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

November 30, 2007

New Minister for Deregulation

Kevin Rudd has appointed Lindsay Tanner as Minister for Finance and Deregulation.

According to Smart Company, Tanner won’t have a red tape review. He was appointed to oversee cuts to business regulation, while a senior official would
enforce the cuts and restrictions. The minister will enforce a promised
“one in-one out” approach under which a new rule could only be imposed
after another is cut.

"Tanner expect to move immediately on simplifying the disclosure regime
for financial services and the harmonisation of state and federal
regulations as well as strengthening the regulatory impact statement."

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Posted 30th November 2007 by David Jacobson in Business Planning

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Mid-Cap Corporate Governance report

The 2007 BDO Kendalls Mid-Cap Corporate Governance report highlights a deterioration in governance levels across the
mid-caps sector (ie 150 “mid–sized” Australian listed companies, the 251st–400th largest based on market capitalisation at 31 December 2006).

Key highlights of the report include:

Less than 50% of mid-cap companies (69) have an independent chairman, and only 25% have a majority of independent directors.
A high 90% of surveyed companies had an audit committee, with more than 80% having an independent chair.
Almost
71% of mid-caps had a separate remuneration committee, however less
than 40% had a separately constituted nomination committee and more
than half (56.9%) did not have a majority of independent members.
14.7%
of companies did not have a code of conduct; 14% did not have a risk
management policy, and 38.7% did not have a share trading policy.

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Posted 30th November 2007 by David Jacobson in Corporate Governance

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The growth of regulation in Australia

The Institute of Public Affairs has published a backgrounder Policy without Parliament: the growth of regulation in Australia.

This year, there will have been more legislation and regulation imposed
in Australia than any other year in history. Furthermore, federal
regulatory agencies have grown dramatically in the last decade. The
budget and staff of the three major regulatory bodies – ACCC, ASIC and
APRA – have nearly doubled over the last ten years.

Here are some key points:

From 2000-2006 Commonwealth Parliament passed 40,266 pages of Acts.

Subordinate legislation—regulation—is growing at a similar pace as legislation.

The Howard Liberal Government oversaw the largest regulatory expansion since Federation.

There are 24,000 different types of licences administered by the three levels of government.

Regulatory compliance now comprises between ten and 25 per cent of board and senior management workload.

The full cost of regulation is much greater than the visible cost of compliance.

There are approximately 60 Commonwealth regulators and national standard-setting bodies. There are a further 40 Federal ministerial councils which set and administer regulations. Although hard to estimate, Federal regulatory agencies employ over 34,000 people, with a combined yearly budget of well over $4.5 billion.

(via Trevor Cook).

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Posted 30th November 2007 by David Jacobson in Business Planning

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November 29, 2007

Simplified Statement of Advice template

The Financial Planning Association has released a Simplified
Statement Of Advice (SOA) model (pdf) which is intended to reduce the cost of advice for
consumers.

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Posted 29th November 2007 by David Jacobson in Financial Services

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APRA publishes its 2007 Annual Report

APRA has published its 2007 Annual Report.

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Posted 29th November 2007 by David Jacobson in Financial Services

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Qantas settles US price fixing claim

As foreshadowed in Qantas’ Annual report, Qantas has announced to the ASX it has entered a Plea Agreement with the US government to settle its liability in the USA resulting from illegal price fixing conduct by its Freight Division involving fuel surcharges.

Qantas has agreed to pay a fine of US$61 million.

BBC News.

UPDATE 15 January 2008: Qantas fined AU$68M (ABC News)

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Posted 29th November 2007 by David Jacobson in Trade Practices

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Regulating financial advice: ASIC’s view

In a paper (pdf) presented by ASIC Chairman Tony D’Aloisio to the Financial Planners Association Conference he outlined the role of ASIC’s retail investor taskforce.

He said one of the taskforce objectives will be to address 7 specific issues with the industry:
• disclosure documents – length and complexity.
• statements of advice – whether ‘one size fits all’ is working.
• compensation arrangements for retail investors – are they adequate?
• lessons from Westpoint.
• remuneration arrangements and conflicts of interest.
• whether fiduciary duties apply and, if so, what that means.

The taskforce will take into account international developments (e.g. USA and UK) in examining these issues.

In relation to remuneration, he said ASIC will allow the market to ‘vote with its feet’ on the models investors prefer. To assist that process, ASIC will be active in applying the existing disclosure regime to its limits (as it has done in the unrated and unlisted debenture area) so that retail investors can make an informed choice and, in effect, can ‘vote with their feet’. While ASIC will not seek to pick ‘winner models’ (as such an approach could distort the competitive dynamics between models) it will be active in applying the existing disclosure regime.

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Posted 29th November 2007 by David Jacobson in Financial Services

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ACCC succeeds in price-fixing and resale price maintenance prosecutions

The ACCC has been successful in 2 recent prosecutions:

In Australian Competition & Consumer
Commission v Australian Abalone Pty Ltd [2007] FCA 1834 penalties totalling $927,500 were imposed on individuals and companies involved in a Victorian abalone cartel.

The ACCC alleged that under the arrangement the parties would not
supply a processor customer unless that processor paid a premium on top
of an average ‘beach’ price (market price) and was a processor
nominated by Australian Abalone Pty Ltd, a corporate vehicle created to
market the catch by the quota holder and others.

Justice Weinberg of the Federal Court in Melbourne found, that the
conduct contravened the primary boycott and price fixing provisions of
the Act ( ss 45(2)(a)(i) and (ii) and
45(2)(b)(i) and (ii) of the Trade Practices Act 1974) and the Victorian Competition Code.

In ACCC v TEAC the Federal Court of Australia imposed penalties totalling $190,000
on TEAC Australia Pty Ltd and its National Sales Manager, Mr Warren
Allison, for engaging in resale price maintenance in contravention of section 48 of the Trade Practices Act in relation to conduct that sought to stop an independent retailer of
electronic products from advertising prices below the ‘go price’
specified by TEAC. (ACCC Media Release).

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Posted 29th November 2007 by David Jacobson in Trade Practices

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November 28, 2007

National Finance Broking Scheme consultation package released

The Ministerial Council on Consumer Affairs (MCCA)
has released a package (pdf) (including an exposure draft Bill) proposing finance broking legislation which is consistent nationally,
and which extends to protections for small business clients.

All types of broking structures will be regulated:
mortgage brokers, finance brokers, single line broking and single mobile
operators, as well as aggregators and franchised organisations. While brokers of
credit for small businesses are covered by the framework of the regulatory
scheme, there will be differences in the requirements for disclosure and the
contractual relationship, to take into account differences in the way brokers
and businesses transact.

It will include all credit unless the applicant is a business entity which:
· Employs more than 100 people if it is a manufacturing business; or otherwise, 20 people; or
· The credit sought is more than $2 million

The definition of broker is similar to that in the
Consumer Credit Administration Act 1995
(NSW), and will include those
intermediaries who are suppliers of goods and services and who negotiate or
obtain credit for purchasing those goods and services.

Brokers will be required to have professional indemnity insurance with coverage set out in the regulations. Applicants for licenses will be required to have attained prescribed educational standards.

The closing date for submissions is 15 February 2008.

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Posted 28th November 2007 by David Jacobson in Financial Services

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APRA releases revised standards on governance for ADI’s and insurers

The
Australian Prudential Regulation Authority (APRA) has released revised
prudential standards on governance for authorised deposit-taking
institutions (ADIs) (APS 510)and life insurers (including friendly societies)(LPS
510).

The
amendments to the prudential standards result from recent changes to the Australian Securities Exchange (ASX)
Corporate Governance Council’s Corporate Governance Principles and
Recommendations.

The key amendments to the governance standards are that:

in
addition to the principle of independence of directors set out in the
standards, APRA has incorporated the ‘relationships affecting
independent status’ in the ASX Corporate Governance Council’s
Principles as circumstances that would preclude a director from being
treated as independent on the Board of an ADI or life insurer. The circumstances are identical to the five “relationships affecting
independent status” in the 2nd edition of the ASX Corporate Governance
Council Principles. They represent a non-exhaustive list of specific
circumstances that would preclude a director from being regarded as
independent for the purposes of serving on the Board of an
APRA-regulated institution. A director in any of these circumstances
would still be able to serve on such a Board, but not as an independent; and
a Board should give consideration to the length of service of directors as part of its Board renewal policy.

The revised standards will take effect from 1 January 2008.

The
revised prudential standard on governance for general insurers (GPS
510) are a result of the Financial Sector Legislation Amendment (Simplifying
Regulation and Review) Act 2007.

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Posted 28th November 2007 by David Jacobson in Corporate Governance, Financial Services, Insurance

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