Archived News for Finance Sector Professionals - January, 2012

ASIC has permanently banned a former South Australian company director from providing financial services after he dishonestly obtained more than $400,000 from clients over a two-year period.

The action against Craig John Horsell, of Adelaide, follows an ASIC investigation into his time as an employee and a director of insurance businesses Horsell International Pty Ltd (HIPL) and PSC Horsell Insurance Brokers Pty Ltd (PHIB) between 22 January 2007 and 23 July 2010.

ASIC’s investigation found that between 7 September 2007 and 4 May 2010 Mr Horsell acted dishonestly and in breach of financial services laws when he authorised the transfers of 72 insurance premium payments from clients totalling $409,635.24 into his bank account but did not purchase the insurance products as requested by the clients.

Mr Horsell’s actions could have had a detrimental impact on a client if an event giving rise to a loss had occurred while they were uninsured.

ASIC banned Mr Horsell in order to protect the public, deter similar conduct and maintain consumer confidence in the financial services sector.

HIPL and/or PHIB have recovered all outstanding funds from Mr Horsell and all insurance covers that were suspected of either being fabricated or compromised by Mr Horsell’s conduct have been placed or reinstated so that no clients have faced any financial losses.

Mr Horsell’s conduct was brought to ASIC’s attention by HIPL which cooperated fully with ASIC’s investigation.

Mr Horsell has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

The most recent Deloitte CFO Survey finds that concerns about the global economy remain at the forefront of many CFOs’ minds, with more than a third identifying global economic uncertainty as their key concern for the coming year and 79% saying the level of uncertainty was above normal.

The Federal Government has announced it will be conducting a new Superannuation Roundtable to consider points raised in the Tax Forum held last year.

The CEO of the Financial Services Council and former leader of the NSW Liberal Party, John Brogden, has been appointed chairman of the NSW government’s property development corporation, Landcom. He replaces William Kirkby Jones who resigned from the position at the end of 2011 after 14 years in the role.  Mr Brogden will continue in his role with the Financial Services Council but will step down as a director of the Sydney Ports Corporation.

The Australian Securities Exchange (ASX), and FFastFill PLC, a provider of Software as a Service (SaaS) to the global financial marketplace, have announced that FFastFill will be adding its globally renowned SaaS infrastructure and services within ASX’s new data and co-location centre - the ASX Australian Liquidity Centre (ALC). 

The Australian Securities & Investment Commission has conducted a trial of finacial advice which has found that only 3% of financial plans offered to clients were valuable.

The Corporations and Markets Advisory Committee (CMAMAC) has released its report on derivatives, finding  that the legislative treatment is appropriate and effective.

The Australian Competition and Consumer Commission has granted the Australian Payments Clearing Association (APCA) interim authorisation to continue operating certain provisions of its High Value Clearing System (HVCS) Regulations and Procedures.

The International Monetary Fund (IMF) has downgraded its growth forecasts in its World Economic Outlook update citing growing global economic uncertainty, the European crisis and the continually deteriorating global financial conditions.

The Australian Bureau of Statistics (ABS) has released its Consumer Price Index (CPI) figures for the December 2011 quarter, finding inflation remains unchanged.

The Australian Government’s Personal Property Securities Register (PPSR)  will commence operation on 30 January 2012, providing people with a way of checking whether the goods they are buying have a security interest over them—such as cars, boats or machinery—almost anything except real estate. The PPSR will replace 40 registers and 70 laws around Australia.

ASIC has released new disclosure benchmarks and principles for infrastructure entities to improve investor awareness of the risks associated with investing in these products.

The risks of investing in infrastructure entities were highlighted during the global financial crisis. The response of retail investors to loss of capital experienced during the crisis indicated that existing disclosure did not effectively communicate an understanding of the characteristics and risks of infrastructure entities to investors.

Regulatory Guide 231 Infrastructure entities: Improving disclosure for retail investors (RG 231) outlines nine benchmarks and eleven disclosure principles that apply to infrastructure entities, aimed at addressing the risks peculiar to infrastructure entities.

ASIC Chairman Greg Medcraft said, ‘It is one of ASIC’s priorities to ensure that investors and financial consumers are confident and fully informed before they invest in financial products. Improved investor understanding of the infrastructure sector and effective disclosure of investment risk is particularly important because there is an increasing tendency for infrastructure to be funded by capital raised from the general public.

‘These disclosure benchmarks and principles, developed after an extensive period of industry consultation, respond to concerns of many retail investors that they did not properly understand the complex business and operational characteristics or risks associated with infrastructure entities’, said Mr Medcraft.

RG 231 is the next in a series of ‘if not, why not’ disclosure benchmarks for sectors that pose particular risks to consumers to ensure they are informed and can be confident when making investment decisions. It follows Regulatory Guide 227 Over-the-counter contracts for difference: Improving disclosure for retail investors (RG 227) which provided benchmarks for the over-the-counter contracts for difference sector.

Infrastructure entities must disclose whether they meet the benchmarks and if not, why not. ‘Why not’ means explaining how a responsible entity deals with the business factor or the issue underlying the benchmark. The benchmarks relate to topics such as corporate structure and management, remuneration of management, classes of units and shares, substantial related party transactions, cash flow forecast, base-case financial model, performance and forecast, distributions and updating the unit price.

Infrastructure entities are also required to disclose against 11 disclosure principles addressing key relationships, management and performance fees, related party transactions, financial ratios, capital expenditure and debt maturities, foreign exchange and interest rate hedging, base-case financial model, valuations, distribution policy, withdrawal policy, and portfolio diversification.

In addition to the benchmarks and disclosure principles, RG 231 also outlines the standards ASIC expects responsible entities to meet when advertising infrastructure entities to retail investors. These standards are consistent with draft guidelines for the advertising of financial products and financial advice, released in November 2011.

Responsible entities of infrastructure entities must disclose the benchmark and disclosure principle information in any existing and new disclosure dated on or after 1 July 2012.

ASIC has also published an investor guide for retail investors and financial consumers on the MoneySmart website to provide more information about this product class.

ASIC has released a consultation paper seeking public comment about its proposals on administering the transfer determination provisions of Chapter 5D of the Corporations Act 2001 (Corporations Act) for trustee companies providing traditional trustee company services (traditional services).

The power to make a transfer determination is a new power for ASIC and is part of the amendments to the Corporations Act enacted in November 2009 to regulate traditional services provided by trustee companies previously authorised under state and territory legislation.

ASIC’s Consultation Paper 173 Trustee companies: Transfer determinations bv ASIC (CP 173) sets out proposals on what information it will require to properly consider a transfer determination. ASIC plans guidance in this area in order to assist trustee companies to efficiently prepare and supply relevant material to ASIC with their applications for a transfer determination.

CP 173 deals with the three types of transfer determination applications it anticipates receiving from trustee companies performing traditional services such as an estate management function. These are:

Submissions to the Senate Economics Committee inquiry the Future of Financial Advice bills close on 27 January.

The Australian Government has announced that the Productivity Commission will conduct an eight month inquiry into default superannuation funds in modern awards. The Government indicated that the inquiry is expected to commence in early February 2012, after formal receipt by the Commission of the terms of reference.

Prime Minister Julia Gillard has announced she is confident of an imminent rate cut to offset the lowest job growth figures since the early 90’s.

ANZ has published its first independent interest rate review, announcing that variable interest rates for retail mortgages and small business lending will remain unchanged.

World banking giant HSBC has released a positive review of Australia’s economic fundamentals in its Australia in 2012: The ‘lucky country looks set for another solid year’ report, which suggest that solid macroeconomic policies and the ongoing commodities boom positions the country to weather any global financial storms.

The Australian Trade Commission (ATC) has released research that shows the Australian financial market remained strong and well positioned to capatalise on the country’s economic growth.

Australia has been placed third in the Heritage Foundation’s 2012 Index of Economic Freedom, scoring an overall 83.1, up 0.6 from last years report.