Australian Regulatory Compliance Review

Borrowing by superannuation funds

The Australian Financial Review has reported industry concern that a recent amendment to the Superannuation Industry (Supervision) Act 1993 (SIS Act) may have gone too far (story not available online). The change late last year introduced a new exception to the prohibition on borrowing by superannuation fund trustees.

The change is contained in section 67(4A) of the  SIS Act entitled  Exception - Instalment Warrants .

Section 71(8) was also inserted containing an exemption to the in-house asset rules for Section 67(4A) arrangements.

Section 67(4A) sets out the conditions for the exception to operate. But there is concern that the exception may permit unintended arrangements.

The amendment did not specifically grant an exemption from the Regulation 13.14 prohibition on a Super fund trustee giving a charge on fund assets.

UPDATE 12 April 2008: ATO Alert

Queensland Freedom of Information Review

The Freedom of Information Independent  Review Panel has released a discussion paper reviewing Queensland's Freedom of Information (FOI) laws.

The discussion paper is intended to raise the major issues that will be considered by the Panel in recommending ways to improve and modernise Queensland’s Freedom of Information Act 1992.

According to the Panel, "The discussion paper challenges core legislative presumptions and current paradigms in the administration of FOI to shake out what matters most and what resonates best in the problemsolving puzzle."

Public submissions close on 7 March 2008.

The Panel will jointly host a FOI Public Seminar with the Australian Law Reform Commission on 6 March 2008.

The panel is scheduled to submit its final report and recommendations for cabinet consideration by the end of May.

The government intends to introduce proposed changes to the state's FOI laws before the end of the year.

Privacy Commissioner calls for mandatory reporting of major data security breaches

The Australian Privacy Commissioner, Karen Curtis, has called for compulsory notification of major data security breaches by Australian organisations.

In a submission by her Office to the Australian Law Reform Commission (ALRC) in response to its Discussion Paper 72: “Review of Australian Privacy Law”, she proposes that reporting would need to be proportional to the severity of the breach.

AML checklist for small business

Austrac has produced an AML/CTF checklist for small business.

Although the AML/CTF Act does not differentiate between the size of regulated entities, Austrac may consider the issue when deciding whether reasonable steps to comply have been taken in the context of its Policy (Civil Penalty) Principles.

Societe Generale: rogue trader or poor systems?

Apart from the size of the loss (about €4.9 billion (US $7.2 billion)) attributed to the Societe Generale rogue trader Jérôme Kerviel, the most interesting aspect of the affair is the speculation over whether the Societe Generale Bank's systems were defective and the flow of other information coming out of the French bank.

This story from The Economist asks whether Kerviel is an evil genius or folk hero.

Forbes has excerpts of transcripts of his police interview.

The fraud overshadowed the bank's announcement of a €2bn loss from the US sub-prime mortgage crisis, in addition to €375m of writedowns. (FT.com)

The Times Online reports that the UK Financial Services Authority is quizzing banks operating in the UK  on their equity derivatives exposure, ahead of announcements relating to the Northern Rock collapse.

Other stories: The Australian, FT.com

Risk issues for 2008

Although we are starting the year with market uncertainty and credit tightening because of the sub-prime mortgage crisis, the larger issue is business judgment. How good are the risk management and decision-making processes of organisations which cannot calculate or understand the risks of the transactions they enter? And how do you know if a key customer or supplier is affected? In this note I identify 3 of the risks you need to manage.

The flow-on effects of the US sub-prime mortgage crisis for the Australian stock market and financial system were unforeseen, it seems, because of ambiguous or misleading disclosure to the market.

So the first risk issue businesses need to consider is how good are your disclosure procedures and those of the businesses you deal with. If you are listed you need to review your continuous disclosure obligations. Even if your company is not listed, if you are a director or manager, are you satisfied you have identified key contracts and risks and understand them? Importantly, are you managing your liquidity risk? Have you reviewed your outsourcing arrangements?

The second risk is privacy and data security. Whether your data is electronically or physically stored, is it secure?

Could the UK Norwich Union Life fraud happen to you?

Do you have a data management and document retention system?

The third risk is errors from complex product packaging: whether you produce or sell consumer goods or financial products do you understand your products and market them accurately? The risk of misleading or deceptive advertising (no matter how innocent) or incorrect calculations or pricing is ongoing.

If you don't have a risk management system in place how do you know whether these risks are  high or low risks for you?

Equine Influenza Inquiry

The inquiry into the outbreak of equine influenza in Australia in August of 2007 has been in progress since October 2007.

Hearings are expected to be completed in late February 2008. The report is to be provided to the government no later than 25 April 2008.

AML and managed investment schemes

Austrac has announced that it is anticipated that regulations will take effect from late January 2008, designed to ensure that companies who carry on a business of issuing or selling interests in managed investment schemes are providing a designated service under item 35 of table 1 in section 6 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. The regulations will commence immediately upon being registered.

UPDATE 30 January 2008: The Anti-Money Laundering and Counter-Terrorism Financing Regulations 2008  wre made on 25 January 2008.

NSW Government report on National Industrial Relations System

The NSW Government has released Working Together: Inquiry into Options for a New National Industrial Relations System (pdf) by Professor George Williams.

The report is the result of an Inquiry to develop options for a national system for the regulation of industrial matters that was based on greater harmonisation between the States and Territories and cooperative federalism.

Mistaken electronic payments

What are your rights when your online funds transfer is credited to the wrong financial institution account (ie an account with a different account owner or account number than intended)?

The Banking Ombudsman discussed difficulties in recovering Internet banking payments when a mistake is made and the wrong account number is keyed in, despite the correct name being included in the on-screen instructions in a Bulletin(pdf) in 2003.

Why is there a problem? Can't the transaction be reversed?

an electronic transfer is processed solely on the basis of the account number. This has the effect that, if the payer keys in the wrong account number the payment will be made but to the holder of the account number that has been keyed in. The mistake may only come to light when the intended recipient tells the payer that the payment has not been received. When the payer tries to find out where the payment has actually gone, he or she may be told that the recipient’s name cannot be released for reasons of confidentiality. Their bank may claim that it acted on the basis of the instructions it was given, that is, the account number.

The recipient’s bank may claim that it has no liability because it acted on the instructions it received from the payer’s bank. .. By the time the payer realises that the payment has gone astray, the recipient may have withdrawn and used the funds, with or without realising that there was a mistake.

Where the Banking and Financial Services Ombudsman has jurisdiction its approach is that "If the account name forms part of the instructions given by the payer to the paying bank then the bank will be in breach of mandate if it debits the account for a payment where the account name and number do not match, and will be liable to re-credit the account...

The receiving bank is in a position to check whether the account into which the payment was made matches the account name entered by the payer. It should do so as soon as it is alerted to the alleged mistake. It does not, in our view, breach its customer’s confidentiality if it merely confirms to the payer’s bank that the account number does not match the name provided by the payer.

The receiving bank is the recipient of a mistaken payment and on the face of it, where the mistake has been verified, it is liable to repay the funds, at least until the point in time that the funds have been withdrawn by its customer and it has, accordingly, accounted to its customer."

The matter could be complicated by specific account terms and conditions and whether or not the recipient has withdrawn the funds before the mistake is discovered.

Contact details for MP's

A list of contact details for Members of the House of Representatives in the 42nd Parliament is here (pdf).

Good practices in board-shareholder relations

In recent years shareholder groups (such as the Australian Shareholders Association) have been increasingly vocal in expressing their views on issues traditionally (and legally) reserved for board and management. Is it time for a re-balancing of the board-shareholder relationship?

Ira M. Millstein, Holly J. Gregory and Rebecca C. Grapsas of US law firm Weil, Gotshal & Manges LLP have issued a memorandum (pdf) discussing shareholder activism and encouraging increased efforts by boards of directors to engage shareholders in less contentious, more cooperative interaction and communication.

They identify board quality as a key factor in the relationship and detail 5 issues where shareholders have legitimate interests which boards need to consider:

• board composition and independent leadership,
• corporate performance disclosures,
• executive performance, compensation and succession,
• strategic direction, and
• societal concerns, including climate change.

They conclude:
Reaching out to shareholders in a concerted fashion will not appeal to every board. However, it is likely to be a prudent approach for companies seeking to avoid confrontation. Setting a positive and constructive tone in shareholder relations not only has the potential to elicit for the board useful insights about shareholder perspectives but also may encourage shareholders to focus on long-term performance and act as owners making rational investment decisions.

Copyright review

The Government has released an Issues Paper (pdf)calling for submissions on whether sections 47J and 110AA of the Copyright Act 1968 which permit photographs and cinematograph films to be reproduced in a different format for private use, subject to certain conditions, are operating satisfactorily or whether either provision should be modified in some way.

The closing date for submissions is 29 February 2008.

Member register access: AXA v Direct Share Purchasing Corporation Pty Ltd

Last year I wrote about member register access in the context of activity by David Tweed and his associated companies including Direct Share Purchasing Corporation and National Exchange Pty Ltd.

In AXA Pacific Holdings Ltd and Anor v Direct Share Purchasing Corporation Pty Ltd, AXA sought to prevent Tweed's company from using Axa's register for an improper purpose.

The proceedings have been resolved by Direct Share Purchasing Corporation agreeing that it will not use or disclose the information contained in the register of members of AXA APH provided to it in response to its request to AXA APH , unless the use or disclosure of the information is relevant to the holding of the interests recorded in the register or the exercise of the rights attaching to them.

ACCC inquiry into grocery prices

The Government has directed the Australian Competition and Consumer Commission to commence a formal inquiry into grocery prices.

The Government has instructed the ACCC to take a broad approach to its inquiry and ensure all aspects of the chain are included - from the farm gate to the check out counter.

The inquiry will consider the current structure of the grocery industry at the supply, wholesale and retail levels including mergers and acquisitions by the national retailers; the nature of competition and the pricing practices in the grocery industry; and factors influencing efficient pricing of inputs along the supply chain.

The ACCC is required to report to the Minister  by 31 July 2008.

UPDATE 2 February: ACCC's announcement that it will release an Issues Paper soon.

Product development, misleading advertising and regulatory compliance

Why is it so hard for some businesses to accurately advertise their products? Are they too complex or is the advertising not checked?

Last week the ACCC issued proceedings for misleading advertising against Crazy John's (in respect of mobile phones) and Saab Australia (in respect of green claims on their cars). How could such claims be prevented?

The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court against Mobileworld Operating Pty Ltd (trading as Crazy John's) for alleged contraventions of sections 52 and 53 of the Trade Practices Act 1974 in relation to the promotion of certain of its mobile phone plans.

The ACCC alleges that Crazy John's has engaged in misleading or deceptive conduct by representing that handsets on its Crazy Phone Plans are available 'FREE' or for '$0', when in fact consumers are required to pay for the handsets through higher call rates than those available on comparable plans which do not include a handset.

The ACCC has also instituted legal proceedings against GM Holden Ltd, which supplies and markets Saab motor vehicles in Australia and trades as Saab Australia, alleging misleading and deceptive conduct and false representations concerning 'green' claims made in the advertising of Saab vehicles.

In 2004 I posted this article (pdf) on the need to consider end compliance issues (such as product standards and misleading advertising) when developing new products or modifying existing products (regardless whether it is a car, a mobile phone plan or a financial product). I recently updated the article to take into account the decisions in ACCC v Audi and ACCC v Telstra. As the issues covered are still relevant I am publishing the full amended version below.

CONTINUOUS COMPLIANCE AND PRODUCT DEVELOPMENT
Even in organisations that have well designed compliance systems,  compliance must be put into the daily practice of the business.

New product development and changes to existing products involve compliance risks. This can occur because of the way in which decisions are made and the way such projects are implemented.

Poor product knowledge combined with lack of understanding of regulatory requirements can lead to a breach.

Even small changes have risks.

In Australian Competition and Consumer Commission V Wizard Mortgage Corporation Limited [2002] FCA 1317 considered an existing advertisement for a loan product which had been legally cleared but had been changed by the marketing head by adding in an interest rate (there was no rate before). However the product was not available at that rate. The Federal Court agreed with the ACCC that the ad was misleading and deceptive.

In BMW Australia Limited v Australian Competition & Consumer Commission [2003] FCA 727 the Federal Court of Australia found that BMW’s 2002 318i model had breached the Trade Practices Act (TPA) by using safety warnings on the jacks which did not comply with the Australian Safety Standards. In dispute was the importance of 5 words which had been omitted.

In Australian Competition and Consumer Commission v Audi Australia Pty Ltd [2007] FCA 1990, the Federal Court made orders against Audi relating to its misleading advertising that the Audi Q7 3.6 SE motor vehicle had 7 seats as a standard feature at the standard price when in fact the standard seating for the Audi Q7 3.6 SE was 5 seats.

In Australian Competition and Consumer Commission v Telstra Corporation Limited  [2004] FCA 987 the Federal Court decided that Telstra's $0 mobile phone advertising was misleading and deceptive after analyding Telstra's mobile phone plans.

The decision making process
Decisions on new products and changes to existing products may be made for different reasons:
• Defensive: follow the leader
• Product innovation
• Market research
• Compliance input

How is the decision made? Is there a team that investigates the options and puts together a business case before a decision is made or does the CEO or the board make the decision and then ask one or more people to investigate it?

You need to do your homework to show that careful business judgment was exercised.

Do you have all the regulatory licences and approvals?
Have you satisfied all regulatory conditions?
Does your pricing model take into account different scenarios?
Have you considered tax issues?
Have you done full "specifications" of the product?
What are the product terms and conditions?
Have pros and cons been weighed?
What are the most important objectives?
Can compromises be made?
Is the change worth making?
What are the different options?
Are there ethical or governance issues?
Is there any ambiguity?
Is it fully documented?
Have you done a cost/benefit analysis?

Implementing decisions
Once the decision is made, who has control?
Is there an external Project Manager?
Is there an implementation team? If so, is every relevant person on it?

An implementation committee should represent the following interests:
• Legal (for issues such as name of product, intellectual property, trade practices, advertising clearance, documentation and specific product regulation)
• Commercial
• Prudential/risk profile
• Accounting/actuarial
• Software (new, modifications)
• Marketing
• HR/training

Will you seek input from your front line staff, key suppliers, customers or regulators?
The committee needs to give clearance at both draft AND final stages.

Product documentation
The process should result in documentation that identifies the background of the product, specifications and operational risks. This will ensure that whoever markets the product has a proper understanding of the product and does not inadvertently mislead consumers. And when the marketing material is produced, a person must have responsibility for checking its accuracy and compliance.

Conclusion
There needs to be a method for ensuring that a new product or a change to an  existing product has been considered from all angles (marketing, IT, compliance, HR, finance etc) before a decision is made to proceed with it.

At the least, failure to do your basic homework can jeopardize your marketing campaign. If timing is critical, the success of the product can be affected.

Graeme Samuel speaks

If you're in Brisbane on Wednesday 20 February, don't miss the opportunity to hear Graeme Samuel, Chair of the ACCC speak about current issues at the ACCC and the Rudd Government’s plan to enhance Australia’s competition laws.

To book for this lunch please contact Liz Venzin, CEO, Australia-Israel Chamber of Commerce (QLD) by emailing liz@aicc.org.au

UPDATE: THIS HAS BEEN POSTPONED TO 3 APRIL

AML/CTF draft rule: over-the-counter derivatives market

Austrac has issued draft AML/CTF Rules exempting certain types of transactions relating to the over-the-counter derivatives market (pdf).

These draft AML/CTF Rules relate to the exemption from the AML/CTF Act of transactions relevant to the over-the-counter derivatives market in Australia relating to the wholesale price of electricity, gas or renewable energy certificates.

A public consultation period is currently open from 16 January 2008 to 31 January 2008.

Garnaut Climate Change Review

Although the new government has ratified the Kyoto Protocol, it had deferred any commitment on specific short-term climate change targets until receipt of the draft Garnaut report.

The Garnaut Climate Change Review will examine the impacts of climate change on the Australian economy, and recommend medium to long-term policies and policy frameworks to improve the prospects for sustainable prosperity.

The Review's final report is due on 30 September 2008, with a draft by 30 June 2008.

ASIC continues review of loans to indigenous borrowers

ASIC has announced that National Australia Bank (NAB) has agreed to tailor its lending practices in recognition of the special needs and circumstances of borrowers in regional and remote Indigenous communities.

The changes follow a review of approximately 25 loans to borrowers in remote parts of Far North Queensland, advanced by the bank during 2006.

NAB is reviewing individual loans that were the subject of ASIC’s initial review and is also undertaking a comprehensive program to assist remote communities in the Torres Strait, including:

• the development of a travelling bank where NAB employees would visit individual communities to provide banking and wealth advice;
• the development of local language assistance cards with tips for buying a car, avoiding bank fees and saving money; and
• a continued commitment to local sponsorships, such as the Torres Strait Football Cup.

ASIC and the Commonwealth Bank of Australia announced a similar review in 2006.

Australian domain name disputes update

Australian cricket captain Ricky Ponting has lodged an application (set for hearing in the Federal Court on 8 February 2008) claiming misleading and deceptive conduct against the operator of a website which described itself as "the official Ricky Ponting site": Ricky Thomas Ponting v Kevin Leonard Consulting Pty Limited (ACN 087 382 858) & Anor (also see Computerworld story)

It is not clear why Ricky Ponting has chosen litigation rather than the domain name disputes resolution procedure administered by .auDA. [UPDATE 17 January: David Starkoff comments]

UPDATE 13 February 2008: Ricky Ponting discontinued his action on 8 February.

According to this data from the World Intellectual Property Organization 2007 was a record year for domain name disputes. Disputes are dealt with under ICANN's Uniform Domain Name Dispute Resolution Policy (“UDRP”)

The auDRP is an adaptation of the Uniform Dispute Resolution Policy (UDRP) administered by ICANN with respect to the generic top level domains such as .com.

auDA can compel dispute resolution where:

(i) a domain name is identical or confusingly similar to a name, trademark or service mark in which the complainant has rights; and
(ii) the domain name owner has no rights or legitimate interests in respect of the domain name; and
(iii) the domain name has been registered or subsequently used in bad faith.

The complainant has the burden of proof.

The Australian 2007 decisions made by WIPO include decisions to transfer the domain name to the complainant as well as cancellation of the name.

The WIPO Domain Name Dispute Resolution Service has resources and past decisions.

In the UK recently Maestro (a subsidiary of Mastercard) failed in its attempt to stop another organisation using maestro.co.uk.

The appeal panel ruled that it did not prove the case that the registration was abusive, and that because maestro is a normal word with a dictionary definition it could not monopolise its use in domain names just because it also happened to be one of its brands.

auDA's policy states that it accepts that a complainant has rights in the complainant's personal name.

Treasurer rules out bank fee legislation

In this transcript of an interview on ABC's 7.30 Report the Treasurer, whilst confirming he has instructed Treasury to review bank switching fees, has ruled out legislation regulating bank fees:

No, I'm not talking about legislating, but it involves issues which are broader than just fees. There are a whole series of issues involved in the portability of accounts and people moving their accounts from bank to bank. I will approach this in a rational way; I will approach it in a way which is based on the evidence that is put before me. 

The Treasury is looking at all of these issues. I've yet to receive their report and I've yet to have a session with the major banks about all of those issues. I'll give them plenty of opportunity to put their point of view to me...

I'm ruling out legislation. We don't regulate the banks when it comes to fees and charges in this economy, it's not a centrally planned economy. But what we need to have is a competitive market.

National Health ID system

The Federal Government has announced the National E-Health Transition Authority has contracted for the development of a new national healthcare identifier service.

It will identify a person's name, date of birth, address and the names and addresses of their practitioners, and is the first step towards establishing a shared electronic health records system.

Federal Minister for Human Services, Joe Ludwig, says it is not an access card and people can decide whether or not they want to be part of the service.

National trade measurement

The Commonwealth will assume responsibility for trade measurement from the States and Territories commencing on 1 July 2010.

The National Measurement Institute (NMI) will administer the national system.

NMI has issued a discussion paper (pdf). Comments should be forwarded to NMI by 8 February 2008.

Insolvency law reform: corporate insolvency information for directors, employees, creditors and shareholders

Insolvency law changed on 31 December 2007 as a result of the Corporations Amendment (Insolvency) Act 2007. The ATO and ASIC have issued information sheets relevant to the changes. The IPA has issued a new Code of Professional Practice for Insolvency Professionals.

Recovering super entitlements from failed companies: Information from the ATO about changes applying from 31 December 2007.

ASIC has issued 11 information sheets for directors, employees, creditors or shareholders affected by the three most common company insolvency procedures:

• voluntary administration
• liquidation, and
• receivership.

INFO 41	Insolvency: a glossary of terms
INFO 42	Insolvency: a guide for directors
INFO 43	Insolvency: a guide for shareholders
INFO 45	Liquidation: a guide for creditors
INFO 46	Liquidation: a guide for employees
INFO 54	Receivership: a guide for creditors
INFO 55	Receivership: a guide for employees
INFO 74	Voluntary administration: a guide for creditors
INFO 75	Voluntary administration: a guide for employees
INFO 84	Independence of external administrators: a guide for creditors
INFO 85	Approving fees: a guide for creditors

The Insolvency Practitioners Association (IPA) has issued a Code of Professional Practice for Insolvency Professionals (pdf)

Discrimination law: Human Rights and Equal Opportunity Commission

The Human Rights and Equal Opportunity Commission (HREOC) administers Commonwealth discrimination laws in the areas of age, race, sex and disability discrimination.

Its latest Human Rights Law Bulletin 21 gives an idea of the scope of its interests: there are reports on cases dealing with self-represented litigants, unfair dismissal, racial hatred, gender balance in schools and ethno-religious derogatory remarks at work.

Under the draft report on the review of the Disability Standards for Accessible Public Transport it is proposed that the HREOC be given the power to refer cases of breaches of the Standards to the Federal Court.

Discussion paper and draft legislation on Criminal Penalties for Serious Cartel Conduct

The Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen has released a discussion paper in relation to the Government’s commitment to implement criminal penalties for serious cartel conduct.

Cartel conduct refers to contracts, arrangements or understandings between competitors to fix prices, share markets, control output or rig bids.

Attached to the discussion paper is an exposure draft of the Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 (the Bill), including the proposed new criminal offences and revised civil prohibitions, amendments relating to the investigation and prosecution of the new offences, and associated amendments.

The discussion paper also seeks input on two specific issues:

• how to distinguish the criminal prohibitions from the civil prohibitions; and
• whether telephone interception warrants should be available in relation to the new criminal cartel offences.

Submissions close on 29 February 2008.

Corporations Act for the company secretary

Part of my motivation for establishing my consultancy was to allow clients to work closer with me than was possible in a traditional legal practice (while still remaining my independence). In the second semester of 2007 I decided to look at life from the company secretary's point of view: I enrolled in "Company Secretarial Practice and Meetings" as part of Chartered Secretaries Australia's Graduate Diploma in Applied Corporate Governance.

I met some very interesting people and passed the subject (assessment was a 3000 word assignment and a 3 hour exam). The course gave me a different framework for approaching practical problems, which my clients will benefit from.

I've decided to add some of my notes to my collaborative compliance wiki. You're welcome to look at them or expand or comment on them.

Liquidity risk

As it appears that the growing problem for Australian businesses is liquidity risk rather than asset quality (eg Centro Properties Group), it is worthwhile looking at the UK Financial Services Authority's Discussion Paper (DP) reviewing liquidity requirements for banks and building societies.

The FSA defines liquidity risk as "the risk that a firm, although solvent in balance sheet terms, does not have, or cannot generate, enough cash to meet its payment obligations in full as they fall due."

The DP re-emphasises the primary responsibility of firms' boards and management for maintaining adequate liquidity and managing their liquidity risk.

The Australian Financial Review reports that APRA is working on a similar review of liquidity rules.

Will APRA be merged with ASIC?

Page 73 of The Parliamentary Library Briefing Book (pdf) raises whether ASIC and APRA should be merged and whether ASIC should have a role in the licensing and registration of valuers under the Corporations Act 2001, as is the case with financial advisers, as issues to be considered by the new government.

These changes would be consistent with the new government's policy of reducing regulation and harmonising requirements.

Key Issues for the 42nd Parliament

The Parliamentary Library Briefing Book (pdf) is a tool to understand the new government's expected significant program of policy development and legislative work.

After reviewing the election results, it identifies the lapsed bills (28 government, 84 private members and senators)and House inquiries.

The Briefing book (html) analyses the issues relating to the government's stated key priorities including:
• industrial relations—for example, the repeal of WorkChoices and the abolition of  Australian Workplace Agreements
• climate change—the ratification of the Kyoto Protocol and the introduction of measures such as a National Emissions Trading Scheme
• defence—the phased withdrawal of combat troops from Iraq
• housing affordability—the establishment of a National Housing Affordability Fund and implementation of tax incentives for investment in low-income and middle-income rental properties
• education—entitlements for early learning contact hours, a national curriculum, the establishment of trade training centres in secondary schools, and the reduction of university fees for certain courses
• health—the establishment of a National Health and Hospital Reform Commission to address duplication in the national health system and the augmentation of general practice clinic services.

A personal compliance officer

Alex is always good value but this cartoon strip set in Philip Pullman's fantasy world brought a smile.

APRA breach notification forms

Entities regulated by APRA must notify APRA of significant breaches of prudential requirements.

APRA has released breach notification forms to enable APRA regulated entities to notify APRA in writing of any significant breach of their prudential requirements. The forms released can only be used to notify APRA of breaches.  The current online superannuation breach notification form will continue to be available and has been updated to include the significance test.

All regulated institutions will need to separately notify ASIC of any breaches of their AFS licence or ASIC requirements until the new APRA online breach notification system is finalised.

The forms are now available on the APRA website at:

ADI Forms

General Insurer Forms

Life Insurer Forms

Friendly Society Forms

Superannuation Forms

Proposed Trade Practices Act changes

Assistant Treasurer and Competition Minister Chris Bowen has given a clear indication of the new Government's approach to competition policy in this interview.

On prison for cartel operators

"The first thing we will do is this. We believe that you need to have disincentives for cartel operations. Cartel is theft. It’s stealing off consumers. In several countries around the world if you operate a cartel you go to prison. Five years, in Canada, Germany, Ireland, the United Kingdom. Ten years in the United States. So we’ll legislate to have prison terms for cartel operations. Because the problem we’ve got is, businesses get together and they think, we could make a lot more money if we did this and even if we get caught, the fine will be potentially less than what we make so we cant really lose. But you’ve got the possibility of five years at Her Majesty’s pleasure, you’ll think a lot more closely about entering into those side deals."

On predatory pricing

"...the ACCC has to be able to prove that that big business can make the money back later. That’s a very, very hard thing to prove so we will legislate to remove that requirement. It’s called the recoupment requirement. We would legislate to remove that and we’ll really strengthen the appropriate sections of the Trade Practices Act and make it easier for the ACCC to bring these cases. We believe in competition, we believe in fair competition, we don’t believe in big businesses or any other business being able to reduce their prices so low for a short period of time to drive everybody else out and then to be able to charge whatever they want...

The other thing that we will do is – at the moment, if you want to take a big business on you have to go to the Federal Court. Now, for a small business that’s very hard. If you believe a big business is intentionally driving you out of business so that they can then put their prices up later you’ve got to go to the Federal Court. That’s a very expensive jurisdiction. So we’ll make that at the Federal Magistrates Court which is cheaper and easier and generally more user friendly – available for those sorts of cases...

we’ll put the definition of take advantage in the law so it is very clear for judges what the Government’s intention is by the term “take advantage”. That will basically say, if you’ve got market power and you use that market power to effect another business, to drive them out of business or to damage them, intentionally then that will a breach of the act."

Privacy in Australia

Privacy International's 2007 International Privacy Rankings have charged Australia with "systemic failure to uphold safeguards".

Here's their analysis in detail. (Note that the Access Card has now been scrapped).

UPDATE: 8 January 2008: Page 124 of The Parliamentary Library Briefing Book (pdf)contains a summary of likely changes to privacy regulation under the new government.

Can you keep legal advice private?: Rich v Harrington

You obtain legal advice about a claim by another person and tell the other person that you have obtained legal advice. When can another party suing you obtain a copy of that legal advice?

In Rich v Harrington [2007] FCA 1987 the Federal Court of Australia dealt with the right of Ms Rich to obtain copies of legal advice received by the management of PricewaterhouseCoopers (PwC) in relation to an action Ms Rich (a former PwC partner) instituted against past and present partners of PwC under s 46PO of the Human Rights and Equal Opportunity Commission Act 1986 (Cth) alleging conduct in breach of that Act and the Sex Discrimination Act 1984 (Cth) following complaints of discrimination she made.

Judge Branson allowed Ms Rich access to 2 types of documents which PwC claimed were privileged:

1. In a letter to her, PwC rather than just saying PwC had taken legal advice and had acted with the benefit of it, it disclosed the substance or conclusion of the external advice received by PwC in an effort to bolster its position. The judge found that PwC had waived its privilege over the advice.

2. Ms Rich also challenged PwC’s claim for client legal privilege in respect of the legal advice provided by persons comprising its Office of General Counsel (OGC) on the basis that the relationship between PwC and its OGC was not such as to give rise to the privilege.

The judge concluded that the relationship between OGC and PwC in the particular circumstances was not such as to secure the advice of OGC concerning Ms Rich’s allegations the objectively independent character necessary to support PwC’s claim of client legal privilege.  OGC was not in a position to give professionally detached advice to the respondents concerning allegations of the character of those made by Ms Rich.

What is a charitable institution?

In Commissioner of Taxation v Word Investments Limited [2007] FCAFC 171 the Full Court of the Federal Court of Australia dismissed an appeal by the Taxation Commissioner against the Federal Court's decision that Word Investments is a "charitable institution" within the meaning of item 1.1 of the table in s 50-5 of the Income Tax Assessment Act 1997 (Cth).

Whilst Word carried out charitable and religious objects overseas, it also carried out financial activities including financial services and a funeral business in Australia.

Judge Allsop said:

Here, on the proper understanding of the memorandum of association, the purpose of all activities was, and could only be, the religious (and charitable) purposes of Word.  The evidence of the subjective motives of the directors conformed with and bolstered those constitutive purposes.  On the basis of the authorities to which I have referred, the commercial nature of the activities did not necessarily destroy the capacity of Word to be characterised as a charitable institution.

The Commissioner intends to appeal to the High Court.

See TR 2005/22 for the current approach of the Tax Office.