Welcome to Edition 92 of Boardroom Brief.

This is a service specifically targeted at the needs of busy non-executive directors. We aim to give you a “heads up” on the things that matter for NEDs in the week ahead – all in two minutes or less.

YOUR KEY BOARDROOM BRIEF

Whistleblower Update. On 6 December 2018, the Senate passed (with amendments) the Whistleblower Bill, which standardises and bolsters cross-sectoral protections available to whistleblowers. The Bill must pass the House of Representatives in the same form before it can receive royal assent. As Parliament has closed for the summer break, the earliest the reforms can apply is 1 July 2019. Directors of companies impacted by the reforms should think afresh how their companies will comply with the new (and onerous) requirements. This will include careful implementation and roll-out of the company’s whistleblower program, so that it is well positioned to iron out any issues identified at an early stage. See G+T Insight article “Whistleblower reform bill progresses to the next stage” for a re-cap of the reforms and an overview of the latest amendments.

Major financial reporting changes and market communication. On 3 December 2018, ASIC confirmed its focus areas for 31 December 2018 financial reports of listed entities and other entities of public interest with many stakeholders, calling on companies to focus on new requirements that can materially affect reported assets, liabilities and profits. Major new accounting standards (primarily relating to revenue recognition and financial instrument values) are expected to have the greatest impact. Directors should ensure that their companies are prepared for the new standards and inform the market of the impact on reported results, including confirming instances of no material impact. Directors are primarily responsible for the quality of the financial report and should ensure appropriate processes and records support the financial information provided. See ASIC’s media release for more detail on ASIC’s review focus of selected half-year and full-year reports.

ASIC publishes 2017-18 regulatory costs. On 5 December 2018, ASIC published the industry funding levies to apply for the 2017–18 financial year (with individual levies to vary according to sector, entity size and business activity levels). This is the first year of a new industry funding model that requires ASIC to recover the actual amount spent in regulating the industry sectors under its jurisdiction, which ASIC has calculated to be $236.6 million. ASIC will issue invoices in early 2019. See ASIC’s media release.

Government comments on Q1 national accounts. In the Treasurer of the Commonwealth’s media release, the September National Accounts were reported to show a 27th consecutive year of economic growth, with real GDP having grown by 0.3% over the quarter - higher than the OECD average and all of the G7 nations except the US. This broad-based economic growth has been partially offset by a significant fall in mining investment as the last of the major LNG projects near completion. New public investment grew by 5.1% in the quarter, with the Government's $75 billion infrastructure rollout to see public investment continue.

Energy market misconduct reforms. Last week, the Government introduced into Parliament the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2018. This so-called “big stick” approach to regulation seeks to address the retail, wholesale and contract market issues identified by the ACCC’s energy market review. Prohibited energy market misconduct will be defined and a greater range of remedies will be available to the ACCC where prohibited misconduct is found. See the Government’s joint media release and the Explanatory Memorandum for more information. While Directors of energy-consuming businesses (and consumers themselves) will find a lot to support in the legislation, it does represent a very marked policy shift away from faith in market mechanisms and towards industry regulation – and if this shift takes hold more generally in response to populist urges, other industries could be affected. 

ASX Group Activity Report for November 2018. According to ASX’s Group Activity Monthly Report, total capital raised during November was $23.2 billion, up 215% on the previous corresponding period (pcp). The average number of daily trades was 17% higher than the pcp and the average daily value traded on-market was $4.7 billion, 11% higher than the pcp. Average daily options volume was up 5% on the pcp, while the value of securities held in CHESS was 2% lower.

GST Act receives royal assent. Click here for our previous summary on the GST reforms.

THE WEEK AHEAD

Prospect of a full-scale trade war looms and continues to unnerve investors. Global financial markets dived last week when reality sunk in that the ‘deal’ struck by President Donald Trump and President Xi Jinping in Buenos Aires was no more than a commitment to talk - with even the Trump administration disagreeing on what happened. Ructions in the bond market, US-China trade talk chaos and uncertainty about the US economic outlook left investors overwhelmed and fleeing for the sidelines, with slowing economic growth in Europe and Asia heightening concern about the global economic outlook heading into 2019. Market pessimism seems at odds with President Trump’s view that trade wars are a good thing and that his tariffs and tax cuts are “making America great again”.

UK Parliament to vote on Brexit Deal tomorrow. The decision will undoubtedly have far-reaching consequences, with a no deal being a disaster for both parties - so if voted down, Prime Minister Teresa May’s only practical option would be to return to Brussels and test their resolve not to renegotiate. A defeat for May might even trigger a leadership spill given the calls to quit she has been facing in recent weeks.