I have been asked to give examples of the sort of problems we find on compliance reviews. Without breaching confidentiality, it may help if I explain why we do reviews and what we look for.

Why do a review?

The reasons we do reviews include:

• to update processes for law changes;
• as part of a merger or acquisition (to ensure that the key assets will be acquired without the prospect of future legal action);
• as part of an ongoing compliance program (eg to test compliance annually);
• because the Board or senior management want assurances before making declarations of compliance;
• because a problem has been identified either internally, through a customer dispute or by a regulator.

When a problem has already been identified we may be asked to confirm the extent of the particular problem and whether other problems exist. This is important when a penalty hearing is likely and the background and extent of a breach is a relevant factor in determining the penalty. (See the United Credit Union decision).

We look for compliance in the areas of highest risk and ways clients can improve processes. We frequently recommend best practices to clients.

Problems can be one off, eg through a manual error or a software glitch, or systemic (eg a disclosure error that has affected all documents for a particular product).

We start off with a checklist for the particular issue we are reviewing. It is based on the statutory requirements and identifies the client’s documents, materials, computer systems and procedures we need to look at.

A theme may develop as we conduct our review.

We interview key staff.

Often there will be issues staff want to discuss.

Sometimes there will be issues related to an out of date procedure or a change to a compliant procedure which was not authorised. Or a document was copied from elsewhere without understanding its assumptions.

If an issue is identified as part of an ongoing review, it is evidence that your compliance framework works. The problem can then be remedied by you rather than wait for a customer complaint or regulator investigation.

Significant legal and compliance changes over the last 12 months mean that it’s critical to ensure that your procedures have been updated and your staff has been adequately trained.

If you have an Australian Financial Services Licence or an Australian Credit Licence minimum annual training for staff is a mandatory licence condfition.

Langes+ offers practical training focussing on essential compliance issues.

We can either attend your offices anywhere in Australia or set up a program at an off-site facility.

Areas of law include:

• Banking, consumer credit and financial services law
• Mergers and acquisitions
• Corporate governance and directors’ duties
• Advertising law
• Website and online financial services compliance
• Anti-Money Laundering Law
• Privacy law
• Consumer protection (formerly trade practices) law
• Workplace relations law

Examples of our training programs include:

• Education packages for new board members, management or front-line staff
• Risk management
• Responsible officer training
• Effective AGM’s and Board Meetings
• Designing a product development system
• Policy Development
• Compliance officer training
• Designing compliance systems
• Auditing compliance systems
• Corporate Governance Update
• Financial Services Regulatory update (Privacy, Credit Code, FSR)
• Consumer Protection Compliance training
• Ecommerce regulation and IT governance

Call your local Langes office to discuss your requirements.

We are excited to announce that Langes+ will be opening an office in Melbourne on 1 June 2010 with a new member of our team, Ronen Atzmon.

Ronen will be in charge of our Melbourne office. He is the former General Counsel of Cuscal, and will join Langes+ in the position of Executive Counsel. He has extensive experience in corporate and finance law and the mutuals sector.

Langes+ was formed with the vision of becoming a national law firm for the financial services sector. The Melbourne office is an important step in our growth strategy and will complement our existing representation in Sydney, Adelaide and Brisbane.

The Bills proposed for introduction and passage in the Winter sittings of the Commonwealth Parliament include:

Corporations Amendment (Corporate Reporting Reform) Bill
- cut red tape for unlisted public companies limited by guarantee, streamline parent entity reporting, provide greater flexibility for companies to pay dividends and to more easily change their year-end reporting dates
- improve disclosures in the directors’ report, refine the framework for solicitor representation letters, provide greater recognition of compliance with international financial reporting standards and refine the framework for lost capital reductions

Superannuation Legislation Amendment Bill (No. 1)
- prevent product providers from marketing excessively risky products to superannuation funds

Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Bill -
enhance the Australian Prudential Regulation Authority’s (APRA’s) ability to regulate bodies in the financial sector in accordance with prudential laws

Paid Parental Leave Bill
Paid Parental Leave (Administration) Bill
Paid Parental Leave (Consequential Amendments) Bill
- introduce Australia’s first comprehensive, statutory paid parental leave scheme, as announced by the Government in the 2009 Budget

This article by me was first published in Retail Banking Review here.

I’ve commented previously that media releases are not law. A law isn’t a law until it is passed by Parliament and for Commonwealth law, that means the Senate as well as the House of Representatives.

Not knowing if, when and in what form a law will be passed makes it hard to plan changes to documents, processes, pricing and software.

Much has been said lately about the Commonwealth Government’s “backflips” on its announced laws so it’s worthwhile looking at the status of its announcements affecting retail banking regulation.

Whether the changes are because of negotiations with industry or as a concession that the law won’t get through the Senate, they need to be factored in to forward business planning.

Some changes are proposed in stages but the second stage reforms won’t be announced until the first stage is completed, for example privacy and data breaches.

Other changes are proposed for 3 years’ time. They assume the current government will still be there or that a new government will agree with the changes.

In recent weeks the Government has abandoned the Emissions Trading Scheme and dropped business phone numbers from eligibility for listing in the Do Not Call Register.

The Government’s Henry Tax Review response of 2 May turned out to be an anti-climax: even though it has important changes for superannuation and company tax (assuming the Resources Super Profits Tax is passed), the opportunity to also make compliance improvements has been deferred. Perhaps they will be announced in the Budget on 11 May.

The Future of Financial Advice reform package will have a significant impact on financial institutions and planners if it is implemented in its current form.

Here’s a timetable of changes based on current announcements and laws as passed:

1 July 2010

• Australian Consumer Law – unfair contract terms law commences
• National Credit Code commences;
• Suitability assessments required for loans by lenders which are not ADI’s or Registered Finance Corporations
• Applications for Australian Credit Licences open for existing consumer lenders (applications close 31 December 2010)

Second half of 2010 (likely)

• Bankruptcy amendment increasing the minimum amount for which a creditor can petition for bankruptcy from $2,000 to $10,000
• Extension of Do Not Call Register to emergency service, fax, other non-business and government numbers. Australian business phone numbers will not be covered by the Register.
• Phase 2 Consumer Credit reform to commence: including a review of credit card limit extension offers, the provision of credit for small businesses, regulation of investment loans other than margin loans and mortgages for residential investment properties and enhancements to the regulation and tailored disclosure of reverse mortgages.

1 January 2011

• Responsible lending starts for all lenders (including ADI’s and registered finance corporations) starts.
• Margin lender licensing transition period ends
• Commencement of new privacy credit reporting laws: reporting will be allowed for repayment history information from 14 April 2010.
• introduction of a Paid Parental Leave scheme.
• Changes to ASX Corporate Governance Principles and Recommendations commence covering reporting on board diversity and executive remuneration
• Small business unfair dismissal rules will only apply to businesses with less than 15 employees by individual head count (as opposed to less than 15 full time equivalent employees until then). Employees of a small business will only be able to claim for unfair dismissal after they have been employed for at least 12 months. To dismiss someone fairly after 12 months the employer will have to comply with a Fair Dismissal Code for Small Business.
• Australian Consumer Law Stage 2: includes a new national legislative scheme for consumer product safety

May 2011

• New Personal Property Securities law commences.

First half 2011

• A new national business names registration system
• mandatory data breach notification decision likely

1 July 2012
Financial adviser commission reforms begin.

2013
Superannuation and company tax reforms commence.