Australian Regulatory Compliance Review

Spam Act action by ACMA: Vodafone and 3 others

The Australian Communications and Media Authority (ACMA) has accepted enforceable undertakings and payments from three companies—Vodafone Hutchison Australia Pty Limited (VHA), New Dialogue Pty Ltd (New Dialogue), Big Mobile Pty Ltd (Big Mobile)—and issued a formal warning to Coca-Cola South Pacific Pty Ltd (CCSP) arising from alleged breaches of the Spam Act 2003 in a marketing campaign that promoted certain Coca-Cola products through SMS.

VHA's enforceable undertaking included a financial component of $110,000. The undertaking was offered by VHA in response to three ACMA investigations into alleged breaches of the Spam Act (including the Coca-Cola marketing campaign). VHA has undertaken to appoint an independent auditor to monitor Spam Act compliance and to make recommendations to improve Spam Act compliance, to be implemented by VHA. VHA has also undertaken to provide Spam Act training for all employees.

The ACMA has also accepted enforceable undertakings from media agency New Dialogue and content aggregator Big Mobile in relation to the Coca-Cola marketing campaign. In accordance with its enforceable undertaking, New Dialogue has paid an amount of $22,000. Big Mobile has undertaken to pay compensation to each recipient of any SMS message that breaches the Spam Act during the term of the enforceable undertaking (12 months).

ACMA has also a formal warning to CCSP for causing commercial electronic messages to be sent without an unsubscribe facility and not providing contact information, as required under the Spam Act.

ASIC targets unsolicited credit cards: NAB agrees to deactivate cards

ASIC has reminded financial institutions of the prohibition in Section 12DL of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) against the sending of unsolicited credit and debit cards by annnouncing the terms of National Australia Bank's response to ASIC's concerns with National Australia Bank (NAB)'s distribution of American Express credit cards as ‘companion’ cards to NAB Qantas Gold account customers. ASIC was concerned that the distribution was unsolicited and potentially in breach of section 12DL .

ASIC was concerned because the distribution of American Express cards was not made in response to a request in writing from customers, and involved the sending of a companion card to its Qantas Gold Card which was an additional card, and not a card sent in renewal, replacement or substitution of an existing card.

In response to ASIC’s concerns, NAB is writing to all of its Qantas Gold account customers. NAB will either give customers who have already used the companion cards the choice not to retain the card (via an opt-out process) or give customers who have not used the companion cards the opportunity to confirm that they wish to retain the card in writing (via an opt-in process), otherwise the companion card will be automatically deactivated.

In both instances, customers’ NAB Qantas Gold accounts will remain open and their Qantas Gold MasterCards or Visa cards will continue to work.

Directors' personal liability principles

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, has announced that the Ministerial Council for Corporations (MINCO) has agreed on a set of principles by which all jurisdictions will audit their legislative provisions that deal with personal liability on company directors as the next step towards achieving consistency across Australia on the laws that impose personal liability on directors.

Upon completion of the audit, the next step for all jurisdictions will be to move to amend any laws that do not adhere to the agreed principles.

The principles are:

• 1.Where a corporation contravenes a statutory requirement, the corporation should be held liable in the first instance.
• 2. Directors should not be liable for corporate fault as a matter of course or by blanket imposition of liability across an entire Act.
• 3. A "designated officer" approach to liability is not suitable for general application.
• 4.The imposition of personal criminal liability on a director for the misconduct of a corporation should be confined to situations where:

  a.there are compelling public policy reasons for doing so (e.g. in terms of the potential for significant public harm that might be caused by the particular corporate offending);

  b.liability of the corporation is not likely on its own to sufficiently promote compliance; and

  c.it is reasonable in all the circumstances for the director to be liable having regard to factors including:
  i.the obligation on the corporation, and in turn the director, is clear;
  ii.the director has the capacity to influence the conduct of the corporation in relation to the offending; and
  iii.there are steps that a reasonable director might take to ensure a corporation's compliance with the legislative obligation.

• 5. Where principle 4 is satisfied and directors' liability is appropriate, directors could be liable where they:

a. have encouraged or assisted in the commission of the offence; or
b.have been negligent or reckless in relation to the corporation's offending.
• 6.In addition, in some instances, it may be appropriate to put directors to proof that they have taken reasonable steps to prevent the corporation's offending if they are not to be personally liable.

Government proposes changes to Franchising Code of Conduct

The Government has responded to reports of the Joint Committee on Corporations and Financial Services and the Senate Standing Committee on Economics by announcing that it will strengthen the Franchising Code of Conduct and the unconscionable conduct provisions of the Trade Practices Act to give small businesses greater protection from anti-competitive behaviour by more powerful businesses. 

Amendments to the Trade Practices Act will make it clear that protection from unconscionable conduct relates not only to the process of settling a contract but to the terms and conditions of the contract and the ongoing behaviour of the parties to the contract.

Penalties of up to $1.1 million for corporations and $220,000 for individuals will apply to anyone engaging in unconscionable conduct or making false or misleading representations.

These penalties will apply upon the commencement of the Australian Consumer Law that is now before the Parliament. The ACL will not commence before 1 July 2010.

The Government will empower the Australian Competition and Consumer Commission (ACCC) to conduct random audits under the Franchising Code and other mandatory codes and to seek redress on behalf of all franchisees who are party to an agreement.

The Government will also empower the ACCC to issue public warnings about rogue or unscrupulous franchisors.

The Franchising Code will be amended to state that nothing in the Code limits any common law requirement of good faith in relation to a franchise agreement to which the Code applies.

Amendments to the Franchising Code will also clarify obligations on the parties in respect of end-of-term arrangements and mediation.

The Government will establish an expert panel to inquire into and report on the need to introduce into the Franchising Code any further provisions to prevent specific behaviours that are inappropriate in a franchising arrangement.

The expert panel will also consider whether a list of examples of unconscionable conduct or a statement of principles of what constitutes unconscionable conduct should be incorporated into the Trade Practices Act.

The panel, to report by the end of January 2010, will consult with franchising and retail tenancy representatives, small business organisations, the ACCC and other interested parties.

Superannuation clearing house service for small business

The Minister for Superannuation, Chris Bowen MP, and Minister for Small Business, Craig Emerson MP, have announced that the Government will deliver a free superannuation clearing house service for small business through Medicare Australia.

The clearing house service will be available for small businesses with less than 20 employees from July 2010.

Eligible small businesses will register for the service on-line from May 2010 and thereafter their superannuation contributions will be paid to a single location (the clearing house) which will forward them on to the nominated superannuation funds.

Small businesses that choose to use the clearing house service will have their legal obligation to make superannuation contributions discharged when payment of the correct amount is made to the clearing house.

Employers will also be able to pass on choice of fund nominations to the clearing house for processing.

Medicare Australia will develop an online system for registration and on-going payments, with payments initially being made via electronic funds transfer (EFT).

Austrac issues first remedial direction

AUSTRAC has issued its first remedial direction for non-compliance with the AML/CTF Act.

The direction was issued to Ms Mojgan Zojaji, trading as Little Persia, a remittance service provider, for failure to adopt and maintain an AML/CTF program.

The direction stipulates that Little Persia has 28 days to submit to AUSTRAC a written AML/CTF program that addresses specified matters.

Eligible Emissions units as Financial Products: Draft Regulations

The Government has decided that eligible emissions units under the Carbon Pollution Reduction Scheme will be financial products for the purpose of the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001.

Treasury is consulting interested parties about draft regulations which contain adjustments to the financial product regime so that it fits the characteristics of eligible emissions units and does not involve unnecessary compliance costs.

Funded class actions get ASIC relief

To avoid any uncertainty arising from Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147, ASIC has announced its intention to grant transitional relief to lawyers and litigation funders involved in legal proceedings structured as funded class actions.

The relief, which will apply until 30 June 2010, is from the requirements that would otherwise apply to funded class actions as ‘managed investment schemes’ under Chapter 5C and Chapter 7 of the Corporations Act 2001 (the Act). These requirements include:

• appointing an AFS licensed public company as 'responsible entity' to operate the scheme
• adopting a complying constitution and compliance plan for the scheme
• registering the scheme with ASIC
• preparing a Product Disclosure Statement for the scheme
• providing ongoing disclosure to members of the scheme.

Regulation of food safety

The Productivity Commission has published a draft research report on the Regulation of Food Safety.

The Report highlights the lack of uniformity in food safety standards and the administration and enforcement of food safety regulation in all levels of Australian government.

The Report also analyses meat, egg, dairy and seafood production.and import and export regulations.

The final report will be prepared after submissions have been received and will be forwarded to the overnment by 16 December 2009.

Commonwealth Bank of Australia pays $100,000 fine for breach of continuous disclosure law

This article by me was first published in Complinet.

On 16 December 2008 as the Commonwealth Bank of Australia (CBA) was attempting to close a AU$2 billion capital raising it received updated information about its impairment expenses. The issue was abandoned and CBA blamed its adviser for telling potential investors of the impairment expense before the rest of the market.

The Australian Securities and Investments Commission (ASIC) issued an infringement notice to CBA alleging it had failed to notify the Australian Securities Exchange (ASX) after becoming aware of information about its expected loan impairment expense (LIE) to gross loans and acceptances ratio for the financial year ending 30 June 2009.

On 14 October 2009 CBA paid a penalty of $100,000 to ASIC relating to the Bank’s alleged failure to comply with the continuous disclosure obligations in the Corporations Act 2001 (the Corporations Act).

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