In announcing its focus areas for 30 June 2017 financial reports of listed entities and other entities of public interest with many stakeholders, ASIC has continued to call on companies to focus on giving information for users of financial reports that is useful and meaningful.

Key issues highlighted by ASIC include:

  • values of assets and accounting policy choices – ASIC has noted that it continues to see companies use unrealistic assumptions in testing the value of assets or apply inappropriate approaches in areas such as revenue recognition;
  • the role of directors and management – companies should have appropriate processes and records to support financial information (rather than relying on the auditor) and should apply appropriate experience and expertise particularly in more complex areas such as accounting estimates, accounting policies and recognition.  While directors are not expected to be accounting experts, they should seek explanation and advice and, where appropriate, challenge accounting estimates and treatments, particularly where the treatment does not reflect their understanding of an arrangement;
  • the need to plan for new accounting standards;
  • the outlining of key audit matters in enhanced audit reports - auditors should describe key audit matters and their work in those areas in a clear and understandable manner and directors and report preparers should be mindful that these matters may relate to accounting estimates and significant accounting policy choices that also require specific disclosures in financial reports;
  • continued ASIC focus on material disclosures of information useful to investors and other users of financial reports (ASIC will not pursue immaterial disclosures that may add unnecessary clutter to financial reports);
  • the holding of client monies by Australian financial services licensees in separate designated accounts and the application of such monies in accordance with client instructions and the requirements of the Corporations Act 2001 (Cth); and
  • continued disclosure in operating and financial reviews of information on matters that may have a material impact on the future financial position of the company eg climate change or cyber-security.

ASIC has also indicated that it will continue to review the financial reports of proprietary companies and unlisted public companies, based on complaints and other intelligence.

For further details of ASIC focus areas, see ASIC media release dated 31 May 2017.

ASIC continues to facilitate dual listings by NZX-listed companies on the ASX

In September 2015, the ASX lowered the threshold listing requirement for entities listed on the main board of the NZX who were looking to achieve a dual listing on the ASX by making it easier for NZX listed companies to apply for a “foreign exempt listing”.

For further details, see G+T Insight dated 26 May 2017 by Adam D’Andreti and Lucy Hall.

ASIC announces that the Federal Court is to clarify whether it is necessary to prove Criminal Code fault in civil proceedings relating to certain breaches of the Corporations Act

ASIC has issued a media release announcing that the Federal Court has agreed to further consider whether it is necessary to prove fault according to Chapter 2 of the Criminal Code in civil proceedings relating to certain breaches of the Corporations Act 2001 (Cth) (Act). In ASIC v Whitebox Trading Pty Limited & Anor (NSD383/2016) (in which ASIC is alleging a contravention of the market manipulation provisions of the Act), ASIC has asked the Federal Court to clarify the law following its decision in Gore v ASIC [2017] FCAFC 13 in February this year. 

Before Gore, ASIC had acted on the basis that it was only necessary to prove Criminal Code fault elements in criminal proceedings. However, in Gore, the Court considered that ASIC had to prove Criminal Code fault elements to obtain civil remedies in relation to breaches of the Act (ie, the offering of securities without a current prospectus). 

The issue is to be considered by a Full Court of the Federal Court as a preliminary issue on a date to be fixed during 6 to 9 June 2017. 

ASIC reports on its approach to regulatory technology

ASIC has released Report 523 ASIC’s Innovation Hub and our approach to regulatory technology (REP 523) which covers ASIC's approach to regulatory technology and invites feedback from the sector and wider industry. 

Amongst the proposals covered in REP 523 are the establishment of a new regtech industry liaison network, a number of new technology trials using regtech applications and the establishment of a hackathon later this year to help identify roadblocks to the successful and rapid take-up of the sector. 

The report also gives an update the work of ASIC’s Innovation Hub, launched in March 2015, to help innovative fintech businesses navigate the regulatory framework. 

Submissions on REP 523 are due by 4 July 2017.

See also ASIC’s media release dated 26 May 2017.

ASIC provides guidance on common issues in registration of managed investment schemes

ASIC has published Information Sheet 220 Managed Investment Schemes: Common registration issues (INFO 220) to better assist scheme operators in the preparation of scheme constitutions.  

INFO 220 explains the common issues ASIC identifies in the content of managed investment scheme constitutions during the registration process, and discusses how ASIC addresses them, including:

  • definition of a scheme member;
  • fees and expenses;
  • member withdrawal from the scheme;
  • timeframes for withdrawal payment; and
  • independent final audit when the scheme is wound up. 

See also ASIC’s media release dated 24 May 2017.

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