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Australian Regulatory Compliance Review
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Treasury has issued a discussion paper on implementation of the Government’s proposal to provide an optional capital gains tax (CGT) roll over for capital losses arising from CGT events happening under a complying superannuation fund’s merger with an APRA regulated superannuation fund with at least five members.
Submissions close on 13 February 2009.
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The Australian Communications and Media Authority (ACMA) has issued two infringement notices to the value of $110,000 to Optus Networks Pty Ltd for allegedly sending electronic messages without accurate sender identification, in contravention of the Spam Act 2003.
The infringement notices were in relation to 20,000 commercial electronic messages sent by Optus that ACMA alleges failed to provide clear and accurate sender identification. The messages promoted the OptusZoo entertainment service to Optus customer mobile phones with the sender identification ‘966’.
Although Optus argued that "966" was the numeric equivalent of Zoo, this was not considered sufficient identification, as "966" could be used to represent any number of permutations on a telephone keypad.
When ACMA and Optus could not agree on an enforceable undertaking, ACMA issued the infringement notices.
Optus has paid the amounts specified in the infringement notices and has advised that new compliance measures have been implemented that will ensure accurate sender identification is included in all commercial electronic messages.
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Leading Indian IT outsource provider Satyam Computer Services has become involved in an accounting fraud scandal allegedly involving more than US$1billion that could affect its services to Australian customers. Business Week.
Satyam has more than 50,000 employees.
The issue for customers is one of trust, especially if the service they outsource is a material business activity.
According toThe Times of India " The initial investigations by the Registrar of Companies (RoC) into the Satyam scam has revealed large-scale selling of the company's shares by institutional investors just days ahead of Ramalinga Raju's startling confession of sexed-up company accounts.
The Serious Fraud Investigation Office (SFIO)… would probe all aspects of the scam, especially since the RoC's initial report has suggested that the company's books of accounts and its corporate filings with the exchanges seem to be unreliable.
The SFIO probe, expected to be completed in three months with the Government's intention to fast-track the process, is likely to be an all-encompassing affair and would also cover the auditors and independent directors and their role.
Gupta said the priority for the Government was to protect the interest of the over 3 lakh shareholders, employees and Satyam's clients, both domestic and overseas. Asked to comment on the fallout of the episode for the credibility of India Inc, the minister insisted that Satyam was an "aberration". "
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Lloyds TSB Bank has announced that it has reached a settlement for US$350 million with both the United States Department of Justice and the New York County District Attorney’s Office in relation to financial transfers that violated US sanctions.
The US Justice Department said Lloyds TSB had acknowledged “criminal conduct” and agreed to forfeit the funds in return for an end to its investigation.
Prosecutors said the bank faked records so clients in Iran, Libya and Sudan could do business with US institutions. (BBC News)
Lloyds TSB disclosed in its interim results for the first half of 2008 that it was in discussions regarding a resolution of the investigation and that it had provided £180 million in respect of this matter
The Office of Foreign Assets Control (OFAC) has confirmed to Lloyds TSB that the amount paid to the United States Department of Justice and the New York County District Attorney’s Office will be credited towards satisfying any penalty it imposes.
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The Minister for Competition Policy and Consumer Affairs, the Hon. Chris Bowen MP,has announced the details of the Government's approach to the implementation of a nationally-consistent, mandatory unit pricing regime.
The national unit pricing regime will:
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Australia does not yet have mandatory data breach notification laws (see last year’s ALRC proposals) but in the USA where many states do have such laws, the Identity Theft Resource Center reports that in 2008 there were 656 breaches from a range of well-known U.S. companies and
government entities. Information about the breaches was collected by tracking
media reports and the disclosures companies are required to make by
law. (via InfoWorld).
The data breaches came from a variety of mishaps, including theft of laptops, hacking, employees improperly handling data, accidental disclosure and problems with subcontractors.
In Australia the Privacy Commissioner has issued a Voluntary Data Breach Notification Guide.
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Treasury has released a discussion paper entitled the ‘Meaning of ‘Understanding’ in the Trade Practices Act 1974‘.
This discussion paper seeks submissions from interested parties regarding the adequacy of the current interpretation of the term ‘understanding’ in section 45 of the Trade Practices Act 1974 (TPA) to capture anticompetitive conduct.
Submissions close on 31 March 2009
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ASIC has updated the position relating to short selling:
1. In relation to covered short selling of financial stocks, the position remains as set out in ASIC’s advisory AD08-210 of 13 November 2008, that the ban will remain in place until the 27 January, 2009.
2. In relation to naked short selling, from 8 January 2009 the Corporations Amendment (Short Selling) Act 2008 bans naked short selling except that exemptions currently in the Corporations Regulations continue to apply. This is confirmed in ASIC Class Order [CO 09/01051]
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This is an article I recently wrote for Complinet.
The HIH Royal Commission recommended that Australia develop a framework for the effective supervision of corporate groups that include general insurers.
APRA’s response began with a discussion paper, Prudential supervision of corporate groups involving authorised general insurers, released in May 2005.
After a lengthy consultation process, on 17 December 2008 APRA published four prudential standards:
• GPS 001 Definitions;
• GPS 111 Capital Adequacy: Level 2 Insurance Groups;
• GPS 221 Risk Management: Level 2 Insurance Groups; and
• GPS 311 Audit and Actuarial Reporting and Valuation: Level 2 Insurance Groups.
Until now APRA supervised general insurers on a solo basis only. APRA did not have a framework for supervising general insurers on a group basis.
There was an inconsistency in APRA’s supervision of insurance groups compared to banking groups.
The HIH Royal Commission found that being part of a wider insurance group can alter the risk profile of a stand-alone general insurer. Financial inter-relationships may expose the general insurer to contagion risk from the financial weakness of another entity within the group and mask the true capital position of a general insurer within the group. Management and policy decisions at the group level may influence the type and level of risks assumed at the entity level. Subsidiaries may end up bearing risks beyond those that they would normally assume if they were operating as independent entities.
As has been seen recently with AIG, financial weakness in one part of a group can have adverse consequences for the whole group.
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One of the important lessons of 2008 is that we can't predict everything and that there will always be surprises (even if in hindsight the cause of the surprise appears to be obvious).
The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us. (page 197, Against the Gods, Peter L Bernstein, 1996)
Whilst the law does not expect directors to be able to predict the future, it does expect them to be diligent in their risk oversight function. There will be increasing regulatory pressure for boards to be more involved in risk management decisions.
Specific hotspots in 2009 will be:
Whilst the board need not be involved in day-to-day activities, it does need to show leadership in the areas of strategy, culture and values.
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