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Allens Arthur Robinson

Finance & Banking Update -  September 2004

In this issue: Read about the latest developments in the world of banking and finance.

Cases

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Banking and finance - fixed and floating charges - charge over book debts (National Westminster Bank Plc v Spectrum Plus Limited [2004] EWHC 9 (Ch)) England and Wales High Court

Some hope for fixed charges rising from the ashes of Brumark. Payment of proceeds into uncontrolled account with mortgagee sufficient to create fixed charge over book debts.

Background

A bank provided a loan and overdraft facility to a company, secured by a debenture which charged the company's book debts. The agreement described the charge as specific and stipulated that proceeds of the book debts must be deposited in the overdraft account. The account was made available on a fluctuating basis to provide working capital but was repayable on demand. The company went into voluntary liquidation. The bank sought a declaration that the debenture created a fixed charge and that the liquidators should account to it for the proceeds of back debts collected by them.

First Instance Decision

The company won. The application was dismissed.

Appeal

The bank won. The charge was characterised as fixed.

In the leading judgment of Siebe Gorman v Barclays Bank, a fixed charge was held to have been created from a debenture which was, in all material respects, identical to the debenture in this case. The reasoning in Siebe Gorman was that the fixed charge attached immediately to the proceeds of the book debts even though there was no express restriction in the debenture on their use by the chargor. This reasoning was adopted by courts for the following 25 years and relied upon by innumerable banks in drafting facility agreements.

The Court of Appeal found that Siebe Gorman was correctly decided. A debenture that prohibits the chargor from disposing of its book debts prior to collection and requires the proceeds of the book debts to be paid into an account with the chargee bank is properly categorised as fixed. In this context, it is unnecessary for the bank to require the proceeds be paid into a blocked account. It is sufficient that the bank has a right to prevent the chargor from drawing on the account if they so desire. The proceeds change their character on being paid into the chargee bank, being replaced by a contractual right to have payment of an equivalent amount.

Furthermore, the Vice-Chancellor at first instance relied on Re Brumark Investments (a Privy Council decision), which departed from the Court of Appeal's decision in Re New Bullas (which had distinguished book debts from their proceeds and allowed a fixed charge over the one and floating over the other). It was not open for the Vice-Chancellor, or the Court of Appeal, to depart from a Court of Appeal decision on the basis that a Privy Council decision had disapproved of it.

Note

The position in Australia is yet to be resolved. This decision still leaves some uncertainty as to the English position. In particular, will the members of the Privy Council in their role as House of Lords, stick to the most extreme positions put in Brumark (which suggested the account needs to be blocked) or will they fall into line with Spectrum Plus?

One interesting part of the judgment is that the court decided it was significant that the account was with the mortgagee. This would have the effect that the proceeds change their character from money to a mere contractual right as against the mortgagee (whether or not the account was in credit) to draw funds out of the account. The court mentioned that the proceeds did change character. Of course, a similar argument would arise if the proceeds had been paid into an account with another party; the proceeds would be converted into a contractual right, albeit against another bank. This exposes one difficulty with the Brumark approach of not distinguishing debts from their proceeds, or not recognising that different forms of property are involved. For example, the book debts may arise under a contract like a lease over which there is clearly a fixed charge, but when the proceeds are received they are paid into a bank account after which there is no fixed charge.

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Letters of comfort - letters of support - intention to contract - privity - misleading and deceptive conduct (Gate Gourmet Australia Pty Ltd (in liq) v Gate Gourmet Holding AG [2004] NSWSC 149) Supreme Court of New South Wales, Einstein J

Letters of comfort or support work (depending on their terms) where they've been acted on - even when addressed to someone else.

Background

A Swiss parent company established an Australian holding company and a trading company. The parent executed letters of comfort which promised the financial commitments of the trading company would be met by the parent as and when they fell due. These letters were addressed to the holding company.

A bank provided facilities to the trading company - the company's liabilities exceeded its assets. The directors gave declarations attesting that the company was a going concern despite these debts. The directors claimed they would not have signed the declarations if they had thought the parent was not bound by the letters of comfort. The trading company went into voluntary administration and, subsequently, liquidation. The parent claimed it did not have the requisite funds to prevent this.

The liquidators claimed the letters of comfort constituted binding agreements between the parent and the trading company. Alternatively, the holding company held the benefit of the promise according to the principles of Trident, or on trust for the trading company and hence the trading company could enforce it. The representation to provide financial support was misleading and deceptive conduct for the purposes of the Trade Practices Act 1974 (Cth).

Decision

The liquidators won.

In determining whether there was an intention to enter legal relations, the court looks to the intention of the parties interpreted with reference to the surrounding circumstances, the nature of their relationship and previous communications. There is a high degree of probability, but not a presumption, that in a commercial setting the factual matrix viewed objectively will lead to a conclusion that there were such intentions. Whether a letter of comfort imposes legal obligations will ultimately turn on its terms. Here, the terms had clear legal significance (the court was influenced by the use of terms usually seen in legal drafting) and the reliance the directors placed on the letters in making statutory declarations suggest both parties intended to be bound. The letters made clear that the trading company was the promisee and as such it did not matter that the addressee was the holding company. The contract was breached by the failure to provide financial assistance.

The court then considered the result if the promisee was the holding company. In Trident General Insurance v McNiece Bros, the High Court found the privity of contract doctrine did not apply to insurance policies protecting against liability for common law damages where it was the common intention of the parties that a non-party beneficiary would benefit under the policy and the beneficiary relied on the policy. There was no logical reason why this exception should not be extended to apply to contracts of indemnity such as this. The trust argument also succeeded.

The parent did not adduce into evidence reasonable grounds for the representation that the parent would, or intended to, meet the trading company's future financial commitments. The representations were a real inducement for the trading company to trade while insolvent and incur loss. This constituted misleading and deceptive conduct under s51A.

For more, see the case.

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Corporations - registration of company charges - extension of time - court's discretion (Hewlett Packard Australia Pty Limited v GE Capital Finance Pty Limited [2003] FCAFC 256) Federal Court of Australia, Full Court

Some relief for the tardy - court can extend time for registration of charge even after administrator appointed.

Background

A financier provided a revolving credit facility to a borrower, secured by a fixed and floating charge over all the borrower's assets. A subordination deed subordinated the rights of the borrower's parent company as a creditor against the borrower to the rights of the financier. By innocent inadvertence, the financier failed to lodge the charge within the original required time period. The borrower went into administration just after the charge was eventually lodged. The financier applied for an extension of the time for lodgment under s266(4) of the Corporations Act 2001 (Cth).

First instance decision

The financier won. A conditional extension was granted, allowing the financier to secure all amounts except $3,700,000, the judge finding exceptional circumstances sufficient to justify an extension.

Appeal

The financier won. The appeal and cross-appeal were both dismissed.

Section 266(1)(d) allows a charge to be lodged after the due date where a court order has been granted under s266(4) and the court order's date for lodgment expires before the critical day. Section 266(4) gives the court the power to grant an extension if the failure to lodge was accidental or due to inadvertence, the extension would not prejudice other parties, or it would be just and equitable to grant relief.

All 3 judges believed that the correct interpretation of s266(1)(d) was that a court did not have the power to grant an extension after the making of a winding up order, administration order or a deed of company arrangement. Whitlam J, dissenting, held that the appeal should be allowed on this ground. The majority disagreed, holding that the weight of judicial authority was in favour of granting an extension even after such events, and proceeded on this basis.

Section 266(4) discretion should be exercised where the circumstances are sufficient to warrant the destruction of the crystallised rights of unsecured creditors over the property the subject of the charge. The exercise of discretion should recognise the intervening rights of all creditors, but need not be subject to an 'exceptional circumstances' test. The degree of likelihood and imminence of winding up will be a powerful consideration as to whether to grant an extension. In granting the extension, the trial judge considered circumstances such as the financier's innocent inadvertence, the fact that substantial funds had been advanced without any security to buy trading stock and the prejudice to unsecured creditors. Hence, the exercise of discretion substantially conformed with the relevant principles and the Corporations Act 2001 (Cth). Moreover, in order to provide certainty to a liquidator, a charge awaiting an extension order is considered void until such an order is granted.

Since the trial judge clearly did not wish to grant relief unconditionally, and the financier did not want the court to reconsider the exercise of discretion, the cross-appeal failed.

For more, see the case.

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Unconscionability - Implied negative stipulation in contract - letters of credit - principle of autonomy and exceptions - (Boral Formwork v Action Makers [2003] NSWSC 713) New South Wales Supreme Court, Austin J

Statutory unconscionability overrides LC autonomy - court grants injunction to prevent unconscionable claims.

Background

A supplier contracted with a buyer to deliver scaffolding on a regular basis and in accordance with certain technical specifications. The supplier would be presented with irrevocable standby letters of credit on delivery. If the scaffolding was defective, the supplier had the option of allowing the buyer to fix goods or making other arrangements. The supplier supplied defective scaffolding, received a letter of credit and later went into receivership.

The buyer sent letters to the receivers noting the defects and suggesting the buyer fix the goods, but the supplier did not respond. The buyer then rectified the faulty scaffolding and sent a further letter to the receivers requesting an undertaking that they would not exercise their rights under the letter of credit on account of the costs of rectification. The receivers then applied to the bank which issued the letter of credit, claiming the amount owed under the letter of credit. They claimed the letter of credit was autonomous to any warranty in the contract, including the provision regarding technical specification of the goods.

The buyer claimed the receivers should be restrained from making demands under the letter of credit and be ordered to pay the costs of rectification, arguing there was an implied negative stipulation in the contract not to call on the bank to make payment if there is a bona fide dispute. The buyer also submitted that the receivers acted unconscionably for the purposes of s51AA and s51AC of the Trade Practices Act 1974 (Cth) in demanding payment under the letter of credit.

Decision

The buyer won. The receivers acted unconscionably and could not call on the letter of credit.

The buyer argued that by not responding to its letters, the receivers either waived their choice of how to fix the goods or should be estopped from choosing to fix the goods contrary to the buyer's recommendation. Therefore, the supplier could not call on the bank to pay the full amount after the buyer had incurred costs fixing the goods because there was an implied provision in the contract preventing such a claim. The court held there was no such implied negative term.

Normally a beneficiary will only be prevented from calling on an LC in cases of fraud. Here there was no fraud.

Olex Focas v Skodaexport and ACCC v Samton Holdings suggest the principle of autonomy for letters of credit cannot override ss51AA and 51AC. By making a call on the letter of credit for an amount greater than was due, the receivers acted unconscionably for the purposes of ss51AA and 51AC. Accordingly, the receivers were ordered to countermand the demand for payment and were restrained from making further demands under the letter of credit. The buyer did not request an injunction against the bank against paying the amount due and therefore it was not considered. The court stated that not in all circumstances would unconscionable conduct be sufficient to counter the principle of autonomy, but where there was a false call on a letter of credit the circumstances were sufficiently special to allow it.

For more, see the case.

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Conflict of laws - insolvency - proof in liquidation - novation (Wight v Eckhardt Marine GmbH [2003] 3 WLR 414) Privy Council

Validity and effect of novation of debt governed by proper law of debt not its situs. Novation not a transfer.

Background

A German company agreed to sell a vessel to a Bangladeshi buyer. Ten days before delivery, a letter of credit was agreed to be opened and a deposit in the form of a guarantee issued by the Bangladeshi branch of a Cayman Islands bank under Bangladeshi law. Before the buyer was able to open the letter of credit, the bank was wound up and refused to honour the call on the guarantee. The Bangladesh government then implemented a scheme that created a new bank which took on the assets and liabilities of the liquidated bank.

The liquidators rejected the proof lodged by the seller on the grounds that all claims had been assumed by the new bank. The seller argued that the question of whether the liquidators owed a debt must be ascertained at the date of winding up and, since it was entitled to payment under Bangladeshi law at that time, it could not be deprived of its entitlement by subsequent events.

First instance decision

The seller lost at first instance but won on appeal to the Court of Appeal. The court found the validity of the debt was not governed by its proper law but by its situs and that, on winding up, the seller was granted a new right to participate in the distribution of the bank's assets. The liquidators appealed to the Privy Council.

Privy Council decision

The liquidators won. The proof was rejected.

The present case was similar to In re United Railways where a novation resulted in the extinction of the liability of one debtor and its replacement by the liability of another. This does not involve the transfer of property and therefore the proper law of the debt must be considered, rather than the lex situs.

A winding up order does not transform a creditor's claim into a new right to participate in the distribution of assets. The claim remains untouched. The debt could therefore be discharged by the Bangladesh government's scheme. Furthermore, subsequent events may be considered in determining a debt in particular circumstances such as these where the value of the claim was reduced to zero. Hence, the buyer could only make a claim against the new bank and not the liquidators.

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Managed investment schemes - money held on trust - total failure of consideration (Spangaro v Corporate Investment Australia Funds Management Ltd [2003] FCA 1025) Federal Court of Australia, Finkelstein J

Background

An investor completed an application and sent a cheque to participate in a managed investment scheme. The prospectus stated that if a minimum number of subscriptions were not reached by a due date, all moneys would be refunded. Funds received were to be held on trust by the custodian until the minimum subscription had been achieved. Many of the applicants utilised bridging finance and as such, cheques for subscriptions were to be received from the financier before the due date.

On the due date, the responsible entity sent the custodian a letter stating that the minimum level had been reached, that the requisite money had been deposited in an account maintained by the custodian and that the custodian should therefore draw cheques payable to the responsible entity. However, this money had not been deposited into the account and it was only later that a cheque was delivered to the custodian, who endorsed it in favour of the responsible entity. The investor argued that the minimum subscription was not reached by the due date. The application money was held on trust by the custodian and this trust was breached when it was paid to the responsible entity without the authority of the investor. The responsible entity was thereby unjustly enriched and should pay restitutionary damages.

Decision

The investor won. The custodian was in breach of trust and the responsible entity was unjustly enriched.

There was no indication in the scheme's documents that a subscription involved a cheque being presented and paid. Therefore, a subscription occurred merely when a cheque was presented. The investor was able to prove that, given the limited evidence advanced by the responsible entity, the minimum subscription was not reached by the due date. To determine whether the custodian held the money on trust, the court looked to the objective intention of the custodian, the nature of the transaction and the surrounding circumstances. Although s601FC(2) of the Corporations Act 2001 (Cth) provides that the responsible entity holds scheme property on trust for investors, there was no scheme property because the project had not yet begun. It was implicit in the prospectus that the custodian would hold the application moneys on trust for investors until the minimum subscription was reached. When the custodian endorsed the cheques to the responsible entity, it acted in breach of trust and was liable to make good the default.

To obtain relief in restitution the investor had to show the responsible entity was unjustly enriched at his expense, in accordance with defined categories and in the absence of any defences. Although the money was paid to the responsible entity by the custodian, it did not lose its character as trust money since it was given to the responsible entity, rather than paid for with valuable consideration.

The responsible entity may also have been liable as constructive trustee. It was a knowing recipient because it had at least knowledge of the circumstances which would indicate to an honest and reasonable person that the property received was trust property transferred in breach of trust.

For more, see the case.

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Contract - implication of terms - purported termination - inducement of breach of contract - conspiracy to injure by unlawful means (Biscayne Partners Pty Ltd v Valance Corp Ltd [2003] NSWSC 874) Supreme Court of New South Wales, Einstein J

Background

An artist and a company directed by the artist and her mother entered a management agreement. The agreement could only be terminated if either party's obligation remained unfulfilled 30 days after a notice of breach of contract was presented. The artist soon became unsatisfied with the manager and, among other things, failed to direct important matters to him and pay his commission and hired another manager. This was in breach of the contract.

The artist then purported to terminate in letters sent on two occasions, claiming the manager had breached the contract and that the contract was void ab initio. The manager then brought proceedings against the artist and her company for breach of express and implied terms and wrongful repudiation, and against the artist and her mother for inducing the company to breach the contract and conspiring to injure by unlawful means.

Decision

The manager won. Breach of express and implied terms and repudiation were proved.

The letters did not terminate the contract because they failed to specify the nature of the alleged breaches and the correct notice form and notice period were not observed.

In O'Brien v Dawson, it was held that directors cannot induce a company to breach a contract because they are agents, or the alter ego, of that company. Since the artist and her mother were the sole directors of the contracting company they could not induce a breach.

The claim of conspiracy failed because it was not the artist or her mother's purpose, predominant or otherwise, to cause injury by shutting the manager out of their activities.

A duty to cooperate is implied in accordance with the presumed intention of the parties where it is necessary to give business efficacy to the contract. Where an obligation to cooperate is fundamental to the contract, it will be implied without further analysis. Where the obligation is not fundamental, it will be implied if it satisfies the BP Refinery five-point test. The cooperation must be reasonable and this is determined by the express obligations and benefits contemplated in the subject contract. The court found terms obligating the parties to, among other things, act in good faith, cooperate and take reasonable steps to enable the implementation and operation of the agreement. These terms were breached.

The artist also breached various express terms by wrongfully purporting to terminate, appointing another manager and for generally 'shutting out' the manager from her affairs. Damages could be assessed for the loss of chance of a commercial advantage or opportunity.

For more, see the case.

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Mortgages - clog on the equity of redemption - option to purchase - whether transaction, in substance, a mortgage (Wily v Endeavour Health Care Services [2003] NSWCA 321) Supreme Court of New South Wales, Court of Appeal

Background

A businessman was in urgent need of finance for the construction of a new medical centre. He approached a good friend, who negotiated a deal with a health care company to provide finance. The parties entered documents entitled: loan agreement, fixed and floating charge, and an option to purchase. An amount of money was provided at an interest rate of 20% to be repaid in 18 months secured by a charge if the businessman granted a call option on the assets of the medical centre, which could be exercised before repayment of the funds. The health care company indicated it was not a financier and would only be involved if it could buy the business.

The businessman's company subsequently went into administration. The administrator argued that the relevant transaction was a secured loan with collateral advantage of an option and that the option is a clog on the equity of redemption and therefore is unenforceable. Only the documents constituting the transaction should be viewed by the court in determining whether there was a clog. If unconscionable conduct was necessary to strike down a clog, the administrator argued there was such conduct because the businessman was a necessitous borrower.

In defence, the lender claimed the loan was collateral to the option and that in any case there was no unconscionable conduct on their part.

First instance decision

The health care company lender won. The transaction was characterised as an option to purchase and no unconscionable conduct was found. Accordingly, there was no clog on the equity of redemption.

Appeal

The health care company lender won. The appeal was dismissed.

A clog on the equity of redemption occurs when a mortgage contains a condition that if the contractual right to redemption was not exercised by a certain date, the mortgagee has an option of purchasing the property.

Not all options that have loans associated with them are void as clogs on the equity of redemption. Where a transaction is characterised as an option with a collateral mortgage there is no clog. When characterising a transaction it is necessary to enquire into its real or true nature, not merely its nominal form. Here, the transaction was an option to purchase with an ancillary loan.

No question of unconscionability arose.

For more, see the case.

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Amendment of statement of claim - unconscionable conduct - professional advisers - fiduciary relationship (Gartner v Ernst & Young (No. 2) [2003] FCA 1436) Federal Court of Australia, Mansfield J

Background

A farming business part of a larger family company sought to develop a vineyard and retained accountants to advise on the best course of action. The accountants recommended constructing a winery themselves, obtaining finance through a bank and using the family company's assets as security. Relying on the accountants' advice, the business' director agreed to borrow from the bank, despite the loan being insufficient to cover all development costs. The accountants received a success fee from the bank for their recommendation.

The business subsequently failed and the bank sought to enforce the guarantees. The borrower alleged the accountants gave negligent advice, owed a duty to avoid a conflict of interest and were obliged by an implied contractual term to take all reasonable care towards the borrower. It was further alleged that the bank made misleading and deceptive representations that caused the borrower to enter the transaction.

In the current proceeding, the borrower sought to amend its statement of claim to include allegations that the accountants, among other things, breached a fiduciary duty to the borrower and acted unconscionably in exploiting the borrower's lack of knowledge in the area of finance. Further amendments claimed the bank had knowledge of the accountants' actions and thereby engaged in unconscionable conduct and participated in the accountants' breach of fiduciary duty by accepting and seeking to enforce the guarantees. The wife of the director proposed a statement of claim alleging it would be unconscionable for the bank to enforce the guarantee against her under s51AA of the Trade Practices Act 1974 (Cth). The bank and the accountants contested that these new claims were not arguable and should not be allowed.

Decision

The borrower's amended claims against the accountants were allowed while those against the bank were refused. The wife's proposed statement of claim was permitted.

It is arguable that accountants can owe both contractual and fiduciary duties to their clients where trust and confidence is involved. This relationship is particularly pertinent where there is a real or substantial possibility of a conflict of interest. That such a duty and conflict existed was arguable in this case.

Where a financial adviser takes advantage of his or her relative technical superiority by inducing the client into a course of action not in their best interests, it can be argued that unconscionable conduct has occurred. Here the financial advice of the accountants was crucial to the borrower's decision and therefore there were reasonable grounds for arguing a breach of s51AA.

It was not arguable that the bank, even assuming it knew the details of the accountants' relationship with the borrower, took unfair or unconscientious advantage of the borrower. There was nothing dishonest about offering a success fee.

The wife's claims that she reposed trust and confidence in her husband and did not read the finance documents or have them explained to her suggested a claim based on s51AA was arguable.

For more, see the case.

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Media releases / websites

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APRA outlines approach for new international accounting standards (APRA media release, 29/7/04)

The Australian Prudential Regulation Authority (APRA) has indicated the approach it will take during the implementation of International Financial Reporting Standards (IFRS) in Australia. The prudential standards and statistical requirements for authorised deposit-taking institutions, life and general insurance companies will be revised over time in accordance with the new IFRS. The revision will address:

  • the treatment of innovative capital instruments for capital adequacy purposes;
  • the treatment of superannuation fund surpluses and deficits; and
  • the treatment of Excess of Market Value over Net Assets (EMVONA) for life insurance subsidiaries.

For more, see the media release.

APRA proposes improved prudential requirements for lenders mortgage insurance (APRA media release, 9/8/04)

APRA has proposed a new capital framework for lenders mortgage insurers (LMIs) and a tightening of the prudential rules governing the 50% capital concession available to authorised deposit-taking institutions on mortgage-insured loans. The new framework would involve a more risk-sensitive regulatory capital model for the industry and an increase in the minimum capital requirement applicable to LMIs. The capital concession would only be granted once the LMI cover meets APRA requirements.

For more, see the media release.

APRA releases draft prudential standards for BCM (APRA media release, 12/7/04)

APRA has released a draft prudential standard requiring approved deposit-taking institutions and insurers to prepare business continuity management (BCM) plans which prove they have measures in place to cope with events such as terrorist attacks, computer systems failures and the loss of key staff. The BCM is designed to ensure regulated institutions meet their financial and service obligations to depositors and policyholders in the event of material disruption to business operations. Whenever a material disruption is experienced, APRA must be notified within 24 hours.

For more, see the draft standard.

APRA releases new monthly banking statistics (APRA media release, 30/6/04)

APRA has released the first issue of Monthly Banking Statistics, a publication containing select information on the banking business of individual banks, including details of each bank's domestic assets and liabilities. The bulletin is aimed at providing greater market transparency.

For more, see the publication.

APRA revises prudential treatment of capitalised expenses (APRA media release, 22/12/03)

APRA has announced amendments to prudential standards that will require authorised deposit-taking institutions to treat the following capitalised expenses as intangible assets for prudential purposes:

  • loan and lease origination fees and commissions paid to mortgage originators and brokers;
  • capitalisation of securitisation establishment costs;
  • costs associated with debt raisings and other similar transaction related costs; and
  • capitalised expenses of a general nature eg, strategic business development initiatives.

For more, see the media release.

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Risk weighting of mortgage lending (APRA media release, 27/11/03)

APRA has announced changes to the risk weighting of residential mortgage lending for the purpose of clarifying the criteria for receiving a 50% risk weighting concession. The revisions require ADIs to institute the following:

  • procedures to assess the ability of borrowers to meet repayment obligations;
  • verification procedures to substantiate critical application data provided by the borrower;
  • guidelines for assessing the marketability of residential property offered as security for a loan; and
  • policies documenting the requirement for formal property valuation or other means of valuation acceptable as an indication of property value.

For more, see the revised standard.

Reform of card payment systems in Australia (RBA media release, 9/9/04)

The Reserve Bank of Australia (RBA) has designated the EFTPOS debit card payment system as a payment system under the Payment Systems (Regulation) Act 1998 (Cth). Designation allows the RBA to establish standards or an access scheme for the payment system. The RBA has concluded that the current interchange arrangements are not conducive to efficiency of the overall payments system. Meanwhile, the RBA has decided not to designate the ATM system, as many industry participants have desired voluntary reform.

Review of the RBA's annual report (House of Representatives Economics Committee media release, 13/8/04)

The House of Representatives Economics Committee has made three recommendations following its review of the RBA's Annual Report:

  • that the Australian Bureau of Statistics, working with the RBA, develop an efficient, accurate and timely method for the collection of data relating to levels and movements in prices of residential real estate in Australia;
  • that the government meet with the states in order to assess and implement the most appropriate regulatory regime for non-bank lenders, consistent with current regulation of authorised deposit-taking institutions;
  • that the government consider amending the Banking Act 1959 (Cth) to extend the restrictions on board members to include members of non-bank lenders.

For more, see the media release.

International banking statistics for Australia (RBA Bulletin, July 2004)

The Reserve Bank of Australia has released a report which shows Australian banks have experienced a decline in retail deposits and a corresponding increase in foreign liabilities. Net foreign liabilities were equal to 29 per cent of GDP in 2003, which is the second-highest ration among the 38 countries reporting to the Bank for International Settlements.

BBA comments on effective interest rate provisions in International Accounting Standards (BBA media release, 11/8/04)

The British Bankers' Association (BBA) has released a paper which considers the impact of the International Accounting Standards (IAS) and the effective interest rate concept (EIR) in relation to loan products, discounted interest rates, prepayment penalties and behavioural maturities. The IAS discussed in this paper introduce the EIR as a basis of accounting and alter the way banks calculate fees and costs. The paper aims to provide guidance on a practical and sensible way to implement the effective interest rate regime, which all EU listed companies must comply with by 1 January 2005.

For more, see the media release.

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ABA to develop new standards on internet banking (ABA media release, 12/7/04)

The Australian Bankers' Association (ABA) has formed a new taskforce to create banking industry standards for improved authentication of online transactions. The Online Authentication Taskforce, which consists of ABA member banks, will be charged with the task of:

  • assessing authentication needs by transaction type and distribution channel;
  • developing best practice standards for authentication in each category; and
  • leading the implementation of authentication measures for industry compliance.

For more, see the media release.

Bankers reach accord on Basel II rules (BIS media release, 11/5/04)

The Basel Committee of the Bank for International Settlements has reached an agreement on Basel II, the new set of international lending standards. Under Basel II, banks' capital requirements will be determined according to the inherent risk of particular types of loans. The requirements are based on 3 pillars: a formula based on the internal credit ratings that banks assign to borrowers; supervisory reviews of a bank's individual risk profile and management; and increased disclosure, using market discipline as a form of oversight. The standardised and foundation approached will be implemented from year-end 2006, while some of the more complex approaches will be implemented from year-end 2007.

For more, see the media release.

Australia-United States financial services discussions (Treasurer media release, 13/8/04)

The Australian and United States governments will soon begin discussions regarding the integration of the financial services sectors of the two economies. The discussions will focus on issues relating to securities, including cross-border access by foreign collective investment schemes and foreign markets, other such prudential issues and related matters. This follows data revealing that equity investment by United States companies in Australia and Australian companies in the United States both surpassed US$100 billion by December 2003.

Financial Sector Advisory Council Review of the Outcomes of the Financial System Inquiry (Treasurer media release 2/8/04)

The Commonwealth Treasurer has released the Review of the Outcomes of the Financial System Inquiry. The inquiry was instigated to assess reforms to the financial system which began five years ago, including the establishment of the Australian Securities and Investments Commission (ASIC) and APRA. The review found that Australia's financial system is on a firm footing and compares favourably with the rest of the world. It also emphasised the importance of policy and regulatory developments keeping pace with the rapid evolution of the financial system caused by globalisation, convergence and technological change.

Release of Report of Review of Financial Sector Levies (Minister for Revenue and the Assistant Treasurer media release, 7/5/04)

The Minister for Revenue and the Assistant Treasurer, Senator Helen Coonan, has released the Report of the Review of Financial System Levies and announced the government's acceptance of its recommendations. The review addresses the system of fee collection from the financial services sector to fund prudential regulation by APRA, ASIC and the ATO, and recommends that system risk and vertical equity considerations, as well as cost, should be determinative of levies. The government's acceptance is subject to the changes not resulting in rises in levies paid by smaller institutions.

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ASIC provides relief for financial services guides given in time critical situations (ASIC media release, 14/9/04)

ASIC has issued a new class order entitled Information in a Financial Services Guide (FSG) given in a time critical situation. In a time critical situation it may not be practical to provide a FSG before the financial service is provided. In such cases the Corporations Act 2001 (Cth) allows a summary to be given at the time and a FSG within five days. This means the information provided in the FSG may be different than would be given in normal circumstances. The class order provides that the FSG eventually given in a time critical situation need only be current to the time of the earlier statement.

For more, see the media release.

Operators of managed discretionary account services - apply for your licence authorisation (ASIC media release, 9/9/04)

ASIC has announced that, from 30 September 2004, new and existing Australian Financial Services (AFS) licensees will be able to apply for an AFS licence authorisation to provide managed discretionary account (MDA) services to retail clients. Existing AFS licensees that are currently operating MDA services must vary their licence by no later than 10 December 2004.

For more, see the media release.

ASIC proposes ongoing licensing relief for securitisation special purpose vehicles (ASIC media release, 17/8/04)

ASIC has proposed granting relief to special purpose vehicle (SPV) issuers of debentures or interests in a managed investment scheme from the requirement to obtain an AFS licence. The relief would apply to SPVs created for the sole purpose of effecting a single securitisation transaction and in circumstances where the securitisation process is largely predetermined. ASIC is seeking comment on the proposals.

For more, see the media release.

ASIC consults on dollar disclosure (ASIC media release, 10/8/04)

ASIC has issued guidelines explaining how investment and superannuation fund managers can gain exemptions from rules on the disclosure of fees and commission. ASIC will determine that compliance with the new rules would be unreasonably burdensome on a fund manager when the task of complying with the rules is extreme, excessive or out of all proportion to the benefits of dollar disclosure. The policy also offers a two-month extension to financial institutions struggling to comply with the 1 January 2005 deadline. ASIC has invited the public to comment on this policy proposal.

For more, see the media release.

ASIC completes review of Australian managed fund practices: late trading and market timing (ASIC media release, 6/8/04)

Following an extensive review, ASIC has found no evidence of systemic or large-scale use of improper investment practices in the Australian managed funds industry. The review was prompted by concern that practices such as 'late trading' and 'market timing', prevalent in the United States, had also plagued the Australian industry.

For more, see the media release.

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Authorised trustee company reporting relief (ASIC media release, 28/7/04)

ASIC is seeking comment on a proposal to bring an end to the relief enjoyed by authorised trustee corporations from disclosing certain information in their financial reports. The proposal would mean such corporations would need to disclose trust liabilities and the right of indemnity from trust assets in the notes to their financial reports.

For more, see the media release.

ASIC provides relief for agency banking services (ASIC media release, 27/7/04)

ASIC has issued Class Order 04/909, which allows agents appointed by authorised deposit-taking institutions to arrange for the issue of basic deposit products without the need to be licensed or to be formally appointed as an authorised representative under the Corporations Act 2001 (Cth). The Class Order was issued following concern that ADIs often provide basic deposit products through agents such as Australia Post and other outlets, who might otherwise be defined as 'arranging' to issue a financial product within the meaning of the Act.

For more, see the media release.

ASIC provides further guidance on Statements of Advice (ASIC media release, 21/7/04)

ASIC has released a guidance note for financial services licensees on the preparation of Statements of Advice (SOAs). The guidance is intended to encourage licensees to produce clear, concise and effective SOAs. ASIC has also released a new class order, CO 04/0576 Statements of Additional Advice, to facilitate shorter SOAs in the context of an ongoing client relationship.

For more, see the media release.

ASIC announces interim position on transaction costs for managed investment scheme constitutions (ASIC media release, 8/7/04)

ASIC has released its interim position on transaction costs in relation to the constitutions of managed investment schemes. Until 31 December 2004, ASIC will consider waiving the requirement for scheme constitutions to a mechanisms for calculating the transaction cost portion of the price of an interest in the scheme. ASIC will consider each case on its merits. Currently ASIC will be taking a no-action position with respect to schemes without such mechanisms.

For more, see the media release.

ASIC provides relief for payments into insurance brokers s918B accounts (ASIC media release, 9/7/04)

ASIC has declared interim relief for insurance brokers who have received payments from clients that must be established and maintained in an account under s981B of the Corporations Act 2001 (Cth). The relief only applies where the insurance broker holds an AFS licence and reasonably believes that at least part of the payment constitutes client monies.

For more, see the media release.

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ASIC issues four CLERP 9 policies (ASIC media release, 1/7/04)

The ASIC has released two policy statements and two practice notes outlining their approach to implementing the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth) (CLERP 9). The policy statements are Policy Statement 180: Auditor Registration and Revised Policy Statement 173: Disclosure for the on-sale of securities and other financial products. The practice notes are Revised Practice Note 34: Auditors' obligations: reporting to ASIC and Revised Practice Note 55: Transaction-specific disclosure.

For more, see the media release.

Stapled Securities (ASIC media release, 29/6/04)

ASIC has given guidance on the disclosure requirements for issuers of stapled securities. ASIC recommends that disclosure to investors details on:

  • whether the stapling can be undone and, if so, in what circumstances;
  • whether the stapling will be effective to allow compulsory acquisition of one of the stapled securities which may not be the subject of a formal takeover bid; and
  • whether all of the stapled securities are subject to the same laws and, if not, what the expected outcome would be if there was a conflict.

For more, see the media release.

ASIC grants relief for debt factoring arrangements (ASIC information release, 4/5/04)

ASIC has granted relief to persons providing, or advising on, debt factoring arrangements from the requirement to hold an AFS Licence, and from the product disclosure and hawking provisions of the Corporations Act 2001 (Cth). The relief is granted by Class Order 04/239, which defines factoring as an arrangement through which a person acquires debt obligations, such as receivables, at a discount.

For more, see the media release.

Disclosing the impact of international accounting standards: an ASIC guide (ASIC information release, 22/4/04)

ASIC has released a guide to disclosing the impact of the adoption of International Financial Reporting Standards on financial information in disclosure statements. Disclosure documents include prospectuses, product disclosure statements and takeover documents. The new standards will apply to financial reports from 1 January 2005, and according to ASIC, following the guide may minimise the potential for non-compliance with these standards.

For more, see the media release.

Guidance for wholesale foreign financial services providers seeking licensing relief (ASIC media release, 17/2/04)

ASIC has issued practical guidelines for wholesale foreign financial services providers seeking to rely on relief from the requirement to hold an AFS licence. Relief was granted under a number of class orders issued in December 2003 and outlined in Information Release 03-41: ASIC Issues Licensing Relief for Certain Wholesale Foreign Financial Services Providers.

For more, see the media release and guidelines.

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New aircraft registration system (CASA media release, 17/6/04)

The Civil Aviation Safety Authority has announced that from November this year, aircraft registration holders will be required to transfer their aircraft to the new registration system under the Civil Aviation Safety Regulations Part 47. The new system provides that an aircraft's owner is the registration holder, who is responsible for the certificate of registration. However, the certificate is not conclusive evidence of legal title to the aircraft. Other features include a reintroduction of aircraft dealer 'trade plates' and simplified transfer of ownership.

For more, see the media release.

Taskforce recommends national financial literacy body (National Financial Literacy Taskforce release, 31/8/04)

The National Literacy Taskforce has made a preliminary recommendation for the establishment of a national financial literacy body. The body is intended to take a strategic approach to financial literacy, including the promotion of financial education in schools and the workplace and a one-stop-shop consumer information website. The body would also engage in national research and attempt to foster communication between industry, government and consumers.

For more, see the media release.

Money laundering reforms policy paper (Minister for Justice media release, 10/6/04)

The Minister for Justice Chris Ellison has released a paper outlining the Federal Government's policy principles on the implementation of new global anti-money laundering standards. The policy is influenced by the Financial Action Task Force on Money Laundering's Forty Recommendations, and includes the following precepts:

  • effective regulation must be balanced by a sensible approach to the impact on industry;
  • regulation should apply consistently across industry sectors, while acknowledging differing business practices and risk factors; and
  • Australia's systems and procedures should enhance its contribution to global instrumentalities.
International action to tackle aggressive tax planning (ATO media release, 4/5/04)

A Memorandum of Understanding has been signed by the Tax Commissioners of Australia, Canada, the United Kingdom and the United States to establish a joint task force to combat aggressive tax planning. The task force will seek to identify promoters and developers of tax minimisation schemes that use financial products and arrangements, often in an international context, to reduce the tax liabilities of individuals and corporations. The task force will assist each nation's domestic tax agency in addressing these issues.

Proposed amendments to IFRS 3: business combinations (IASB media release, 29/4/04)

The International Accounting Standards Board (IASB) has released for public comment proposed changes to IFRS 3: Business Combinations. The proposed amendments are set out in Exposure Draft: Combinations by Contract Alone of Involving Mutual Entities and describe the accounting consequences of combinations involving mutual entities or combinations in which separate entities are brought together by contract alone.

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IASB issues exposure draft of proposed amendment to IAS 39 (IASB media release, 21/4/04)

The IASB has released an Exposure Draft on a proposed limited amendment to IAS 39 Financial Instruments: Recognition and Measurement on The Fair Value Option. The Draft proposes to require options to only be applied to assets and liabilities whose fair value is verifiable and to limit the types of assets and liabilities to which the option may be applied. The amendments are in response to concerns that the fair value option might be used inappropriately.

AASB Chairman announces year 2005 target achieved (AASB media release, 16/7/04)

Chairman David Boymal has announced that the Australian Accounting Standards Board (AASB) has formally made the 31 March 2004 tranche of International Accounting Standards into Australian Accounting Standards. Accordingly, these standards will enter Australian law on or after 1 January 2005.

New AASB accounting standard (AASB media release, 21/4/04)

The AASB has announced the gazettal of accounting standard AASB 1047 Disclosing the Impacts of Adopting Australian Equivalents to International Financial Reporting Standards. The standard aims to provide information to users of financial reports about the impacts of changes in accounting policies in the lead up to the adoption of international standards. In 2004, reporting entities will be required to explain how the transition to new accounting standards is being managed and, in 2005, estimates must be given of the impact of the changes on their financial reports.

Tax changes increase opportunities for Australian businesses (Minister for Revenue and the Assistant Treasurer media release, 1/3/04)

The Federal Government will introduce legislation to make current Interest Withholding Tax (IWT) exemptions for payments relating to offshore borrowings consistent with the way companies raise finance. The definitions of debenture and offshore borrowing for IWT purposes will be aligned with the definition of debt for tax purposes, and payments made in respect of Upper Tier 2 capital financial instruments will be treated as interest for IWT purposes. Additionally, debentures transferred from Australian subsidiaries of foreign banks to Australian branches will retain eligibility for IWT exemption.

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Legislation update

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FSR update
New offence - dishonestly dealing in personal financial information

The Crimes Legislation Amendment (Telecommunications Offences and Other Measures) Act (No. 2) 2004 (Cth) has been assented to. The Act inserts a new Part 10.8 - 'Financial information offences' - into Chapter 10 of the Criminal Code. This Part criminalises dishonestly obtaining, or dealing in, personal financial information without the consent of the person to whom the information relates. It also criminalises the possession, control or importation of a thing with the intention of using it to commit such an offence.

For more, see the Act.

Consumer Credit Code amendments

The draft Consumer Credit (Queensland) Amendment Bill 2004 and the draft Consumer Credit Amendment Regulation (No. 1) 2004 have been prepared to implement the e-commerce recommendations of the Post Implementation Review of the Consumer Credit Code (UCCC). The Bills address uncertainty in the market about the interaction between the UCCC and the electronic transactions legislation in each jurisdiction. The proposed amendments seek to recognise electronic transactions by harmonising the UCCC with the electronic transactions laws.

ADI levy amendments

The Authorised Non-operating Holding Companies Supervisory Levy Imposition Amendment Bill 2004 (Cth) has been introduced to the House of Representatives. The Bill proposes to separate the authorised deposit-taking institutions supervisory levy into a restricted and an unrestricted component. The Bill will also make changes to the statutory upper limit applying to the levy for the 2005-06 financial year and the calculation of the indexation factor used to the statutory upper limits applying in later years.

For more, see the Bill.

Tougher laws to stop bankrupts living the high life (Attorney-General media release no. 74/04, 14/5/04)

The Federal Government released a draft Bill aimed at preventing high income earners from avoiding bankruptcy debts. The changes will allow the trustee in bankruptcy to recover assets held in the name of the bankrupt's spouse or another party, where the bankrupt has paid for and takes benefit from the assets. Additionally, the trustee may set aside transactions between family members aimed at circumventing creditors. The draft legislation has been referred to the House of Representatives Standing Committee on Legal and Constitutional Affairs.

CPA Australia, the Institute of Chartered Accountants in Australia and Professions Australia have criticised the reforms as "cracking a nut with a sledge hammer". They believe the changes could undermine entrepreneurial activity and that the ATO should use its existing powers to prosecute tax cheats. Community legal centres have also opposed the draft Bill out of concern that it will enable overzealous bankruptcy trustees to recover assets, such as the family home, at the expense of a bankrupt's spouse and children.

On 23 July 2004 the Attorney General, Phillip Ruddock, withdrew and revised the draft Bill following industry criticism. Changes to be addressed by the government include the reversal of the onus of proof that a bankrupt had a 'tainted purpose' in transferring assets and determining time limits on how far back bankruptcy trustees could look in seeking to recover transferred property.

The House of Representatives Standing Committee on Legal and Constitutional Affairs has tabled a report of its inquiry into the draft bill.

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Bankruptcy and Family Law Legislation Amendment Bill 2004 (Cth)

The Bankruptcy and Family Law Legislation Amendment Bill 2004 (Cth) has been introduced to the House of Representatives. The Bill proposes to amend the Bankruptcy Act 1966 (Cth) and the Family Law Act 1975 (Cth) to eliminate the uncertainty that can arise when creditors and a non-bankrupt spouse have competing claims to the assets of a bankrupt. The Bill allows concurrent bankruptcy and family law proceedings to be tried together, excludes financial agreements from the definition of maintenance agreement in the Bankruptcy Act 1966 (Cth) and proposes a new act of bankruptcy, arising when a person becomes insolvent due to assets being transferred under a financial agreement.

For more, see the Bill.

Amendment to Farm Debt Mediation Act 1994 (NSW)

The National Competition Policy Health and Other Amendments (Commonwealth Financial Penalties) Act 2004 (NSW) has been passed by parliament and assented. The Act amends the Farm Debt Mediation Act 1994 (NSW) by requiring creditors seeking to enforce a farm debt to attempt mediation with the farmer. The purpose of the legislation is to avoid the imposition of Commonwealth competition payment penalties.

For more, see the Act.

Capital gains tax changes announced (Minister for Revenue and the Assistant Treasurer media release no. 29/04, 11/5/04)

The Federal Government has announced proposed changes to the capital gains tax (CGT) regime. Insolvency practitioners will be empowered to declare shares and other securities in a company worthless for CGT purposes, whereas previously only liquidators had this power. Such a declaration gives rise to a CGT event allowing shareholder to choose to make a capital loss. The rules also provide for an automatic CGT rollover for mergers of superannuation funds occurring due tot the government's new trustee licensing requirements.

State Revenue Legislation Amendment Act 2004 (NSW)

Earlier this year, the NSW government passed the State Revenue Legislation Amendment Act 2004 (NSW). The Act introduces a new stamp duty of 2.25% on the sale of investment properties where the sale price exceeds the original purchase price to the vendor by 12% or more. In addition, the Act abolishes the threshold for land tax while lowering the rate and granted a first home owner's stamp duty exemption for properties less than $500,000 in value. The premium property tax has been replaced with a 7% tax on residential properties sold for over $3 million.

The Property Council of Australia has warned the NSW government's plans for new stamp duty laws could force vendors to pay duty on the sale of property prior to receiving money from the purchaser. Executive director Ken Morrison has criticised the legislation as being hastily drafted and containing numerous errors. Additionally, he warned that the legislation would seriously threaten an already softening property market.

For more, see the Act.

Taxation Laws (Clearing and Settlement Facility Support) Act 2004 (Cth)

The Taxation Laws (Clearing and Settlement Facility Support) Act 2004 (Cth) has received royal assent. The Act ensures that payments out of the National Guarantee Fund (NGF) under the Corporations Act 2001 (Cth) do not have taxation consequences under Commonwealth income tax or GST laws. The NGF provides clearing and settlement support through financial backing for ASX-related clearing houses and distributes compensation to investors sustaining losses.

For more, see the Act.

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Improved tax loss recoupment rules for companies (Minister for Revenue and the Assistant Treasurer media release no. 21/04, 7/4/04)

The Federal Government plans to introduce legislation to simply the tests that companies must pass in order to claim losses reducing their tax bills. The tests seek to ensure losses are only available for those who incurred them in the first place, rather than new owners. The first test is the 'continuity of ownership' test, which now public companies to trace shareholdings over 10% to prove continuity of ownership. If that test is failed, the company can be considered under the 'same business test' which determines whether, despite a change in ownership, the business itself has not changed.

Corporations Amendment Regulations (No. 7) 2004 (Cth)

The Corporations Amendment Regulations (No. 7) 2004 (Cth) have commenced operation. The Regulations amend the Corporations Regulations 2001 (Cth) to:

  • add certain disclosure requirements for annual directors' reports;
  • provide practical experience and educational requirements for registration as a registered company auditor;
  • provide for registration of authorised audit companies; and
  • provide conditions for registration of authorised audit companies and company auditors.

For more, see the Regulations.

Corporations Amendment Regulations (No. 2) 2004 (Cth)

The Corporations Amendment Regulations (No. 2) 2004 (Cth) have been gazetted. The Regulations amend the Corporations Regulations 2001 (Cth) and support reforms introduced by the Financial Services Reform Act 2001 (Cth). Specifically the Regulations aim to:

  • improve the operation of the disclosure regime;
  • specify a number of things that are not financial products; and
  • provide exemptions from the licensing regime.

For more, see the Regulations.

Partnership Amendment (Venture Capital Funds) Act 2004 (NSW)

The Partnership Amendment (Venture Capital Funds) Act 2004 (NSW) has been passed by parliament and assented. The Act provides for the formation of a new corporate identity, the incorporated limited partnership, which can be used as a structure for venture capital investment funds. The Act is intended to complement Commonwealth venture capital tax legislation and attract foreign capital to NSW.

For more, see the Act.

Powers of Attorney Act 2003 (NSW)

The Powers of Attorney Act 2003 (NSW) has come into force. The Act removes the statutory provisions governing the Conveyancing Act 1919 (NSW) and substantially re-enacts them, with some changes. The former 'protected power of attorney' is now an 'enduring power of attorney' and requires signature by the attorney before the power is granted. Among other things, the Act clarifies that powers of attorney are only registrable if they affect land, expands the category of 'prescribed witnesses' and recognises powers of attorney made in other states as valid in NSW.

For more, see the Act.

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New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 (Cth)

The New Business Tax System (Taxation of Financial Arrangements) Act (No. 1) 2003 (Cth) has received royal assent. The Act specifies the tax treatment of foreign currency gains and losses and provides for the translation of foreign currency amounts into Australian currency. The provisions allow taxpayers to choose one of 6 ways for their foreign currency transactions to be treated by the Tax Office. These options are aimed at reducing compliance costs for taxpayers.

For more, see the Act.

New International Tax Arrangements Act 2004 (Cth)

The New International Tax Arrangements Act 2004 (Cth) has been assented to and has commenced operation. Among other things, the Act inserts a new s128FA into the Income Tax Assessment Act 1936 (Cth). Section 128FA provides that interest paid by the trustee of an eligible unit trust under debentures the subject of a public offer, will be exempt from interest withholding tax in the same way as a company is exempt under s128F. An eligible unit trust is a trust whose units are:

  • listed for quotation in the official list of a stock exchange;
  • offered to the public;
  • held by 50 or more persons,
  • or else have all its units held by some combination of other eligible unit trusts, complying approved deposit funds, pooled superannuation trusts, complying superannuation funds, life insurance companies or their qualifying subsidiaries.
WA mortgage duty amendments

On 1 January 2004, the Business Tax Review (Assessment) Act (No. 2) 2003 (WA) came into force. The Act is the result of a thorough review of the business tax system, and makes substantial amendments to the Stamp Act 1921 (WA). The new provisions, among other things, will narrow the current base that imposes duty on a wide range of documents that were used to secure the payment of money for any type of financial accommodation, such as a guarantee or an unsecured loan agreement. These documents will only attract duty if they are a "mortgage" and the mortgage is security for an "advance", likening the new provisions to those currently operating in NSW, Victoria, Queensland and Tasmania.

Acts Amendment and Repeal (Competition Policy) Act 2003 (WA)

The WA parliament has passed the Acts Amendment and Repeal (Competition Policy) Act 2003 (WA), which substantially repeals the Hire Purchase Act 1959 (WA). The new rules relating to hire purchases will regulate some of the actions of the financier/owner when the hirer is in default and when goods are repossessed, but will not regulate contract formation and content. The new rules are now in operation.

Financial Sector Legislation Amendment Act 2003 (Cth)

The Financial Sector Legislation Amendment Act 2003 (Cth) has received royal assent. The Act amends the Banking Act 1959 (Cth) to require directors and senior managers of authorised deposit-taking institutions and non-operating holding companies to satisfy a 'fit and proper person' test. Among other provisions, APRA is empowered to remove auditors that do not comply with new provisions which will be consistent with those regulating auditors under the Insurance Act 1973 (Cth).

 

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