Australian Regulatory Compliance Review

Telemarketing Standards varied

On 29 May 2007, ACMA varied the Telecommunications (Do Not Call Register) (Telemarketing and Research Calls) Industry Standard 2007 effective from 31 May 2007 to allow research calls to be made on Sundays between 9.00 am and 5.00 pm.

Telemarketing calls are still prohibited on Sundays under the standard.

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Do Not Call Register commences

The Do Not Call Register came into effect at midnight on 31 May 2007.

According to the Minister “At 9am today (31 May), the total number of registrations was 1,012,813. The register has been taking more than 20,000 registrations per day.”

Senator Coonan also said that more than 44,500,000 numbers had been checked, or ‘washed’, against those listed on the register, following the start of the list washing service on 25 May. A total of 355 businesses have opened accounts with the register.

New Telecommunications Industry Ombudsman appointed

The Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, has announced the appointment of Ms Deirdre O’Donnell as the Telecommunications Industry Ombudsman (TIO).

The TIO is a free and independent dispute resolution scheme for small business and residential consumers with unresolved complaints regarding their telephone or internet services. The TIO has the authority to make decisions that are legally binding upon telecommunications companies.

Corporate insolvency reforms introduced

The Parliamentary Secretary to the Treasurer, Chris Pearce MP, has introduced the Corporations Amendment (Insolvency) Bill 2007 into Parliament.

The Insolvency Bill will:

• strengthen the protection of employee entitlements, improving insolvency practitioner disclosures to creditors (including on independence and remuneration), and streamline procedures
• extend ASIC’s investigative powers in monitoring liquidators and improving court processes in relation to misconduct by company officers.
• introduce more regular reporting requirements for insolvency practiotioners, requiring adequate insurance to be held and providing greater flexibility to the Companies Auditors and Liquidators Disciplinary Board.
• Fine tune the voluntary administration process.

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UPDATE 9 August 2007: Bill passed by Senate.

New ASIC Chair spells out ASIC's priorities

The appearance before the Senate Standing Committee on Economics by Tony D'Aloisio, the new Chairman of ASIC, on 30 May 2007 gave him his first opportunity to publicly set out ASIC’s priorities for the next 12 months.

Tony D'Aloisio's opening statement  identified 6 things ASIC will do in the next 12 months:

1. lifting the operational effectiveness and service levels of ASIC for all stakeholders.

2. For retail investors (in particular ‘baby boomers’ retirees and the generation following them), to develop initiatives to assist them to better manage and protect their investments and wealth.

3. For all investors, to continue to maintain and improve confidence and integrity in Australia’s capital markets with new investigative and other techniques in the area of insider trading and market manipulation.

4. How ASIC can use new technology to improve existing services, add new services and reduce costs – that is, to reduce ‘red tape’ in providing legal infrastructure ( company registration, registration of charges, issue of licences, relief orders etc) for small and medium businesses.

5. For all investors, to improve what ASIC can do to facilitate inward and outward investment in our capital markets.

6. over the next 9 to 12 months while these things are going on, there will be an overall review of ASIC’s strategies (its priorities and initiatives).With a new Chairman, a fresh set of eyes can look at the organisation.

D'Aloisio made separate statements on  Westpoint, Fincorp and Australian Capital Reserve.

Making complaints: regulation of professions and businesses

Complaint schemes are now a common part of any industry. They are designed to provide a consumer with a method of making a complaint and, if the complaint cannot be resolved, a method for resolving disputes.

But  I have to say that I was surprised there are over 125 complaints categories currently in Australia according to ComplaintLine. (via The Australian Professional Liability Blog)

Reserve Bank’s review of Australia's payments system

The Reserve Bank of Australia has released a discussion paper ‘Reform of Australia’s Payments System: Issues for the 2007/08 Review’. The release of this paper begins the formal process of consultation for the Bank’s review of previous payments system reforms (including credit card reform in 2002) as foreshadowed in 2006.

The paper sets out details on the timing and scope of the review and provides a summary of the reforms and their rationale. The paper also raises a number of specific issues on which the Bank is seeking comment from interested parties.

The review will examine not only the effects of the reforms to date, but also how, looking forward, the regulatory regime can best contribute to competition and efficiency in the Australian payments system. In particular, the review will examine what has changed since the reforms were introduced and how any changes might bear on the appropriate regulatory regime in the future.

Reflecting the broad scope of the review, the paper raises three interrelated questions:

1. what have been the effects of the reforms to date?
2. what is the case for ongoing regulation of interchange fees, access arrangements and scheme rules, and what are the practical alternatives to the current regulatory approach? and
3. if the current regulatory approach is retained, what  changes, if any, should be made to the standards and access regimes?

Submissions are due by 31 August 2007. The Bank expects to release its preliminary conclusions from the review – including details of the general directions the Board is considering – for consultation in April 2008.

ACCC v Leahy Petroleum Pty Ltd: petrol price fixing action fails

In Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 794, the Federal Court dismissed ACCC's application against 18 respondents for civil penalties  relating to its allegations of the fixing of retail prices of petrol in the Geelong retail petrol market.

The ACCC relied on circumstantial evidence, principally a document compiled from data available to the ACCC of records of telephone communications between participants in the Geelong retail petrol market, and records of changes to the retail price of ULP by various participants in that market. Some admissions were made by some respondents who also consented to orders.

The action failed as the Judge found there was insufficient evidence:

"948 Thus, all of the witnesses called to give evidence for the ACCC who acted on behalf of parties to the alleged arrangements or understandings confirmed to a greater or lesser degree the absence of any commitment, moral obligation, or obligation binding in honour on the part of any party to any of those arrangements or understandings.  The evidence on the issue is all one way.  It is not possible to dismiss it, as counsel for the ACCC attempted to do in submissions, as indicative of freedom to withdraw from, or to act inconsistently with, an arrangement or understanding on a particular occasion.  The plain fact is that there was nothing by way of constraint to raise prices, felt or otherwise, from which any party had to withdraw, or with which it was necessary to act inconsistently, if prices were not increased on a particular occasion. The express evidence is overwhelmingly to the effect that an essential element of an arrangement or understanding, whether in the abstract or as pleaded, in the form of a commitment or obligation to increase prices, did not exist...As I have said, an arrangement or understanding in which each party is free to do as it wishes is a creature unknown to s 45(2) of the Trade Practices Act.  "

Judge Gray decided that none of the arrangements or understandings alleged by the ACCC existed and dismissed the proceeding against the respondents who defended it.  He also refused to rely on the admissions made by the respondents who consented to the case being decided against them, and coupled with the finding that the alleged arrangements or understandings did not exist, came to the conclusion that he should not give effect to the consents.

The ACCC has expressed disappointment at the decision.

Australian Capital Reserve (ACR, Estate Property Group): another unsecured borrower fails

The appointment of an administrator to Australian Capital Reserve and the Estate Property Group which has reportedly borrowed $300 million from the public by way of unsecured notes has drawn attention again to ASIC's role (this story from The Age) and the usefulness of our consumer protection laws, following Westpoint and Fincorp.

ASIC's response is that on 9 March 2007, ASIC issued an Interim Stop Order on ACR’s 9th prospectus and has since then been kept informed of developments about ACR's financial position.

2007 Financial Services Regulation Update web seminar

2007 FSR Update Web Seminar:Wednesday 20 June 2007 at 11am -12 noon Australian Eastern Time

The Financial Services Regulation provisions of the Corporations Act require financial service providers to be licensed and comply with strict disclosure obligations.

In this 60 minute live web seminar David Jacobson will discuss FSR developments in the last 12 months and refinements (including the Simpler Regulatory System package) which affect your day to day procedures.

The seminar will discuss integrating the refinements in your existing FSR compliance program and how ASIC is currently administering the laws.

Responsible officers can treat the seminar as part of their training obligation.

You will learn about:

• updated ASIC policies
• Corporate and Financial Services Review Proposals Paper and The Simpler Regulatory System Bill Package 2007
• review of PS 146
• financial services compensation requirements
• dollar disclosure requirements
• relief applications and decisions
• disclosure of termination values and interest rates for deposit products
• relief from the dollar disclosure requirements for issuers of non-basic deposit products

More information

ASIC updates FSR policies

ASIC has released technical updates to three ASIC policy statements, a guidance paper, and a number of class orders relating to financial services providers to ensure users of its policy publications are working with the most current information.

The updated policy statements are:

• [PS 168] Disclosure: Product disclosure statements (and other disclosure obligations)
• [PS 175] Licensing: Financial product advisers – Conduct and disclosure
• [PS 182] Dollar disclosure

The updated guidance paper is titled Licensing: The Scope of the Licensing Regime: Financial Product Advice and Dealing – an ASIC Guide (‘Advice and Deal Guide’).

The policy statements and guides have been updated to take account of the regulations made on 15 December 2005 amending the financial services regime.

More details

2007 AML Update web seminar

2007 AML Update Web Seminar:Wednesday 13 June 2007
at 11am -12 noon Australian Eastern Time

Under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 reporting entities must lodge AML/CTF compliance reports and develop, maintain and comply with anti-money laundering and counter-terrorism financing programs.

In our 60 minute live web seminar on 13 June 2007 David Jacobson will discuss recent changes which require review of your implementation plan to comply with the new laws,integrating the new rules and policies in your existing compliance program and how AUSTRAC will monitor your compliance.

You will learn about:

• the 2007 amendments to the Act
• the AML/CTF Rules
• AUSTRAC's Penalty Policy
• How to assess your current preparations
• implementation tips
• AUSTRAC powers
• AML compliance reporting
• dealing with AML breaches

More information

Workplace Relations Amendment (A Stronger Safety Net) Bill 2007 introduced

The Govrernment has introduced the Workplace Relations Amendment (A Stronger Safety Net) Bill 2007.

If passed, the Bill would introduce a fairness test that would apply to workplace agreements (and variations to workplace agreements) lodged on or after 7 May 2007 that cover employees who work in industries or occupations usually regulated by awards, and modify or exclude protected award conditions.

The test would not apply to Australian Workplace Agreements (AWAs) covering employees with full-time (or full-time equivalent) base salaries of $75,000 or more.

The fairness test would be supervised by the Workplace Authority Director.

Employee share ownership plan laws reviewed

The Employee Share Ownership Project  (a joint initiative of the Centre for Corporate Law and Securities Regulation, the Centre for Employment and Labour Relations Law and The Tax Group), has published 4 papers  reviewing the existing regulatory regime for employee share ownership plans in tax and corporate law in Australia and examining the current incidence and forms of ESOPs in Australia.

• ESOPs in Australia - the Taxation Law Framework
• ESOPs in Australia - the Corporate Law Framework
• Employee Share Ownership - a Review of the Literature
• An Overview of Existing Data on Employee Share Ownership in Australia

AUSTRAC argues there are business benefits in AML compliance

I recently discussed whether there is value in compliance? Do you really need to present a business benefits case to implement a compliance program required by law?

It's been commonly accepted that AML is one compliance program where implementation is an obligation (ie satisfying regulatory requirements) and cost with little business opportunity.

But in recent presentations, AUSTRAC has argued that regulated entities can create value by managing ML/TF risk:

• Investing in ML/TF risk management creates value by addressing the following risks of damage or destabilisation to vital Australian financial assets:

1. Sovereign risk – compromising Australia’s international standing as a safe financial centre with a sound institutional infrastructure.
2. Horizon risk – favouring potentially transient short-term gains over the entity’s long-term best interests.
3. Reputational risk – damaging the commercial value of the brand name.

• Substantially upgraded ‘Know Your Customer’ and increased record retention obligations are costs –but are also more than just burdens. In organisations which do not yet have tools to present a single customer view (eg are account based rather than customer based) the cost of the new KYC programs will have spin off marketing and cross-selling benefits.

What other benefits are there in an AML program that might represent cost savings?

• Although AML and fraud detection use different techniques, there may be fraud detection benefits especially in connection with "politically exposed persons".
• The program may be the basis for a consistent approach to a range of problems group-wide.

In any case, AML, like any other compliance obligation, requires careful implementation project plannning. If other benefits can be identified, all the better.

AUSTRAC releases AML/CTF compliance implementation tools

As we approach the 12 June 2007 start date for AML/CTF compliance reporting obligations, AUSTRAC has produced a Self Assessment Questionnaire (SAQ) to assist the financial services sector, bullion dealers and gambling establishments meet their obligations under the incoming anti-money laundering and counter-terrorism financing system.

The SAQ is a Word document which can be used as a checklist for your implementation progress and also to identify issues to add to your compliance program. It is not a form which needs to be lodged with AUSTRAC but AUSTRAC may have access to it and any supporting documentation if it conducts an audit of your compliance program.

AUSTRAC has also released five policies outlining its approach to education, monitoring, exemptions, enforcement and supervisory capability under the AML/CTF Act to help industry understand its approach.

AML archives

Privacy Commissioner releases more case notes

The Privacy Commissioner, Karen Curtis, has released seven new case notes, the first release for 2007.

Most of the cases deal with complaints of improper disclosure of personal information, with respondents including a computer repairer, a licensed club, a government agency, a bankruptcy trustee firm and an insurance company.

The Simpler Regulatory System Package introduced

Chris Pearce MP, Parliamentary Secretary to the Treasurer, has introducedinto the House of Representatives the Simpler Regulatory System Package (comprising the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007, and supporting Bills, the Corporations (Fees) Amendment Bill 2007 and the Corporations (Review Fees) Amendment Bill 2007) which is intended to reduce red tape in the corporate community and financial services sector. Details are set out below.

Other reforms detailed below will be made by regulation or in the Financial Sector (Simplifying Regulation and Review) Bill 2007.

The Bill will implement the bulk of the proposals in the Proposals Paper released by Mr Pearce in November last year, covering a range of regulatory areas such as financial services, financial reporting, takeovers, auditor independence, corporate governance and fundraising. It also contains some additional initiatives that were developed during the consultation process.

The Bill also includes the Government’s response to a number  of recommendations of the Rethinking Regulation report of the Banks Regulation Taskforce of January 2006, including initiatives relating to: the use of the internet for financial reporting; financial reporting thresholds for proprietary companies; reporting requirements for executive remuneration; and fundraising requirements for employee share schemes.

The Government intends the Bill to be passed during the Winter session of Parliament (which ends on 21 June 2007) to enable reduced financial reporting burdens and electronic distribution of annual reports to take effect for the 2006-07 financial reporting year.

REFERENCE GUIDE: CORPORATE AND FINANCIAL SERVICES REVIEW PROPOSALS PAPER AND THE SIMPLER REGULATORY SYSTEM BILL PACKAGE 2007

References in the table to proposal numbers are to the Corporate and Financial Services Review Proposals Paper, November 2006.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

A. MEASURES TO BE IMPLEMENTED THROUGH SIMPLER REGULATORY SYSTEM BILL PACKAGE
1. Financial Services Regulation
1.2 Scope of financial services advice — Statement of  Advice exemption — no product recommendation and no remuneration	The requirement to provide a Statement of Advice when personal advice is provided that does not involve the recommendation of a product and no remuneration is received for, or in relation to, the advice will be removed. Instead, a Record of Advice will be required to be prepared by the adviser. This measure will be supported by changes to the relevant regulations.
1.3 Scope of financial services advice — threshold for requiring a Statement of Advice	A threshold will be introduced into the Statement of Advice requirements so that a full Statement of Advice will only be required if the advice given is in relation to an investment amount that is above a prescribed threshold. A Record of Advice would need to be given to the client for advice in relation to amounts less than this threshold. This measure will be supported by regulations and the threshold is expected to be set at $15,000.
1.4 Scope of financial services advice —Financial Services Guide exemption — public forum	A Financial Services Guide will not need to be provided at a forum where 10 or more retail clients attend, whether or not it is open to any person to attend the forum. This measure will be supported by changes to the relevant regulations.
1.6 Sophisticated investors	In Chapter 7 of the Corporations Act 2001 a mechanism will be adopted similar to provisions of Chapter 6D, which allows a financial services licensee to be satisfied that an investor is adequately equipped to be determined a wholesale investor.
1.7 Cross‑endorsement of authorised representatives	The cross‑endorsement arrangements will be amended so that licensees are only jointly and severally responsible for the conduct of their authorised representatives where those representatives provide financial services in relation to the same sub‑class of financial product. This measure will be supported by changes to the relevant regulations.
1.9 Product activity and data collection	Amendments will replace the current mechanism for reporting the requirements of the in‑use notice with a new mechanism which will require the responsible person for a Product Disclosure Statement (PDS) to provide information in a standardised online report when: a financial product for which a PDS must be prepared is first recommended, issued or sold; a financial product for which a report previously had to be made ceases to be available to be recommended; there is a change in the fees and charges set out in the enhanced fee disclosure table; or changes are made in a supplementary or new PDS. This measure will be supported by changes to the relevant regulations.
1.10 Self‑listing and licensed market operators	Amendments will provide for ASIC to supervise listed entities which are related to the market licensee, and participants who are related to or in competition with the market licensee.
1.11 Pooled superannuation trusts and product    disclosure	The current exemption from licensing for dealing services provided by trustees of pooled superannuation trusts under the retail/wholesale client test will be extended to the product disclosure framework.
1.12 Registered managed investment schemes investing in unregistered managed investment schemes	The prohibition on investments by managed investments schemes in unregistered managed investment schemes will be removed.
2. Company Reporting Obligations
2.1 Executive remuneration	Amendments will be made to harmonise and remove duplication in the executive remuneration disclosure requirements between the Corporations Act and accounting standards, without dilution of disclosure requirements. This measure will be supported by changes to the relevant regulations.
2.2 Thresholds for financial reporting of large proprietary companies	The revenue and asset thresholds for financial reporting of large proprietary companies will be increased. The revenue and assets thresholds that determine a large proprietary company will be increased by 150 per cent from $10 million in revenue to $25 million in revenue and from $5 million in assets to $12.5 million in assets. The threshold regarding the number of employees will remain at 50 employees.
2.3 Change in office holders	The requirement for a company to notify ASIC of a change in officeholder, where the officeholder has already notified ASIC, will be removed.
2.4 Company addresses	A single process for notification of an update of all company addresses will be implemented. This measure will be supported by changes to the relevant regulations.
2.6 Reduce compliance burden associated with voluntary deregistration	Amendments will allow deregistration of a company to proceed where an annual review fee becomes payable or is incurred after the application for deregistration is approved.
2.7 Upfront payment of annual fees for companies	Amendments will allow companies to pay a single sum to cover review fees for an extended period. For example, instead of $212 per year for 10 years ($2,120), proprietary companies would only be required to pay a one-off fee of $1,600. This measure will be supported by changes to the relevant regulations.
2.8 Electronic distribution of annual reports	The default option for receiving annual reports will be changed to be via the Internet. Members will continue to be able to choose to receive hard copy annual reports free of charge.
3. Auditor Independence
3.1 Anomalies arising from CLERP 9	The Bill will reduce complexity by incorporating earlier remedial measures made under the Corporations Regulations and ASIC Class Orders into the Corporations Act. The refinements will also reduce the compliance burden for auditors by making improvements to the regime without weakening the existing robust auditor independence framework.
4. Corporate Governance
4.1 Related party approval thresholds	Amendments will provide for a prescribed level for payments to related parties below which member approval is not required. This would avoid member approval of what could be considered minor transactions. This measure will be supported by changes to the relevant regulations.
4.2 Director amounts threshold	The director amounts threshold will be repealed, as it will be subsumed into the threshold under Proposal 4.1.
5. Fundraising
5.1 Quoted securities rights issue disclosure	Amendments will provide that rights issues for quoted securities and interests in managed investment schemes do not require the production of a prospectus or PDS. A cleansing notice will have to be provided before the rights issue offers are made, and the notice must include appropriate information on the consequences of any potential effect of the rights issue on the control of the entity.
5.2 Small scale offerings	The definition of sophisticated and professional investors in Chapter 6D of the Corporations Act will be amended to align with that used for wholesale investors in Chapter 7. The maximum amount of money that may be raised using an Offer Information Statement when combined with funds previously raised will be increased to $10 million or less.
5.3 Secondary sale issues	Amendments will allow controllers to arrange sales of securities they hold without disclosure subject to the existing section 708A conditions, but subject to the requirement that the controller and the company provide a cleansing notice in order to provide up to date price sensitive information to the market. The required period for quotation of the securities will be reduced to three months to provide such a track record and, therefore, provide some relief from the current requirement of 12 months.
5.4 Employee unlisted share schemes disclosure	Relief will be provided from certain of the licensing and hawking restrictions of the Corporations Act for employee share schemes for unlisted companies. This relief will be subject to the condition that such employee share schemes must be accompanied by a disclosure document such as an Offer Information Statement or a prospectus. Listed entities may also take advantage of this relief if they wish, subject to the same condition.
5.5 Prospectus and PDS advertising rules	Amendments will align the prospectus advertising provisions relating to quoted securities and advertising post lodgment of a prospectus for unquoted securities with those pertaining to financial products (other than securities). ASIC’s stop‑order powers will be extended to cover advertising of quoted and unquoted securities and other financial products.
5.6 Stapled securities disclosure	The application of the provisions regarding replacement prospectuses will be extended to cover combined prospectus/PDSs prepared for offers of stapled securities comprising one or more shares and one or more units in managed investment schemes. This measure will be supported by changes to the relevant regulations.
6. Takeovers
6.1 Remove telephone monitoring during takeover bids	Amendments will remove provisions of the Corporations Act that require the recording, storing etc of telephone conversations with retail shareholders during takeover bids.
6.2 85 per cent notices	Amendments will remove provisions of the Corporations Act that require the disclosure of an 85 per cent holding.
7. Compliance
7.3 Simplifying returns of company particulars	Amendments will limit the need for return of particulars to be provided to ASIC to situations where ASIC suspects or believes that the details recorded are not correct and extend the notification period from 28 days to two months.
7.4 Electronic registration of charges	Amendments will facilitate electronic registration of charges and associated documents, and reduce the associated paperwork. This measure will be supported by changes to the relevant regulations.
OTHER INITIATIVES IN THE SIMPLER REGULATORY SYSTEM BILL PACKAGE
Auditor independence requirements	Amendments will implement a range of measures arising from a discussion paper Australian Auditor Independence Requirements:A Comparative Review released on 15 November 2006, and make some technical amendments designed to improve the effectiveness of the auditor independence requirements.
Body corporate names	Amendments will permit delegation to ASIC rather than Treasury of the power to approve the use of body corporate names that would otherwise be unacceptable.
Constitutions of non-profit companies	Bodies corporate with licences to omit the word ‘Limited’ from their names will no longer need to obtain Ministerial approval for changes to their constitutions, but they will need to notify ASIC.

 

                       

B. MEASURES TO BE IMPLEMENTED THROUGH OTHER BILLS
7.1 Breach reporting period	The period for reporting a breach to ASIC will be aligned with the time period for reporting a breach to APRA.	This will be implemented in the Financial Sector (Simplifying Regulation and Review) Bill 2007.

 

                               

C. MEASURES TO BE IMPLEMENTED THROUGH REGULATIONS
1.5 Non‑cash payment facilities	Disclosure requirements that apply to all non‑cash payment facilities that are not related to a basic deposit product will be streamlined by applying the same limited disclosure requirements to these facilities. The disclosure requirements that currently apply to non‑cash payment facilities related to basic deposit products will be maintained.
2.5 Share and member reporting requirements	Amendments will remove the obligation on public companies to notify ASIC each year of the top 20 shareholders.

 

                                                                       

D. PROJECTS FOR FURTHER SEPARATE CONSULTATION
1.1 Scope of financial services advice — sales recommendation	There are some situations where pure product sales activities are being captured by the personal advice definition. It was proposed that in some situations, financial service providers may provide sales recommendations that are not considered to be financial advice.	While there was general support for the need to address issues that arise as a result of the definition of financial advice, the proposal was not broadly supported. Treasury will continue consultations on this issue with stakeholders.
1.8 Policy Statement 146 — training requirements	It was proposed that ASIC would review PS146 to consider the concerns raised about the training framework and any consequential revisions that may arise from other proposals.	ASIC information release (IR 07‑18) on 22 May 2007 indicates that ASIC will issue a consultation paper on this subject in July.
5.4 Employee share schemes (in relation to one aspect of the proposal on self‑acquisition of shares)	It was proposed that provisions relating to the self‑acquisition of shares by companies would not apply in the context of employee share schemes, subject to certain safeguards.	Further consultation is required, including consideration by the Ministerial Council for Corporations.
7.2 Australian Business Number Reference	It was proposed to remove the requirement in section 912F of the Corporations Act on a financial services licensee to cite the AFSL number in disclosure documents and other relevant documents and require the licensee to cite their ABN instead. The licensee would also be required to state that they hold an AFSL.	Further consultations are required, particularly with ASIC and the Australian Taxation Office, to ensure that all AFSL licensees are eligible to use an ABN.

 

APRA requires ADI auditors to report on APS 310 issues

APRA has written to ADI auditors requiring them to report on issues covered by APS 310 even though the requirements of APS 310 are broader than the more limited audit coverage indicated under AGS 1008.

APRA also requires auditors to include in their reports under APS 310 paragraph 13, at a minimum, their opinion on the ADI’s compliance with:
• The requirements for notification and consultation with APRA under APS 231 Outsourcing (specifically paragraphs 27 and 29);
• The requirements for notification of APRA under APS 232 Business Continuity Management (specifically paragraph 42); and
• The requirements for informing APRA under APS 520 Fit and Proper (specifically paragraphs 40-43).

Can a company indemnify a director for a restrictive trade practices breach?

No. Schedule 9 to the Trade Practices Legislation Amendment Act (No. 1) 2006 (No. 131, 2006 which commenced on 1 January 2007) inserted sections 77A, 77B and 77C in the Trade Practices Act prohibiting a company from indemnifying an officer from liability to pay a pecuniary penalty under section 76 for a contravention of a provision of Part IV of the Trade Practices Act (the restrictive trade practices provisions) or legal costs when the person has been found to be liable.

If your company's constitution or director's access and indemnity deed only prohibits indemnities disallowed under Section 199A of the Corporations Act (and not under the Trade Practices Act or "any law"), it could be committing an offence under section 77C.

With AGM season approaching, now is the time to consider whether a constitution amendment is required.

ASIC reviews PS 146 on financial services training

ASIC has announced it is conducting a review of its policy on retail financial adviser training standards (Policy Statement 146 Licensing: training of financial product advisers).

ASIC is not planning to fundamentally revisit the current training standards.

It anticipates that the review will focus on:

• the appropriateness of current training standards towards the perimeter of the financial advice regime, and in particular, the appropriateness of the current standards for providers of general advice and providers of advice on general insurance products;
• the description of the knowledge and skills categories in Appendix A of the policy (e.g. whether the categories should be broken down into a larger number of narrower categories);
• the administration and ease-of-use of ASIC’s training register (including how courses are placed onto the register); and
• recognition of prior study and training.

AUSTRAC releases AML draft guidance note on register of remittance services

AUSTRAC has released a draft guidance note to provide information and assistance to those reporting entities required to register with AUSTRAC as providers of registrable designated remittance services.

The note provides guidance on which entities need to register.

The public consultation period closes on 31 May 2007.

Is there value in compliance?

In the Collaborative Compliance Wiki's Introduction to Compliance, I discuss what compliance means but don't discuss compliance in terms of its benefits or value.

Why? Because once you discuss compliance in terms of monetary benefits (what happens if we don't comply? is compliance too expensive? is it a risk we can take?) rather than in terms of your organisation's culture ("do the right thing") you view compliance as a cost rather than as part of risk management and the creation of an organisation committed to certain values and standards.

Yes, having an effective compliance program means you prevent and detect breaches of the law and reduce the risk of prosecutions (both civil and criminal) and penalties (either jail or money) for your organisation and its directors and officers.

And it is possible to argue that the long-term benefit of compliance exceeds the short-term cost and inconvenience. But you can't make money out of compliance.

If you can have to value compliance, what is its value?

Compliance adds to the reputation and integrity of the organisation. It creates a culture that values accountability  and good governance. It shows your employees you are committed to ethical conduct. It shows your customers you are trustworthy. It reduces the risk of errors and of prosecution and penalties.

Compliance helps create a sustainable organisation.

Financial services compensation arrangements

Chris Pearce, the Parliamentary Secretary to the Treasurer, has announced that a regulation to complement section 912B of the Corporations Act 2001 (the Act) is expected to be made by 1 July 2007 (when the current class order giving transitional relief ends).

The Act requires financial services licensees that provide financial services to retail clients to have in place appropriate compensation arrangements. The arrangements must either be approved by ASIC, or satisfy the requirements specified in the regulations.

The proposed regulation will specify that section 912B is satisfied if licensees have professional indemnity insurance in place. Certain bodies which are regulated by the Australian Prudential Regulation Authority will be exempt from this requirement.

The regulation will also include transitional provisions and provisions relating to the return of the security bonds held by the Australian Securities and Investments Commission (ASIC).

The regulation will be supplemented by ASIC guidance. The draft guidance note, which will assist licensees to put appropriate arrangements in place, will be released by ASIC for public consultation at the time the regulation is made.

A draft regulation was issued in November 2006.

The draft regulation will be amended in the light of the submissions received.  Changes generally relate to areas of misunderstanding and ambiguity in the draft regulation, and the proposed requirement for licensees to disclose their arrangements in their Financial Services Guide.

Do Not Call Register telephone registrations open

Consumers can now register on the Do Not Call Register by telephoning 1300 792 958.

Privacy Commissioner investigation response timeframe shortened

The Privacy Commissioner has reduced the standard timeframe given to respondents and complainants to address investigation and preliminary view letters. Responses will now be expected within 21 days, not 28 days. In reasonable circumstances, including complex matters, the Commissioner will agree to respondents and complainants having more time to respond.

Draft Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007 released

The Minister for Revenue and Assistant Treasurer, the Hon Peter Dutton, has released an exposure draft of the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007 for industry comment.

The Bill contains a number of proposals to streamline and simplify prudential regulation in a manner that is consistent with the findings of the Bank’s Inquiry Report, including  

• streamlined breach reporting;
• flexibility through exemption powers, enforceable undertakings and discretion under prudential standards;
• simpler processes for appointing actuaries and auditors and enhanced cooperation with professional bodies; and
• proposals simplifying the Life Insurance Act 1995 and the Superannuation Industry  (Supervision) Act 1993.

The draft Bill also includes amendments implementing the Government’s response to the Review of Part 23  of the Superannuation Industry (Supervision) Act 1993.

Comments on the draft Bill may be made up to 30 May 2007.

UPDATE 21 June 2007: Bill introduced

AUSTRAC releases AML compliance reporting date rules

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has released draft Rules (pdf) setting out the reporting period and lodgement period for the first compliance report required by providers of financial services, bullion and gambling services captured under new anti-money laundering laws.

Under subsection 47(1) of the AML/CTF Act, all reporting entities are now required to report on their compliance with the legislation.

The draft AML/CTF Rules  set out for consultation purposes the proposed reporting period and lodgement period for the first compliance report under the AML/CTF Act. Public comment on the draft Rules is sought by 29 May 2007.

It is proposed that the first compliance reporting period under the AML/CTF Act will cover the period 13 December 2006 to 31 December 2007. The deadline for lodging reports will be 31 March 2008. As a consequence, AUSTRAC’s Chief Executive Officer intends that there will be no further annual compliance reporting under the FTR Act.

In June 2007, AUSTRAC will provide information on what will need to be included in the first compliance report.

AML archive

ASIC reports on FSR, mergers, fundraising relief applications

ASIC has released a report (pdf) outlining its recent decisions on applications for relief from the corporate finance, financial services and managed investment provisions of the Corporations Act between 1 October and 31 December 2006.

The report also highlights instances where ASIC decided to adopt a no-action position regarding specified non-compliance with the provisions, and features an appendix detailing the relief instruments it executed.

Do Not Call Register attracts consumer interest

According to Senator Helen Coonan, as at 10 May online registrations on the Do Not Call Register were over 530,000, just one week after pre-registrations opened on 3 May.

Telephone registrations are scheduled to open on 22 May.

The Do Not Call Register will begin operation on 31 May. From that date, it will generally be unlawful to make telemarketing calls to numbers on the Register.

From 25 May, telemarketers will be able to submit their calling lists to the Register operator for checking against the register before the scheme commences.

Postal applications are downloadable from the Do Not Call Register website (www.donotcall.gov.au) and will be available from Australia Post outlets from 15 May.

The initial online registration problems have been blamed on verification procedures (Australian IT).

Commonwealth Budget 2007-2008

The Treasurer has announced the 2007-2008 Budget.

On the tax side he proposes to change the tax threshholds (rather than the rates):

• From 1 July 2007, the low income tax offset will increase to $750 per year and the 30 per cent threshold will rise from $25,000 to $30,000.
• From 1 July 2008, the 40 per cent threshold will increase to $80,000 and the 45 per cent threshold will increase to $180,000.

From 1 July 2007, businesses with annual turnover of less than $75,000 will no longer be required to register for GST. The GST registration threshold for non-profit bodies will be increased to $150,000.

Personal tax returns will also be simplified:

Taxpayers will be able to go online to access an income tax return prepared by the Commissioner of Taxation, including income from salary and wages, interest, dividends, information on private health insurance, and any benefits paid from the Government, including the family tax benefit.

If the taxpayer is satisfied with this pre-prepared statement, they will be able to click online and file their return without any further action. If there is additional information to provide, this can be added to the pre-prepared return.

ASIC consults on management rights schemes

ASIC has released a consultation paper (pdf) inviting comment on its proposal to modify existing relief for management rights schemes by modifying Policy Statement 140 Serviced strata schemes [PS 140] .

Management rights schemes are managed investment schemes that involve owners of strata units sharing income through a rental pool.

 ASIC invites comments on the proposals set out in the consultation paper by 9 July 2007.

ASIC consults on relief for group insurance arrangements

ASIC has issued a consultation paper (pdf) seeking submissions from the public on its proposals to offer exemptions for some bodies that arrange group insurance.

ASIC is seeking feedback to help it consider exemption for some bodies which arrange group insurance policies, such as sporting and community associations, from the licensing provisions of Chapters 7 and 5C of the Corporations Act.

When group purchasing bodies are small industry bodies or not-for-profit associations, it may not be economical for them to obtain an AFS licence or to register a managed investment scheme.

ASIC is also consulting on proposals for technical relief for insurers from the product disclosure statement provisions when a person to be covered under a group insurance product would have acquired the product as a wholesale client if they were the insured.

The comments period closes on 25 June 2007.

Government announces WorkChoices safety net

The Prime Minister has announced that from 7 May 2007 all Australian Workplace Agreements lodged with the Office of the Employment Advocate (which will be renamed the Workplace Authority) will be subject to a fairness test in order to guarantee that entitlements such as penalty rates and public holiday pay are not traded off without adequate compensation.

The test will protect workers who would otherwise have been entitled to award conditions and are paid less than $75,000 a year.

If an agreement removes or modifies those award conditions, then the employee will be required to receive fair compensation. These protected award conditions are:

• penalty rates, including for working on public holidays and weekends;
• shift and overtime loadings;
• monetary allowances;
• annual leave loadings;
• public holidays;
• rest breaks; and
• incentive-based payments and bonuses.

If an agreement does not pass the fairness test, the relevant industrial instrument will apply until an agreement is formed that passes the test. The Workplace Authority will not be able to arbitrate an agreement.

A new Workplace Ombudsman will have power to investigate employers who fail to meet their obligations under the workplace laws.

The Ombudsman will replace the Office of Workplace Services.

More details (pdf)

FOI in Queensland

The Office of the Information Commissioner in Queensland deals with applications for review of decisions by Queensland government agencies regarding access to documents held by the agency.

Its website has been updated to include decisions and FOI concepts.

(via Open and Shut)

New rules for foreign insurers in Australia

The Minister for Revenue and Assistant Treasurer, Peter Dutton MP, has announced reforms to enhance protection for Australian consumers and businesses from unauthorised direct offshore foreign insurers (DOFIs).

DOFIs are not currently subject to the provisions of the Insurance Act 1973 because they are not considered to be ‘carrying on insurance  business in Australia’ for the purposes of the Act.

The HIH Royal Commissioner’s report raised concerns about the regulation of DOFIs and DMFs. On 12 September 2003 the Government commissioned the Review of Discretionary Mutual Funds and Direct Offshore Foreign Insurers (the Potts review).

The Government will amend the Insurance Act 1973 (Insurance Act) so that anyone carrying on insurance business in Australia, either directly or through the actions of another, must become an authorised insurer.

As a result, the Insurance Act will apply to: DOFIs, including ‘captives’; foreign insurers and foreign reinsurers currently operating in Australia via an APRA-authorised branch or subsidiary; and domestic insurers and domestic reinsurers.

Limited exemptions will exist for DOFIs that underwrite risks that cannot be underwritten in Australia, either because the Australian general insurance market is too small or because it is not sufficiently specialised to underwrite the risk.

Offshore foreign reinsurers will not be required to be authorised in Australia, but they may be indirectly subject to the regulatory regime through the prudential standards applied to insurers. The Insurance Act provisions relating to Lloyd’s underwriters will not change.

A person who breaches the requirement to be authorised or who is complicit in such a breach will be liable to prosecution. A new Part will also be inserted into the Insurance Act 1973 to ensure APRA has  the power to investigate breaches.   Compliance will also be enforced through Federal Court injunctions. 

To complement these changes, the Australian Prudential Regulation Authority (APRA), will modify its prudential regulatory framework to ensure that there is clear recognition in prudential standards of different types of insurers. Tailored prudential standards will apply, so that categories of insurers posing a lower risk will face a reduced regulatory burden. Limited exemptions from the new Government reforms will be provided, enabling those unable to obtain appropriate cover domestically to access the world insurance market.

APRA will publish a discussion paper and consult with the insurance industry and other interested parties, as part of the development of the modified framework that is intended to apply from 1 July 2008.

UPDATE 21 June 2007: Bill introduced

Government responds to Cole Inquiry AWB Report

The Commonwealth Government has issued its response to the Cole Inquiry Report tabled on 27 November 2006.

The Government has accepted the Cole Report’s recommendations and in response will introduce legislation:

• requiring applicants for licences to import or export under United Nations sanctions to provide information to the Government; criminal penalties will apply for giving false or misleading information;
• creating a new offence for breaching UN sanctions;
• giving Government agencies the power to obtain evidence about suspected evasion of sanctions so they can be referred to law enforcement agencies;
• strengthening laws aimed at bribery of foreign officials; and
• making tax laws consistent with foreign bribery laws.

The penalty for a breach will be up to three times the value of the offending transaction and up to 10 years’ jail for individuals.

Reform of personal property securities Discussion Paper 3

The Australian Attorney-General has released the third discussion paper on personal property securities (PPS) reform. The paper deals with legal issues arising from possessory security interests.

Comments can be made until 18 June 2007.