone calls. The Register will allow people to opt out of receiving such calls. There will be no cost for submitting a telephone number to the Register.

The Register is expected to be up and running in 2007. ACMA is currently drafting an implementation plan for its introduction.

ACMA is also setting minimum national contact standards to regulate telemarketing calls. These standards will cover permitted calling hours, minimum information requirements and termination of calls.

The standards will apply to all telemarketers, including organisations that are exempted from the Do Not Call Register arrangements.

Corporate social responsibility report

The Parliamentary Joint Committee on Corporations and Financial Services has delivered its report following its inquiry into corporate responsibility.

On the issue of whether company directors should be obliged to consider the interests of parties other than shareholders, the committee was of the view that the Corporations Act permits directors to have regard for the interests of stakeholders other than shareholders, and that amendment to the Corporations Act is not required.

The committee takes the view that although it is not appropriate to mandate the consideration of stakeholder interests into directors’ duties, or to mandate sustainability reporting, there is a need to seriously consider options to encourage greater uptake and disclosure of corporate responsibility activities.

The report contains 29 recommendations in that respect.

Do Not Call Register Bills passed by Senate

The Do Not Call Register Bills have been passed by the Senate.

The Bills are now waiting Assent. The are not expected to commence until early 2007.

FSR permanent relief granted for disclosure of termination values and interest rates for deposit products

ASIC has announced new class order relief which simplifies certain disclosure requirements for issuers of deposit products provided certain conditions are met.

Class Order [CO 06/476] varies Class Order [CO 05/681] by granting: 

• permanent unconditional relief to issuers of deposit products from the requirement to include termination values in periodic statements; and
• permanent conditional relief to issuers of deposit products from the requirement to disclose interest rates in Product Disclosure Statements (PDSs).

Relief from disclosure of termination values is available provided:
• you give a written notice to depositors or display a notice at branches and on your website explaining how a person who holds a deposit product may find out the termination value of the deposit product at the time of an inquiry;
AND
•you have in place means by which the holder may find out the current termination value, being means that are simple and involve no charge imposed by the issuer or its associates, and little inconvenience to the holder.

Relief from the requirement to disclose interest rates in PDSs for all deposit products is given on the following conditions:
• The PDS clearly and prominently states how any person (including prospective applicants) may ascertain the interest rate at any time; and
• The means by which any member of the public may ascertain the interest rate are simple and involve no charge and little inconvenience to them.

The effect of this relief is that interest rate changes will not require a formal amendment (by SPDS) or replacement of a part of a PDS and lodgement of an in-use notice.

FSR dollar disclosure transitional relief extended for non-basic deposit products

ASIC has extended class order relief from the dollar disclosure requirements for issuers of non-basic deposit products.

 CO 06/476 varies CO 05/683 Dollar disclosure: further transitional relief by granting an extension of transitional relief to issuers of deposit products from the dollar disclosure requirements from 1 July 2006 to 31 March 2007.

Since December 2005 when the Government excluded basic deposit products from the PDS regime, only non-basic deposit products have been subject to the dollar disclosure requirements.

In general, "non-basic deposit products" are term deposits that must be held for at least two years and do not offer "at call" termination in less that seven days.

As the Government did not exclude non-basic deposit products from the PDS regime, the current transitional relief from the dollar disclosure regime for non-basic deposit products was due to expire on 30 June 2006. While ASIC expects issuers of non-basic deposit products to comply with the dollar disclosure regime as soon as practicable, it has granted a short extension of the transitional relief (until 31 March 2007) to allow an orderly transition to the new regime. 

The Corporations Amendment Regulations 2004 (No. 6) 2004 No. 149 require licensees and product issuers to disclose various fees, benefits, costs and interests as dollar amounts in statements of advice, product disclosure statements and periodic statements unless they obtain an ASIC exemption.

CO 05/683 gave relief for deposit products, non-cash payment products and general insurance.

In December 2004 ASIC released its policy PS182 regarding dollar disclosure obligations. Under the dollar disclosure provisions, providing entities and product issuers will be obliged to disclose various fees, benefits, costs and interests as amounts in dollars in Statements of Advice (SOAs), Product Disclosure Statements (PDSs), and periodic statements, unless ASIC makes a determination that dollar disclosure is not possible.

Access Card update

Chair of the Access Card Consumer and Privacy Taskforce, Professor Allan Fels AO, has released the first discussion paper developed by the Taskforce on the health and social services access card.

The Discussion Paper outlines the Government's proposal for the new access card and discusses some of the issues that require public consideration and debate.

The Taskforce has been established by the Government to provide independent advice directly to the Minister for Human Services about how consumers will use the card and the subsequent privacy considerations. It expects to release further Discussion Papers during the current consultation period.

Professor Fels said the Taskforce had identified key questions which need to be immediately addressed:

• how any new card can be prevented from evolving into a national identity card
• the administrative or legislative basis upon which the new card should be established
• the impact on personal privacy of introducing an access card
• the consumer benefits or otherwise of having an access card

Submissions on this Discussion Paper can be made up to 27 July.

PS I have set up a new Access Card category (see right hand column) so that you can see all posts on the one page.

Do Not Call Register Bills update

The Do Not Call Register Bills have been passed by the House of Representatives. They now pass to the Senate where the Senate Environment, Communications, Information Technology and the Arts Legislation Committee is due to report on 19 June.

Westpoint promissory notes not regulated

The Court of Appeal of the Supreme Court of Western Australia has rejected ASIC's appeal against the decision of trial judge Justice Simmonds, that promissory notes issued by Emu Brewery (part of the now collapsed Westpoint group) with a face value of at least $50,000 were not debentures for the purposes of the Corporations Act. (ASIC v Emu Brewery Mezzanine Limited. Now available online as PDF)

 This means that the provisions of the Corporations Act relating to the issue of debentures, including the requirement for investors to receive a complying disclosure document, and a debenture trust deed and an independent trustee did not apply to the issue of promissory notes by Emu Brewery (and, by extension, other Westpoint companies involved in issuing promissory notes).

ASIC will ask that the Act will be reviewed to determine whether consumer protection in this area is more important than not imposing burdensome regulation on legitimate fundraisers.

 ASIC commenced proceedings against Emu Brewery in May 2004.

Justice Simmonds ruled on 19 November 2004 that the promissory notes were not debentures and that the promissory notes gave rise to interests in a managed investment scheme. His Honour did not find the representations in the information memoranda issued by Emu Brewery were misleading or deceptive.

Duties of managers

The Corporations and Markets Advisory Committee (CAMAC) has published its report on Corporate duties below board level (pdf). In recognition of the fact that many corporate decisions are made by managers, the report generally recommends aligning the liability of managers to that of directors.

CAMAC accepted 11 of the 12 recommendations of the HIH Royal Commission Report.

The report's recommendations include:

• application of the duties in ss 180 (care and diligence) and 181 (good faith and proper purpose) to directors and corporate officers and ‘any other person who takes part, or is concerned, in the management of that corporation’.
• extension of the prohibitions in ss 182 and 183 (dealing with improper use of corporate position or corporate information) beyond directors, other officers and employees of a corporation to ‘any other person who performs functions, or otherwise acts, for or on behalf of that corporation’. This is to ensure that a person who performs functions for a company cannot avoid these prohibitions, designed to protect the interests of a company and its shareholders, because that person is not technically an officer or employee
• for similar reasons, extension of the prohibitions in ss 1309 (providing false information to various parties, including a director, auditor or shareholder) and 1307 (falsifying or destroying corporate records) beyond officers and employees of a corporation to ‘any other person who performs functions, or otherwise acts, for or on behalf of that corporation’.

The report did not recommend there should be a general provision prohibiting individuals from acting dishonestly in connection with the performance of any statutory obligation imposed on a corporation.

Managers will be entitled to take advantage of the "business judgment" rule and be indemnified by the company to the same extent as directors.

Treasurer releases superannuation details

After the initial pleasant surprise at the extent of the superannuation reform on Budget night came the requests for detail particularly in respect of persons planning imminent retirement.

The Treasurer has now released details of transitional provisions to apply to the proposed $150,000 annual cap on post-tax contributions announced in A plan to simplify and streamline superannuation and the payment rules for people aged 65 and over.

The Government has decided that it will allow the cap to be averaged over three years to allow people to accommodate larger one-off payments.

Post-tax contributions made between 1 July 2005 and Budget night 9 May 2006 would not count towards the cap. This means that the 2005-06 cap of $150,000 will only apply for contributions made between 10 May 2006 and 30 June 2006.

Access card or National ID card?

The Australian Privacy Foundation says the proposed health services access card has all the features of the cancelled Australia Card and worse privacy dangers.

Queensland Budget 2006-07

Whilst the Queensland State Budget was focussed on infrastructure, there were some duty implications: new payroll tax, land tax and first home owners' vacant land transfer duty concessions were announced. Of course some pre-announced transfer duty increases will also start from 1 July.

ACCC loses application for special leave: multi-level marketing is not always pyramid selling

The ACCC has failed to overturn the the decision of the Full Court of the Federal Court in Australian Communications Network Pty Ltd v Australian Competition and Consumer Commission [2005] FCAFC 221 (25 October 2005).

The proceedings concerned the ACN scheme whereby people paid a fee of $499 plus GST to become representatives.

Access Card costings and privacy

The Human Services Minister Joe Hockey has released the business case prepared by KPMG for the health and social services access card.

Instead of the Advisory Board recommended by KPMG he has established an independent Consumer and Privacy Taskforce and appointed Professor Allan Fels, AO to chair it.

More

FPA Principles to Manage Conflicts of Interest.

The Financial Planning Association has adopted Principles to Manage Conflicts of Interest (pdf) in accordance with section 912A(1)(aa) of the Corporations Act.

FSR: things to check before 1 July 2006

Although FSR started on 11 March 2002, there are still requirements that have been deferred and have not yet come into force. The issues that have been deferred until 1 July 2006 are:

• compensation arrangements;
• dollar disclosure in PDS's (CO 05/683) ;
• stating termination values in deposit product periodic statements (CO 05/681); and
• disclosing interest rates in PDS's (CO 05/681) .

ASIC has not yet announced whether relief for these issues will extend beyond 1 July, become permanent or lapse.

Reform of personal property securities

There is a different system in each State of Australia for taking and registering security interests (including leases, hire purchase and retention of title arrangements) over most types of tangible and intangible personal property  (including livestock, crops, intellectual property and receivables) ranging from motor vehicles and boats to liquor licences, water rights, taxis and gaming machines.

Bur it now appears that a consensus exists for a unified national law and registry where substance will take precedence over form.

The Standing Committee of Attorneys-General has released an Options Paper (Pdf) for consultation.

Corporate and Financial Services Regulation Review.

The time for submissions in respect of the Consultation Paper entitled Corporate and Financial Services Regulation Review, released by the Parliamentary Secretary to the Treasurer has closed.

The paper covers the areas of financial services regulation, company reporting obligations, auditor independence, corporate governance, fundraising, takeovers, collective investments and dealing with regulators.

It is expected that, following consultation, new legislation will be introduced by the end of the year.

ASX Corporate Governance Review

ASX has released a report of listed public company compliance for 2005 with its corporate governance principles and recommendations.

The overall reporting level for all Recommendations (being the aggregate of actual adoption of the Recommendations and the ‘if not, why not’ exception reporting) increased to 88% from 84% in 2004.

An interesting aspect is the areas where companies did not comply and explained "why not":
• Recommendation 2.1 (A majority of the board should be independent directors) - 47% ‘if not, why not’ exception reporting
• Recommendation 2.4 (The board should establish a nomination committee) - 57% ‘if not, why not’ exception reporting
• Recommendation 9.2 (The board should establish a remuneration committee) - 38% ‘if not, why not’ exception reporting.