The Superannuation Industry (Supervision) Amendment Bill 2010, if passed, will change the conditions on which superannuation funds can borrow on a limited recourse basis for investment purposes.

The Bill will replace the existing Section 67(4A) and replace it with Sections 67A and 67B the effect of which will be:

• each borrowing is permitted only in respect of a single asset (excluding money) or in prescribed circumstances, a
  collection of assets which are identical and are treated as a single asset (eg a collection of shares of the same type in a single company).

  An example of assets for which a single borrowing would not be permitted is a collection of buildings each under separate strata title, irrespective of whether the buildings are substantially the same at the time of acquisition.

  In the case of the purchase of real property for example, a single title for land and the accompanying house on it would be considered a single acquirable asset, but additional items such as furnishings would not be allowed to be purchased through the same limited recourse borrowing arrangement.;

• the recourse of the lender and of any other person against the superannuation fund trustee for default on the borrowing is
  limited to rights relating to the acquirable asset;
• the asset within the arrangement can only be replaced in prescribed circumstances that arise from owning the original asset.

If checklists can help reduce deaths and complications in hospitals and avoid aircraft accidents they should be able to help in managing legal compliance.

In The Checklist Manifesto, Atul Gawande, a doctor who developed a surgery checklist for operations throughout the world for the World Health Organisation, convincingly argues that “checklists seem able to defend anyone, even the experienced, against failure in many more tasks than we realised…They catch mental flaws inherent in all of us - flaws of memory and attention and thoroughness.”

He argues that the discipline of checklists and increased communication amongst team members can help all professions no matter how complex and complicated the work they do.

The subtitle is “How to get things right”. This is an entertaining, easy to read book and I recommend it to everyone involved in compliance.

How would you develp a checklist for financial services compliance? Here’s a checklist for developing a checklist.

Watch an interview with the author.

We are delighted that Ronen Atzmon has been appointed as Executive Counsel to our new Melbourne office which is opening on Tuesday 1 June.

Ronen worked at Cuscal for 15 years, the last 6 years as General Counsel.

He has experience in corporate governance, institutional and retail banking, and general commercial matters and was involved in many of Cuscal’s significant complex commercial transactions.

He will work closely with our lawyers in Sydney, Adelaide and Brisbane to provide specialist credit union and mutuals advice.

The Competition and Consumer Legislation Amendment Bill 2010 has been introduced into the Commonwealth Parliament.

If passed, the Bill will amend the Trade Practices Act 1974 (‘the TP Act’) to clarify the operation of the “creeping acquisitions” provisions relating to mergers and acquisitions.

The Bill will also insert a statement of interpretative principles into the unconscionable conduct provisions of the Australian Consumer Law (ACL) and the Australian Securities and Investments Act (ASIC Act) and unify the consumer and business-related provisions in sections 21 and 22 of the ACL (formerly sections 51AB and 51AC of the TP Act). The changes to the unconscionable conduct provisions will generally be reflected in the ASIC Act.

The statement will say:
It is the intention of the Parliament that:
(a) the provisions are not limited by the unwritten law relating to unconscionable conduct; and
(b) the provisions are capable of applying to a system of conduct or pattern of behaviour, whether or not a particular
individual is identified as having been disadvantaged by the conduct or behaviour; and
(c) in considering whether conduct to which a contract relates is unconscionable, a court’s consideration of the contract may
include consideration of:
(i) the terms of the contract and
(ii) the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.

The provisions relating to mergers and acquisitions will commence not later than 2 months after Act receives the Royal Assent.

The provisions related to unconscionable conduct will commence immediately after the commencement of Schedules 1 to 5 of the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010.

I spoke at the Australian Financial Institution Auditors Association Annual Conference yesterday on the topic of the audit implications of the National Credit Act including licensing, credit code changes and responsible lending.

Whilst we don’t know the form yet of the annual compliance certificate required to be lodged by licensees under section 53 of the National Credit Act it appears that as it will relate to the general conduct obligations in section 47, including compliance with “credit legislation” in section 47(1)(d), its scope will be quite wide.

“Credit legislation” is defined in section 5 as meaning:
(a) the National Consumer Credit Protection Act; and
(b) the Transitional Act; and
(c) Division 2 of Part 2 of the ASIC Act and regulations made for the purpose of that Division; and
(d) any other Commonwealth, State or Territory legislation that covers conduct relating to credit activities (whether or not it also covers other conduct), but only in so far as it covers conduct relating to credit activities.

The certificate could therefore extend to compliance with State interest cap restrictions, Privacy Act credit provisions and AML/CTF issues.

And it appears that a credit compliance breach which involves a breach of the ASIC Act (eg unfair contract terms, misleading conduct) could also have implications for a licensee’s AFS licence and completion of FS71.

The Sydney Morning Herald has reported (here) on an investigation at the ANZ Bank into allegations that unsecured-debt collections staff used a fake profile on Facebook as a tool to entice skipped defaulters into providing details about themselves and their locations.

Whilst a lot of personal information is made publicly available on the internet by individuals, collecting personal information without disclosing its proposed use is a breach of the Privacy Act.

Similarly contacting relatives and friends of a borrower to either discuss the customer’s financial affairs or using a fake story to obtain personal information about the borrower could be unlawful.

You should review your collections procedures to ensure your use of social media to collect information is lawful.

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, has introduced the Corporations Amendment (Corporate Reporting Reform) Bill 2010 into Parliament to reduce red-tape on business and improve Australia’s corporate reporting framework.

The key measures include:

• reducing the regulatory burden on companies limited by guarantee, which typically have a not-for-profit purpose, by introducing a three-tiered differential reporting framework. Small companies limited by guarantee will be exempt from reporting and auditing requirements and other companies limited by guarantee will have streamlined assurance requirements and simplified disclosures in the directors’ report. In addition, the process for companies to distribute the annual report to their members will be streamlined;
• streamlining parent-entity reporting;
• providing greater flexibility for companies to pay dividends, by replacing the profits test with a solvency-type test; and
• allowing companies to more easily change their year-end date to minimise the burden on companies and their auditors during peak reporting periods.

Other reforms include:

• improving disclosure of non-financial information in the directors’ report;
• refining the statement of compliance with International Financial Reporting Standards contained in the directors’ declaration; and
• clarifying the circumstances in which a company can cancel its share capital.

A proposal contained in the draft Bill, protecting solicitors’ representation letters from disclosure to enable auditors to properly verify a company’s contingent liabilities, was removed from the final version of the Bill prior to its introduction.

The Government will consult further on the proposal and include reforms in a later Bill once appropriate wording has been settled.

The Do Not Call Register Legislation Amendment Act 2010 was assented to on 18 May and is now available on Comlaw here. The changes are expected to come into effect on 30 May 2010.

The Act allows the registration of emergency service and government phone numbers and all Australian fax numbers on the Do Not Call Register but not business phone numbers.

Sending unsolicited marketing faxes to an Australian number which is registered on the Do Not Call Register will be prohibited.

The Act also extends the current registration period for domestic numbers from 3 years with an arrangement that enables the Minister to determine the appropriate registration period, probably 5 years.

Langes+ Partner Shannon Adams recently spoke at the Law Society of South Australia Personal Property Securities Conference on the topic “Enforcement of Securities under the Personal Property Securities Act 2009″.

You can download his slides here.

Your credit guide and financial services guide (FSG) can be combined into a single document if you have an Australian Financial Services Licence (or you are the authorised representative of such a licensee) and you have to give a credit guide as the holder of an Australian Credit Licence (or as a credit representative of such a licensee).  Any statements or information to be included in the credit guide that are identical to statements or information in the FSG do not have to be repeated.

The regulation permitting the combination of the credit guide and FSG into one document is regulation 7.7.08B under the Corporations Act, which was introduced in the Corporations Amendment Regulations 2010 (No.4) made on 6 May 2010 . The regulation commences on 1 January 2011.