Council of Financial Regulators Annual Report – 1998 Appendix D

ASC, in co-operation with complaints resolution schemes for banking, life and general insurance, superannuation and investment advice, opens Financial Complaints Referral Centre on a trial basis.

The Insurance Laws Amendment Act 1998 receives Royal Assent. The Act improves the ISC's ability to gather statistics from general insurers, arrangements pertaining to insurance brokers' dealings with clients and general insurance disclosure requirements.

The Australian Accounting Standards Board re-issues its draft accounting standards for life insurers.

ASC launches investor education campaign, High Returns = High Risks, warning people of the dangers of investing in schemes offering unusually high returns.

The Government announces the proposed transfer of the regulation of the majority of small superannuation funds (ie those with fewer than five members) to the Australian Taxation Office, and changes to the investment rules and penalty arrangements applying to all superannuation funds.

The Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 receives Royal Assent. This Act deals with various matters associated with the transfer of regulatory functions associated with the establishment of APRA and ASIC.

The Financial Sector (Shareholdings) Act 1998 receives Royal Assent. It provides that a person must not have 15 per cent stake in, or practical control of, an authorised deposit-taking institution or insurer unless the Treasurer has given approval. This Act replaces the Banks (Shareholdings) Act 1972 and part of the Insurance Acquisitions and Takeovers Act 1991.

The Payment System (Regulation) Act 1998 receives Royal Assent. This Act gives the RBA wide-ranging powers in the payments system. The RBA may ‘designate’ a particular payment system as being subject to its regulation, determine rules for participation in that system, set standards for safety and efficiency in that system and arbitrate on disputes in that system. The Act also requires holders of the stored value of purchased payment facilities to be either supervised by APRA or regulated or exempted by the RBA.

The Life Insurance Actuarial Standard on Minimum Surrender Values and Paid-up Values comes into force.

ASIC replaces the ASC, with expanded responsibilities for market integrity and consumer protection across the financial services sector.

The Managed Investments Act 1998 receives Royal Assent. The Act reforms the law regulating managed investment sche mes and establishes a ‘single responsible entity’ in place of the existing dual structure of investment manager and trustee. ASIC releases detailed policy and procedural guidance on compliance with the new legislation.

The Payment Systems and Netting Act 1998 receives Royal Assent. The Act allows Australian banks to enter into netting contracts with legal certainty; in turn, this will allow the recognition of netting for capital adequacy purposes. The Act also ensures the finality of RTGS transactions by allowing the RBA to exempt such transactions from possible application of the ‘zero hour’ rule, which would date the insolvency of an institution from the midnight before it was declared.

RBA and APRA release a booklet, Year 2000 Preparations in the Australian Banking and Financial System, describing the Year 2000 preparations of financial institutions in Australia and the activities of the financial sector regulators. It also describes preparations in payments and securities settlement systems.

The Life Insurance (Conduct and Disclosure) Bill 1998 is introduced into Parliament. This includes provisions comparable to the Corporations Law in relation to product disclosure, financial advice and prohibitions on misleading and deceptive conduct.

ASIC launches its first book, Scams and Swindlers, containing case studies on scams, swindlers and their victims.

The Assistant Treasurer announces the Government's decision that superannuation funds offering asset test exempt pensions will have to provide actuarial certification of their ability to meet promised payments.

The RBA's Payments System Board holds its first meeting.

APRA commences a program of revising and re-issuing its Superannuation Circulars which provide general guidance on issues arising under the Superannuation Industry (Supervision) Act 1993.

APRA and ASIC release a Memorandum of Understanding setting out how the two agencies will co-operate in the regulation of the Australian financial system.

APRA releases details of its audit requirements for the derivatives risk management statements of superannuation funds.

APRA and ASIC release a joint booklet, A Guide for Trustees of Corporate, Public Offer and Industry Superannuation Funds, providing guidelines on the respective roles and responsibilities of the two agencies.

The Minister for Financial Services and Regulation launches ASIC's new Consumer Advisory Panel.

The Superannuation Legislation Amendment (Resolution of Complaints) Act 1998 receives Royal Assent. The Act provides an interim solution to the constitutional problem experienced by the Superannuation Complaints Tribunal.

APRA issues draft amendments to its capital requirements for banks incorporating new provisions for bilateral netting. The provisions are consistent with the guidelines of the Basle Committee on Banking Supervision.