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January 16, 2014

Takeover panel consults on draft revised guidance notes

The Takeovers Panel has issued 2 consultation papers on draft revised guidance notes: the first relates to the issue of summaries of takeover documents and the second relates to including the value of franking credits in the headline offer price.

The Panel encourages summaries of takeover documents that are accessible to retail shareholders in particular. The draft revisions set out the Panel's best practice guidance on the contents of a summary section to assist preparers of takeover documents.

In the consultation paper on dividends the Panel says that any reference to the value of franking credits should be made in a separate, suitably qualified statement.

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Posted 16th January 2014 by David Jacobson in Corporations Act

January 10, 2014

ASIC acts on misleading super advertising

ASIC has announced that Media Super Limited has paid a $10,200 penalty to comply with an ASIC infringement notice after producing potentially misleading advertisements.

Media Super published the ads as a factsheet in September 2012. The factsheet titled ‘Self-managed super? You be the judge’, compared the costs and benefits of self-managed super funds with the Media Super fund. It appeared on Media Super’s website and was sent to all fund members.

ASIC was concerned that the factsheet inaccurately represented the costs and benefits of the Media Super funds compared to self-managed super funds.

The fact sheet omitted a component of Media Super’s fees.

Media Super corrected the error immediately after it was identified.

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Posted 10th January 2014 by David Jacobson in Corporations Act, Marketing, Superannuation

December 30, 2013

The regulatory schedule for 2014

2014 begins with some uncertainty: in addition to its legislation repealing the carbon tax and the mining tax, the Government has indicated it will be changing FOFA and conducting a Financial System Inquiry. Its charities changes have also been held up in the Senate.

It will also be "cleaning up" announced but unimplemented tax and superannuation changes. The Superannuation Guarantee charge percentage increase from 9.25% to 9.5% scheduled for 1 July 2014 has been postponed. The rate will remain at 9.25% until 30 June 2016.

But some significant changes will definitely commence in 2014, particularly the privacy changes commencing on 12 March.

1 January 2014

Anti-bullying law: anti-bullying legislation comes into effect on 1 January 2014 and will enable victims of workplace bullying to apply directly to the Fair Work Commission for an order that the bullying stop.

Small businesses will be apply to apply for External Dispute Resolution for disputes on loans up to $2 million

Risk management: New APRA standards for ADIs requiring a chief risk officer commence.

The Financial Claims Scheme single customer view commences.

The National Regulatory Scheme for Community Housing will also start in January.

The new statutory definition of charities will commence, notwithstanding the Government's proposed changes to the sector.

Other key dates

Personal Property Securities Act transition ends on 31 January 2014: pre-30 January 2012 securities must be registered on the PPS Register to retain priority.

National Gambling Reforms (including daily ATM limits in gambling venues) commence on 1 February 2014.

The Co-operatives National Law commences in NSW and Victoria on 3 March and later in the year in other States and Territories.

The Privacy Amendment Act commences on 12 March 2014 including changes to credit reporting.

Gender equality: from 1 April 2014 businesses with 100 or more employees will be required to lodge reports each year containing information relating to various gender equality indicators.

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Posted 30th December 2013 by David Jacobson in Charities, Compliance, Corporations Act, Financial Services, Privacy, Superannuation, Tax, Workplace

UBS gives EU over BBSW

ASIC has accepted an enforceable undertaking (EU) from UBS AG (UBS) in relation to potential misconduct involving the Australian Bank Bill Swap Rate (BBSW).

In July 2012, UBS reported to ASIC that it had found evidence of conduct between 2005 and 2011 seeking to influence its BBSW submissions, based on how the submissions may benefit UBS' derivatives positions.

The discovery was made following its global internal investigation relating to its LIBOR conduct.

In February 2013, UBS withdrew from the BBSW submissions panel.

At ASIC's request, UBS engaged an independent expert to conduct a review of BBSW submissions. The expert found that any market impact was insignificant.

UBS will also make a voluntary contribution of $1 million to fund independent financial literacy projects in Australia.

Since 27 September 2013 the BBSW has been electronically calculated, and the panel banks no longer make submissions. The BBSW calculation is different from the LIBOR calculation.

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Posted 30th December 2013 by David Jacobson in Corporations Act, Financial Services

December 23, 2013

FOFA changes announced

The Assistant Treasurer has announced proposed amendments to the Future of Financial Advice (FOFA) legislation.

The Government's amendments will include:

  • removing the opt-in requirements so that advisers no longer need to seek their client’s agreement every two years
  • restricting fee disclosure statements to new clients from 1 July 2013
  • removing 'catch-all' from the best interests duty of advisers
  • amending the best interests duty to explicitly allow for the provision of scaled advice to enable consumers to receive "one-off advice" from financial advisers
  • exempting general advice from conflicted remuneration: the ban on conflicted remuneration only applies to personal financial advice
  • amending grandfathering: advisers can move between licensees whilst continuing to access grandfathered benefits.

ASIC's response

ASIC will not take enforcement action in relation to the specific FOFA provisions that the Government is planning to repeal. For example, ASIC will not take action for breaches of current section 962S of the Corporations Act 2001, which requires fee disclosure statements to be provided to retail clients with ongoing fee arrangements entered into before 1 July 2013.

ASIC will review and consult on its regulatory guides on FOFA once the proposed amendments have been made.

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Posted 23rd December 2013 by David Jacobson in Corporations Act, Financial Services, Future of Financial Advice Reforms

December 20, 2013

ASIC relief on superannuation disclosure

ASIC has issued Class Order [CO 13/1534] Deferral of Stronger Super amendments in relation to PDS and periodic statement disclosure which provides for the following:

  • a change to the start date for compliance with new fees and costs disclosure arrangements: the class order extends the date of compliance from 31 December 2013 to 1 July 2014 for Product Disclosure Statements given on or after that date, and reporting periods on or after 1 July 2014 for periodic statements and aligns it with the commencement date for managed investment products, and
  • interim relief so that RSE licensees do not have to provide a hard copy of the product dashboard with the periodic statement: the class order provides interim relief from compliance with subregulation 7.9.20(1)(o), if a trustee includes in the periodic statement, or accompanies the periodic statement with, a website address for the latest product dashboard for the investment option. This also applies to periodic statements provided to members who are exiting the fund.

ASIC has also provided a no-action position for RSE licensees so that information about accrued default amounts does not need to be included in an exit statement.

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Posted 20th December 2013 by David Jacobson in Corporations Act, Superannuation

December 12, 2013

Leases from insolvent landlords at risk

In Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) [2013] HCA 51 the High Court decided that the liquidators of a lessor company had the power to disclaim the leases to investors under section 568(1)(f) of the Corporations Act 2001.

A majority of the High Court decided that the liabilities of the lessor (including its obligations to provide quiet enjoyment and not derogate from the grant of exclusive possession) would be terminated from the day on which the disclaimer takes effect, as would the correlative rights of the tenant. Each tenant's estate or interest in the land would be terminated.

The decision has implications for tenants who make substantial improvements to property over which they have a long-term lease or who borrow on the security of their lease: the solvency of their landlord is now a risk factor.

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Posted 12th December 2013 by David Jacobson in Corporations Act, Financial Services, Property, Risk Management

November 20, 2013

Financial System Inquiry details released

The Treasurer Joe Hockey has announced the appointment of Mr David Murray AO to head an inquiry into Australia’s financial system and the draft Terms of Reference of the inquiry.

Amongst other things, the Inquiry will recommend policy options that:

  • promote a competitive and stable financial system that contributes to Australia’s productivity growth;
  • promote the efficient allocation of capital and cost efficient access and services for users;
  • support individuals and businesses to be reasonably able to manage their finances by understanding risks and rewards in the financial sector;
  • foster dynamic and innovative financial service providers.

The Inquiry will take account of the regulation of the general operation of companies through corporations law to the extent these impinge on the efficiency and effective allocation of capital within the financial system.

It will also examine the taxation of financial arrangements, products or institutions to the extent these impinge on the efficient and effective allocation of capital by the financial system.

The Inquiry will take account of, but not make recommendations on the objectives and procedures of the Reserve Bank in its conduct of monetary policy.

Mr Murray will head a Committee of four eminent Australians drawn from the finance, business and academic sectors.

The Committee will draw on the expertise of a Special External Council comprising five international business people to specifically advise on matters relating to international competitiveness and offshore regulatory frameworks and related issues.

Following feedback, final terms of reference and the final composition of the inquiry will be announced in mid-December, with the inquiry to publish an interim report by September 2014 and deliver a final report by November 2014.

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Posted 20th November 2013 by David Jacobson in Corporations Act, Financial Services, Tax

November 18, 2013

How hard is it to wear two hats?

There are many corporate positions that may be double hatted (depending on the company size): company secretary/general counsel, general counsel/chief compliance officer, CFO/risk officer, internal auditor/compliance officer.

But how practical is it for an employee to wear two hats at once?

The issue is whether the person can effectively carry out both functions.

For example, for ADIs, insurers and superannuation funds, APRA requires that a Chief Risk Officer be independent from business lines, the finance function and other revenue-generating capabilities.

Other positions may require direct access to the board (not just to report to the board) without a conflict of interest.

The issue is whether the double-hatted role will result in serious problems being overlooked or whether the dual roles interact well together.

For lawyers there are issues relating to liability and legal professional privilege:

In Shafron v Australian Securities and Investments Commission [2012] HCA 18 the High Court decided that Mr Shafron's responsibilities with James Hardie as company secretary and general counsel were indivisible and must be viewed as a composite whole.

In Telstra Corporation Limited v Minister for Communications, Information Technology and the Arts (No. 2) [2007] FCA 1445, the Federal Court decided that it must not be assumed that all advice given by a lawyer employed in both legal and management positions in a company has the benefit of legal professional privilege if it cannot be proved they were acting in a legal (rather than a management) capacity when they gave the advice.

It should not be assumed that 2 positions which may appear to "fit" will work together in practice.

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Posted 18th November 2013 by David Jacobson in Compliance, Corporations Act, Financial Services, Insurance, Risk Management, Superannuation

ASIC reviews employee incentive schemes

ASIC has released a Consultation Paper 218 on employee incentive schemes for persons offering and receiving shares or other financial products under an employee incentive scheme.

It seeks feedback on ASIC's proposals to extend relief currently in Class Order [CO 03/184] Employee share schemes and Regulatory Guide 49 Employee share schemes (RG 49). The paper attaches a draft updated version of RG 49.

ASIC's proposed changes include who can make offers and who can receive offers, to make it easier for employers and issuers to develop an employee incentive scheme, subject to new conditions to support the interests of participants who are considering taking up such a scheme.

Certain offers will only be alowed to be made by listed bodies.

The proposals reflect changes to the Corporations Act as well as developments in market practice for structuring employee share schemes.

ASIC considers that it is appropriate to reduce the compliance burden for employers if the following policy objectives are satisfied:
(a) the objective of the offer is not fundraising, but rather to enable employees to participate in the financial success (including the benefits of ownership) of a body;
(b) the offer sufficiently supports the long-term interdependence between the employer and the employee; and
(c) there are adequate protections for employees and, in particular, a history of disclosure in a well-regulated financial market, which will help employees in determining a reliable alternative market price for the financial products they are being offered.

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Posted 18th November 2013 by David Jacobson in Corporations Act, Financial Services, Workplace
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