Now that the laws have commenced in several states and territories, and following  recent findings from our WHS Risk Self-Assessment Survey suggesting that only 8 per cent of companies are ‘low risk’ or considered fully compliant and ready, we will be running an interactive webinar on Wednesday, 1 February 2012 which will primarily focus on solutions to meet these challenges.

CompliSpace has developed a comprehensive online WHS module that enables our clients who are subject to the new WHS laws to comply with their obligations. Our WHS program covers over 30 common safety hazards (from manual handling through to stress) providing the perfect platform for organisations to rid themselves of paper and advance their work practices by embracing a simple, smart, flexible online solution.

The interactive, 45 minute webinar will provide you with an opportunity to clarify any questions or issues that may have arisen out of our Risk Self-Assessment Survey or our Directors & Officers Briefing Paper.

It will also cover:

• The importance of being able to verify that your WHS Program is actually working in practice.
• How to integrate WHS with HR – and why you need to!
• A practical demonstration of CompliSpace’s online WHS Program.
• Why our WHS training and testing system will save, even the smallest businesses, time, money and sleepless nights.
• CompliSpace’s online incident and injury reporting tools.
• Examples of key WHS management reports.
• Simple ways to improve efficiency and reduce the paper chase.
• Ways to simultaneously reduce your business risk profile and your compliance costs.

Details:

Date: Wednesday, 1 February 2012
Time: 1:30pm to 2:30pm

Reserve your webinar seat now.

Once registered, you will receive an email confirming your registration with the information you need to join the Webinar.

System Requirements
PC-based attendees
Required: Windows® 7, Vista, XP or 2003 Server

Macintosh®-based attendees
Required: Mac OS® X10.5 or newer

If you have any queries or have any difficulties registering please feel free to contact me on the details below:

E. jessica.price@complispace.com.au
T.+61 (2) 9299 6105
W. www.complispace.com.au

A bunch of Non-Executive Directors turn up once a month (maybe once a quarter) and after reading a few documents, and maybe receiving a quick executive briefing, suddenly start making brilliant decisions steering their organisation towards its vision, mission, goals, objectives etc etc.

Now you’re either thinking …that’s exactly what these directors do, they are extremely talented individuals, no wonder they get paid so much (or not paid in the case of most not for profit boards) … or you’re thinking …there is no way, no matter how smart and experienced you are, as a non-executive director you can’t do much more than do a bit of mentoring and steering.

Well the truth is that it’s probably a bit of both. The point we are making in this blog is that the performance of individual directors, and boards as a whole, can only be as good as the information they receive from the organisations that they govern. If directors don’t get the right information delivered to them in a timely fashion, no matter how smart the individual directors, or their levels of experience and expertise, the board can’t work effectively.

Directors can ask the hard questions but ultimately, if they don’t get the information they request, they end up like a blind folded captain of an ocean liner on autopilot … the ship will keep on going full steam ahead until ultimately, when meaningful decisions need to be made in the face of adverse risk events, disaster will more than likely strike. In corporate terms this means financial loss, reputational damage and potentially destruction. Think ABC Learning, Allco, Great Southern, Enron, Lehman Brothers, Merrill Lynch, the list goes on and on.

So why is it that when most people talk about corporate governance they usually focus on the Board of Directors,  Independent Chairs, Board Room Evaluations, Non-Executive Directors and Board Decision Making Processes (let’s call this Board Governance)?

Why is there so much focus on Board Governance when, simply put, “Boards Can’t Work without Organisational Governance”? Who cares if there is an independent chairperson, or a majority of independents on the board? If the board is not getting the right information, at the right time, it cannot make meaningful decisions.

Organisational Governance is about delivering financial and, critically, non-financial information to senior management and to the board of directors.  Organisational Governance is about establishing robust governance programs and internal policies and procedures (think enterprise risk management, compliance, business continuity, human resources, work health and safety, complaints handling, privacy, conflicts of interest, related party transactions, operational guidelines to name a few) that are integrated and linked to strategic goals and objectives. Organisational Governance is about transparency of process, monitoring organisational performance and, perhaps most importantly, the ability to extract meaningful financial and non-financial information in a timely fashion so that those at the helm can make meaningful decisions based on reliable information.

This is not a case of the chicken and the egg. To those that maintain that organisational governance systems will naturally follow once a good board is put in place, we say rubbish (respectfully of course)!

The reality is that there are now a plethora of laws in Australia that confer personal liability on directors (600+ and counting – one of the most recent being the new Work Health & Safety laws – see D&O Executive Briefing Paper for more).   Quality candidates for board positions are now looking before they leap and only joining up once they are satisfied that the organisation has an adequate organisational governance framework in place which will protect them from the increasing risk of personal liability and reputational damage.

How would you rate organisational governance in your organisation?  Does your senior management team and your board of directors have clear visibility of your organisations material business risks, key compliance obligations, complaints etc? Is your organisation attractive to experienced directors and officers?

How can CompliSpace Help?

We are Australia’s leading experts in organisational governance. Our business is built around utilising a combination of technology and consulting expertise to assist clients to streamline their internal governance programs, to ensure that their policies and procedures are fully integrated into their day to day operations, and to establish systems through which organisational performance can be easily monitored and reported against.

Over the years we have worked with hundreds of organisations ranging from ASX 100 companies and government owned entities, through to not for profits and small private businesses to make corporate governance come alive and add real value through the reduction of business complexity and increased productivity.

For more information please visit www.complispace.com.au or contact us on +61 (2) 9299 6105, +61 (8) 9288 1826 or contactus@complispace.com.au

The WHS laws change the way organisations, directors, senior managers, and even workers themselves are liable for workplace behaviour and safety.

So how prepared is Australia?

In the lead up to  the 1 January 2012 introduction of the new WHS, CompliSpace released a number of resources including a Director’s Briefing Paper and online WHS risk self-assessment survey to assist businesses prepare for the changes.

Initial results from the WHS survey show that 70 per cent of small and medium sized organisations fall into the ‘High’ to ‘Extreme Risk’ category, meaning that they have little or no WHS infrastructure in place to address these obligations.

Only 8 per cent of companies are ‘low risk’ or considered fully compliant and ready.

These preliminary results are alarming, and reflect general confusion in the business community about who is responsible for what. Under the previous State based systems, everyone used to talk about directors and officers going to jail, however this rarely happened.

Things might be about to change under the new regime as States such as NSW and QLD will now hear the prosecution of significant WHS breaches through the criminal court system. Unlike the Industrial Court, these are courts that send people to jail every day.

Failure to comply with the new laws carries a maximum prison term of 5 years and fines of up to $3 million for a company and $600,000 per breach for an officer.

Under the new WHS laws:

• “Officers” (including directors, company secretaries and, in some cases, key managers) have a positive obligation to undertake due diligence to ensure that their organisations are compliant with their WHS obligations.
• Officers’ due diligence obligations include the need for each officer to have a good working knowledge of WHS laws and how they apply to the organisation, to allocate appropriate resources and processes to manage WHS, to have a compliance program in place and to verify that these systems and processes actually work in practice.
• The primary duty to ensure a safe and healthy workplace has been expanded and now rests with the Person Conducting the Business or Undertaking (“PCBU”). The PCBU is not just the employer but is any person or organisation who exercises influence or control over workers or a workplace.
• PCBU’s are required to conduct a formal risk assessment to determine that they can ensure, so far as is reasonably practicable, that their workers are not exposed to health and safety risks.
• The definition of ‘Worker’ has been expanded considerably to include volunteers, contractors, work experience students and various other individuals to whom the PCBU owes the primary duty.
• Health and Safety Representatives have expanded powers and can issue directions to cease work or improve work practices.
• Fines and penalties have basically doubled from those under the previous state systems.

The big message is that organisations, and their directors and officers, should act now to ensure compliance and to avoid fines and penalties.

So how prepared are you?

To find out, we encourage you to complete the online WHS Risk Self-Assessment survey, which allows you to quickly assess your organisations readiness for WHS. An instant, tailored report outlines the organisation’s risk profile and identifies key areas that need to be addressed.

In addition to the survey, CompliSpace has published a briefing document that provides a high level overview of the ‘must-know’ changes to assist Directors and Officers.

We will be watching with keen interest to see how the levels of risk change during the course of 2012. The most important thing to remember is that there is no time to waste – the laws are in force now and employers and individual directors and managers are at risk if they fail to implement the changes necessary to fulfil their WHS obligations.

If you have any questions about managing your WHS obligations please feel free to contact us on +61 (2) 9299 6105 or contactus@complispace.com.au. Further information on our services is also available at www.complispace.com.au.

It began with a Greek tragedy and the biggest threat to the stability of Europe since the outbreak of the Second World War.  There was anarchy in the UK as the Brits relived their Waterloo moment with riots in the streets of London …and then New York.

Down under, a new sheriff rode into town on May 13 with a promise to clean up the crooks and rogues of the financial services industry. Former Sonray CEO Scott Murray and Orion young gun John Hartman felt the full force of the Regulators’ wrath and joined a growing list of financial services bad boys that faced their first Christmas behind bars.

Jan-March

January began with an ASIC statement of intent as the Regulator introduced several measures to enhance consumer protection across the industry, as well as focusing particular attention on Managed Discretionary Accounts (MDA’s) providers, ‘Gatekeepers’ (lawyers, product issuers, financial advisers, auditors, custodians and credit ratings agencies) and anyone holding client money as part of the provision of their financial services.

Various Regulatory Guides were released to enhance consumer protection, RG 221: Facilitating online financial services disclosures   and RG 168: Disclosure: Product Disclosure Statements and other disclosure obligations,  as well as some specific guidance from ASIC in relation to the calculation and reporting of short positions, which varied from industry to industry, especially across funds management.

April-June

Public companies in Australia spent April reviewing their Conflicts of Interest and Related Party Transaction procedures with ASIC issuing new guidance to assist public companies and registered managed investment schemes in this area.

May 13 was unlucky for some as new ASIC Chairman, Greg Medcraft, was appointed and immediately announced a range of new measures to nail corporate crooks, including greater use of telephone/wire taps and email intercepts.

As well as re-emphasising ASIC’s enforcement focus on Gatekeepers, the new Chairman also highlighted the Regulator’s intention to focus on the Indirect Market Participant industry following some pretty high profile collapses (Sonray and Lift Capital to name a couple).

July-Sept

The Centro case dominated 2011, but the repercussions will probably start to emerge in 2012 as the courts will undoubtedly now apply a higher level of care and diligence when assessing the duties and responsibilities of Australian company directors.

The proposed bans on conflicted remuneration and volume based shelf fees, forming a large part of the Future of Financial Advice (FOFA) reforms, really started to build momentum in the middle of 2011 with the release of the Corporations Amendments (Future of Financial Advice) Draft Bill.  The commencement of these reforms is still on target for July 2012, but there will be many twists and turns before then so watch this space.

Following the collapse of several agricultural investment schemes throughout 2011,  as well as a 2011 Victorian case highlighting the inherent conflicts that occur when an RE is also appointed as Investment Manager of a registered scheme, ASIC released a consultation paper with a view to reducing the risks associated with those entities operating registered schemes.

Oct-Dec

The momentum had been growing so it was no surprise that we finally saw the confirmation of new RE financial reporting requirements in November, which were long overdue.  RE’s who operate managed investment schemes will need to ensure that they are adequately prepared for the revised financial capacity requirements, which will come into effect in November 2012.

November also saw a flurry of revised ASIC Regulatory Guides (RG’s) with disclosure being a common theme as RG 55, 65, 97, 168 and 228 were all revised.

2011 also witnessed increased recognition of the impact of good governance on your bottom line, and it was inevitable that the private equity industry would embrace the governance movement with the release of a Code of Private Equity (PE) Governance guide, which comes hot on the heels of the environmental, social and governance (ESG) Reporting Guide for Australian Companies, as well as the re-shaping of the UNPRI Principles across specific asset classes. The message is simple – if you are looking to raise large wholesale funds in 2012 then you will not reach your fundraising target without being able to demonstrate strong governance.

ASIC ended the year with continued focus on Indirect Market Participants, who often also operate research house or corporate advisory services, with the release of Consultation Paper 171: Strengthening the regulation of research report providers (including research houses). If CP 171 gains momentum then expect to see a mandatory separation of these business units as a strategy to manage inherent conflicts of interest in this area, including the physical and electronic separation between each business unit.

AML/CTF

As the 2011 AML/CTF compliance reporting period draws to a close, it may be a good time to consider an Independent Review of your AML/CTF Program, which forms part of your S47 AML/CTF Compliance Report, which is due by the end of March 2012 at the latest. If you would like some assistance with an independent review, please contact CompliSpace on +61 2 9299 6105. There have been several procedural changes across the AML/CTF Act and Rules in 2011, with the crucial changes being:

• New Threshold Transaction Report (TTR) requirements came into effect on 1 October 2011 to include details of the individual conducting the threshold transaction where that individual is not the customer of the designated service.
• Australia’s new autonomous sanctions regime slipped in slightly under the radar on 27 May 2011. As part of your AML/CTF Program consider amendments to assist you to carry out all reasonable due diligence and ensure that you are aware of the true identity of your client.
• AUSTRAC’s supervisory cost recovery legislation was passed by Parliament, consisting of three components. All existing Reporting Entities should now have re-registered with AUSTRAC. However, the levy amounts are now subject to change, although this will mainly affect those entities who are subject to the large entity component.
• S.35A, Div 5A, now enables Reporting Entities to disclose certain personal information to credit reporting agencies for identity verification purposes, subject to certain procedures being followed, including disclosure requirements and the retention of verification information.
• The Combating the Financing of People Smuggling and Other Measures Act 2011 introduced three new categories of remitters, being 1. remittance network providers, 2. affiliate of remittance network provider or 3. independent remittance dealers. If you fall within any of these categories then you will need to go through the formal registration process with AUSTRAC. All existing Reporting Entities should also have re-registered with AUSTRAC.

What’s in store for 2012?

January:

• AML/CTF Compliance Reports: The reporting window for the submission of your online S.47 AML/CTF Compliance Reports begins in January, with a deadline of 31 March.

• New national work health and safety laws: Are you ready?

July

• FOFA Reforms are due to commence, although it is still not clear what Tranche 1 and 2 will look like by then, although it has been noted that ASIC will adopt a ‘facilitative compliance’ approach for the first 12 months of the implementation of the FoFA reforms, until 1 July 2013.

November

• New RE Financial Requirements: RE’s who operate managed investment schemes will need to ensure that they are adequately prepared for the revised financial capacity requirements, which will come into effect in November 2012.

For those directors and officers of financial services businesses who think that workplace safety doesn’t apply to them, think again.

• Mental health has recently overtaken physical injury as the cause of the longest absences from work.
• Mental health claims account for almost 22% of claims which result in workers taking more than a week off work.
• There has been a 54 per cent increase in stress claims in the past 5 years.

Go beyond your immediate workplace and think about your authorised representatives, or investee companies, or controlled assets, or even your other board positions (in particular not-for-profits) and suddenly your personal exposure to WHS has increased exponentially.

“But it won’t happen to me!”  Again, think again.  As they say in the safety industry “it’s not a matter of ‘if’, it’s a matter of ‘when’”.   So eventually it will happen, or so the theory goes.

“Yeah, yeah, yeah… but why should I worry about these new laws?  We’ve never had a problem in the past”. 

A few key things about the new laws you should be aware of:

•  The new model laws impose a positive obligation on directors and officers to undertake “due diligence” to ensure that their organisations are compliant.

• This concept of “due diligence”, as defined, not only requires directors and officers to ensure that their organisations have appropriate safety systems in place but also requires them to verify that they actually work in practice.

• If you don’t comply you may be exposed to fines of up to $600,000 per breach for directors and officers, $300,000 for individual workers, and for the most serious cases up to 5 years jail time.

• Imprisonment is now a reality in many state jurisdictions (NSW & QLD in particular) as criminal proceedings arising from WHS events are being moved from the Industrial Courts to the main stream court system, where prison terms are handed down on a daily basis.

This is all pretty complicated stuff which is why CompliSpace has recently published a plain English Briefing Paper for Directors  & Officers as well as a free online WHS Risk Self-Assessment Survey which you can complete in about 5-10 minutes and get an instant risk profile for your business.

How Can CompliSpace Help?

At CompliSpace we have long recognised the difficulties that organisations have in establishing and maintaining up-to-date policies and procedures in a wide range of areas that are heavily reliant on legal interpretation, including workplace safety and human resources.

For many years now, we have been providing our clients with high quality online workplace safety and human resources programs which are designed to be rapidly tailored to the specifications of individual organisations. These programs come with online training and testing programs to ensure that core policies are effectively communicated to front line staff and appropriate records are maintained.

A key feature of our service is that we maintain the relevant content up-to-date with key legal and regulatory changes thus allowing our clients to focus on their core business. We also provide assurance software through which the undertaking of key safety obligations (e.g. staff training, workplace safety inspections, reporting of injuries and incidents) are verified by line managers, to provide directors and officers with the transparency and visibility they require under the new legislation.

Our clients range from top 100 ASX listed entities, through to not-for-profits and small private companies, in a wide range of industries, including financial services, mining and exploration, education, professional services, community services and wholesale distribution.

WHS Solutions Webinar- 20 December 2011

CompliSpace will be running an interactive, 45 minute webinar to  provide you with an opportunity to clarify any questions or issues that may have arisen out of our Risk Self-Assessment Survey or Directors & Officers Briefing Paper.

It will also cover:

• A practical demonstration of CompliSpace’s online WHS Program.
• Why our WHS training and testing system will save, even the smallest businesses, time, money and sleepless nights.
• How to integrate WHS with HR – and why you need to!
• The importance of being able to verify that your WHS Program is actually working in practice.
• CompliSpace’s online incident and injury reporting tools.
• Examples of key WHS management reports.
• Simple ways to improve efficiency and reduce the paper chase.
• Ways to simultaneously reduce your business risk profile and your compliance costs.

Details:

Date: Tuesday, 20 December 2011
Time: 1:30pm to 2:30pm

Reserve your webinar seat now

If you would like to know more about our services, or if you have any questions please feel free to contact us:

Sydney: T: +61 2 9299 6105

Perth: T: +61 8 9288 1826

Email: contactus@complispace.com.au

Online: www.complispace.com.au

The starting point is to clearly identify who the “officers” are in your organisation as these individuals are the ones who have exposure to personal liability under the new laws.   The term “officers” is defined in the Corporations Act and  covers Directors as well as senior executives who “make or participate in making decisions that affect the whole or a substantial part” of the business or the organisation

Whilst Chief Executives, Chief Financial Officers, and other Chief- level executives will fall within the definition of “officer”, in most organisations, there will also be people whose title may not clearly identify them as a senior decision-maker but  that may well fall within the ambit of the legal definition of “officer”.  This could, for example, be an Office Manager who decides how much (if anything) is spent on managing health and safety risks.

Once Directors and Officers are identified it is important that they be briefed as to their responsibilities and potential liabilities under the new laws, and in particular their obligation to undertake “due diligence” with respect to health and safety matters.  The concept of “due diligence” is explained in detail in the Directors & Officers Briefing Paper recently published by CompliSpace.

Applicants and Tenants with Complex Needs

For Community Housing Providers one of the greatest health and safety risks relates to dealing with applicants and tenants with complex needs. This has two components:

• Ensuring the health and safety of employee workers in relation to their face-to-face interaction with these applicants and tenants ( and members of the tenants’ households, including their pets).

• Ensuring the health and safety of contractors, sub-contractors, their employees, and  labour hire workers who may also be exposed to tenants or applicants, perhaps while performing maintenance in tenant premises, or while working in your organisation’s premises.

Whilst the first point should be familiar, as it remains unchanged from the old laws, the second point will require Community Housing Providers to establish new safety procedures relating to management of contractors and sub-contractors.

Consulting with other PCBUs

The concept of a Person Conducting a Business or Undertaking (PCBU) is described in detail in the Directors & Officers Briefing Paper.

Under the new laws Community Housing Providers have a joint duty of care for the safety of  contractors, sub-contractors, and their employees. This duty of care is shared with, in most cases, the employer of these workers which will also be a PCBU.  In these circumstances Community Housing Providers have a positive obligation to consult, co-operate and co-ordinate with other PCBUs to ensure the health and safety of all workers involved in a particular joint business activity or undertaking.

Each PCBU is responsible for these workers to the extent that it “influences and controls” their activities, so Community Housing Providers will need to work out what their organisation can control or influence (for example, contractual conditions that workers be licenced and appropriately trained), and what the other PCBU controls (selection of workers, their level of expertise, if the work is of a specialist nature, how the work is done etc.). Community Housing Providers will also need to consult with other PCBUs about providing site inductions, consulting arrangements, notification procedures (if injuries, incidents, new risks or hazards occur) and providing facilities such as first aid (who provides them, how and when?).

Consultation initiatives with other PCBUs should always be documented with appropriate records kept.

Consulting with Contractor’s workers

Community Housing Providers must ensure that they provide site inductions for their contractors’ workers.  The content of these inductions should include identification of any material safety risks and hazards of which the Community Housing Provider is aware. For example Community Housing Providers should identify and advise contractor’s workers of any tenant premises where there is a risk of aggression or violence, and also brief them with regard to the methods of eliminating or minimising those risks (this includes a clear understanding that they should leave if they believe their safety is at risk).

Community Housing Providers must also ensure that there are mechanisms in place for continuing consultation, for example nominating a contact person if there are incidents or injuries, when new risks/hazards have been identified, or there are issues with controls or mechanisms.

Make sure that all of this is documented!

 Major Renovations or Developments

Where Community Housing Providers are involved in construction work where there are no tenants on site, the same issues relating to joint duty of care for contractor’s workers will apply and Community Housing Providers must:

• consult with other PCBUs
• provide consultative mechanism for their workers
• monitor the work to the extent of their “influence and control” and take action if there appear to be breaches

The Regulations (approximately 700 sections) and the Codes of Practice also provide considerable information on the specific requirements and methods that relate to construction work. As we all digest this information (including the regulatory agencies) we will get a clearer understanding of the extent to which, if any, Community Housing Providers will need extra resources to ensure compliance and minimise the potential for Directors and Officers  to be exposed to personal liability (both civil and criminal).

If you have any questions regarding the topics covered in this blog please contact us on the details below:

Sydney: T: +61 2 9299 6105

Perth: T: +61 8 9288 1826

Email: contactus@complispace.com.au

Online: www.complispace.com.au

CompliSpace recently published a plain English Briefing Paper for Directors & Officers as well as a free online WHS Risk Self-Assessment Survey. The survey can be completed  in about 5-10 minutes and gives the respondent an instant risk profile for their business.

The following 10 Steps to help you prepare for the new WHS laws have been extracted from the briefing paper.

10 Steps to Help You Prepare for the WHS Laws Commencing 1 January 2012

1. Ensure each of your directors and officers are briefed as to the core elements of the new WHS laws well prior to their commencement on 1 January 2012.
2. Conduct a gap analysis of your organisation’s current workplace safety program identifying areas, such as consultation, which will need to be revised from 1 January 2012.
3. Ensure that your organisation’s hazard risk register has been maintained up to date and records all reasonably foreseeable safety hazards.
4.  Ensure that for each safety hazard that has been identified your organisation has an appropriate safety policy or treatment plan in place.
5.  Amend your current workplace safety program before 1 January 2012 to ensure that it is compliant with the new laws.
6. Conduct training sessions for your directors, officers and managers ensuring that they understand key concepts such as the “PCBU”, “reasonably practicable, “consultation” and “due diligence”.
7.  Ensure that your organisation has maintained up to date records of workplace safety inspections, names of Health and Safety Representatives and Health and Safety Committee members, injuries and incidents, as well as staff training.
8. Implement a system of regular workplace safety reviews if your organisation has not done so before.
9. Establish an internal assurance program that allows your organisation to effectively monitor the overall effectiveness of its workplace safety program.
10. Ensure that workplace safety matters are considered as a regular agenda item in management and board meetings.

How Can CompliSpace Help?

At CompliSpace we have long recognised the difficulties that organisations have in establishing and maintaining up to date policies and procedures in a wide range of areas that are heavily reliant on legal interpretation, including workplace safety and human resources.

For many years now, we have been providing our clients with high quality online workplace safety and human resources programs which are designed to be rapidly tailored to the specifications of individual organisations. These programs come with online training and testing programs to ensure that core policies are effectively communicated to front line staff and appropriate records are maintained.

A key feature of our service is that we maintain the relevant content up-to-date with key legal and regulatory changes thus allowing our clients to focus on their core business. We also provide assurance software through which the undertaking of key safety obligations (e.g. staff training, workplace safety inspections, reporting of injuries and incidents) are verified by line managers, to provide directors and officers with the transparency and visibility they require under the new legislation.

Our clients range from top 100 ASX listed entities, through to not-for-profits and small private companies, in a wide range of industries, including financial services, mining and exploration, education, professional services, community services and wholesale distribution.

If you would like to know more about our services, or if you have any questions please feel free to contact us:

Sydney: T: +61 2 9299 6105

Perth: T: +61 8 9288 1826

Email: contactus@complispace.com.au

Online: www.complispace.com.au

New Responsible Entity (RE) Financial Requirements

Why do we need a change? Well, there has been a steady rise in assets under management since 2002 (the last time these measures were reviewed) as well as the perceived need for increased financial controls following several recent high profile RE collapses (think Trio Capital, Timbercorp, and Great Southern).

Trio was a case of out and out fraud, whilst many other managed investment funds have been built on high levels of debt coupled with investments being driven by tax minimisation strategies with potential for commercial gain coming a distance second.

RE’s who operate managed investment schemes will need to ensure that they are adequately prepared for the revised financial capacity requirements, which will come into effect in November 2012.

The changes can be broken down into three parts:

1. Cash Needs Requirement:

RE’s will need to prepare 12 month cash flow projections from November 2012.  Crucially, directors will need to approve these projections on at least a quarterly basis. (See RG 166.43 and revised Table 4).

2. NTA Requirement:

If you have outsourced your custody function, RE’s will need to hold the greater of:

• $150,000;
• 0.5% of the average value of scheme property (capped at $5 mill); or
• 10% of the average RE revenue (uncapped).

If you have not outsourced your custody function, you must hold the greater of:

• $5 million; or
• 10% of the average RE revenue (uncapped).

The revenue component has been introduced to ‘catch’ those RE’s with high revenue and low FUM (e.g. agribusiness schemes). Have a look at RG 166.73 – Table 6 for some really useful guidance on calculating these NTA requirements.

3. Liquidity Requirement:

Finally, RE’s must hold the greater of $150,000 or at least 50% of its required NTA in cash or cash equivalents and the balance held in liquid assets (convertible in 6 months).

For more information on these requirements please see:

• Consultation Paper 140
• ASIC Regulatory Impact Statement – Responsible Entities: Financial Requirements, Nov 2011
• Class Order (CO 11/1140)
• Updated RG 166 Licensing: Financial Requirements
• Pro Forma 209 (PF 209) AFSL Conditions

FOFA Tranche 1 Update

The future looks uncertain for the Future of Financial Advice Bill (FOFA) as Tranche 1 (Corporations Amendment (Future of Financial Advice) Bill 2011) has been referred to the Senate Economics Legislation Committee.

Followers of these reforms should expect to see plenty of submissions in response to the tabled client opt-in and disclosure statement reforms, especially if the annual fee disclosure statement obligation is applied to existing as well as future clients.

Submissions for the Bill are due by 6 February 2012 with a Senate report date of 14 March 2012.

Meanwhile, Tranche 2 of the FOFA Bill (the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011) has been introduced into the House of Representatives and forms the second part of the reforms.  In particular, Tranche 2 includes:

• a ban on conflicted remuneration (including product commissions), where licensees or their representatives provide financial product advice to retail consumers; and
• a ban on volume-based shelf-space fees from asset managers or product issuers to platform operators.

Don’t expect too much movement over Christmas.  Whilst the timing of the commencement of these reforms remains uncertain, one thing is certain, these reforms will have a big impact on a large part of the financial services sector during 2012.

Every financial services licensee (not just financial planners) should get a good handle on the FOFA reforms and assess the potential impact of this new legislation via their risk management program.

Time for a D+O insurance health check?

Australian Insurance Brokers and company directors are frantically checking Director and Officers (D+O) policies following a recent NZ case which, if followed in Australia, will have a significant impact on directors and officers insurance coverage.

The directors in the case were faced with a criminal claim by the NZ equivalent of ASIC, as well as an action in the civil courts by the company receivers, for various breaches of their duties. The receivers successfully argued that they had a ‘charge’ (or first rights) over the insurance proceeds  in the civil compensation claim, leaving the directors unable to fund their criminal defence costs through their D&O policy.

The Directors mistake? The policy provided cover for both defence costs and claims for damages and compensation in one policy. Subject to State clarification, Australian directors may now have to consider finding and purchasing separate cover for defence costs only, thereby segregating coverage levels.

AML/CTF Update

1. All reporting entities should now have re-registered with AUSTRAC through AUSTRAC Online. In addition, all remittance service providers also need to apply for registration, including those that have previously registered with AUSTRAC.

There is a useful guide to completing this registration, which can be found here.

2. The Carbon Credits (Consequential Amendments) Act 2011 amends several Acts, including the AML/CTF Act 2006 and makes Australian Carbon Credit Units (ACCUs) a “financial product”. Under the amendments the acquisition and disposal of ACCUs (and eligible international emissions units) by an agent on behalf of another person is now a “designated service”.

The following draft rule changes have also been released by AUSTRAC in recent weeks :

• Chapter 11 (S.47 exemption for entities that only provide a designated remittance service)
• Draft AML/CTF Rules exempting financial institutions from the applicable customer identification procedures in certain circumstances.
• Chapter 23 (persons who carry out a ‘law practice’ or an ‘accounting practice’ are ‘non-financiers’ as defined in section 5 of the AML/CTF Act and are not carrying out a designated remittance arrangement)
• Chapter 28 (clarification on the exemption from conducting the applicable customer identification procedures on assignment, conveyance, sale or transfer of businesses)

Corporate Advisory Vs Securities Businesses – more than a Chinese Wall

Research house services are becoming an increasingly familiar business model within Australia. However, because these services will commonly sit ‘alongside’ ancillary business units, such as broking and funds management, the firms running this model run a huge risk of potential conflicts of interests, front running and insider trading.

The regulator has had this issue on their radar for some time now and this is reflected in Consultation Paper 171: Strengthening the regulation of research report providers (including research houses).  If CP 171 gains momentum, then expect to see a future separation of these business units as a strategy to manage inherent conflicts of interest, including the strict and formal physical and electronic separation between each business unit.

If you have any questions regarding the topics covered in this blog please feel free to contact us oncontact us on +61 2 9299 6105 or contactus@complispace.com.au.

Passed:

In Progress:

Not yet:

If you have operations in NSW, QLD, ACT, Tas or NT you should be preparing for the commencement of the new legislation on 1 January 2012 (32 days and counting).

For those businesses that have operations in VIC, WA and SA, notwithstanding the delays in implementation of the legislation, the clear intention is to proceed (once the politicians can get their collective acts together).  You should therefore also be reviewing your health and safety procedures in anticipation of the new legislation commencing at some stage in the New Year.

To assist our clients and subscribers we have prepared the following:

• Online Work Health & Safety Self-Assessment Survey…assess the status of your current WHS infrastructure.
• Executive Briefing Paper for Directors & Officers…Find out what you need to know in this important briefing paper for directors, company secretaries and other officers.

If you have any questions regarding WHS and what it means for your business please feel free to contact us on +61 2 9299 6105 or contactus@complispace.com.au.

The introduction of the Combating the Financing of People Smuggling and Other Measures Act 2011 will see changes to the way that remitters are registered and monitored by AUSTRAC, and in particular an extension to the types of businesses that will need to be registered.

It is proposed that from November 2011, the AML/CTF Act will require remitters to apply, or reapply, to be registered with AUSTRAC, and the application will need to demonstrate suitability for registration.

The key changes are outlined below:

New categories of remitters

The Combating the Financing of People Smuggling and Other Measures Act 2011 introduces three new categories of remitters, which are:

1. Remittance network providers: an organisation that operates a network of remittance affiliates by providing the systems and services that enables its affiliates to provide remittance services;

2. Affiliate of remittance network provider: a business that provides remittance services to customers as part of a remittance network facilitated by a remittance network provider; or

3. Independent remittance dealer: a business that provides remittance services to customers using their own systems and processes, independent of a remittance network.

New registration scheme

All remitters will need to be registered with AUSTRAC under the new registration scheme and will need to reapply for registration (renewal) every three years.

The new registration scheme will:

• Require a person seeking registration to provide the AUSTRAC CEO with information relevant to their suitability for registration.

• Allow the AUSTRAC CEO to obtain information from other persons to determine whether the person is suitable to be registered.

• Allow the AUSTRAC CEO to refuse, suspend, cancel or impose conditions on the registration of a remittance network provider, remittance affiliate or independent remittance dealer. The applicant or registered remittance provider will also be able to make an application to request an independent review of a decision by the AUSTRAC CEO.

• Allow the AUSTRAC CEO to issue infringement notices for certain breaches of registration requirements.

•  Require remittance network providers to undertake some AML/CTF Act reporting obligations on behalf of their affiliates.

Transition to the new registration scheme

Remitters that are already registered with AUSTRAC will need to register under the new registration scheme once it comes into operation, which is currently proposed to take place in November 2011:

• Independent remittance dealers will have six months to apply for registration

• Remittance network providers will have 12 months to apply for registration for themselves and their affiliates.

This registration will be available to all remitters through AUSTRAC Online.

Further information

AUSTRAC will shortly publish a fact sheet on the new registration requirements for remitters which should clarify some of these points.

ComLaw has published a consolidated AML/CTF Act 2006, taking into account amendments up to Combating the Financing of People Smuggling and Other Measures Act 2011 that applied as at 1 July 2011. In particular, the inclusion of various schedules at the end of the updated AML/CTF Act incorporate the changes to the remittance sector, which were bought about as a result of the Combating the Financing of People Smuggling and Other Measures Act 2011.

In addition, please note a number of draft AML/CTF Rules have been published which:

• specify information to be included in a registration application;

• specify matters to be considered by the AUSTRAC CEO in considering applications for registration;

• relate to reporting obligations of registered remittance affiliates;

• relate to the Remittance Sector Register;

• deal with the suspension of registration from the Remittance Sector Register; and

• specify matters to be considered by the AUSTRAC CEO when deciding to cancel a registration.

These draft AML/CTF Rules can be accessed at the following location: http://www.austrac.gov.au/aml_ctf_rules.html