Australian Regulatory Compliance Review

Regulation of mortgage brokers, lending practices and consumer credit code amendments

In response to the recent call by the Treasurer for the States to accelerate work on the licensing, conduct and disclosure of mortgage brokers and the report of the House of Representatives Economics, Finance and Public Administration Committee on Home loan lending - Inquiry into home loan lending practices and the processes used to deal with people in financial difficulty the States have provided an update on consumer credit code review progress.

The Ministerial Council on Consumer Affairs has now announced that:

• It is anticipated that a draft exposure Bill for the mational regulation of finance brokers will be released by December 2007.
• In response to concerns raised about reverse mortgages, the Ministerial Council on Consumer Affairs has agreed that there should be a prescribed Information Statement for reverse mortgages and a statutory protection against negative equity.
• The Ministerial Council on Consumer Affairs has agreed to investigate the introduction of mandatory participation in external dispute resolution by all providers of consumer credit.  The consultation regulatory impact statement is being prepared.
• Consultation on the bill facilities regulation amendment has now closed. It is anticipated that the regulation could be made as early as the end of October 2007.
• As part of an ongoing review of the fringe credit industry, the Ministerial Council on Consumer Affairs has invited comments on the exposure drafts of the Consumer Credit Code Amendment Bill 2007 and Consumer Credit Amendment Regulation 2007.  The deadline for submissions has been extended until 5 October 2007.
• In respect of reform to pre-contractual disclosure, the Standing Committee of Officials of Consumer Affairs has agreed to UCCCMC commissioning research, by an independent consultant, into pre-contractual disclosure with the goal of developing a disclosure model which addresses the needs of consumers. Negotiations are currently underway with the preferred tenderer.
• In respect of instalment contracts, a Bill has been finalised and submitted to the Ministerial Council on Consumer Affairs for approval to be made by the Queensland Parliament. Provisions affecting solicitor lending have been removed altogether pending further consideration of the underlying issues.
• A consultation regulatory impact statement on responsible lending through credit cards is being prepared and should be released before the end of the year.
• An independent review on mandatory comparison rates is still being considered.

ASIC consults on exemptions for rights issues

The Corporations Legislation Amendment (Simpler Regulatory System) Act 2007, allows listed entities to conduct a rights issue without a prospectus or product disclosure statement (PDS) disclosure.

ASIC has now released a consultation paper (pdf) seeking comments on its proposal to widen the disclosure exemption for rights issues to cover non-traditional features developed by issuers and their advisers to raise capital more effectively.

ASIC’s proposal would extend the disclosure exemption to rights issues that allow accelerated institutional participation and other deviations from the ‘vanilla’ rights issue format, provided there is, in substance, an equality of opportunity to participate for all holders.

The exemption is intended to benefit retail holders by encouraging listed entities to use rights issues, rather than other forms of fundraising that exclude retail participation (e.g. placements). 

For technical reasons, some rights issues would not qualify for the disclosure exemption without ASIC relief and ASIC has therefore proposed the widening of the exemption.

ASIC invites comments on the consultation paper by Wednesday 7 November 2007. 

Client Legal Privilege and Federal Investigatory Bodies

The Australian Law Reform Commission (ALRC) has released a  Discussion Paper, Client Legal Privilege  and Federal Investigatory Bodies (DP 73), containing 42 proposals aimed at addressing lengthy and costly disputes over client legal privilege in federal investigations.

The paper adopts the definition of client legal privilege formulated by Dr Sue McNicol:
It provides that, in civil and criminal cases, confidential communications passing between a lawyer and her or his client, which have been made for the dominant purpose of seeking or being furnished with legal advice or for the dominant purpose of preparing for actual or contemplated litigation, need not be disclosed in evidence or otherwise revealed. This rule also extends to communications passing between a lawyer or client and third parties if made for the purpose of actual or contemplated litigation.

The ALRC's research identified 41 federal investigatory bodies—as well as Royal Commissions that are established from time to time—that have coercive information-gathering powers. Many of the laws governing these bodies provide no guidance about whether client legal privilege applies wholly or in part. In those laws that do address privilege, there is no consistency of language or approach.

The ALRC proposes that where privilege applies, there should be a consistent legal framework. Where Parliament determines that privilege should be abrogated, this should be on the basis of clear principles—that is, where there is a significant public interest, and where legal advice is central to the matters being investigated. Where it is abrogated, appropriate safeguards should be put in place about the subsequent use of the information disclosed.

Other key proposals include:

• to allow privilege to apply to advice on taxation law provided by accountants;
• requiring parties claiming privilege to provide details of privileged documents and the basis of the claim; and
• improved education and training for lawyers concerning their ethical responsibilities in relation to making privilege claims.

The ALRC is seeking community feedback before a final report is completed in December 2007. Submissions close on 1 November 2007.

ALRC to examine Freedom of Information laws

Attorney-General Philip Ruddock has issued draft Terms of Reference for the Australian Law Reform Commission (ALRC) to examine Freedom of Information laws and practice across Australia.

The ALRC will examine existing Commonwealth, State and Territory access laws and practices, with a view to providing advice on how to harmonise those laws and practices. It will also examine the impact of technology on existing access laws.

The reference is partly in response to the Right to Know campaign.

The ALRC is to complete its work by 31 December 2008.

AML customer identification record-keeping requirements

Section 114 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 deals with record-keeping requirements where customer identification procedures have been carried out by one reporting entity on behalf of another.

Under draft AML/CTF Rules issued by Austrac subsections 114(2), 114(3) and 114(5) of that Act do not apply to a designated service which is, or is to be, provided in circumstances described in paragraphs 114(1)(a), 114(1)(b) and 114(1)(c), if the second reporting entity has access to records of identification procedures made by the first reporting entity in accordance with subsection 112(2), under an agreement between the first reporting entity and the second reporting entity for the management of such records.

A public consultation period is currently open from 24 September 2007 to 8 October 2007.

Legislative update

Once the election is called the Commonwealth Government will be in "caretaker" mode when no new laws will be passed unless they're urgent and have bipartisan support. The Spring sittings are scheduled to commence on 15 October 2007 but will not occur if the Parliament is prorogued (brought to a close) before that date for a general election.

Looking at the Bills List, there are Bills not passed which represent the culmination of a long period of consultation and negotiation. Other Bills (such as Access Card) have had to be amended and will likely wait for the next term to be re-introduced, if at all.

The Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 and Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007 and  the International Trade Integrity Bill were passed on 13 September and are awaiting Assent. The Trade Practices Legislation Amendment Bill (No. 1) 2007 was passed on 20 September and is also awaiting Assent. UPDATE: These Bills all received assent on 24 September.

The Financial Sector Legislation Amendment (Review of Prudential Decisions) 2007 Bill was introduced on 13 September but will lapse.

The Australian Securities and Investment Commission (Fair Bank & Credit Card Fees) Amendment Bill 2007 will also lapse.

The Trade Practices (Industry Codes - Franchising) Amendment Regulations 2007 (No. 1) will have to wait for a further 6 Senate sitting days before they take effect (to ensure they are not disallowed).

Regardless of the election, here's a sample of key dates that are not dependent on further Parliament sittings this year:

• 12 December 2007: Anti-money laundering customer identification rules start
• 1 December 2007: the new ASIC debenture disclosure rules start
• 1 January 2008: the new ASX governance principles and APRA governance standard start
• 1 January 2008: The Basel II framework starts
• 1 March 2008: new franchise disclosure regulations commence (if not disallowed)
• 31 March 2008: first AML compliance report due
• 1 July 2008: merged financial services dispute resolution scheme starts.

Managing Cross-Border Disputes: International Arbitration Explained

The Australian Centre for International Commercial Arbitration has recently published a booklet entitled Managing Cross-Border Disputes: International Arbitration Explained. The booklet seeks to assist Australian corporations by explaining the significance and advantages of international arbitration for managing disputes in cross-border transactions.

CAMAC issues discussion paper on shareholder claims against insolvent companies (Sons of Gwalia)

The Corporations and Markets Advisory Committee (CAMAC) has released a discussion paper  Shareholder claims against insolvent companies: Implications of the Sons of Gwalia decision (pdf).

The paper responds to a request from the Parliamentary Secretary to the Treasurer, the Hon. Chris Pearce, MP, for CAMAC to consider the implications of the decision of the High Court of Australia in Sons of Gwalia Ltd v Margaretic  [2007] HCA1.

In that case, the High Court held that a shareholder who is misled by a company into acquiring its shares can claim as a creditor in the external administration of the company. Such a claim is not postponed behind other unsecured creditors as are claims brought in a shareholder’s ‘capacity as a member of the company’. While clarifying the interpretation of relevant statutory provisions, the decision opens up underlying policy considerations, as was recognised by members of the Court.

CAMAC has been asked to consider whether the current position should be retained or changed to postpone claims by shareholders as aggrieved investors, and whether other changes should be made to ameliorate the consequences of either outcome.

The paper reviews various arguments for or against change to the current legal position and notes the divergence between the US and UK positions. It canvasses possible changes to the conduct of creditors’ meetings and to the procedure for determining shareholder claims if the current position is retained. It raises the possibility of introducing a ‘fraud on the market’ principle to assist shareholder claims should the law be changed. Finally, the paper considers whether shareholders whose claims are postponed in a liquidation should still be treated as creditors, with voting and other rights in an external administration.

Submissions close on Friday 21 December 2007.

The ACCC and franchising complaints

The ACCC has set up a new section on its website explaining the ACCC’s role in relation to franchising complaints and investigations and detailing some matters the ACCC has investigated and taken to the courts.

Although the ACCC notes that many complaints fall outside the jurisdiction of the ACCC and the Trade Practices Act 1974, are of a private contractual nature, or cannot be substantiated to the degree required to allow further action it gives case studies of where enforceable undertakings were obtained (eg Quiznos and You Can Bake-It Franchising P/L) as well as examples of investigations that were inconclusive or reached a mediated settlement (eg The Midas Franchise and Michel’s Patisserie) .

Freedom of information: right to know?

It's often impossible for a business, as well as individuals, to know how or why government made a particular decision.

The Australian media have been running a Right to Know campaign. Whilst the media have their own interests in the campaign, there is little doubt that Australia's Freedom of Information Laws have had variable success (see Open and Shut).

New Queensland Premier Anna Bligh has announced an independent review of Queensland’s Freedom of Information Laws, with particular interest in the exemption of cabinet documents. (see this The Australian report).

The panel terms of reference include the time and cost of providing access to government documents, and the appropriateness of the fees and times that apply.

The panel will also assess existing and proposed FOI laws and practices across the country as well as internationally.

It is expected that an information paper will be released for community consultation in January and any necessary legislative amendments prepared by the middle of next year. 

Senate passes amendments to Trade Practices Legislation Amendment Bill (No. 1) 2007

The Trade Practices Legislation Amendment Bill (No. 1) 2007 was passed in the Senate on 18 September 2007, with amendments.

The original Bill amended the Trade Practices Act 1974 to provide greater protection for small businesses against misuse of market power and unconscionable conduct by large corporations.

The amendment Bill has further amended the misuse of market power provisions in section 46 of the Act to:

• address concerns about establishing when a corporation has a substantial degree of power in a market, which is the threshold requirement for section 46 to apply;
• specifically prohibit a corporation from leveraging market power from one market to another; and
• refer to sustained below‑cost pricing conduct as a factor the Court may consider in deciding whether a corporation has misused its market power.

The Government’s new amendment is based on an amendment by Senator Joyce and includes a specific prohibition against a corporation with a substantial share of a market from engaging in sustained below-cost pricing conduct for the purpose of eliminating or substantially damaging a competitor, preventing the entry of a person into a market, or deterring or preventing a person from engaging in competitive conduct in a market.

The Bill also makes amendments to the unconscionable conduct provisions in section 51AC of the Act to:

• include unilateral variation contract terms as a factor the Court may consider in deciding whether a corporation has engaged in unconscionable conduct; and
• raise the transaction limit for section 51AC from $3 million to $10 million to extend the its application to a wider range of transactions.

Finally, the Bill creates a second Deputy Chairperson position at the ACCC. The Government has announced that the second Deputy Chairperson appointment will be filled by a person who is experienced in small business matters.

The Bill will now be returned to the House of Representatives for final consideration.

UPDATE: Trade Practices Legislation Amendment Act (No. 1) 2007 as passed

Licence breach notifications

For both financial services licensees and superannuation licensees not only is it an offence to breach a licence term, it is also an offence not to report a material breach within a required time (in the case of financial services licensees, the obligation covers significant breaches, or likely breaches). (see s. 912D Corporations Act 2001 and s. 29JA of the Superannuation Industry (Supervision) Act 1993).

For RSE Licensees, APRA has released an online breach notification process.

APRA releases discussion paper on Basel II supervisory review process

The Australian Prudential Regulation Authority (APRA) has released a discussion paper on its proposed approach to the supervisory review process under the new Basel II capital adequacy regime, known as the Basel II Framework.

The supervisory review process, or Pillar 2, is one of three mutually reinforcing pillars on which the Framework is based. The process is intended to ensure that locally incorporated authorised deposit-taking institutions (ADIs) have adequate capital to support all the risks in their business and to encourage ADIs to develop and use better risk management techniques in monitoring and managing their risks.

As APRA's existing supervision framework is already largely consistent with Pillar 2, no separate Pillar 2 prudential standard will be issued and APRA will apply draft Prudential Standard APS 110 Capital Adequacy (APS 110).

Consistent with its existing processes for determining capital adequacy, APRA is proposing to set a prudential capital requirement (PCR) for each ADI, which must be met at all times.

Subject to the minimum capital requirement of eight per cent established in the Framework, PCRs will be set at a level proportional to each ADIs overall risk profile.

A key requirement of Pillar 2 is that an ADI should develop, document and maintain a comprehensive internal capital adequacy assessment process (ICAAP), proportional to its operations and consistent with prudential requirements. The information provided by an ADI in its ICAAP is essential input into APRA's supervisory review and determination of the PCR.

In line with the Framework, APRA intends to apply a limit on reductions in regulatory capital for ADIs accredited to use the advanced Basel II approaches, relative to what would have applied had the current Basel Capital Accord continued in force. The limit will be 10 per cent in 2008 and this limit will be retained in 2009 pending a review of experience with the advanced Basel II approaches.

The Basel II Framework will come into force in Australia on 1 January 2008.

Comments on the discussion paper are invited by 26 October 2007.

ALRC releases privacy discussion paper

The Australian Law Reform Commission (ALRC) has released Discussion Paper 72, Review of Australian Privacy Law, containing 301 proposals for overhauling Australia’s complex and costly privacy laws and practices.

The ALRC proposes there be a single set of privacy principles for information-handling across all sectors, and all levels of government. This will make it easier and less expensive for organisations to comply, and much more simple for people to understand their rights.

Other issues discussed include:

• The protection of personal information stored or processed overseas
• a new system of data breach notification
• the removal of the exemption for political parties from the Privacy Act.
• introducing a new statutory cause of action where an individual’s reasonable expectation of privacy has been breached
• abolishing the fee for ‘silent’ telephone numbers
• expanding the enforcement powers of the Privacy Commissioner
• imposing civil penalties for serious breaches of the Act
• introducing a more comprehensive system of credit reporting.

The ALRC is seeking community feedback on these proposals before a final report and recommendations are completed in March 2008.  Submissions close on 7 December 2007.

ALRC proposes a more comprehensive credit reporting regime

The Australian Law Reform Commission (ALRC) has proposed the introduction of a more comprehensive credit reporting regime, in a Discussion Paper released as part of its major review of Australian privacy law and practice.

The ALRC proposes that:

• the types of information that may be recorded on a credit file be expanded, to include information about current credit accounts, the dates those accounts were opened and closed, and the credit limits of each.
• an individual who has been a victim of identity theft should be able to advise credit reporting agencies and request that this be flagged on their file, so that any prospective credit provider is aware that an applicant for credit may be an impostor.
• any credit provider who lists debt defaults on credit information files must be part of an external dispute resolution scheme to provide a fast, simple process for consumers who wish to dispute a default listing.

The ALRC is seeking community feedback on these proposals before the final report and recommendations are presented to the Attorney-General in late March 2008. Submissions close on 7 December 2007.

Takeovers Panel issues discussion paper on treatment of equity derivative holdings

The Takeovers Panel has released a draft Guidance Note, and discussion paper, seeking public discussion and comment on the approach which the Panel proposes as to when, and in what circumstances, the use of equity derivatives may constitute unacceptable circumstances.

The Panel proposes that for control and substantial holding disclosure purposes, at least, long equity derivatives (cash settled or deliverable) should be treated the same as physical holdings of the relevant securities. The Panel's discussion Guidance Note indicates that: when considering whether or not unacceptable circumstances exist, the Panel will normally treat a person's long equity derivative interests and voting power in listed entities in a combined manner.

Responses are due by 7 December 2007.

Anti-competitive conduct and doctors

In Australian Competition and Consumer Commission v Knight [2007] FCA 1011 the Federal Court imposed penalties totalling $110 000 on two Adelaide cardiothoracic surgeons after they admitted contravening ss 45(2)(a)(ii) and 45(2)(b)(ii) of the  Competition Code of South Australia (which adopts the Trade Practices Act) and to attempted contravention of s 45(2)(a)(ii)including:

• that Mr Knight and Mr Ross made an arrangement that they would hinder or prevent a newly qualified surgeon from entering or supplying his services in the market before he had undertaken further surgical training, notwithstanding that he was legally qualified to practice as a cardiothoracic surgeon.

• that Mr Knight and Mr Ross gave effect to the arrangement on six occasions between 6 February 2001 and 9 March 2001 by advising either hospitals at which the surgeon sought to operate, or cardiothoracic surgeons who had been asked to support the surgeon's applications to operate at those hospitals, that the surgeon was insufficiently trained, or had not completed his training, and should not be allowed to operate at those hospitals.
  

• that Mr Ross attempted via a letter in May 2003, to reach a non-compete arrangement with a second surgeon whereby that surgeon would not provide surgical services at Ashford Hospital and that Mr Ross would agree not to provide surgical services at Wakefield Hospital. The court also declared that Mr Knight attempted, via a letter in November 2004, to reach a similar non-compete arrangement with the surgeon.

The doctors were two of only seven or eight such surgeons in the region who supplied cardiothoracic surgical services to private patients in South Australia.

The anti-competitive conduct provisions in the TPA were extended in 1996 to apply to individuals in the health sector in South Australia as a result of the enactment of the Code by the Competition Policy Reform (South Australia) Act 1996 (SA).The trial judge noted that "Mr Knight and Mr Ross had little knowledge of the TPA or Code and did not know that the admitted conduct constituted a breach of the Code. Their conduct was not covert. The conduct was accordingly deliberate only in the sense of not being accidental or involuntary and was not in knowing contravention of the law. The respondents have consented to an order that they undergo appropriate training so that contraventions can be identified and avoided in the future."

The court ordered Mr Knight and Mr Ross to each pay a pecuniary penalty of $55 000 and make a contribution of $5000 each to the ACCC's costs in relation to the proceedings.

UPDATE 15 September: ACCC issues proceedings against orthodontists for price-fixing and anti-competitive coinduct

General Insurance Prudential Framework update

APRA has extended the closing date for submissions on its Discussion Paper on Refinements to the General Insurance Prudential Framework to 28 September 2007.

The extension will allow sufficient time for respondents to consider APRA’s proposals while also considering an options paper on exemptions for DOFIs that the Treasury is expected to release during September. This will give respondents an opportunity to identify whether there are any issues arising from the Treasury consultation paper that would affect their submission to APRA’s Discussion Paper.

APRA has clarified its comments on capital recognition of reinsurance recoverables older than 12 months. It also noted that the Discussion Paper made no reference to transitional provisions for this proposal. APRA is nevertheless considering transitional provisions relating to pre-existing reinsurance arrangements.

APRA releases proposed amendments to governance standards

The Australian Prudential Regulation Authority (APRA) has released a discussion paper on proposed amendments to prudential standards on governance for authorised deposit-taking institutions (ADIs), general insurers and life insurers and a revised Prudential Standard APS 510 Governance for ADIs. The change is expected to take effect from 1 January 2008.

  These amendments follow the release of the ASX Corporate Governance Council’s Principles and Recommendations (2nd ed) which contained changes to the provisions on the independence of board directors.

As the ASX document no longer provides a definition of independence but identifies a number of “relationships affecting independent status” that Boards should consider in determining a director’s independence, APRA proposes to redraft its standard.

APRA will remove reference to the definition of independence in the 1st edition of the ASX Corporate Governance Council Principles. Instead, the paragraph will refer to circumstances that will not satisfy the principle of independence.

The circumstances are identical to the five “relationships affecting independent status” in the 2nd edition of the ASX Corporate Governance Council Principles. They represent a non-exhaustive list of specific circumstances that would preclude a director from being regarded as independent for the purposes of serving on the Board of an APRA-regulated institution. A director in any of these circumstances would still be able to serve on such a Board, but not as an independent.

APRA is also proposing that an ADI's Board Renewal policy must give consideration to whether directors have served on the Board for a period which could, or could reasonably be perceived to, materially interfere with their ability to act in the best interests of the regulated institution. 

Written submissions on these proposals should be submitted by 28 September 2007.

Prudential standards on governance for general insurers and life insurers (GPS 510 and LPS 510) will also be revised in the same way, but will be finalised subject to a number of other changes required as a result of the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007. APRA will consult separately on those other changes.

UPDATE 28 November 2007: Final standards issued

Professional Indemnity and Public and Product Liability Insurance

APRA has released the National Claims and Policies Database (NCPD) publication Overview of Professional Indemnity and Public and Product Liability Insurance, for the period 1 January 2003 to 31 December 2006

You need to register in order to obtain access.

Parliament resumes: election countdown?

Parliament resumes on Tuesday 11 September for sittings until Friday 20 September.

On Tuesday 11 September it is expected that the Right Honourable Stephen Harper, Prime Minister of Canada, will deliver an address to the House of Representatives.

It is planned to resume debate on Government bills already introduced including:

• National Greenhouse and Energy Reporting Bill 2007
• Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007
• Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007
• Trade Practices Amendment (Small Business Protection) Bill 2007

ASIC releases report on relief applications

ASIC has released a report outlining its recent decisions on applications for relief from the corporate finance, financial services and managed investment provisions of the Corporations Act (the Act) between 1 January and 31 May 2007. 

The report, Overview of decisions on relief applications (January to May 2007), provides an overview of situations where ASIC has exercised, or refused to exercise, its exemption and modification powers, from the financial reporting, managed investment, takeovers, fundraising and financial services provisions of the Act. 

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.

Senate reports on Trade Practices Amendment (Small Business Protection) Bill 2007

The Senate Standing Committee on Economics has released its report on the Trade Practices Amendment (Small Business Protection) Bill 2007.

The Bill amends section 87 of the Trade Practices Act 1974 to allow the Australian Competition and Consumer Commission (ACCC) to seek compensation for damages on behalf of parties affected by unlawful secondary boycotts.

The Committee recommended the Bill be passed.

APRA releases Basel II reporting requirements

With less than 90 working days before the implementation of the Basel II Framework in Australia, APRA has released its proposed reporting requirements (pdf) for authorised deposit-taking institutions (ADIs) under the new Basel II capital adequacy regime.

APRA proposes to finalise and issue the reporting standards, reporting forms and instruction guides in late 2007, following the release of the full suite of finalised Basel II prudential standards. The reporting standards will come into effect at the same time as the Framework, on 1 January 2008; the first submission of data will be for the period 1 January 2008 to 31 March 2008.

A recent speech by Bernie Egan, Program Director, Basel II Australian Prudential Regulation Authority provides useful background on the changes.

Draft AML/CTF Rules for designated remittance arrangements

Austrac has released draft AML/CTF Rules for designated remittance arrangements.

These draft AML/CTF Rules describe conditions under paragraph 10(1)(c) of the AML/CTF Act relating to a designated remittance arrangement.

A public consultation period is currently open from 5 September 2007 to 18 September 2007.

Best Practice Regulation Handbook

The Office of Best Practice Regulation has issued the Best Practice Regulation Handbook .

The Handbook sets out the Australian Government's enhanced framework for analysing regulatory proposals. It is intended to ensure that regulation is only introduced after a rigorous examination of options and consequences.

How effective is regulation reform?

Nicholas Gruen from Lateral Economics has released a report (pdf) he did for the Victorian Government in 2006 on Regulation and Innovation.

He argues that regulation reform has become too scientific and process-focussed rather than looking at outcomes which encourage improvement and innovation as well as compliance. A new approach to regulation should be more fully focused on continually optimising our regulatory systems in the way businesses continually improve their own production systems.

He gives the example of an organisation which did not update its regulatory requirements because to do so would require a new Regulatory Impact Statement.

He argues that measurement of compliance should be a basis for improvement and higher morale rather than a basis of punishment and that the social objectives of regulation should be achieved in ways that maximise the operating flexibility of those who are regulated.

If you're interested you can listen to an interview Nicholas did on Radio National (it starts around the 37 minute mark).

Draft AML/CTF Rules for reportable details relating to international funds

Austrac has published draft AML/CTF Rules relate to information required to be included in an international funds transfer instruction report under subsection 45(3) of the AML/CTF Act.

A public consultation period is currently open from 3 September 2007 to 17 September 2007.

Cook v Permanent Mortgages Pty Ltd appeal

In Cook and Anor v Permanent Mortgages Pty Ltd [2007] NSWCA 219 the New South Wales Court of Appeal rejected an appeal by the defendant borrowers against the relief they were given from an unjust loan contract in their original trial in Permanent Mortgages v Cook.

The trial judge relieved the borrowers from the obligation to pay to the mortgagee fees associated with entry into the transaction, from payment of interest at a default rate of 13.8%pa (5% more than the ordinary interest of 8.8% per annum), and from any obligation to pay the mortgagee’s costs and expenses following default.

On appeal the borrowers sought relief from the obligation to pay even the ordinary interest at the rate of 8.8% per annum.

The Court of Appeal rejected that claim and stated "Relieving them from payment of interest to the respondent would do more than restore them to their previous position. It would improve their position."

However the Court of Appeal ordered that the mortgagee pay ninety per cent of the borrower’s trial costs and fifty per cent of appeal costs. 

Draft AML/CTF Rules for issuing or selling a security or derivative

Austrac has issued draft AML/CTF Rules relating to the "designated service" in item 35 of table 1 in section 6 of the AML/CTF Act (issuing or selling a security or derivative).

A public consultation period is currently open from 31 August 2007 to 14 September 2007.