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September 30, 2007

Regulation of mortgage brokers, lending practices and consumer credit code amendments

In response to the recent call by the Treasurer for the States to accelerate work on the licensing, conduct and disclosure of mortgage brokers and the report of the House of Representatives Economics, Finance and Public Administration Committee on
Home loan lending – Inquiry into home loan lending practices and the processes used to deal with people in financial difficulty the States have provided an update on consumer credit code review progress.

The Ministerial Council on Consumer Affairs has now announced that:

  • It is anticipated that a draft exposure Bill for the mational regulation of finance brokers will be released by December 2007.
  • In response to concerns raised about reverse mortgages, the Ministerial Council on Consumer Affairs has agreed that there should be a prescribed Information Statement for reverse mortgages and a statutory protection against negative equity.
  • The Ministerial Council on Consumer Affairs has agreed to investigate the introduction of mandatory participation in external dispute resolution by all providers of consumer credit.  The consultation regulatory impact statement is being prepared.
  • Consultation on the bill facilities regulation amendment has now closed. It is anticipated that the regulation could be made as early as the end of October 2007.
  • As part of an ongoing review of the fringe credit industry, the Ministerial Council on Consumer Affairs has invited comments on the exposure drafts of the Consumer Credit Code Amendment Bill 2007 and Consumer Credit Amendment Regulation 2007.  The deadline for submissions has been extended until 5 October 2007.
  • In respect of reform to pre-contractual disclosure, the Standing Committee of Officials of Consumer Affairs has agreed to UCCCMC commissioning research, by an independent consultant, into
    pre-contractual disclosure with the goal of developing a disclosure
    model which addresses the needs of consumers. Negotiations are
    currently underway with the preferred tenderer.
  • In respect of instalment contracts, a Bill has been finalised and submitted to the Ministerial Council on
    Consumer Affairs for approval to be made by the Queensland Parliament.
    Provisions affecting solicitor lending have been removed altogether
    pending further consideration of the underlying issues.
  • A consultation regulatory impact statement on responsible lending through credit cards is being prepared and should be released before the end of the year.
  • An independent review on mandatory comparison rates is still being considered.

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Posted 30th September 2007 by David Jacobson in Financial Services

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. 

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Posted 30th September 2007 by David Jacobson in Compliance, Simpler Regulatory System 2007

September 26, 2007

Client Legal Privilege and Federal Investigatory Bodies

The Australian Law Reform Commission (ALRC) has released a  Discussion Paper, Client Legal Privilege  and Federal Investigatory Bodies (DP
73), containing 42 proposals aimed at addressing lengthy and costly
disputes over client legal privilege in federal investigations.

The paper adopts the definition of client legal privilege formulated by Dr Sue McNicol:
It provides that, in civil and criminal cases, confidential communications passing between a lawyer and her or his client, which have been made for the dominant purpose of seeking or being furnished with legal advice or for the dominant purpose of preparing for actual or contemplated litigation, need not be disclosed in evidence or otherwise revealed. This rule also extends to communications passing between a lawyer or client and third parties if made for the purpose of actual or contemplated litigation.

The ALRC’s research identified 41 federal investigatory bodies—as well as Royal Commissions
that are established from time to time—that have coercive
information-gathering powers. Many of the laws governing these bodies
provide no guidance about whether client legal privilege applies wholly
or in part. In those laws that do address privilege, there is no
consistency of language or approach.

The ALRC proposes that where privilege applies, there should be a
consistent legal framework. Where Parliament determines that privilege
should be abrogated, this should be on the basis of clear
principles—that is, where there is a significant public interest, and
where legal advice is central to the matters being investigated. Where
it is abrogated, appropriate safeguards should be put in place about
the subsequent use of the information disclosed.

Other key proposals include:

  • to allow privilege to apply to advice on
    taxation law provided by accountants;
  • requiring parties claiming privilege to provide details of privileged documents and the basis of the claim; and
  • improved
    education and training for lawyers concerning their ethical
    responsibilities in relation to making privilege claims.

The ALRC is seeking community feedback before a final report is
completed in December 2007. Submissions close on 1 November 2007.

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Posted 26th September 2007 by David Jacobson in Compliance

September 25, 2007

ALRC to examine Freedom of Information laws

Attorney-General Philip Ruddock has issued draft Terms of Reference for the Australian Law Reform Commission (ALRC) to examine Freedom of Information laws and practice across Australia.

The ALRC will examine existing Commonwealth, State and Territory access laws and practices, with a view to providing advice on how to harmonise those laws and practices. It will also examine the impact of technology on existing access laws.

The reference is partly in response to the Right to Know campaign.

The ALRC is to complete its work by 31 December 2008.

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Posted 25th September 2007 by David Jacobson in Business Planning

AML customer identification record-keeping requirements

Section 114 of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 deals with record-keeping requirements where customer identification procedures have been carried out by one reporting entity on behalf of another.

Under draft AML/CTF Rules issued by Austrac subsections 114(2), 114(3) and 114(5) of that Act do not apply to a designated service which is, or is to be, provided in circumstances described in paragraphs 114(1)(a), 114(1)(b) and 114(1)(c), if the second reporting entity has access to records of identification procedures made by the first reporting entity in accordance with subsection 112(2), under an agreement between the first reporting entity and the second reporting entity for the management of such records.

A public consultation period is currently open from 24 September 2007 to 8 October 2007.

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Posted 25th September 2007 by David Jacobson in Anti-money laundering

September 24, 2007

Legislative update

Once the election is called the Commonwealth Government will be in "caretaker" mode when no new laws will be passed unless they’re urgent and have bipartisan support. The Spring sittings are scheduled to commence on 15 October 2007 but will not occur if the Parliament is prorogued (brought to a close) before that date for a general election.

Looking at the Bills List, there are Bills not passed which represent the culmination of a long period of consultation and negotiation. Other Bills (such as Access Card) have had to be amended and will likely wait for the next term to be re-introduced, if at all.

The Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 and Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007 and  the International Trade Integrity Bill were passed on 13 September and are awaiting Assent. The Trade Practices Legislation Amendment Bill (No. 1) 2007 was passed on 20 September and is also awaiting Assent. UPDATE: These Bills all received assent on 24 September.

The Financial Sector Legislation Amendment (Review of Prudential Decisions) 2007 Bill was introduced on 13 September but will lapse.

The Australian Securities and Investment Commission (Fair Bank & Credit Card Fees) Amendment Bill 2007 will also lapse.

The Trade Practices (Industry Codes – Franchising) Amendment Regulations 2007 (No. 1) will have to wait for a further 6 Senate sitting days before they take effect (to ensure they are not disallowed).

Regardless of the election, here’s a sample
of key dates that are not dependent on further Parliament sittings this year:

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Posted 24th September 2007 by David Jacobson in Business Planning, Financial Services, Trade Practices

Managing Cross-Border Disputes: International Arbitration Explained

The Australian Centre for International Commercial Arbitration has recently published a booklet entitled Managing Cross-Border
Disputes: International Arbitration Explained. The booklet seeks to
assist Australian corporations by explaining the significance and
advantages of international arbitration for managing disputes in
cross-border transactions.

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Posted 24th September 2007 by David Jacobson in Business Planning

September 21, 2007

CAMAC issues discussion paper on shareholder claims against insolvent companies (Sons of Gwalia)

The Corporations and Markets Advisory Committee (CAMAC) has released a discussion paper  Shareholder claims against insolvent companies: Implications of the Sons of Gwalia decision (pdf).

The paper responds to a request from the
Parliamentary Secretary to the Treasurer, the Hon. Chris Pearce, MP,
for CAMAC to consider the implications of the decision of the High
Court of Australia in Sons of Gwalia Ltd v Margaretic  [2007] HCA1.

In that case, the High Court held that a
shareholder who is misled by a company into acquiring its shares can
claim as a creditor in the external administration of the company. Such
a claim is not postponed behind other unsecured creditors as are claims
brought in a shareholder’s ‘capacity as a member of the company’. While
clarifying the interpretation of relevant statutory provisions, the
decision opens up underlying policy considerations, as was recognised
by members of the Court.

CAMAC has been asked to consider whether
the current position should be retained or changed to postpone claims
by shareholders as aggrieved investors, and whether other changes
should be made to ameliorate the consequences of either outcome.

The paper reviews various arguments for
or against change to the current legal position and notes the
divergence between the US and UK positions. It canvasses possible
changes to the conduct of creditors’ meetings and to the procedure for
determining shareholder claims if the current position is retained. It
raises the possibility of introducing a ‘fraud on the market’ principle
to assist shareholder claims should the law be changed. Finally, the
paper considers whether shareholders whose claims are postponed in a
liquidation should still be treated as creditors, with voting and other
rights in an external administration.

Submissions close on Friday 21 December 2007.

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Posted 21st September 2007 by David Jacobson in Corporate Governance

The ACCC and franchising complaints

The ACCC has set up a new section on its website explaining the ACCC’s role in relation to franchising complaints and investigations and detailing some matters the ACCC has investigated and taken to the courts.

Although the ACCC notes that many complaints fall outside the jurisdiction of the ACCC and the Trade Practices Act 1974, are of a private contractual nature, or cannot be substantiated to the degree required to allow further action it gives case studies of where enforceable undertakings were obtained (eg Quiznos and You Can Bake-It Franchising P/L) as well as examples of investigations that were inconclusive or reached a mediated settlement (eg The Midas Franchise and Michel’s Patisserie) .

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Posted 21st September 2007 by David Jacobson in Trade Practices

September 20, 2007

Freedom of information: right to know?

It’s often impossible for a business, as well as individuals, to know how or why government made a particular decision.

The Australian media have been running a Right to Know campaign. Whilst the media have their own interests in the campaign, there is little doubt that Australia’s Freedom of Information Laws have had variable success (see Open and Shut).

New Queensland Premier Anna Bligh has announced an independent review of Queensland’s Freedom of Information Laws, with particular interest in the exemption of cabinet documents. (see this The Australian report).

The panel terms of reference include the
time and cost of providing access to government documents, and the
appropriateness of the fees and times that apply.

The panel will also assess existing and proposed FOI laws and practices across the country as well as internationally.

It is expected that an information paper will be released
for community consultation in January and any necessary legislative
amendments prepared by the middle of next year. 

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Posted 20th September 2007 by David Jacobson in Business Planning