REGULATORY AUTHORITIES
ASIC
Renaming of existing ASIC documents
From the 5 July 2007 onwards, regulatory guides will replace policy statements, practice notes, FAQs and other previously released ASIC guidance. The remaining regulatory documents – consultation papers, reports and information sheets – as well as class orders, instruments and forms, will continue in their current form, while new and updated documents will be published using a revised template, including document overviews and section summaries.
ASIC will also be releasing a 'regulatory road map', indexing links to regulatory documents and class orders, to assist people in locating documents on the ASIC website.
ASIC – A guide to our regulatory documents can be accessed via the following link:
Investor directed portfolio services – consultation paper and Class Order
ASIC has released a consultation paper reviewing its approach to the regulation of investor directed portfolio services (IDPS).
Review of ASIC policy on investor directed portfolio services – ASIC consultation paper proposes a number of amendments to Policy Statement PS 148 Investor directed portfolio services, including the implementation of a 'principles based approach' to IDPS regulation, the adoption of a consistent approach to IDPS and IDPS-like schemes, and the removal of certain IDPS obligations to simplify the current regulatory framework.
The consultation paper also considers whether an Australian financial services licensee should be permitted to receive product disclosure statements issued under section 1012IA of the Corporations Act 2001 No. 50 (Cth) as an agent.
In addition to the consultation paper, ASIC has released Class Order CO 07/480 Investor directed portfolio services, investor directed portfolio-like services and managed discretionary accounts – amendments, which amends CO 02/294 Investor directed portfolio services and CO 02/293 Investor directed portfolio-like services provided through a registered managed investment scheme, to clarify auditor report requirements for IDPS, IDPS-like schemes and managed discretionary accounts.
Review of ASIC policy on investor directed portfolio services – ASIC consultation paper can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/CP_IDPS.pdf/$file/CP_IDPS.pdf
Policy Statement PS 148: Investor directed portfolio services can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps148.pdf/$file/ps148.pdf
CO 07/480 Investor directed portfolio services, investor directed portfolio-like services and managed discretionary accounts – amendments can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/co07-480.pdf/$file/co07-480.pdf
Consent to quote – Practice note and Class Order relief
ASIC has published a revised practice note, PN 55 Disclosure documents and PDS: consent to quote, and has granted Class Order relief to entities from obligations under the Corporations Act 2001 No. 50 (Cth) (Act) requiring them to gain the consent of a person they wish to quote in a prospectus, PDS or takeover document.
The Class Orders, CO 07/428 Consent to quote: Citing credit ratings, trading data and geological reports in disclosure documents and PDS and CO 07/429 Consent to quote: Citing credit ratings agencies, trading data and geological reports in takeovers, exempt entities from the consent provisions of the Act when quoting credit ratings, trading data and historical geological reports.
PN 55 Disclosure documents and PDS: consent to quote can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/pn55.pdf/$file/pn55.pdf
CO 07/428 Consent to quote: Citing credit ratings, trading data and geological reports in disclosure documents and PDS can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/co07-428.pdf/$file/co07-428.pdf
CO 07/429 Consent to quote: Citing credit ratings agencies, trading data and geological reports in takeovers can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/co07-429.pdf/$file/co07-429.pdf
MIS withdrawal rights and scheme liquidity
ASIC has published a consultation paper on withdrawal rights disclosure and liquidity risks in relation to pooled mortgage schemes.
Managed investment schemes: Withdrawal rights and scheme liquidity proposes a number of minimum standards for responsible entities of pooled mortgage schemes in relation to risk management, risk monitoring and disclosure of withdrawal rights to members.
Submissions on the consultation paper are invited and must be received by 21 August 2007.
Managed investment schemes: Withdrawal rights and scheme liquidity can be accessed via the following link:
Tracing beneficial ownership – Policy Statement update
ASIC has reviewed its policy on beneficial ownership tracing to incorporate previous guidance contained in Information Release IR 05/50 ASIC revises practice in relation to beneficial tracing notices, and its current approach to tracing requests received from non members.
The updated Policy Statement, PS 86 Tracing beneficial ownership, also takes into account recent court judgements involving the operation of the beneficial ownership tracing sections in the Corporations Act 2001 No. 50 (Cth).
Policy statement PS 86 Tracing beneficial ownership can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps86.pdf/$file/ps86.pdf
Information Release IR 05/50 ASIC revises practice in relation to beneficial tracing notices can be accessed via the following link:
Updated AFS licensing requirements
ASIC has published a revised Policy Statement and Pro Forma licence conditions, and withdrawn three guides in relation to Australian financial services (AFS) licensing requirements.
The updated Policy Statement PS 166 Licensing: Financial requirements contains a revised approach to calculating 'surplus liquid funds', while Pro Forma 209 Australian financial services licence conditions has been amended to incorporate the updated Policy Statement 166 and recent changes to PS 160 Time-sharing schemes, in addition to recent guidance contained in CO 04/1526 Securitisation special purpose vehicles and CO 05/26 Constitutional provisions about the consideration to acquire interests.
The guides Meeting the financial requirements for your AFS licence: Compliance with Policy Statement PS 166 – An ASIC guide, Responsible officers: Demonstrating compliance with organisation competency obligations – An ASIC guide and Small business and your AFS licence: Compliance with Policy Statements 164 and 181 – An ASIC guide have been withdrawn, as the guidance they contain has been, or is the process of being, incorporated into other ASIC documents.
PS 166 Licensing: Financial requirements can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps166.pdf/$file/ps166.pdf
Pro Forma 209 Australian financial services licence conditions can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/PF209.pdf/$file/PF209.pdf
Superannuation investment strategy product disclosure – revised policy
Following extensive industry consultation, ASIC has reissued its policy statement outlining how superannuation entities may comply with the product disclosure provisions of section 1012IA of the Corporations Act 2001 No. 50 (Cth).
In addition to clarifying the disclosure obligations for superannuation trustees contained in section 1012IA, Policy Statement PS184 Superannuation: Delivery of product disclosure for investment strategies introduces the 'integrated PDS' as a new disclosure relief option. An integrated PDS not only includes information about a superannuation product, but also information on investment strategies involving accessible financial products.
The transition period rules for compliance with section 1012IA apply from 1 July 2007 for new superannuation trustees, and to all new PDSs issued by current trustees from that date onwards.
PS184 Superannuation: Delivery of product disclosure for investment strategies can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/ps184.pdf/$file/ps184.pdf
A table comparing the original PS184 to the reissued PS184 can be accessed via the following link:
Class Order CO 07/386 Superannuation: Delivery of product disclosure for investment strategies – amendment can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/co07-386.pdf/$file/co07-386.pdf
Extended disclosure relief for general insurers: Class Order
ASIC has granted interim Class Order relief to general insurers from the disclosure requirements in sections 7.9.15D-7.9.15F of the Corporations Regulations 2001 No. 193 (Cth) (Regulations).
Class Order CO 07/409 General Insurance Disclosure: Extension of Transitional Period extends the compliance transition period contained in the Regulations to 31 August 2007, to allow general insurers to incorporate recent amendments to the Insurance Contacts Act 1984 No. 80 (Cth), and the proposed Corporations Amendment Regulations (Cth), into their disclosure documents.
CO 07/409 General Insurance Disclosure: Extension of Transitional Period can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/co07-409.pdf/$file/co07-409.pdf
Actuaries receive AFSL relief extension: Class Order
ASIC has released Class Order CO 07/410 Actuaries: Further Extended Transitional Relief, which exempts actuaries from having to hold an Australian Financial Services Licence (AFSL) until 31 August 2007.
This extension should be sufficient to provide actuaries relief until Corporations Regulation 7.1.29 comes into effect later this year, which permanently exempts actuaries from having to hold an AFSL if providing the regular services of an actuary.
CO 07/410 Actuaries: Further Extended Transitional Relief can be accessed via the following link:
http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/co07-410.pdf/$file/co07-410.pdf
Enforceable undertaking templates
ASIC has published four enforceable undertaking templates:
- sample terms for a standard enforceable undertaking, with an example of acceptable background;
- sample terms for compliance program assessment (including the form of the expert evidence note);
- sample terms for compensation (including letter to be sent and procedure for contacting persons); and
- sample terms for corrective advertising on the Internet (including example of possible advertisement).
The templates can be accessed via the following link:
http://www.asic.gov.au/asic/asic.nsf/byheadline/Enforceable+undertakings+templates?openDocumentAPRA
Basel II advanced approaches – response paper and final draft standards released
APRA has published a response paper, final draft prudential standards and accompanying prudential practice guides for authorised deposit-taking institutions (ADIs) on advanced approaches under the Basel II Capital Framework, in relation to credit risk, operational risk and interest rate risk in the banking book.
The paper responds to issues raised during the public consultation on draft prudential standards APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk, APS 115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk and APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book. The final draft standards and practice guides incorporate changes recommended in public submissions made to APRA.
Submissions on the final draft prudential standards are invited and must be received by 27 July 2007.
Response to Submissions – Implementation of the Basel II Capital Framework: 2. Advanced approaches to credit risk, operational risk and interest rate risk in the banking book can be accessed via the following link:
target=_newhttp://www.apra.gov.au/ADI/upload/Response-paper_June-2007.pdf
Final draft prudential standards:
APS 113 Capital Adequacy: Internal Ratings-based Approach to Credit Risk can be accessed via the following link:
http://www.apra.gov.au/ADI/upload/Draft-APS-113-June-2007.pdf
APS 115 Capital Adequacy: Advanced Measurement Approaches to Operational Risk can be accessed via the following link:
http://www.apra.gov.au/ADI/upload/Draft-APS-115-June-2007.pdf
APS 117 Capital Adequacy: Interest Rate Risk in the Banking Book can be accessed via the following link:
http://www.apra.gov.au/ADI/upload/Draft-APS-117-June-2007.pdf
Final draft prudential practice guides:
APG 113 – Internal Ratings-based Approach to Credit Risk can be accessed via the following link:
http://www.apra.gov.au/ADI/upload/Draft-APG-113-13-June-2007.pdf
APG 115 – Advanced Measurement Approaches to Operational Risk can be accessed via the following link:
http://www.apra.gov.au/ADI/upload/Draft-APG-115.pdf
APG 117 – Interest Rate Risk in the Banking Book can be accessed via the following link:
http://www.apra.gov.au/ADI/upload/Draft-APG-117.pdf
Capital adequacy – discussion paper and draft prudential standards
APRA has published a discussion paper and draft prudential standards on capital adequacy requirements for authorised deposit taking institutions (ADIs) and general insurers.
The discussion paper, Capital adequacy for authorised deposit-taking institutions and general insurers, proposes a number of amendments to ADI and general insurer capital requirements, and are incorporated into the draft prudential standards APS 110 Capital Adequacy and APS 111 Capital Adequacy: Measurement of Capital. The majority of amendments to the ADI prudential standards will be mirrored in the general insurer prudential standard, GPS 110 Capital Adequacy.
The proposed changes aim to harmonise Australian capital adequacy requirements with the international Basel II Framework, and implement APRA's final approach to conglomerate groups involving one or more domestically incorporated ADI.
The discussion paper can be accessed via the following link:
http://www.apra.gov.au/Policy/upload/Discussion-paper-capital-July-07.pdf
The draft APS 110 Capital Adequacy can be accessed via the following link:
http://www.apra.gov.au/Policy/upload/Draft-Prudential-Standard-APS-110-July-07.pdf
The draft APS 111 Capital Adequacy: Measurement of Capital can be accessed via the following link:
http://www.apra.gov.au/Policy/upload/Draft-Prudential-Standard-APS-111-July-07.pdf
Modification declaration – sub-custodian arrangements
APRA has released Modification Declaration No. 1 of 2007 (MD107), which provides relief to registrable superannuation entity (RSE) licensees and custodians from subregulation 4.16(6) of the Superannuation Industry (Supervision) Regulations 1994 No. 57 (Cth), in relation to 'downstream' arrangements between the custodian and subcustodians. The relief is only available if the custodian, in its arrangement with the RSE licensee, assumes full liability if the sub-custodian does not exercise reasonable custody of an RSE's assets.
Modification Declaration No. 1 of 2007 can be accessed via the following link:
The explanatory statement can be accessed via the following link:
Revised classification of Employer ETPs
Following consultation with the ATO, APRA has revised its classification of Employer Eligible Termination Payments (Employer ETPs).
APRA now considers that Employer ETPs should be classified as 'member contributions made by the member', as opposed to 'non-mandated employer contributions'.
APRA's classification update can be accessed via the following link:
Superannuation audit report
APRA has released the approved form audit report for reporting entities under the Superannuation Industry (Supervision) Act 1993 No. 78 (Cth) (SIS Act). The audit report is applicable for reporting periods beginning on or after 1 July 2006, for the audit of APRA-regulated superannuation entities.
The approved form audit report (with notes) can be accessed via the following link:
http://www.apra.gov.au/Superannuation/upload/Final_AuditForm.pdfACCC
Telstra denied injunction against Optus's comparative ads
On 15 May 2007, the Federal Court dismissed an interlocutory injunction sought by Telstra to restrain Optus from publishing advertisements comparing the Optus $49 cap plan and Telstra's $40 phone plan. Telstra submitted the comparison was misleading because it did not compare like products. Evidence submitted showed that Optus has an Optus $39 ‘yes’ plan which is similar to the Telstra $40 phone plan, and Telstra has $49 cap plan, which has a number of features similar to the Optus $49 cap plan.
However, the court relied on the Full Court's judgement in Gillette Australia Pty Ltd v Energizer Australia Pty Ltd (2002) 193 ALR 629, in which the Full Court concluded that it was open to the advertiser to choose with which product it compared, and to choose the feature on which it made a comparison (ie, that it was not bound to compare like with like). The court held that there was no serious question to be tried and that the balance of convenience was against Telstra.
Telstra Corporation Limited v SingTel Optus Pty Ltd [2007] FCA 824 can be accessed via the following link:
http://www.austlii.edu.au/au/cases/cth/federal_ct/2007/824.html
Jefferson Ford loses counterclaim in Ford counterfeit parts case
On 6 June 2007, the Federal Court issued an interlocutory decision in proceedings brought by Ford Australia against Jefferson Ford alleging that it had sold counterfeit or non-genuine parts, constituting an infringement of various trade marks, a breach of sections 52 and 53 of the Trade Practices Act 1974 No. 51 (Cth) (TPA), and a breach of the dealer agreement. In interlocutory proceedings, the Federal Court has struck out certain provisions of the defence lodged by Jefferson Ford but also gave summary judgement in favour of Ford Australia in respect of a counter claim brought by Jefferson Ford against Ford Australia for contravention of sections 51AC and 51AD of the TPA.
Ford Motor Company of Australia Ltd v Jefferson Ford Pty Ltd [2007] FCA 870 can be accessed via the following link:
http://www.austlii.edu.au/au/cases/cth/federal_ct/2007/870.html
Petrol price-fixing decision won't be appealed
The ACCC announced that it would not appeal the recent decision of Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 794, where the Federal Court rejected its claims that there had been price-fixing in the Geelong petrol market in 1999 and 2000.
Although the ACCC had contemplated appealing in relation to the parties which admitted to having an 'understanding' with other petrol retailers about petrol pricing, the fact that there was no arrangement or agreement where 'all the parties had admitted their involvement' caused the ACCC to consider the success of any appeal unlikely.
ACCC's media release can be accessed via the following link:
http://www.accc.gov.au/content/index.phtml/itemId/790103/fromItemId/2332
Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd [2007] FCA 794 can be accessed via the following link:
http://www.austlii.edu.au/au/cases/cth/federal_ct/2007/794.htmlCAMAC
CAMAC to advise on insolvency law reform
The Treasury has requested that CAMAC address a number of issues raised by stakeholders during the consultation process for the Corporations Amendment (Insolvency) Bill 2007 (Cth).
The broad range of issues CAMAC has been asked to consider are contained in the terms of reference.
The terms of reference can be accessed via the following link:
http://www.camac.gov.au/camac/camac.nsf/byHeadline/PDFReference/$file/Insolvency_Law_Reform.pdf
TAKEOVERS PANEL
Becker Group Limited – Unacceptable circumstances and final orders
The Takeovers Panel (Panel) has made a declaration of unacceptable circumstances and final orders in relation to the activities of Becker Group Limited (Becker).
Becker was the target of an off-market takeover bid by Prime Media Broadcasting Services Pty Limited (Prime). Becker simultaneously entered into an Implementation Agreement in relation to Prime's offer, and an agreement with Becker Film Group Pty Limited (BFG) to sell it's film, production, exhibition and distribution businesses to BFG (the Asset Sale Proposal). The Asset Sale Proposal was conditional upon Prime obtaining 50% voting power in Becker, and Prime's offer was conditional on Prime obtaining 80% voting power in Becker.
At this time, Richard and Russell Becker were directors of Becker, and indirectly held 42.6% of Becker's shares, while Prime controlled 24.11%. Prime had indicated that it intended to support the Asset Sale Proposal, and Richard and Russell Becker had indicated that if the Asset Sale Proposal was successful, they would accept Prime's offer.
The Panel held that these circumstances were unacceptable, as Prime's voting for the Asset Sale Proposal and its subsequent approval, would:
- confer a benefit upon Richard and Russell Becker that no other shareholder had the opportunity to take part in; and
- be likely to affect to affect the control or potential control of Becker, and the efficient and competitive operation of the market for the shares in Becker.
It was also held that there were information deficiencies in a number of documents issued by Becker in relation to Prime's offer and the Proposed Asset Sale.
Consequently, the Panel made final orders prohibiting Prime from exercising any voting rights in Becker in relation to the Proposed Asset Sale during its takeover bid, and ordered the rectification of the information deficiencies in Becker's documents.
The Panel's decision in Becker Group Limited can be accessed via the following link:
http://www.takeovers.gov.au/content/1233/download/MR07-39.pdf
Finalised Guidance Note on insider participation in control transactions
The Panel has published a finalised Guidance Note, accompanied by a public consultation response paper, on when the Panel may make a declaration of unacceptable circumstances in relation to insider participation in control transactions.
Guidance Note 19 details the Panel’s approach to takeover bids where there is involvement, or possible involvement, with the bidder by an insider or participating insider (which may include management, directors and external advisors of the target company). It also sets out when the Panel can make a declaration of unacceptable circumstances in relation to such situations, in accordance with Chapter 6 of the Corporations Act 2001 No. 50 (Cth).
The consultation response paper includes material comments received by the Panel on the draft Guidance note, and reasons why the Panel incorporated or did not incorporate specific comments into the final Guidance Note.
Guidance Note 19: Insider participation in control transactions can be accessed via the following link:
http://www.takeovers.gov.au/content/1225/download/GN19_Insider_Participation.pdf
The public consultation response paper can be accessed via the following link:
http://www.takeovers.gov.au/content/1227/download/Insider_Participation.pdf
Queensland Cotton Holdings Limited - Panel PublishesReasons
The Panel has now published its reasons for declining to commence proceedings in relation to the activities of Queensland Cotton Holdings Limited.
The Panel’s reasons can be accessed via the following link:
http://www.takeovers.gov.au/content/1234/download/Queensland_Cotton_Holdings.pdf
Qantas Airways Limited 02R – reasons published
The Panel has now published its reasons for declining to commence proceedings in relation to an application to review its decision in Qantas Airways Limited 02.
The Panel’s reasons can be accessed via the following link:
http://www.takeovers.gov.au/content/1228/download/Qantas_Airways_Limited_02R.pdf
Magna Pacific (Holdings) Limited 03 & 04 - Panel Publishes Reasons
The Panel has now published its reasons for consenting to the withdrawal of Lionsgate Pty Limited's application in Magna Pacific (Holdings) Limited 03, and declining to commence proceedings in Magna Pacific (Holdings) Limited 04.
The Panel's reasons for its decision in Magna Pacific (Holdings) Limited 03 can be accessed via the following link:
http://www.takeovers.gov.au/content/1241/download/magna_pacific_limited_03.pdf
The Panel's reasons for its decision in Magna Pacific (Holdings) Limited 04 can be accessed via the following link:
http://www.takeovers.gov.au/content/1242/download/magna_pacific_limited_04.pdf
PROPOSED LEGISLATION
Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 (Cth)
The Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 (Cth) (Bill) proposes to amend the Corporations Act 2001 No. 50 (Cth) and Financial Sector (Collection of Data) Act 2001 No. 104 (Cth).
The Bill proposes that direct offshore foreign insurers be prudentially regulated by the Insurance Act 1973 No. 76 (Cth), and requires discretionary mutual funds to provide information to APRA so that the nature and scope of their operations can be accurately determined.
Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 (Cth) can be accessed via the following link:
http://parlinfoweb.aph.gov.au/piweb/Repository/Legis/Bills/Linked/21060712.pdf
The explanatory memorandum can be accessed via the following link:
http://parlinfoweb.aph.gov.au/piweb/Repository/Legis/ems/Linked/21060711.pdf
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.