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September 24, 2013

Australian prudential regulation of foreign banks

In a letter to ADI's APRA has set out the terms on which APRA would not object to a foreign bank (not licensed by APRA as an ADI) conducting business with Australian counterparties from its offshore offices.

The conditions are:

  • the foreign bank does not maintain an office or permanent staff in Australia, including staff employed by an entity within the banking group that conducts non-banking business on its behalf in Australia;
  • the foreign bank does not solicit business from retail customers in Australia;
  • all business contracts and arrangements are clearly transacted and booked offshore;
  • the foreign bank does not engage in advertising or allow bank staff to physically solicit business in Australia; and
  • where offshore staff of the foreign bank meet with clients and potential clients in Australia, it is for the limited purpose of arranging or executing documentation in relation to the business of those clients.

Provided a foreign bank conducts its business with Australian counterparties under these conditions, APRA does not consider that the foreign bank will be in breach of section 66 of the Banking Act 1959 if it uses a restricted word such as 'bank', including in its corporate name, when dealing with its clients.

APRA is also of the view that the foreign bank will not breach section 66 of the Banking Act 1959 where it uses restricted words such as 'bank' to register a security interest over property in Australia, including on the Personal Property Securities Register established pursuant to the Personal Property Securities Act 2009.

APRA will not, however, provide exemptions from section 66 for unlicensed foreign banks wishing to use a restricted word such as 'bank' to register as a foreign company under the Corporations Act 2001. APRA will only provide such an exemption for the limited activities of a representative office.

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Posted 24th September 2013 by David Jacobson in Financial Services

September 23, 2013

Draft APP Privacy Guidelines: second stage released

From 12 March 2014, the Australian Privacy Principles (APPs) will replace the National Privacy Principles and Information Privacy Principles.

The Office of the Australian Information Commissioner (OAIC) has released draft Australian Privacy Principles (APP) Guidelines for consultation. The Guidelines outline how the OAIC will interpret and apply the APPs.

Consultation on the draft Australian Privacy Principles (APP) Guidelines 6 to 11 (Parts 3 and 4) is now open. This forms the second stage of APP Guidelines to be released for consultation.

Consultation on Chapters A to D and 1 to 5 has closed.

The Guidelines for Chapters 6 to 11 cover:

  • APP 6 use or disclosure of personal information
  • APP 7 direct marketing
  • APP 8 cross-border disclosure of personal information
  • APP 9 adoption, use or disclosure of government related identifiers
  • APP 10 quality of personal information
  • APP 11 security of personal information

The third stage of draft guidelines (APPs 12 & 13) will be released in October.

Langes can advise you on the impact of the APPs on your business.

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Posted 23rd September 2013 by David Jacobson in Marketing, Privacy

September 18, 2013

ASIC reviews quality of advice to SMSFs and costs

ASIC has released Consultation Paper 216 Advice on self-managed superannuation funds: Specific disclosure requirements and SMSF costs (CP 216) containing ASIC’s proposals to impose specific disclosure obligations on advisers.

ASIC's recent review found that there is a need to improve the disclosure of information that may influence a decision to establish or switch to an SMSF including the need to:

  • warn clients that SMSFs do not have access to the compensation arrangements under the Superannuation Industry (Supervision) Act 1993 in the event of theft or fraud, and
  • explain other matters that may influence the client’s decision to set up an SMSF.

CP 216 also looks at the appropriate level of resources consumers should have before setting up an SMSF.

ASIC commissioned Rice Warner to examine the minimum cost-effective balance for SMSFs when compared with super funds regulated by the Australian Prudential Regulation Authority (APRA). CP 216 includes Rice Warner’s report: Costs of Operating SMSFs.

Rice Warner’s report also looks at the appropriate level of resources consumers should have before setting up an SMSF.

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Posted 18th September 2013 by admin in Corporations Act, Financial Services, Superannuation

Regulation of crowd sourced equity funding

The Corporations and Markets Advisory Committee (CAMAC) has released a discussion paper Crowd sourced equity funding.

Crowd sourced equity funding (CSEF) refers to schemes through which a business seeks to raise funding, particularly early-stage funding, through offering debt or equity interests in the business to investors online. Businesses seeking to raise capital through CSEF typically advertise online through a crowd funding platform website, which serves as an intermediary between investors and the business.

The CAMAC discussion paper notes that CSEF is already theoretically available in Australia, but subject to compliance by the issuer and the online intermediary with fundraising, licensing and other requirements under the Corporations Act. This paper examines the nature of those requirements and raises for consideration, taking into account approaches in other jurisdictions, whether the Australian provisions should be adjusted in some manner for CSEF.

ASIC issued its guidance on the issue here.

The CAMAC discussion paper contains options for reform in relation to crowd sourced equity funding (CSEF) in Australia including:

  • no regulatory change;
  • liberalising the small scale personal offers exemption in the fundraising provisions;
  • confining CSEF exemptions to sophisticated, experienced or professional investors;
  • making targeted amendments to the existing regulatory structure for CSEF open to all investors; and
  • creating a self contained statutory compliance structure for CSEF open to all investors.

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Posted 18th September 2013 by David Jacobson in Corporations Act, Financial Services, Investments, Web/Tech

New Financial Services Ministers

Mr Abbott has named his new Ministry and and Parliamentary Secretaries and they are expected to be sworn in by the Governor-General today.

UPDATE: printable Ministry list and new Departmental structure.
Amendments to Ministry list

Whilst there is no specific Financial Services Minister, decisions in respect of financial services are expected to be made by the Treasurer Joe Hockey, the Assistant Treasurer Arthur Sinadinos and the Parliamentary Secretary to the Treasurer Steven Ciobo.

The Attorney-General George Brandis will be responsible for privacy-related issues.

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Posted 18th September 2013 by David Jacobson in Financial Services, Privacy

September 12, 2013

Draft third edition Corporate Governance Principles released

The ASX Corporate Governance Council has released for public comment a
a consultation paper entitled Review of the Corporate Governance Principles and Recommendations and a draft of the proposed third edition of the Principles and Recommendations.

The draft third edition of the Principles and Recommendations maintains the 30 recommendations in the current second edition, but it has been revised and restructured to improve readability.

Substantive changes have also been made including:

  • introducing a new recommendation requiring listed entities to have a clawback policy for performance-based remuneration from its senior executives;
  • a new recommendation that listed entities establish a risk committee, either on a stand-alone basis or as part of the responsibilities of the audit committee;
  • expanding the categories of relationships that may indicate that a director may not be independent to include a person with "close family ties" with a shareholder, director or senior employee, a professional adviser or consultant, a material supplier or customer as well as a person who has been a director for more than 9 years;
  • allowing entities to treat the reporting of their "Gender Equality Indicators" under the Workplace Gender Equality Act 2012 as satisfying their obligations to report their gender statistics under the Principles and Recommendations;
  • giving greater flexibility to listed entities to make their governance disclosures on their website rather than in their annual report.

Some changes are needed to the ASX Listing Rules to give effect for listed entities to the reforms proposed in the third edition of the Principles and Recommendations.

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Posted 12th September 2013 by David Jacobson in Corporate Governance, Corporations Act

September 10, 2013

A new Government: implications for financial services regulation

The LNP Coalition has gained a majority in the House of Representatives and will form the next Federal Government.

It has already announced what it won't do: it won't remove the FBT motor vehicle statutory formula method as proposed by the former government.

It will keep Labor's planned Financial Stability Fund, funded by a levy set at 0.05 per cent on deposits in ADI's.

The new Treasurer (Joe Hockey) has previously stated he will initiate a review of the financial system within the first 100 days.

The new government has not stated its position on mandatory data breach notification or further consumer credit reform.

Legislative changes will require Senate support. The composition of the Senate is unclear.

The House of Representatives is next scheduled to sit on 1 October but it is possible that it may not resume until late October or early November.

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Posted 10th September 2013 by David Jacobson in Business Planning, Financial Services

Product terms not transparent: pet insurance

When financial product features, costs and incentives are not transparent consumers are prevented from making well-informed financial decisions or comparing products.

ASIC has announced that improvements have been made to disclosure in pet insurance product disclosure statements (PDSs) and websites in response to concerns raised by ASIC as part of a targeted industry-wide review.

There has been a significant increase in disputes received by the Financial Ombudsman Service Limited (FOS) about pet insurance during 2012 and 2013.

ASIC’s review identified concerns about disclosure in some pet insurance PDSs and websites including:

  • Insufficient or confusing disclosure about policy limits, pre-existing conditions (including conditions that consumers are likely to consider unusual or unexpected) and policy exclusions.
  • some of the PDSs did not make it clear that pet insurance generally excludes cover for pre-existing conditions that occurred prior to the purchase of pet insurance, even if the pre-existing condition last resulted in symptoms or treatment many years beforehand, and
  • some of the PDSs and some of the online material (such as online quotes) did not clearly state the limits to the amount of cover provided per year and/or per illness or accident.
  • Insufficient disclosure or non-disclosure of the need for consumers to make co-payments and pay excesses in the event of a claim.
  • The use of worked examples of benefit amounts and other promotional material conflicting with or not accurately reflective of the policy
  • Representations comparing pet insurance to health insurance (which is a different type of insurance product with different features of cover).

ASIC has previously raised disclosure issues in respect of funeral insurance.

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Posted 10th September 2013 by David Jacobson in Financial Services, Insurance, Marketing

Facebook promotions rules change

Facebook has updated its Promotions Guidelines (previously discussed here).

The Promotions Guidelines set out how Facebook functionality may be used in competitions by businesses (whether involving skill or chance).

Under the new rules businesses can now:

  • Collect entries by having users post on the Page or comment/like a Page post
  • Collect entries by having users message the Page
  • Utilize likes as a voting mechanism

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Posted 10th September 2013 by David Jacobson in Marketing, Web/Tech

September 6, 2013

Banks to change structured product promotional materials

ASIC has announced that investment banks Credit Suisse Investments Services (Australia) Limited and UBS AG (Australia branch) have changed their promotional materials for complex financial products following ASIC concerns that they were potentially misleading.

Boutique structured products investment manager Instreet Investment has also made changes to its materials promoting a product issued by UBS following similar ASIC concerns.

ASIC was concerned that Credit Suisse’s and UBS’ use of the terms ‘contingent capital protection’ and ‘conditional protection’, respectively, in their promotional material for ‘capital at risk’ structured products, was inappropriate as the products could suffer a capital loss in a falling market.

The materials could be downloaded from the companies’ websites, and were also provided to consumers by third party financial advisers.

It is essential that marketing material be checked against financial product terms to ensure that it is not misleading.

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Posted 6th September 2013 by David Jacobson in Compliance, Financial Services, Marketing
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