July « 2007 « Australian Regulatory Compliance Review from Langes+ Lawyers

July 31, 2007

APRA releases discussion paper on new rules for foreign insurers in Australia

APRA has issued a
discussion paper on proposed refinements to the general insurance
prudential framework which will affect not only direct offshore foreign insurers (DOFIs) (previously discussed here) that wish to become
APRA-authorised but also all APRA-authorised general insurers.

The proposed refinements to the prudential framework are intended to apply from 1 July 2008.

The
proposals recognise five different categories of insurer, based on
their risk profiles, while maintaining adequate protection for
policyholders.

The
five categories of insurer are locally incorporated insurers, wholly
owned subsidiaries of local or foreign insurers, foreign insurers
operating as foreign branches, association captives, and sole parent
captives.

The Government intends that offshore foreign reinsurers will not be required to be authorised in Australia.

APRA’s
discussion paper does not address the proposed exemptions from
prudential regulation foreshadowed in the Government’s announcement on foreign insurers.
The Treasury is developing options for such exemptions and intends to
issue a separate consultation paper on this topic.

APRA
invites written submissions by 11 September 2007.

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Posted 31st July 2007 by David Jacobson in Insurance

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APRA issues final responses to Basel II capital adequacy regime

The
Australian Prudential Regulation Authority (APRA) has released a
paper (pdf) that sets out its responses to submissions on its proposals to
implement the standardised approaches under the new Basel II capital
adequacy regime as well as two final draft prudential standards that incorporate a
number of amendments suggested in the consultation process.

The final draft prudential standards cover:

the standardised approach to credit risk [APS 112, first released in April 2005]; and
the standardised approach to operational risk [APS 114, first released in July 2005].

The responses include:

APRA will retain its proposed riskweighting scheme for residential mortgage loans (ie four different risk-weights based on the loan-to-valuation ratio (LVR) of a loan, whether the loan has acceptable lenders mortgage insurance and whether the loan is a ‘standard’ or ‘non-standard’ housing loan.
In the final draft APS 112, the risk-weighting treatment of past due or impaired residential mortgage loans differs depending on whether or not the loans are covered by acceptable lenders mortgage insurance.

The
proposals form part of the Basel II capital adequacy regime for ADIs
that will come into force on 1 January 2008. The full suite of Basel II
prudential standards is expected to be finalised in late 2007.

Comments on the response paper and the final draft prudential standards APS
112 Capital Adequacy:Standardised Approach to Credit Risk and APS 114
Capital Adequacy: Standardised Approach to Operational Risk are invited by 3 September 2007

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Posted 31st July 2007 by David Jacobson in Financial Services

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ATO offers Div 7A amnesty

The ATO has issued practice statement PSLA 2007/20 setting out how taxpayers can take corrective action to fix mistakes made between 2001-02 and 2006-07 regarding payments and loans from their
private companies and avoid penalties under Division 7A. The Commissioner has a discretion to enable him to provide relief for
deemed dividends that have arisen under Division 7A because of an
honest mistake or inadvertent omission.

The Practice Statement gives examples of omissions and corrective action where the exercise of the Commissioner’s discretion is not required.

If a taxpayer takes corrective action by 30 June 2008 they will not have to pay interest and penalties. However, even if they don’t have
to pay a penalty or interest, taxpayers will have to pay the correct
amount of tax provided the time limits under the law allow it.

From 1 July 2008, the Tax Office will resume audit work to ensure
payments made by private companies are correctly accounted for and
company loans are not used to distribute tax free profits.

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Posted 31st July 2007 by David Jacobson in Compliance

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July 29, 2007

ACCC obtains penalties in bid-rigging and price fixing cartel action

In Australian Competition and Consumer
Commission v Admiral Mechanical Services Pty Ltd [2007] FCA 1085 penalties of more than $9.1 million have been imposed on 11
companies and 18 individuals for a series of bid-rigging and price
fixing cartels in commercial air conditioning after Australian
Competition and Consumer Commission Federal Court action.

Justice Nicholson, in the Federal Court, Perth declared that a number of companies in the commercial air conditioning
and mechanical services industry had engaged in illegal bid-rigging and
price-fixing cartels in breach of the Trade Practices Act 1974.

The cartels existed between 1991 and June 2003. It involved
companies tendering for commercial air conditioning and mechanical
services projects in Western Australia agreeing on which would submit
the lowest price for particular jobs and therefore be likely to win the
tender.

ACCC’s media release

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Posted 29th July 2007 by David Jacobson in Trade Practices

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AML/CTF Rules amended

On 28 June 2007 the Anti-Money Laundering and Counter-Terrorism Financing Rules Amendment Instrument 2007 (No. 1) was registered, adding an eleventh chapter setting out the reporting and lodgment periods for compliance reports.

The first reporting period begins on 13 December 2006 and ends on 31 December 2007. The report must be lodged within 3 months of the end of the reporting period.

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Posted 29th July 2007 by David Jacobson in Anti-money laundering

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Privacy of health information examined: HCF cleared

The Privacy Commissioner, Karen Curtis, has found that private health insurance company HCF did not breach the Privacy Act when it disclosed the personal and sensitive information of its clients to McKesson Asia Pacific as part of its ‘Helping Hands’ program.

It had been alleged in media reports that HCF had given McKesson the
contact details, gender, age, the broad type of mental illness, and the
number of hospital admissions for 370 of its members without their
consent.

The OFPC investigation established that HCF wrote to members inviting them to
participate in the ‘Helping Hands’ program based on their claims
history. The letters described the program’s purpose and background,
setting out McKesson’s role in administering the program and the
contact process. Participation in the ‘Helping Hands’ program was
entirely voluntary and involved telephone-based case management and
support.

In addition, the HCF Privacy Policy advises members that it
may use the personal information it collects to provide further health
services where the member has consented or would reasonably expect HCF
to do so.

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Posted 29th July 2007 by David Jacobson in Privacy

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July 26, 2007

ACCC speeches

The ACCC website has copies of speeches over the last 6 months relevant to a range of industries including transport, energy, horticulture, aviation, telecommunications and media.

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Posted 26th July 2007 by David Jacobson in Trade Practices

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Senate Inquiry into the Private Equity Investment and its Effects on Capital markets and The Australian Economy

The Senate Inquiry into the Private Equity Investment and its Effects on Capital markets and The Australian Economy is currently conducting public hearings.

It is due to report on 16 August 2007.

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Posted 26th July 2007 by David Jacobson in Financial Services

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July 25, 2007

Access to member register of building societies, credit unions and friendly societies clarified

Corporations Amendment Regulations 2007 (No. 9) modifies section 173 of the Corporations Act 2001 dealing with the right of access to a member register of building societies, credit unions and friendly societies by inserting new subsections (1AA), (1AB), (3A) and (3B) and insertlng a new Part 3 of Chapter 2C Corporations Act dealing with use of information on a register of members.

Under section 173, companies are required to provide a copy of their register of members
within seven days to a person requesting access to the register and
paying the required fee. But section 173 was modified in the case of building societies and credit unions.

When corporate regulation of building societies, credit unions and friendly societies was transferred to ASIC in 2001, the Corporations Act had to be modified to deal with, for example, the concept of member shares, demutualisation and the right of access to the member register.

Part of the concern of mutuals was that, unlike other public
companies, as customers needed to be members, disclosure of the member
register also provided personal information about members in their
capacity as customers. Security concerns were also raised for companies whose membership is concentrated in the
defence or police sectors.

Subsection 173(3B) was inserted
by reg 12.8.06 of the Corporations Regulations 2001 (Cth).The modification was recently considered in Capricornia Credit Union Ltd v Australian Securities and Investment Commission [2007] FCAFC 79 .

The Government has addressed the concerns by requiring that where an applicant wishes to contact members and where a copy of the register has not been provided within 28 days of a personâs request for a copy, the company may (unless it reasonably believes the contact or material to be sent is not lawful) satisfy its obligations by providing the member register details to a secure third party provider such as a mailing house rather than the applicant directly.

The Regulation does not change the need for the applicant to have a lawful purpose for access but does provide a clearer process and member privacy safeguards. The Regulation also inserts a new ground on which a company can refuse access, namely the body is not satisfied that allowing the person to inspect or copy the register is in the interests of the members as a whole.

DISCLOSURE: I advised Capricornia Credit Union in its action.

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Posted 25th July 2007 by David Jacobson in Corporate Governance

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July 24, 2007

AUSTRAC releases further AML definitions

Anti-Money
Laundering And Counter-Terrorism Financing Rules Amendment Instrument 2007 (No. 2) provides definitions of ‘approved third-party bill payment system’ and identifies the transfer instructions under subparagraph 70(a)(i) of the AML/CTF Act to which the tracing information requirement applies.

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Posted 24th July 2007 by David Jacobson in Anti-money laundering

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