Australian Regulatory Compliance Review from Langes+ Lawyers

April 16, 2013

Bank IT operational risk and regulatory compliance

Information technology research and advisory company Gartner has published a report "Banks That Are 'Too Big to Fail' Are Also Too Big to Succeed."

Gartner cites higher levels of regulatory compliance, increased investment in risk management and technology advancements as stress points.

The report concludes that increased size and operational complexity as banks change focus from agility in response to external conditions to risk control creates performance drags by accelerating demand and complexity.

It says there is a "law of diminishing IT returns" under which any technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.The paradox is that increased efficiency leads to increased demand.

As demand continues to rise, Gartner says the critical factor is not the number of devices, but rather the number of digital services offered via the Internet. These in turn, will continue to mean that efficiency gains in supply are overwhelmed by consumption.

For all financial service providers, new technologies, customer expectations and market conditions require closer attention to IT governance to maintain continuity of customer services.

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Posted 16th April 2013 by David Jacobson in Financial Services, Risk Management, Web/Tech

April 10, 2013

ASIC argues the benefits of co-operation

ASIC has released Information Sheet 172 Cooperating with ASIC (INFO 172) explaining the benefits of co-operating with ASIC investigations and the factors ASIC takes into account when assessing co-operation.

ASIC says that co-operating with it may benefit a person or company in many ways including the type of enforcement action it pursues and whether ASIC will give credit for cooperation in proceedings it commences.

There is no doubt a good working relationship between businesses and ASIC is of benefit to both sides. Although ASIC has a significant budget it does not have unlimited resources.

Co-operation and communication with ASIC can be difficult in a national or international business involving multiple groups where they may not be a single point of contact for all regulatory issues.

Who is responsible for ASIC requests for information or unscheduled visits?

Businesses need to develop a policy on these issues as part of their compliance framework.

Of course businesses may have a valid different interpretation of the law from ASIC. But often those disputes can be resolved on a practical co-operative basis without waiving important rights.

INFO 172 follows releases on ASIC’s information gathering powers (refer 11-194AD), public comment and enforceable undertakings (refer 12-29MR), surveillance work (refer 12-224MR), and claims of legal professional privilege (refer 12-314MR).

ASIC's enforcement report for the period 1 July 2012 to 31 December 2012 summarises ASIC’s actions against a range of gatekeepers in the Australian financial system, such as credit licensees, insurance representatives, financial advisers, auditors and directors. ASIC focuses on four key attributes of gatekeepers: competence, diligence, honesty and independence.

During the period, 44 of the 88 enforcement outcomes in the market integrity, corporate governance and financial services areas involved cooperation between the person concerned and ASIC.

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Posted 10th April 2013 by David Jacobson in Compliance, Corporations Act, Risk Management

ADI disclosure of capital and remuneration

APRA has released for comment a consultation paper and draft amended prudential standard APS 330 relating to Basel Pillar 3 disclosures on the composition of capital and on remuneration by authorised deposit-taking institutions (ADIs) incorporated in Australia.

ADIs will be required to publish a reconciliation between their regulatory capital and financial statements. They will also need to disclose full details of the terms and conditions of each regulatory capital instrument and a summary of those instruments in a standard form. They are intended to be referenced or included in full in published financial statements and on an ADI’s website, unless APRA agrees otherwise.

In addition, APRA will be consulting on its proposed implementation of the Basel Committee’s requirements for ADIs to disclose qualitative and quantitative information about their remuneration practices and aggregate remuneration data for senior managers and material risk-takers. This is wider disclosure than that required under the Corporations Act.

APRA is proposing that it be open to a listed ADI to incorporate the APS 330 remuneration disclosure requirements into its Remuneration Report, provided that the disclosures made in relation to ‘key management personnel’ under the Corporations Act are clearly distinguished from the disclosures made under APS 330 for ‘senior managers’ and ‘material risk-takers’.

APRA is proposing that the requirements commence for the first reporting period on or after 30 June 2013.

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Posted 10th April 2013 by David Jacobson in Corporate Governance, Financial Services

April 9, 2013

Reminder: superannuation guarantee charge increases on 1 July 2013

The Superannuation Guarantee (Administration) Amendment Act 2012 increases the Superannuation Guarantee charge payable by employers from 9 percent to 12 percent of an employee’s ordinary time earnings (up to a prescribed maximum) over the next 6 years.

The first Superannuation Guarantee charge percentage increase is from 9% to 9.25% on 1 July 2013.

Subsequent increases are: 9.5% on 1 July 2014, 10% on 1 July 2015, 10.5% on 1 July 2016, 11% on 1 July 2017 and 11.5% on 1 July 2018. On 1 July 2019 the rate will be set at 12 per cent for 2019-20 and subsequent income years.

The maximum age limit of an employee at which the superannuation guarantee no longer needs to be provided is also abolished. Currently employers are required to contribute to complying superannuation funds of eligible mature age employees aged 70 and older.The SG maximum age limit of 70 has been removed and employers are required to contribute to complying superannuation funds of eligible mature age employees aged 70 and older.

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Posted 9th April 2013 by David Jacobson in Superannuation, Workplace

Draft statutory definition of charity

Treasury has released for comment a draft Charities Bill 2013 which will introduce a statutory definition of "charity", applicable across all Commonwealth laws for the first time.

The definition is:

charity means an entity:
(a) that is a not-for-profit entity; and
(b) all of the purposes of which are:
(i) charitable purposes (see Part 3) that are for the public benefit (see Division 2 of this Part); or
(ii) purposes that are incidental or ancillary to, and in furtherance or in aid of, purposes of the entity covered by subparagraph (i); and
Note 1: In determining the purposes of the entity, have regard to the entity’s governing rules, its activities and any other relevant matter.
Note 2: The requirement in subparagraph (b)(i) that a purpose be for the public benefit does not apply to certain entities (see section 9).
(c) none of the purposes of which are disqualifying purposes (see Division 3) ; and
(d) that is not an individual, a political party or a government entity.

The definition will apply from 1 January 2014.

As a result of the introduction of a definition of charity and charitable purpose in the Charities Bill 2013, a number of consequential amendments to Commonwealth legislation and transitional arrangements are required. These are set out in the draft Charities (Consequential Amendments and Transitional Provisions) Bill 2013.
(more...)

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Posted 9th April 2013 by David Jacobson in Charities, Not-for-profit sector, Tax

April 8, 2013

Credit reporting code consultation

The Australasian Retail Credit Association (ARCA) has released for public consultation a draft of the new Credit Reporting Code of Conduct (CR Code).

If approved by the OAIC, the new CR Code will supplement the privacy protection regime set out in Part IIIA of the Privacy Act as amended in December 2012, and will replace the existing Credit Reporting Code of Conduct, that has operated since 1996. It will set out how the Privacy Act Part IIIA provisions are to be applied or complied with.

The CR Code has been designed to:

address expectations in Part IIIA or the Explanatory Memorandum;
replicate current Credit Reporting Code of Conduct obligations that continue to be relevant given that this Code will be replaced by the new CR Privacy Code;
make credit reporting work from a practical perspective;
provide some assistance to consumers to understand and interact with the new systems; and
address industry uncertainty as to how to interpret aspects of Part IIIA in the interests of consistency of approach within industry.

The CR Code does not encompass all aspects of Part IIIA and so compliance with the CR Code alone will not achieve full compliance with Part IIIA.

The CR Code is being released publicly so that submissions can be received from the public and stakeholder views taken into account as required by Section 26Q of the amended Privacy Act.

The public consultation process closes at 5.00pm on 5 May 2013.

It is expected the finalised draft Code will be lodged with OAIC by 1 July 2013.

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Posted 8th April 2013 by David Jacobson in Financial Services, National Credit Code, Privacy

Superannuation tax proposals

On 5 April 2013 the Government announced (here and here) proposed changes to taxation on superannuation which will:

reduce the tax concession that people with annual income above $300,000 receive on their contributions from 30 per cent to 15 per cent;
cap the tax exemption for annual earnings on superannuation assets supporting income streams at $100,000, with a concessional tax rate of 15 per cent applying thereafter, and apply the same treatment to defined benefit funds;
Change the amount of the concessional contributions cap;
Reform the treatment of concessional contributions in excess of the annual cap;
Extend the normal deeming rules to superannuation account-based income streams;
Extend concessional tax treatment to deferred lifetime annuities; and
Further reform the arrangements for lost superannuation.

(more...)

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Posted 8th April 2013 by David Jacobson in Financial Services, Superannuation, Tax

ASIC Stronger Super information

ASIC has released four information sheets covering aspects of the Stronger Super reforms, including providing intra-fund advice and disclosure requirements associated with the reforms.

Information Sheet 168 Giving and collectively charging for intra-fund advice (INFO 168) explains:

what intra-fund advice is
the restrictions on collectively charging for advice
MySuper and conflicted remuneration
how the Future of Financial Advice (FOFA) reforms and other advice laws apply to intra-fund advice, and
what records must be kept.

Previous intra-fund advice requirements in Class Order [CO 09/210] Intra-fund superannuation advice will cease on 1 July 2013.

Information Sheet 167 Disclosure requirements for superannuation trustee: s29QC (INFO 167) covers the new section 29QC of the Superannuation Industry (Supervision) Act 1993 (SIS Act) which requires a super trustee to use the same calculation when providing information to a person or on a website as it does when giving the same or equivalent information to the Australian Prudential Regulation Authority under a reporting standard.

INFO 167 sets out:

the disclosure requirements
what the changes mean for trustees
what happens if the data collection and disclosure requirements conflict, and
what happens if s29QC is breached

Information Sheet 169 Notifying members about superannuation transfers: Accrued default amounts (MySuper transition) (INFO 169) addresses requirements under section 29SAA(3) of the SIS Act and regulations for a super trustee to provide a notice to a fund member with an ‘accrued default amount’ regarding an intended transfer or attribution to a MySuper product in the same fund, or to another fund within specific timeframes.

INFO 169 covers:

the notification requirements
exemptions from having to provide a notice under regulation 9.46
timing of the notifications, and
how the notification should be made

Information Sheet 90 Notifying members about superannuation transfers without consent (INFO 90), which explains the requirements for disclosure to members where there is a 'significant event' or 'material change' regarding their super fund, has been updated to reflect the Stronger Super changes and also to recognise the fact that the Stronger Super reforms may result in an increase in successor fund transfers more generally.

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Posted 8th April 2013 by David Jacobson in Financial Services, Future of Financial Advice Reforms, Superannuation

Privacy issues for mobile app developers

The Office of the Australian Information Commissioner (OAIC) is seeking comment on a consultation draft of Mobile privacy: A better practice guide for mobile app developers.

The OAIC has developed this guide to help mobile device application (app) developers embed better privacy practices in their products and services.

The Commissioner comments that:

It is clear that the mobile environment, along with the new app economy it has generated, presents risks as well as potential. If you are a mobile app developer, whether you work on your own, or for a business or government agency, you should adopt a ‘privacy by design’ approach, where privacy-enhancing practices are applied throughout the life cycle of the personal information – that is, its collection, use (including data matching and analytics), disclosure, storage and destruction.

Given the growing popularity of apps, app developers can expect increased scrutiny of the privacy practices in the app industry in the years ahead – by both regulators and the market itself, driven by increasingly informed, discerning and influential consumers.

The draft guide contains a privacy checklist for app developers.

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Posted 8th April 2013 by David Jacobson in Privacy, Web/Tech

April 3, 2013

Case note on bid-rigging: Norcast v Bradken

In Norcast S.ár.L v Bradken Limited (No 2) [2013] FCA 235 Judge Gordon of the Federal Court of Australia decided that a bid rigging arrangement occurred between Bradken and Castle Harlan, whereby Castle Harlan agreed to bid for Norcast's subsidary Norcast Wear Solutions, Inc (NWS), a Canadian mining consumables company and Bradken agreed not to bid for NWS in contravention of sections 44ZZRJ and 44ZZRK of the Competition and Consumer Act 2010 (Cth) (the cartel provisions). The cartel provisions were applied even though the bid was made in USA for a Canadian company.

In a lengthy and complex judgment Judge Gordon concluded that had Bradken and Castle Harlan not entered into the Bid Rigging Arrangement, Bradken would have made a bid for NWS in excess of the approximately US$190 million which it ultimately paid for NWS. She assessed damages at US$22.4 million (being the difference between the US$212.4 million including costs and expenses which Bradken did in fact pay to acquire NWS and the US$190 million Norcast received from Castle Harlan).

An interesting aspect was the attempted avoidance of the effect of a Non-Disclosure Agreement by Castle Harlan by appointing Bradken as its consultant.

An appeal is expected.

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Posted 3rd April 2013 by David Jacobson in Compliance, Trade Practices