Australian Regulatory Compliance Review

Corporations Regulations (SImpler Regulatory System)

The Corporations Amendment Regulations 2007 (No. 12) amend the Corporations Regulations 2001 to support the provisions in the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007.

The Regulations are in 3 parts which commence as follows:
(a) on 28 September 2007 — regulations 1 to 3 and Schedule 1 which give FSR Relief for Financial Services Guides, Product Disclosure Statements and Statements of Advice;
(b) on the commencement of items 218 and 219 of Part 3 of Schedule 1 to the Act (but no later than 28 December 2007) — Schedule 2 which deals with liability of insurance licensees for authorised representatives and gives relief from providing FSG's at public events;
(c) on 1 July 2008 — Schedule 3 which deals with requirements when a change is made to fees and charges.

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. 

Corporations Amendment Regulations 2007 (No. 10): FSR changes

The Corporations Amendment Regulations 2007 (No. 10) commenced on 23 August 2007. They allow for certain information to be 'incorporated by reference' in financial product Statements of Advice and Product Disclosure Statements.

Further Simpler Regulatory System changes come into force

The Governor-General has proclaimed 1 September 2007 as the day on which items 198 to 215, 221 and 222 of Part 3 of Schedule 1 of Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 commence.

Simpler Regulatory System Act commences

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and accompanying Bills were given Royal Assent on 28 June 2007.

UPDATE 5 July: Here's the Act

Most of the Simpler Regulatory System package commences on either Royal Assent or 1 July 2007.  Some parts, including particular changes to the regulation of financial advice, will not be fully effective without forthcoming supporting regulations.

UPDATE 5 July: here are the regulations

The Regulations to implement the Act are:

• Corporations Amendment Regulations 2007 (No. 2)
• Corporations Amendment Regulations 2007 (No. 3)
• Corporations Amendment Regulations 2007 (No. 4)
• Corporations Amendment Regulations 2007 (No. 5)
• Corporations Amendment Regulations 2007 (No. 6)
• Corporations Amendment Regulations 2007 (No. 7)
• Corporations Amendment Regulations 2007 (No. 8)

UPDATE 28 August: Corporations Amendment Regulations 2007 (No. 10)

You can check when the changes you are interested in commence by looking at my articles here.

The changes take effect immediately include amendments to facilitate distribution of annual reports over the internet, and to increase the monetary thresholds to define a large proprietary company as these thresholds have not been adjusted since 1995.  As these changes apply immediately, so they affect financial reports relating to the 2006-07 reporting period ending on 30 June 2007.

Simpler Regulatory System: financial services regulation changes

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 made changes to FSR requirements including:

• removing the need for a Statements of Advice to be provided in two circumstances:  where there is no recommendation in relation to a particular financial product and no remuneration (eg a free initial consultation or where a financial adviser recommends that a person continue to hold an existing product); and where the amount to which the advice relates is under the prescribed threshold;

• refining the circumstances where a Financial Services Guide is not required to be provided, particularly at seminars which are not open to the public;

• introducing changes to the retail/wholesale client distinction regarding sophisticated investors;
• refining the liability of licensees under the cross-endorsement provisions where authorised representatives act for a number of financial services licensees with their consent;

• introducing a new ‘in use’ notice for Product Disclosure Statements to determine when a Product Disclosure Statement is no longer current;

• improving the mechanism whereby the Australian Securities and Investments Commission (ASIC) takes a role in overseeing compliance with a financial market’s rules where the market operator has a conflict of interest; and

• allowing registered managed investment schemes to invest in unregistered managed investment schemes.

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 and provided to the client upon their request.

The measure does not alter the need for the advice to be appropriate or for the adviser to be appropriately trained to provide personal advice.

The amendments will commence on Royal Assent.

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.

An initial threshold of $15,000 is proposed.

A Statement of Advice will be required to be prepared and provided to a client if the amount to which the advice relates is $15,000 or more.  For advice relating to amounts less than $15,000, the adviser will be required to provide a Record of Advice to the client.

The Bill will limit the application of this relief in relation to superannuation advice where the advice relates to consolidation into, or supplementation of, a superannuation fund in which the person is an existing member.

The amendments will commence on Royal Assent.

Financial Services Guide exemption — general advice to the public
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.

The amendments commence from a day to be fixed by Proclamation.  If no date is fixed within 6 months from the date on which the Act receives Royal Assent, then the amendment will commence on the first day after that period.

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 investors who satisfy a financial services licensee as to their experience may be treated as wholesale clients for the purpose of Chapter 7.

The amendments will commence on Royal Assent. The amendments apply to financial products and financial services provided on and after the day the amendments commence.

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.

The amendments commence from a day to be fixed by Proclamation. If no date is fixed within 6 months from the date on which the Act receives Royal Assent, then the amendment will commence on the first day after that period. The amendments apply in relation to the conduct of a representative on or after the day on which the amendments commence.

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.

The requirement commences on 1 July 2008, when ASIC has established the on-line report and electronic lodgement mechanism. From 1 July 2008 to 1 January 2009, both hard copy and electronic lodgement will be available. From 1 January 2009, the notices will have to be lodged electronically.

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.

The new section 798C will apply not only to market licensees, but also to a body corporate related to the market licensee, a managed investment scheme whose responsible entity is a related body corporate of the market licensee and a trust whose trustee is a related body corporate of the market licensee, if they list on that market.

The amendments commence on Royal Assent.

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.

The trustees of superannuation funds, approved deposit funds, pooled superannuation trusts or public sector superannuation schemes with net assets of at least $10 million are no longer treated as retail clients for the purpose of the product disclosure and related provisions when acquiring an interest in a pooled superannuation trust.

The amendments commence on Royal Assent.

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.

The amendments commence on Royal Assent.

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.

This change will be implemented by regulation.

Simpler Regulatory System Bill passed

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and related legislation was passed by the Parliament on 21 June 2007.

Some parts of the package will commence on Royal Assent, others on 1 July or within 6 months.

Some parts of the package, particularly changes to streamline regulation of financial advice, require supporting regulations which will be issued in the coming weeks.  There will also be regulations to refine the financial services provisions to, among other things, allow disclosure documents to incorporate supplementary material by reference, thereby making them shorter and easier for consumers to understand.

UPDATE: Royal Assent given on 28 June 2007

Simpler Regulatory System: takeover rules changes

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 when passed will make amendments to the takeovers provisions in the Corporations Act.

Removal of telephone monitoring during takeover bids
The provisions of the Corporations Act that require the recording, storing, destroying, accessing and copying of the recordings of telephone conversations with retail shareholders during takeover bids are repealed.

The purpose of the subdivision was to ensure that security holders did not receive information from the takeover bidder or target that could be considered misleading.

The existing provisions have not increased the protection of security holders and impose significant costs on the parties involved.

The repeal of the telephone monitoring requirements will take effect on the day of Royal Assent.

85 per cent notices
The provisions of the Corporations Act that require the disclosure of an 85 per cent holding are repealed.

The provisions were enacted to provide holders of securities with an advanced warning that the majority holder is approaching the 90 per cent limit, at which the majority holder can compulsorily acquire their securities.

However, it is often the case that the minority are already aware of the majority holder’s position.  For listed entities, other mechanisms in the Corporations Act will mean that the information is already publicly disclosed.

The repeal of the 85 per cent notice requirement will take effect on the day of Royal Assent.

Simpler Regulatory System: Fundraising changes

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 when passed will make amendments to the fundraising provisions in the Corporations Act. There are 6 principal areas of change:

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.

The amendments apply to employee share schemes offered on or after the day on which the amendments commence.

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.

The amendments relating to small scale offerings commence on Royal Assent.

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.

The amendments relating to secondary sale issues commence on Royal Assent.

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.The amendments relating to rights issues commence on Royal Assent.

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).

The amendments relating to advertising rules for offers of securities requiring a disclosure document and for offers or issues of other financial products commence on proclamation or six months after Royal Assent, whichever is earlier.

ASIC’s stop‑order powers will be extended to cover advertising of quoted and unquoted securities and other financial products.

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.

The amendments relating to Replacement Product Disclosure Statements for stapled securities commence on Royal Assent.   

Inquiry into the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007

The Parliamentary Joint Committee on Corporations and Financial Services has released its Report on the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 (pdf).

The Committee said there was general support for the Bill and recommended the Bill be passed but noted that there was concern over details of the FSR changes, especially those relating to Statements of Advice and Product Disclosure Statements.

Simpler Regulatory System: Corporate Governance changes

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 when passed will make amendments to the Corporations Act to:

·      allow public companies to give small financial benefits to related parties without seeking member approval in certain circumstances;

·      allow delegation to ASIC of the function of consenting to grant a particular company name notwithstanding it is identical to another name or otherwise unacceptable; and

·      remove the requirement for companies exempted from using ‘limited’ in their name to seek ministerial approval for changes to their constitutions, and replace it with a requirement to notify ASIC of any changes.

Related party approval thresholds
The related party transactions provisions in Part 2E.1 of the Corporations Act require that public companies obtain member approval before they can give any financial benefit to a related party (such as a director, a director’s spouse, a controlling entity, or entities controlled by mutual entities), unless the benefit fits within certain exceptions.

The Bill will insert a provision into the Corporations Act to provide that member approval is not required for giving a financial benefit to a related party which is at or below a prescribed amount aggregated over a financial year.  [Schedule 1, Part 2, item 190]. This would avoid the need for member approval of what could be considered minor transactions.

It is expected that the amount initially prescribed will be $5,000.

The new provision will repeal and replace the current section 213 and absorb its effect.  The current provision allows payments at or below $2,000 to related parties who are directors or directors’ spouses to be made without member approval.  Under the new provision, member approval will not be required for giving a financial benefit to these related parties (ie directors or directors’ spouses), which is at or below the prescribed level aggregated over a financial year.

By referring to ‘amounts or values’, the provision contemplates both monetary and non-monetary financial benefits.  It is intended that non-monetary financial benefits will be valued by reference to ordinary valuation concepts.

The new section 213 will not interfere with the requirements on directors or officers to exercise their powers and discharge their duties in accordance with other provisions of the Corporations Act, including the duties in Part 2D.1 and rules under the general law.

The amendments regarding related party transactions apply to financial years commencing on or after 1 July 2007. 

Company names
The Bill will allow delegation to ASIC of certain administrative functions regarding identical or unacceptable company names, and approval of changes to certain corporate constitutions.

The amendments allowing delegation of administrative functions to ASIC will commence on 1 July 2007.

Simpler Regulatory System: Company reporting changes

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 when passed will simplify company reporting obligations.

Executive remuneration
Amendments will remove duplication in the executive remuneration disclosure requirements between the Corporations Act and accounting standards so that the remuneration disclosure requirements for individual directors and executives of listed companies will be exclusively contained in the Corporations Act.  Following on from the amendments to the Corporations Act in this Bill, the remaining remuneration disclosure requirements in the accounting standards will be incorporated into the Corporations Regulations.

The Act will adopt the standards' definition of ‘key management personnel’.

Disclosures will be made in a company’s directors’ report instead of the financial report. 

The amendments regarding executive remuneration will apply to financial years that begin on or after commencement.

Companies that are disclosing entities must disclose their policy in relation to directors and executives hedging their incentive remuneration and how the company enforces this policy.

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.

The changes to thresholds for reporting for large proprietary companies will take effect in the financial year that ends on or after commencement.

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. The changes to requirements for companies to inform ASIC when officeholders change will commence on a date to be proclaimed, or if no date is proclaimed, six months after Royal Assent

Company addresses
A single process for notification of an update of all company addresses will be implemented. This will allow companies to nominate an address, separate from the registered office address, at which they prefer to receive documents from ASIC. But if they do so a company must lodge a change to its contact address in the prescribed form. This will commence on a date to be proclaimed, or if no date is proclaimed, six months after Royal Assent

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. This will commence on Royal Assent.

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.

The change will commence on a date to be proclaimed, or if no date is proclaimed, six months after Royal Assent

Electronic distribution of annual reports
The default option for receiving annual reports will be changed to be via the Internet if a company does not wish to send every shareholder a hard copy. But if a company chooses to distribute reports in this way it must comply with new section 314(1AA). Members will continue to be able to choose to receive a hard copy or an electronic copy of annual reports free of charge if they so elect.

Under section 314(1AA)(c) a company must directly notify those members who did not receive a hard copy that the reports are accessible on the web site, and specify the direct address of the web site (ie the URL of the reports). This notification can be made in hard copy, or by electronic means (for example, e-mail or fax).

The amendments regarding distribution of annual reports apply to a financial year that ends on or after commencement.

I discuss this change in detail in my June podcast.

The Simpler Regulatory System Package update

The Simpler Regulatory System Package was passed by the House of Representatives and introduced into the Senate on 14 June 2007.

The Government intends to pass the Bills this week so that certain provisions can commence on 1 July 2007.

As the Bills cover a range of topics (Financial Services Regulation, Company Reporting Obligations,  Auditor Independence,  Corporate Governance,  Fundraising,  Takeovers, and  Compliance) which I summarised here, I will do separate notes dealing with the final changes in each area.

UPDATE: Detailed notes now added on

Company reporting changes

Corporate governance

Fundraising

Takeover rules

The Simpler Regulatory System Package

ComLaw has published the Bills that are part of the Simpler Regulatory System Package:

Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007

Corporations (Fees) Amendment Bill 2007

Corporations (Review Fees) Amendment Bill 2007

Financial Sector Legislation Amendment (Restructures) Bill 2007

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.