1. Financial Services Regulation

1.2 Scope of financial services advice — Statement of  Advice exemption — no product recommendation and no remuneration

The
requirement to provide a Statement of Advice when personal advice is
provided that does not involve the recommendation of a product and no
remuneration is received for, or in relation to, the advice will be
removed. Instead, a Record of Advice will be required to be prepared by
the adviser.

This measure will be supported by changes to the relevant regulations.

1.3 Scope of financial services advice — threshold for requiring a Statement of Advice

A
threshold will be introduced into the Statement of Advice requirements
so that a full Statement of Advice will only be required if the advice
given is in relation to an investment amount that is above a prescribed
threshold. A Record of Advice would need to be given to the client for
advice in relation to amounts less than this threshold.

This measure will be supported by regulations and the threshold is expected to be set at $15,000.

1.4 Scope of financial services advice —Financial Services Guide exemption — public forum

A
Financial Services Guide will not need to be provided at a forum where
10 or more retail clients attend, whether or not it is open to any
person to attend the forum.

This measure will be supported by changes to the relevant regulations.

1.6 Sophisticated investors

In Chapter 7 of the Corporations Act 2001
a mechanism will be adopted similar to provisions of Chapter 6D, which
allows a financial services licensee to be satisfied that an investor
is adequately equipped to be determined a wholesale investor.

1.7 Cross‑endorsement of authorised representatives

The
cross‑endorsement arrangements will be amended so that licensees are
only jointly and severally responsible for the conduct of their
authorised representatives where those representatives provide
financial services in relation to the same sub‑class of financial
product.

This measure will be supported by changes to the relevant regulations.

1.9 Product activity and data collection

Amendments
will replace the current mechanism for reporting the requirements of
the in‑use notice with a new mechanism which will require the
responsible person for a Product Disclosure Statement (PDS) to provide
information in a standardised online report when:

• a financial product for which a PDS must be prepared is first recommended, issued or sold;
• a financial product for which a report previously had to be made ceases to be available to be recommended;
• there is a change in the fees and charges set out in the enhanced fee disclosure table; or
• changes are made in a supplementary or new PDS.

This measure will be supported by changes to the relevant regulations.

1.10 Self‑listing and licensed market operators

Amendments
will provide for ASIC to supervise listed entities which are related to
the market licensee, and participants who are related to or in
competition with the market licensee. 

1.11 Pooled superannuation trusts and product    disclosure

The
current exemption from licensing for dealing services provided by
trustees of pooled superannuation trusts under the retail/wholesale
client test will be extended to the product disclosure framework.

1.12 Registered managed investment schemes investing in unregistered managed investment schemes

The prohibition on investments by managed investments schemes in unregistered managed investment schemes will be removed.

2. Company Reporting Obligations

2.1 Executive remuneration

Amendments
will be made to harmonise and remove duplication in the executive
remuneration disclosure requirements between the Corporations Act and
accounting standards, without dilution of disclosure requirements.

This measure will be supported by changes to the relevant regulations.

2.2 Thresholds for financial reporting of large proprietary companies

The
revenue and asset thresholds for financial reporting of large
proprietary companies will be increased. The revenue and assets
thresholds that determine a large proprietary company will be increased
by 150 per cent from $10 million in revenue to $25 million in revenue
and from $5 million in assets to $12.5 million in assets. The
threshold regarding the number of employees will remain at 50
employees.

2.3 Change in office holders

The
requirement for a company to notify ASIC of a change in officeholder,
where the officeholder has already notified ASIC, will be removed.

2.4 Company addresses

A single process for notification of an update of all company addresses will be implemented.

This measure will be supported by changes to the relevant regulations.

2.6 Reduce compliance burden associated with voluntary deregistration

Amendments
will allow deregistration of a company to proceed where an annual
review fee becomes payable or is incurred after the application for
deregistration is approved.

2.7 Upfront payment of annual fees for companies

Amendments will allow companies to pay a single sum to cover review fees for an extended period.

For example, instead of $212 per year for 10 years ($2,120),
proprietary companies would only be required to pay a one-off fee of
$1,600.

This measure will be supported by changes to the relevant regulations.

2.8 Electronic distribution of annual reports

The
default option for receiving annual reports will be changed to be via
the Internet. Members will continue to be able to choose to receive
hard copy annual reports free of charge.

3. Auditor Independence

3.1 Anomalies arising from CLERP 9

The
Bill will reduce complexity by incorporating earlier remedial measures
made under the Corporations Regulations and ASIC Class Orders into the
Corporations Act. The refinements will also reduce the compliance
burden for auditors by making improvements to the regime without
weakening the existing robust auditor independence framework.

4. Corporate Governance

4.1 Related party approval thresholds

Amendments
will provide for a prescribed level for payments to related parties
below which member approval is not required. This would avoid member
approval of what could be considered minor transactions.

This measure will be supported by changes to the relevant regulations.

4.2 Director amounts threshold

The director amounts threshold will be repealed, as it will be subsumed into the threshold under Proposal 4.1.

5. Fundraising

5.1 Quoted securities rights issue disclosure

Amendments
will provide that rights issues for quoted securities and interests in
managed investment schemes do not require the production of a
prospectus or PDS. A cleansing notice will have to be provided before
the rights issue offers are made, and the notice must include
appropriate information on the consequences of any potential effect of
the rights issue on the control of the entity.

5.2 Small scale offerings

The
definition of sophisticated and professional investors in Chapter 6D of
the Corporations Act will be amended to align with that used for
wholesale investors in Chapter 7.

The maximum amount of
money that may be raised using an Offer Information Statement when
combined with funds previously raised will be increased to $10 million
or less.

5.3 Secondary sale issues

Amendments
will allow controllers to arrange sales of securities they hold without
disclosure subject to the existing section 708A conditions, but subject
to the requirement that the controller and the company provide a
cleansing notice in order to provide up to date price sensitive
information to the market.

The required period for
quotation of the securities will be reduced to three months to provide
such a track record and, therefore, provide some relief from the
current requirement of 12 months.

5.4 Employee unlisted share schemes disclosure

Relief
will be provided from certain of the licensing and hawking restrictions
of the Corporations Act for employee share schemes for unlisted
companies. This relief will be subject to the condition that such
employee share schemes must be accompanied by a disclosure document
such as an Offer Information Statement or a prospectus. Listed
entities may also take advantage of this relief if they wish, subject
to the same condition.

5.5 Prospectus and PDS advertising rules

Amendments
will align the prospectus advertising provisions relating to quoted
securities and advertising post lodgment of a prospectus for unquoted
securities with those pertaining to financial products (other than
securities).

ASIC’s stop‑order powers will be extended
to cover advertising of quoted and unquoted securities and other
financial products.

5.6 Stapled securities disclosure

The
application of the provisions regarding replacement prospectuses will
be extended to cover combined prospectus/PDSs prepared for offers of
stapled securities comprising one or more shares and one or more units
in managed investment schemes.

This measure will be supported by changes to the relevant regulations.

6. Takeovers

6.1 Remove telephone monitoring during takeover bids

Amendments
will remove provisions of the Corporations Act that require the
recording, storing etc of telephone conversations with retail
shareholders during takeover bids.

6.2 85 per cent notices

Amendments will remove provisions of the Corporations Act that require the disclosure of an 85 per cent holding.

7. Compliance

7.3 Simplifying returns of company particulars

Amendments
will limit the need for return of particulars to be provided to ASIC to
situations where ASIC suspects or believes that the details recorded
are not correct and extend the notification period from 28 days to two
months.

7.4 Electronic registration of charges

Amendments
will facilitate electronic registration of charges and associated
documents, and reduce the associated paperwork.

This measure will be supported by changes to the relevant regulations.

OTHER INITIATIVES IN THE SIMPLER REGULATORY SYSTEM BILL PACKAGE

Auditor independence requirements

Amendments will implement a range of measures arising from a discussion paper Australian Auditor Independence Requirements:A Comparative Review released
on 15 November 2006, and make some technical amendments designed to
improve the effectiveness of the auditor independence requirements.

Body corporate names

Amendments
will permit delegation to ASIC rather than Treasury of the power to
approve the use of body corporate names that would otherwise be
unacceptable.

Constitutions of non-profit companies

Bodies
corporate with licences to omit the word ‘Limited’ from their names
will no longer need to obtain Ministerial approval for changes to their
constitutions, but they will need to notify ASIC.

B. MEASURES TO BE IMPLEMENTED THROUGH OTHER BILLS

7.1 Breach reporting period

The period for reporting a breach to ASIC will be aligned with the time period for reporting a breach to APRA. 

This will be implemented in the Financial Sector (Simplifying Regulation and Review) Bill 2007.

C. MEASURES TO BE IMPLEMENTED THROUGH REGULATIONS

1.5 Non‑cash payment facilities

Disclosure
requirements that apply to all non‑cash payment facilities that are not
related to a basic deposit product will be streamlined by applying the
same limited disclosure requirements to these facilities. The
disclosure requirements that currently apply to non‑cash payment
facilities related to basic deposit products will be maintained.

2.5 Share and member reporting requirements

Amendments will remove the obligation on public companies to notify ASIC each year of the top 20 shareholders.

D. PROJECTS FOR FURTHER SEPARATE CONSULTATION

1.1 Scope of financial services advice — sales recommendation

There
are some situations where pure product sales activities are being
captured by the personal advice definition. It was proposed that in
some situations, financial service providers may provide sales
recommendations that are not considered to be financial advice.

While
there was general support for the need to address issues that arise as
a result of the definition of financial advice, the proposal was not
broadly supported. Treasury will continue consultations on this issue
with stakeholders.

1.8 Policy Statement 146 — training requirements

It
was proposed that ASIC would review PS146 to consider the concerns
raised about the training framework and any consequential revisions
that may arise from other proposals.

ASIC
information release (IR 07‑18) on 22 May 2007 indicates that ASIC will
issue a consultation paper on this subject in July.

5.4 Employee share schemes (in relation to one aspect of the proposal on self‑acquisition of shares)

It
was proposed that provisions relating to the self‑acquisition of shares
by companies would not apply in the context of employee share schemes,
subject to certain safeguards.

Further consultation is required, including consideration by the Ministerial Council for Corporations.

7.2 Australian Business Number Reference

It
was proposed to remove the requirement in section 912F of the
Corporations Act on a financial services licensee to cite the AFSL
number in disclosure documents and other relevant documents and require
the licensee to cite their ABN instead. The licensee would also be
required to state that they hold an AFSL.

Further
consultations are required, particularly with ASIC and the Australian
Taxation Office, to ensure that all AFSL licensees are eligible to use
an ABN.