New guidance for AFS licensees
On November 27, ASIC released a new regulatory guide in relation to compensation and professional indemnity (PI) requirements for Australian Financial Services (AFS) licensees servicing retail clients.
RG 126 Compensation and insurance arrangements for AFS licensees will require AFS licensees, during the first two years of the guide's implementation, to hold PI insurance subject to commercial availability. Subsequently, the guide requires AFS licensees to implement and maintain a 'higher standard' of PI insurance. This is intended to be developed through industry consultation.
The relative standards of PI insurance available to AFS licensees are linked to the relative levels of compensation available to consumers for the provision of poor quality services and other misconduct by AFS licensees.
RG 126 can be accessed via the following link:
Singaporean Investment Schemes Class Order
ASIC has issued a class order for collective investment schemes authorised under the Monetary Authority of Singapore that provides conditional relief from registration, licensing and certain financial product disclosure requirements under the Corporations Act 2001 (Cth).
CO 07/753 Singaporean collective investment schemes was issued pursuant to ASIC's policy on the recognition of foreign collective investment schemes in Australia reflected in RG 178 Foreign collective investment schemes.
CO 07/753 can be accessed via the following link:
RG 178 can be accessed via the following link:
Changes To Prudential Standards On Governance
On November 28, APRA released revised prudential standards on governance for authorised deposit taking institutions (ADIs) and life insurers.
APS 510 Governance for ADIs and LPS 510 Governance are scheduled to take effect from 1 January 2008.
The key change is that the principle of independence of directors now incorporates 'relationships affecting independent status' from the ASX Corporate Governance Council's Principles. The incorporated part is a non-exhaustive list of circumstances that may preclude a director of a regulated institution from being treated as independent.
A separate revised standard will be released in relation to general insurers since additional changes are required pursuant to the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007 (Cth).
APS 510 Governance for ADIs can be accessed via the following link:
LPS 510 Governance can be accessed via the following link:
Changes To Prudential Standards For Life Companies
APRA has released amended prudential standards for life companies.
LPS 230 Reinsurance and LPS 310 Audit and Actuarial are scheduled to take effect from 1 January 2008.
The changes are designed to maintain the operation of APRA's current prudential standards but incorporate recent amendments to the Life Insurance Act 1995 (Cth) affected by the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007 (Cth).
The changes revoke two prudential standards for friendly societies relating to actuarial advice – they are now incorporated into LPS 310 Audit and Actuarial. LPS 230 Reinsurance can be accessed via the following link:
LPS 310 Audit and Actuarial can be accessed via the following link:
Release Of Basel II Prudential Standards
APRA has released a series of prudential standards designed to implement the Basel II capital adequacy regime (Basel II) into the Australian market.
Basel II applies to all authorised deposit-taking institutions (ADIs).
It is scheduled to come into force on 1 January 2008 and APRA will soon publish a list of ADIs it has "forward –approved" to use Basel II from that date.
The discussion papers and response papers issues in relation to the implementation of Basel II can be accessed via the following link:
Yaba Daba Don't
On November 26, the Federal Court imposed penalties totalling $927,500 on 10 individuals and nine companies for their involvement in a Victorian abalone cartel. They were also required to pay $161,000 in costs.
The arrangement involved eight abalone quota holders who had agreed to charge processors a premium in addition to the market price. They also agreed to supply abalone only to those processors nominated by Australian Abalone Pty Ltd. Penalties were to be imposed on quota holders who supplied abalone outside of this arrangement.
Justice Weinberg found that their actions contravened the primary boycott and price fixing provisions of the Trade Practices Act 1974 (Cth) and the Victorian Competition Code. His Honour commented on the unusual nature of the case, as the participants had made no attempt to conceal their conduct on the basis that they believed it to be lawful.
His Honour said that although the cartel was at the 'less serious end of the scale', a pecuniary penalty was necessary to deter companies and individuals from entering into similar arrangements in future.
The ACCC's media release can be accessed via the following link:
Resale Price Maintenance - $190,000 Penalty
On November 28, the Federal Court imposed a penalty of $175,000 on TEAC Australia Pty Ltd for engaging in resale price maintenance. Its National Sales Manager, Mr Warren Allison, was also ordered to pay $15,000 for being knowingly concerned in the conduct.
The parties had sought to prevent an independent retailer of electronic products from advertising prices below the level specified by TEAC.
Justice Kenny discounted the penalties on the basis that TEAC had admitted liability early on and had cooperated with the ACCC in the investigation process.
In addition to the pecuniary penalties, His Honour ordered that TEAC implement a trade practices compliance program and send a letter to all its retail customers advising them that they are free to set the price for the products they purchase from TEAC. It was also required to pay $10,000 in legal costs.
The ACCC's media release can be accessed via the following link:
Exposure Draft Finance Broking Bill 2007
The Ministerial Council on Consumer Affairs (MCCA) recently released the Exposure Draft Finance Broking Bill. The proposed legislation outlines a scheme for the national regulation of broking structures. The Bill includes provisions in relation to entry requirements, mandatory external dispute resolution scheme membership and greater consumer protection.
The closing date for submissions is 15 February 2008.
The MCAA's media release can be accessed via the following link:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.