Australian Regulatory Compliance Review

Insurance slogan misleading

Insurance Australia Group (IAG) will make changes to advertising materials and policy documents for comprehensive car insurance in response to concerns raised by ASIC.

IAG has clarified the use of the words ‘Maximum No Claim Discount For Life’ in advertising materials and policy documents for comprehensive car insurance.

ASIC was concerned that IAG’s advertisements and other disclosure documents were misleading or deceptive, or were likely to mislead or deceive. NRMA Insurance, SGIC and SGIO have advertised Maximum No Claim Discount For Life in many of its marketing campaigns.

IAG has agreed to take a number of steps including making significant changes to their documentation, publishing advertisements in major newspapers and setting up a dedicated telephone line to handle enquiries.

The Maximum No Claim Discount For Life insurance policies are issued by Insurance Australia Limited under the following brand names:

• NRMA Insurance in New South Wales, Queensland, Tasmania and the ACT;
• SGIC in South Australia; and
• SGIO in Western Australia.

Maximum No Claim Discount For Life is a policy feature available to many customers of NRMA Insurance, SGIC and SGIO. It seeks to reward eligible customers by allowing them to retain the maximum no claim discount offered, even if the customer makes an at-fault claim. No claim discounts up to 65 per cent are offered.

ASIC’s concerns

ASIC was concerned that NRMA Insurance’s, SGIC’s and SGIO’s advertising materials and product disclosure statements did not make it clear that the premium payable by customers who qualify for Maximum No Claim Discount For Life policies are affected by the claims and incident history of the drivers of the insured vehicle. That is, although customers retained the 65 per cent discount for the duration of their insurance, claims and incidents affect the base premium calculation and could lead to an increase in the premium. Any change in the base premium applies from the time of the next policy renewal.

ASIC considered that people with a Maximum No Claim Discount For Life policy would not expect to have an at-fault claim considered in the calculation of a base premium.

Personal liability for corporate fault

CAMAC has released its report on Personal Liability for Corporate Fault. The report makes recommendations for a principled and consistent approach to the imposition of personal liability on individuals by reason of corporate misconduct. It aims to redress undue burdens on people involved in the governance of companies while maintaining appropriate levels of responsibility on their part.

The Advisory Committee is concerned about the trend in regulatory legislation – particularly state and territory statutes – to impose criminal sanctions on directors and others for corporate breaches by reason of their position within the company unless they can establish a defence. To be guilty of these it is not necessary to show that the individual was actually involved in some way in the offence. The Committee also draws attention to considerable variation in the form of personal liability provisions used in legislation across Australia and to consequential complexity and lack of clarity in regard to responsibilities for compliance.

The report includes a review of the treatment of corporate officers in environmental protection, occupational health and safety, hazardous goods and fair trading statutes in the various jurisdictions.

The Committee considers that liability for breach of a legal requirement by a company should fall in the first place on the company itself. In addition, an individual who has personally helped in or been privy to the misconduct should be punishable as an accessory in accordance with ordinary principles. The Committee acknowledges that, in some circumstances, it may be appropriate to make a designated individual responsible for compliance with a particular requirement or to extend ordinary notions of accessorial liability to cover reckless or negligent disregard of a company's relevant conduct.

However, the Committee considers that the presumption of fault in many provisions that currently apply to company officers is objectionable in principle and unfairly discriminates against those individuals compared with the way other people are treated under the law. While those provisions may be well-intentioned – to encourage corporate compliance – they are not well suited to the practicalities of governance of many firms. Moreover, inconsistencies and lack of harmony in the standards of responsibility and defences available under the statutes that apply to various aspects of a company's operations can be counter-productive. A standardised as well as principled approach would reduce complexity and aid understanding. It would assist efforts to promote effective corporate compliance and risk management while providing more certainty and predictability for the individuals concerned.

The subject matter of the report was also referred to by the Regulation Task Force in its report earlier this year Rethinking Regulations: Report of the Task Force on Reducing Regulatory Burdens on Business. That report (the Banks report) recommended that the Council of Australian Governments initiate reviews to achieve more nationally consistent regulation of various matters, including personal liability of company directors and officers for corporate fault, following the completion of the Advisory Committee review.

Copyright amendments

The Attorney-General intends to introduce the Copyright Amendment Bill 2006 into the Parliament in October and to refer the Bill to the Senate Standing Committee on Legal and Constitutional Affairs for consideration following its introduction.

The Bill will contain amendments to implement the outcome of various reviews the Government has conducted including:

• the ‘Fair Use and Other Copyright Exceptions Review’,
• the review of the 2001 Digital Agenda reforms,
• the subscription broadcast review and
• the harmonisation of criminal law provisions with the Criminal Code Act 1995 and Australian Government criminal law policy.

It will contain amendments to implement Australia’s remaining obligations under the Australia-United States Free Trade Agreement in relation to technological protection measures (TPMs). Drafts of the TPM amendments have already been released.

The Bill will also contain other initiatives that the Government has been working on such as measures to improve Australia’s copyright enforcement regime and amendments to implement various reforms concerning the Copyright Tribunal.

Preparing for your AGM

If you are a public company, your AGM is your regular opportunity to communicate with your shareholders. Of course, if you are listed you have a continuous disclosure obligation.

I have prepared a summary of the steps required leading up to your AGM and after it.

Do we still have privacy?

I used to show a clip from Enemy of the State to show how little privacy we actually have.

But this video from ACLU is pretty good (via Peter Timmins).

APRA standards on governance and fit and proper persons commence 1 October

APRA Standards APS 510 and APS 520 will apply to APRA-regulated entities from 1 October 2006.

A fit and proper assessment must be completed for each responsible person by 28 October 2006 . (APS 520.25)

The entity must, by 28 October 2006, notify APRA of the following information for each responsible person:
(a) the person’s full name;
(b) the person’s date of birth (for identification purposes only);
(c) the person’s position and main responsibilities; and
(d) a statement of whether the person has been assessed under the Fit and Proper Policy.
(APS 520.40)

APRA has issued 2 new interim forms: a notification of responsible persons and a notification of changes to responsible persons.

For a summary of the first decision reviewing APRA's disqualification of a person on the grounds of not being fit and proper read  When is a director fit and proper?

Why are there so many financial service regulators?

ASIC, APRA, the Reserve Bank and the ASX all have a role in regulating financial service providers. Why are their functions separated?

Deputy ASIC Chair Jeremy Cooper recently analysed the integration of Australia's financial regulatory authorities in a speech to Brazil's Stock Exchange.

He explores three main regulatory options; a mega regulator, a lead regulator and a ‘twin peaks’ regulatory model and explains why Australia chose the latter.

Treasurer proposes expansion of Takeovers Panel jurisdiction

The Treasurer has released an exposure draft Corporations Amendment (Takeovers) Bill 2006 for public comment until 5 October 2006.

The Bill will amend provisions in Chapter 6 of the Corporations Act 2001 which relate to takeovers and the powers of the Takeovers Panel.

Two recent decisions ( Glencore International AG v Takeovers Panel[2005] FCA 1290 and Glencore International AG v Takeovers Panel [2006] FCA 274)restricted when and in what circumstances the Takeovers Panel could act. The Explanatory Statement sets out the effect of the proposed changes in response to those decisions.

Written comments on the draft Bill may be made until 5 October 2006.

High Court limits freedom of information

In a split 3-2 decision, the High Court has decided that the Treasurer's certificate that documents were exempt under section 36 of the Commonwealth Freedom of Information Act was conclusive:  McKinnon v Secretary, Department of Treasury [2006] HCA 45 (6 September 2006)

A journalist had sought access to internal Treasury reports on bracket creep and the First Home Buyers Scheme.

Comment: see Open and Shut

Shareholder action succeeds

The Western Australia Supreme Court decision in KIM RILEY IN HIS CAPACITY AS TRUSTEE OF THE KER TRUST -v- JUBILEE MINES NL [2006] WASC 199 is another example of increasing shareholder action.

In this case a shareholder in a mining company sued for damages when he found out after  selling his shares that the company had discovered nickel deposits but had not disclosed that discovery to the ASX. The shareholder was awarded damages of $1,842,000.

High Court approves litigation funding