Welcome to Edition 61 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.
KEY BOARDROOM BRIEF
RBA releases its May Statement on Monetary Policy. Last Friday, the RBA released its quarterly Statement on Monetary Policy. Key forecasts were largely unchanged. GDP was forecast to grow to 3.25% by December 2019 with unemployment falling to 5.25% and headline inflation rising to 2.25%. The RBA described current trade tensions between the United States and China as "manageable", but cautioned that a further escalation in protectionist measures could significantly harm global growth. Further, with bank borrowing generally priced relative to US Treasury bills, a big challenge facing banks – in addition to the pending Royal Commission – is the rise in bank funding costs, hence market push back on the timing of RBA’s much awaited rate hike.
ASX consults on proposal to replace CHESS. ASX has published a consultation paper on its proposal to replace the Clearing House Electronic Subregister System (CHESS), the core system used by ASX to perform clearing, settlement and other post-trade services for the Australian equity market. Submissions must be made by 22 June 2018. ASX aims to provide a final functional scope and implementation roadmap for the CHESS replacement system in late July 2018. See ASX website.
Government response to Senate Economics References Committee Report on White-collar crime. As we reported last week, the timing of this Report is ominous given the increased public focus on allegations of wrong-doing in the corporate sector. The Government has now released a response to the report, accepting a number of recommendations, including an increase in civil penalties both for individuals and bodies corporate, some of which may be set as a multiple of benefit gained or loss avoided, to increase deterrent effects. See Treasury’s website.
ASIC welcomes the authorisation of the Australian Financial Complaints Authority. On 1 May 2018, the Minister for Revenue and Financial Services announced the authorisation of Australian Financial Complaints Limited to operate the Australian Financial Complaints Authority (AFCA). The AFCA will provide a one-stop shop for resolving disputes with banks, insurers, super funds and certain credit providers. All financial firms that are required to have a dispute resolution system to deal with complaints from consumers and small businesses must become members of the AFCA by 21 September 2018. There will soon be a consultation on proposed AFCA rules and an interim AFCA funding model. See ASIC’s media release and the Hon Kelly O’Dwyer’s media release.
ASIC increases regulatory focus on initial coin offerings (ICOs) of crypto-assets. On 19 April 2018, ASIC received delegated powers from the Australian Competition and Consumer Commission (ACCC) to take action under the Australian Consumer Law relating to crypto-assets. In particular, the delegation allows ASIC to regulate the marketing or selling of ICOs, even if the ICO does not involve a financial product. This regulatory development recognises the global interest in crypto-assets, including the use of ICOs by entities to raise funds, with a number of international regulators having already issued guidance on the application of their securities and financial services laws to ICOs. See ASIC’s updated ICO and crypto-currency information sheet 225 (INFO 225) for guidance about the potential application of the Corporations Act to entities that are considering raising funds through an ICO and to other crypto-asset businesses.
THE WEEK AHEAD
Government’s consultation on Ipso Facto Insolvency Regulations closes this Friday. As previously reported in Boardroom Brief, the Treasury’s consultation on a forthcoming declaration and regulations - which propose exceptions to the recently enacted stay on ipso facto clauses - closes on 11 May 2018. The ipso facto reforms will affect contracts in all industries and segments of the market. The ipso facto stay is likely to come into operation on 1 July 2018 and will affect any applicable arrangements entered into on or after that date. Directors should consider both the impact of the reforms on its existing arrangements and participating in the consultation process.
ASIC’s consultation on industry funding levies closes next Monday. As reported in last week’s Boardroom Brief, the Government is proposing enhancements to the industry levies that came into effect on 1 July 2017. The deadline for submissions is 14 May 2018. See the draft regulations and explanatory material for more information.
AUSTRAC registration deadline for DCEs operating in Australia closes next Monday. As previously reported in Boardroom Brief, AUSTRAC, Australia’s financial intelligence agency and anti-money laundering and counter-terrorism financing (AML/CTF) regulator, implemented new laws on 11 April 2018 (with immediate effect) to regulate cryptocurrency providers for the first time in Australia. Digital currency exchange (DCE) providers operating in Australia were given until 14 May 2018 to register with AUSTRAC. DCEs should, however, already be complying with the AML/CTF compliance and reporting obligations. See AUSTRAC’s DCE page on AUSTRAC’s website for more information.