Key issues arising from the Essential Legal and Regulatory Update held on 13 March 2018

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Sponsored by Clyde & Co

Members of Governance Institute had an opportunity to hear from three key regulators at the Annual Legal and Regulatory Update held on 13 March at the offices of sponsor  Clyde & Co. Attendees received presentations from:

  • John Price, Commissioner, Australian Securities and Investments Commission (ASIC)
  • Kevin Lewis, Chief Compliance Officer, ASX Limited
  • Sarah Court, Commissioner, Australian Competition and Consumer Commission (ACCC)
  • David Locke, Assistant Commissioner, Australian Charities and Not-for-profits Commission (ACNC).

John Price gave an overview of the key work conducted by ASIC in 2017 This included a focus on annual general meetings and cyber resilience. ASIC considers cyber resilience vital for all organisations as it represents a key threat to strategic priorities. John referred to ASIC Report 555 Cyber resilience of firms in Australia’s financial markets. Focus areas for 2018 for ASIC are:

  • Culture and conduct – aligning conduct in a market based system with investor and consumer trust and confidence
  • Building the financial capability of consumers
  • Digital disruption and cyber resilience in financial services and markets
  • Globalisation of financial markets, products and services; and
  • Structural and demographic change in our financial system enhancing the role of market based funding.

As part of its work on annual general meetings in 2017 ASIC identified the issue of voting by a show of hands as a practice which raises concerns that this method of voting does not reflect the true will of all members.

“ASIC encourages companies to consider conducting a poll on all resolutions as a matter of good corporate governance.” John said.

Kevin Lewis of ASX reported on recent changes to the ASX Listing Rules and guidance notes and provided a summary of the upcoming rule and guidance note changes expected in 2018.

Recently, important changes have been made to the ASX admission requirements.

‘ASX has an absolute discretion in deciding whether or not to admit an entity to the official list and quote its securities.’ Kevin said. ‘ASX exercises this discretion to reject listing applications and the ASX website publishes the reasons for declining listings and waiver applications, on an anonymous basis.

Common reasons for rejecting listing applications include:

  • Boards with no ASX or industry experience or who contain promoters, directors or advisors with whom ASX has had prior unacceptable dealings
  • Concerns about solvency/adequacy of capital raising or where the company has an unconvincing business model or where there are doubts over the legality of the business
  • Companies with governance ‘red flags’ such as controlling shareholders ‘seeding’ the board with spouses and advisors
  • Companies with an unacceptably short operating history or that are little more than concepts or ideas
  • Companies refused a listing on another exchange or which are of concern to regulators or which have unacceptable structures or operations.

Commissioner Sarah Court of the ACCC highlighted the challenges facing the regulator in 2018. The issue of penalties will be a focus for the ACCC with many commentators arguing that penalties imposed against large businesses for breaches of the competition and consumer law provisions are inadequate when compared with penalties in other jurisdictions. The Federal Government is currently reviewing the issue of penalties under the Australian Consumer Law to ensure that they are sufficiently punitive and not considered  ‘just a cost of doing business’.

Finally, David Locke, Assistant Commissioner, ACNC, spoke on the recent work of the ACNC and discussed a review of the ACNC Acts currently underway by the review panel which consists of Patrick McLure AO, Greg Hammond OAM. Su McCluskey and Dre Mathew Turnour. The ACNC has lodged its own submission to the review in which it submits that overall the legislation has been workable and does not require wholesale change. The Panel is to report to the Government by 31 May 2018.

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