This is a service specifically targeted at the needs of busy non-executive directors (NEDs).  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.

In this edition, we discuss ASIC’s focus areas for 30 June 2023 reporting, ASIC’s latest Market Integrity Update for the month of May and ASIC’s new Memorandum of Understanding with NOPSEMA.  We consider Crown’s admission of guilt in the Federal Court for breaches of anti-money laundering and counter terrorism laws and the application received by the Takeovers Panel seeking review of its decision in A S P Aluminium Holdings Pty Ltd. 

In Risk Radar, we discuss the resurfacing of criticisms towards Australia’s demanding and complex regulatory landscape and the risk this poses for the conduct of business in Australia.

GOVERNANCE & REGULATION

ASIC highlights focus areas for 30 June 2023 reporting.  On 6 June 2023, the Australian Securities and Investments Commission (ASIC) announced its focus areas for 30 June 2023 reporting, urging directors to assess the impact of uncertain market and economic conditions on reporting for the period.  ASIC highlighted several areas for attention, including: (1) asset values, (2) provisions, (3) solvency and going concern assessments, (4) events occurring after year end and before completing the financial report, (5) disclosures in the financial report and the Operating and Financial Review, and (6) the impact of a new accounting standard for insurers.  ASIC Commissioner Danielle Press stated that “[d]irectors should ensure that investors are properly informed on the impact of changing and uncertain economic and market conditions, ‘net zero’ targets and other developments on financial position and future performance”.  ASIC reiterated the uncertainties and risks currently at play, stressing the need for directors and management to assess how the future performance, value and business strategy of an entity may be affected.  Directors should keep these uncertainties and risks in mind when preparing annual and financial reports and limit assumptions to those which are reasonable and supportable.  See ASIC media release.

ASIC’s monthly Market Integrity Update.  ASIC has published its Market Integrity Update: Issue 148 (May 2023) which contains a compilation of the corporate regulator’s actions and recommendations for the month of May 2023.  One of ASIC’s key recommendations for the period include a reminder to market participants of the importance of compliance with market integrity rules, especially since the introduction of higher penalties for contraventions.  ASIC also featured its new initiative in light of the recent cyberattacks, allowing ASIC-regulated entities of all sizes and sectors to complete ASIC’s ‘Cyber Pulse Survey’ to assess and detect any cyber risks.  See ASIC Market Integrity Update.

ASIC signs MoU with NOPSEMA.  On 24 May 2023, ASIC signed a new Memorandum of Understanding (MoU) with the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) aimed at facilitating mutual support in the monitoring and regulatory activities of offshore oil and gas companies in Australia.  The MoU reflects ASIC and NOPSEMA’s willingness to cooperate in fulfilling their respective regulatory mandates by ensuring oil and gas companies meet their obligations to remediate their sites as well as accounting for these obligations in regulatory documents under ASIC’s remit.  See ASIC media release.  Directors of oil and gas companies should note that the MoU may preface a greater focus by ASIC on matters such as the recording and measurement of decommissioning liabilities in the company’s financial accounts, and the discussion of the risk of such matters in the operating and financial overview contained in the annual report.

LEGAL

Crown and AUSTRAC propose $450 million penalty in Federal Court proceedings.  On 30 May 2023, AUSTRAC announced that AUSTRAC, together with Crown Melbourne and Crown Perth (Crown), have filed joint submissions in the Federal Court of Australia, proposing that a $450 million penalty be imposed on Crown for various breaches of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act).  In doing so, Crown admitted that it contravened the AML/CTF Act in various ways, including by failing to establish an appropriate framework for board and senior management oversight of its anti-money laundering and counter-terrorism financing obligations.  A court hearing has been set for 10 and 11 July 2023, where Justice Lee will consider the proposed settlement and determine the appropriate penalty.  The Commonwealth Government intends to broaden the scope of the AML/CTF Act to cover lawyers, accountants, conveyancers and trust and company service providers (see G+T Knowledge article).  See AUSTRAC media release. 

Takeovers Panel receives application seeking review of its decision in relation to the affairs of ASP.  On 31 May 2023, the Takeovers Panel (Panel) received an application from Villfranche Investments Pty Ltd as trustee of the Gates Family Trust seeking review of the Panel’s decision in A S P Aluminium Holdings Pty Ltd (TP23/021).  The Panel had originally declined to make a declaration of unacceptable circumstances in relation to the affairs of A S P Aluminium Holdings Pty Ltd (ASP), stating that its alleged breaches of Chapter 6 of the Corporations Act 2001 (Cth) (Corporations Act) were better dealt with by the judicial system (see previous edition of Boardroom Brief).  However, the Panel consented to the application for review and made interim orders to maintain the status quo until the application can be fully considered.  The interim orders prohibit certain persons affiliated with ASP from dealing in ASP shares and ASP must not register any transfer of ASP shares.  ASP must also communicate these prohibitions to its shareholders.  See Takeovers Panel media release.

RISK RADAR

A simplified regulatory landscape – fact or fantasy?  Australia’s regulatory landscape is increasingly intricate and demanding, presenting a wider range of stakeholder concerns and increasing the supervision obligations of boards and posing risks to efficient and robust corporate decision-making.  The Australian Institute of Company Directors’ (AICD) recent Director Sentiment Index reflects these concerns, with AICD Managing Director and CEO Mark Rigotti noting that “[h]eavy handed and complex regulations are impacting productivity and economic growth” (see previous edition of Boardroom Brief).  A common example is the Corporations Act, spanning more than 3,900 pages and noted by the Australian Law Reform Commission as hindering organisations from knowing how to comply with the law and preventing regulators from enforcing it.  Criticism of this daunting regulatory environment has resurfaced after the Commonwealth Government’s proposed reforms to three significant pieces of legislation impacting Australian businesses: a review of the Privacy Act 1988 (Cth), the proposed introduction of mandatory climate reporting and the 2023-2030 Australian Cyber Security Strategy.  Although sensible regulation should not be discouraged, with each new addition the burden of compliance grows, and it remains important for management and boards to ensure they keep this in mind.  See AICD article.