June « 2005 « Australian Regulatory Compliance Review from Langes+ Lawyers

June 17, 2005

Super choice advice

ASIC has warned employers who do not have AFS licences they should avoid providing financial advice to employees seeking guidance about super choice.

ASIC says that employers are under no obligation to talk with their employees about super choice, which comes into force on 1 July. However, it anticipated that employers would be asked by employees
about how they could select their own fund.

You need to be careful that statements you make to employees about superannuation or super choice are not financial product advice. If you give financial product advice without being licensed or authorised to do so, or if what you say is misleading, you may be breaking the law. Moreover, advice that is inappropriate to employees’ circumstances could influence employees to make choices that cost them money.

ASIC has issued a list of frequently asked questions to explain what constitutes financial advice, and what information employers can offer without breaching the Corporations Act.

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Posted 17th June 2005 by David Jacobson in Financial Services

June 13, 2005

Financial institutions, privacy, EFT Code and deceased estates

Digital Property and the Laws of Inheritance from TechNews World discussses whether executors have the right to obtain passwords to websites and email services used by a deceased.

Starting with a discussion of the Yahoo case when Yahoo refused to give the parents of a US Marine killed in Iraq access to their son’s email account without court approval, the article then considers wider inheritance issues.

How does this apply to Australian internet service providers and financial institutions?

Assuming the provider or the institution can even access your personal confidential password, the general principle is that the provider will not release a person’s personal information without proof that the third party enquirer is properly authorised either as an attorney (if the account holder is still alive) or an executor or administrator (if the account holder is deceased).

Section 69AA of the Banking Act only gives ADI’s the power to deal with a deceased’s depositor’s money in an account; it does not discuss the right to other information such as passwords. Usually a financial institution will only disclose information to a person who claims to be an executor after they produce a certificate of death and evidence of their appointment as executor or administrator.

In Australia, the EFT Code is silent about a person or their financial institution giving their estate details of their passwords to different accounts. The assumption must be that in giving your password to your executors you have authorised any electronic transaction they undertake.

The bottom line is that passwords and usernames which give access to online data such as financial records, journals, emails and photos can be just as valuable as cash and property and should be securely stored in a place accessible to beneficiaries. An online business customer should not assume that their estate will automatically be given their information by their service provider.

UPDATE 16 June: I have just received a notice from my telecommunications provider that it has amended my general terms to clarify that "personal information" may include numbers I have called, the time of a call and the location of a call. The amendment allows it to disclose personal information to emergency services organisations. No mention of disclosure to my estate.

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Posted 13th June 2005 by David Jacobson in Financial Services, Intellectual Property, Privacy

Electronic record retention for tax purposes

The ATO has issued Taxation Ruling 2005/9. This Ruling explains the principles associated with the retention of electronic
records created from business transactions including those carried out
through the internet for the purposes of section 262A of Income Tax Assessment Act 1936. It replaces draft Taxation Ruling TR 2004/D23 discussed here.

It supplements Taxation Ruling TR 96/7 (Income tax: record keeping – section 262A -
general principles) and Taxation Determination TD 2002/16 (Income tax:
what are the obligations under the Income Tax Assessment Act 1936 where
a business chooses to keep some of its records as encrypted
information?) which should be read in conjunction with this Ruling.

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Posted 13th June 2005 by David Jacobson in Business Planning

June 8, 2005

Changes to Queensland State Taxes

As part of the 2005/06 State Budget handed down on 7 June 2005, the Treasurer announced significant changes to State taxes including land tax, in addition to the already announced abolition of bank accounts debits tax from 1 July and changes to pay roll tax.

The land tax changes mean that from 1 July 2005 threshholds have increased and the actual tax rate has reduced thereby reducing the number of landowners liable to pay the tax and reducing the amount of tax any others will pay.

In addition as part of Queensland’s GST agreement with the Commonwealth, the Treasurer confirmed that 6 other state taxes would be progressively abolished:

Lease duty and credit business duty will be abolished on January 1 2006,
hire duty and duty on marketable securities will be abolished on January 1 2007,
half of mortgage duty over 2008 and the other half in 2009,
half of transfer duty on non-real property business assets in 2010 and half in 2011.

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Posted 8th June 2005 by David Jacobson in Business Planning

How good is data security?:Citigroup loses backup tape

None of the privacy principles (especially NPP 4.1) will protect data containing personal information if care is not taken to physically secure it. How many office cabinets are left unlocked overnight ? How many files are taken home on the train?

Now we have a report from The Register (via Rob Hyndman) that Citigroup has admitted that a backup tape containing personal information on almost 4 million customers has gone missing. The tape contains Social Security numbers and transaction histories on
both open and closed accounts at the bank’s lending branches.

Some US States have introduced laws compelling public notification of data disclosure.

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Posted 8th June 2005 by David Jacobson in Privacy

June 7, 2005

Medical indemnity insurance

In 2002 Australian medical indemnity insurers underwent a crisis due to a combination of high negligence awards, under-provision by insurers and the collapse of HIH. Specialist doctors (particularly obstetricians) were concerned about the level of premiums and what would happen to their personal assets if a successful judgment was obtained against them and their insurer could not pay.

This article by APRA analyses the past events, the new regulatory structure and current health of medical indemnity insurers.

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Posted 7th June 2005 by David Jacobson in Business Planning

June 5, 2005

ASIC monitors super choice advertising

As the introduction of super fund choice gets closer, ASIC has shown that it is carefully monitoring advertising by funds.

ASIC has announced that it has accepted an enforceable undertaking from Industry Fund Services Pty Ltd (IFS) in relation to its super choice advertising campaigns ‘Compare the pair’ and ‘A lifetime of difference’.

‘ASIC was concerned that consumers might have been confused by the advertisements as previously published, and is pleased that IFS has changed its advertising in response to our concerns’, Mr Jeremy Cooper, Deputy Chairman of ASIC, said.

IFS has, without accepting ASIC’s views, undertaken to refrain from:

using projections of retirement payouts or future fund balances applying comparisons of current or past fees or average fees, unless these projections were properly qualified, and
representing that the only relevant factor for comparisons of different super funds, in the context of projections of retirement payouts or future fund balances, is the fees charged by the operator of the fund.

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Posted 5th June 2005 by David Jacobson in Financial Services, Trade Practices

June 1, 2005

New trade practices penalties discussed

In this speech ACCC Commissioner David Smith discusses the proposed new penalties for company directors:

This week’s news that new tougher penalties for anti-competitive conduct will for the first time fully expose company executives to massive fines and legal bills should focus the minds of everyone in Australian business on the need to comply with the Trade Practices Act.

No longer can the cost benefit analysis assume that even if caught, the benefits may outweigh the penalty, and in any case, the company will pick up the tab.

New tougher penalties and indemnity change mean the cost to companies involved will easily outweigh any benefit, and the individuals responsible will face the potential of financial ruin and, in the case of hard core cartels, possibly jail terms as well.

So now, more than ever, a culture of compliance with the Trade Practices Act will not be an optional extra, but an essential element of doing business…

Under the new tougher penalties arising out of the Dawson review, the maximum civil penalties for all anti-competitive conduct for corporations will be the greater of $10 million, three times the value of the gain from the illegal conduct, or (if the gain cannot easily be determined) 10 per cent of annual turnover of the entire corporate group. That last point needs to be stressed – that is 10% of the entire group, even including businesses not directly involved in the illegal activity.

Maximum penalties for individuals will remain at $500,000 – but this will now be a penalty they cannot pass on to shareholders. Directors and senior executives caught engaging in anti-competitive conduct will lose their legal protection and will be forced to pay the fines and their legal costs themselves.

In addition, judges will have the power to ban senior officers implicated in anti-competitive conduct from being a director or a manager of a company.

As the Financial Review noted this week, this puts anti-competitive behaviour like price fixing, misuse of market power and restrictive anti-competitive contracts into the league of serious Corporations Act offences, even before the expected introduction later this year of criminal penalties for hard core cartels.

Those criminal penalties will provide for jail terms for executives involved in hard core cartels of up to five years and fines of up to $220,000. The financial penalties for corporations under the criminal regime will be the same as the much tougher new civil penalties.

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Posted 1st June 2005 by David Jacobson in Trade Practices