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ASIC Licence conditions
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ASIC is increasingly using licence conditions and enforceable undertakings to impose compliance systems on licensees. It has, for example, recently imposed licence conditions on 2 licensees requiring them to appoint an independent professional consultant to conduct reviews of their compliance systems, to provide copies of the reviews to ASIC and to take appropriate action in response to any adverse findings by the consultant. It has also entered into an enforceable undertaking to similar effect with another licensee. See media releases 02/427 and 02/396

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New Austrac acceptable referee form
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Austrac has released a new 'acceptable referee' form for use under section 21 of the Financial Transaction Reports Act.

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New APRA Prudential Standards
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The Australian Prudential Regulation Authority (APRA) has released updated prudential standards for Authorised Deposit-taking Institutions (ADIs). The revised standards, which represent minimum compulsory requirements for ADIs under the Banking Act 1959, are effective 1 July 2003.

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Unsuitable directors
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APRA has called on company boards in the banking, insurance and superannuation industries to retire directors who do not meet its stringent "fit and proper" standards. APRA General Manager for Enforcement, Dr Darryl Roberts, said that some directors were not meeting the high standard expected of those entrusted with safe-guarding the community's finances. Although APRA is confident that the vast majority of directors comply with APRA standards, almost every serious situation APRA has come across in the financial services sector can be traced back to management and, ultimately, a weak board", Mr Roberts said.

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Farm Management Deposits: tax problem?
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In Senate Estimates hearings on 20 November 2002, a potential tax problem regarding Farm Management Deposits (FMDs) was raised. The FMD scheme is managed by the ATO and operates such that, basically, primary production income deposited in FMDs is deductible in the year deposited and assessable in the year in which funds are withdrawn. That is, when an FMD deposit is made, it is not included in taxable income in the period in which it is earned. When an FMD withdrawal is made, the amount withdrawn is subject to tax in the period in which the withdrawal is made. Funds must be invested for a minimum of 12 months. The potential problem apparently revolves around whether certain FMD products offered by some financial institutions comply with the law.

The Department of Agriculture, Fisheries and Forestry says it appears that some financial institutions have been, "in terms of the pricing of farm management deposits, pricing for periods less than 12 months" ie FMDs are being offered for periods of less than 12 months. The Department says it is seeking a ruling on the issue from the ATO. The issue apparently goes back to July 2001 and the ATO is still working on the ruling.

Source: Senate Estimates Hansard, Rural and Regional Affairs and Transport Legislation Committee, 20 November 2002 [pp 57-58, proof copy]

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