Legal

Former Trio-linked investment manager jailed

A FORMER investment manager with links to the failed firm Trio Capital (Trio), was sentenced on June 27 to 25 months jail for making false statements resulting in his business receiving more than $500,000 in payments.

Tony Maher, who changed his name from Paul Gresham, pleaded guilty in October 2013 to making the statements regarding the valuation of investments made by the ARP Growth Fund (ARP) over two years. 

At the time he owned and controlled PST Management Pty Ltd, the company that acted as the investment manager of ARP.

Mr Maher, 60, of Katoomba, was charged with 20 offences (refer to ASIC article: 13-293MR).
Appearing in the District Court of NSW, Mr Maher was sentenced to 25 months jail. He will serve 15 months before being eligible for parole.

ASIC Commissioner John Price said, “Mr Maher’s conduct fell below an acceptable standard. Gatekeepers, like directors, company officers, auditors, investment advisers and financial planners, who think they can flout the law, should think again.”

Since ASIC’s investigation started on October 2, 2009, more than 11 people have either been jailed, banned from providing financial services, disqualified from managing companies or have agreed to remove themselves from the financial services industry for a total of more than 50 years. Two agreed to lifetime bannings.

In February 2012, ASIC accepting an enforceable undertaking (EU) from Mr Maher, preventing him from ever again working in the Australian financial services industry or managing a corporation (refer:12-15MR).

Further enforcement outcomes include:

  • Shawn Richard, former investment manager of the Astarra Strategic Fund (ASF), being sentenced to three years and nine months jail with a minimum of two years and six months (refer: 11-169MR)
  • The permanent banning of Eugene Liu, ASF'’s chief investment strategist, from providing financial services (refer: 13-041MR). In April 2014, Mr Liu’s request for review of his permanent ban from providing financial services was heard. The decision has been reserved.
  • Enforceable undertakings (EU) with five former Trio directors, where they agreed not to be involved in the financial services industry or manage a company for between two and 15 years. The former directors are: Natasha Beck, Keith Finkelde, David O’Bryen, David Andrews and Rex Phillpott (refer: 11-182MR and 11-133MR).
  • An EU with planning firm Kilara Financial Solutions to address compliance issues (refer: 11-122MR).
  • Suspending the licence of financial planners Seagrims, with this licence then being cancelled at the company’s request (refer: 11-134MR).
  • Banning Seagrims directors Peter Seagrim and Anne-Marie Seagrim for three years, with the Administrative Appeals Tribunal subsequently cutting the ban to six months (refer: 11-134MR).
  • An EU with former ASF auditor Timothy Frazer, providing he would not act as a registered company auditor for three years (refer: 12-22MR).

www.asic.gov.au

 

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POSTED JULY 2, 2014

Details of Federal red tape reductions reveal a fair start

THE Federal Government’s ‘big numbers’ of the Federal Budget have been under discussion in great detail, but the smaller details of what is being changed through the ‘red tape reduction’ efforts of the government are just as important operationally for many businesses.

Parliamentary Secretary to the Prime Minister, Josh Frydenberg, said back in March the government introduced legislation and tabled documents to repeal more than 10,000 “unnecessary and counter-productive pieces of legislation and regulations”.

He called the more than 50,000 pages set for repeal “unnecessary and costly legislation and regulations that are a dead weight on Australian businesses, community groups and households” expecting this reduction in red tape across the economy to save “more than $700 million a year, every year”.

“We are committed to cutting red tape costs by $1 billion a year to improve our nation’s competitiveness, help to create more jobs and lower household costs,” Mr Frydenberg said. 

“It will be easier for small businesses to do business with government. There will be a simplified process for tendering for contracts below $200,000, standardised terms and conditions and user-friendly online templates.

“We are making it easier for small businesses to be paid with the introduction of a new policy; credit and debit cards will become the Government’s preferred payment option for purchases under $20,000.”

Mr Frydenberg said the goal was for national businesses to operate under one workers’ compensation scheme right around the nation, rather than have to operate in up to eight.

Other specifics outlined were:

  • Businesses will no longer be required to administer the former government’s paid parental leave scheme.
  • Importers of agricultural chemicals and veterinary medicines, such as pet worm tablets, household weed killers or agricultural fertilisers, will no longer need to re-register well established products over and over, when the products haven’t changed.
  • A reduction in paperwork for Australians seeking to do business in the Asia Pacific  region with a streamlined accreditation process for the APEC Business Travel Card.
  • A new one-stop-shop for offshore petroleum environmental approvals (NOPSEMA) will streamline approval of projects that include offshore petroleum and greenhouse gas activities in Commonwealth waters.
  • Repealing the Carbon Tax and the Mining Tax should not only reduce cost of living pressures and help create jobs, but will also save nearly $100 million in compliance costs.
  • The film industry will be able to make minor modifications to films (for example, turning 2D into 3D, then DVD and Blu-ray) without going through the classification process every time.
  • Job service providers will no longer have to retain cabinets full of paper files and will now be able to keep records electronically.
  • Slow moving machinery – like concrete mixers or ‘wacker packers’ (used to compact soil) will no longer need to be registered as ‘motor vehicles’ under the Personal Property Securities register.
  • Universities will no longer be required to submit extensive (and duplicated) survey data on the size, use, management and maintenance of their lecture theatres, laboratories, offices and other facilities each year.
  • Charities will no longer be subjected to as much duplication with their paperwork.
  • Aged care providers and Disability Employment Service Providers will be spared many thousands of hours of paperwork.

Mr Frydenberg said, “Common sense changes will be made to Labor’s recent Future of Financial Advice laws to reduce the compliance costs for small businesses, financial advisers, and the broader financial services industry, whilst maintaining the quality of advice for consumers.”

That particular pledge has recently come under fire and may yet be modified on its course through the Parliament.

“Cutting red tape is at the heart of this Government’s mission: to build a strong and prosperous economy for a safe and secure Australia,” Mr Frydenberg said.

www.cuttingredtape.gov.au

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POSTED MAY 27, 2014

ACCC ‘on the march’

THE Australian Competition and Consumer Commission (ACCC) seems to be ‘on the march’ in dealing with major companies deemed to have breached their trading obligations, judging by the March 2014 quarterly report, ACCCount. Top of the bill is activity ahead of the Federal Government’s repeal of the carbon tax.

The ACCC has begun a formal monitoring role in preparation for the repeal of the carbon tax. The ACCC is to monitor prices, costs and profits to assess the general effect of the carbon tax scheme in Australia.

The ACCC’s focus will be on suppliers of regulated goods, namely natural gas, electricity and synthetic greenhouse gases, as well as corporations identified as liable entities under the Clean Energy Act 2011.

“The ACCC is gathering information that will provide a benchmark to allow the ACCC to compare prices charged to consumers both before and after the carbon tax is removed,” ACCC acting chairman Michael Schaper said. 

In February the ACCC released its Compliance and Enforcement Policy for 2014. The policy outlines the ACCC’s new priority areas including drip pricing, misleading promotions in retail energy plans, disruption of scams, and complexity “and unfairness in consumer or small business contracts”.

Cartel conduct, anti-competitive agreements, misuse of market power, and product safety remain enduring priorities for the ACCC, Dr Schaper said.

He said the ACCC was on track to meeting its commitment to increase the number of competition cases investigated. In the March quarter the ACCC:

  • obtained a penalty of $11 million against Flight Centre Limited for attempting to enter into anti-competitive arrangements with airlines (case now under appeal and cross-appeal);
  • instituted proceedings in the Federal Court against Pfizer Australia Pty Ltd for alleged misuse of market power and exclusive dealing;
  • instituted proceedings against Woolworths Ltd and Coles Group Ltd for allegedly breaching court enforceable undertakings in relation to shopper docket discounts.

Continuing its focus on consumer protection, in the first quarter of 2014 the ACCC was involved in 29 proceedings relating to consumer protection, including the commencement of proceedings against Zen Telecom Pty Ltd for alleged contraventions of the Australian Consumer Law (ACL) in relation to its unsolicited telemarketing practices.

The ACCC regulatory arm released its final decision on the review of the declaration of the domestic transmission capacity service (DTCS) in March. The DTCS is a high-capacity transmission service used to carry large volumes of voice, data and video traffic.

 The DTCS is an essential input into the provision of services over the legacy copper network and the national broadband network (NBN). The ACCC’s final decision extends the declaration of the DTCS for a further five years and includes a number of variations.

“Competition for transmission services like the DTCS typically provides lower prices for this essential wholesale service. Retailers are then able to pass this on to consumers in the form of lower prices,” Dr Schaper said.

“The changing nature of Australia’s telecommunications industry has put the ACCC’s regulatory role into sharp focus. The ACCC will continue its important work in various infrastructure sectors with a particular concentration on telecommunications.”

The Australian Energy Regulator (AER) made its final decision on SP Australian Networks Limited (SP AusNet)’s revenue proposal capping it at $1600 million ($ nominal). This cap has been applied to ensure SP AusNet recovers no more than its efficient costs. The AER has also begun engagement with its Consumer Challenge Panel, a key part of the Better Regulation programme.

The ACCC assessed and reviewed a total of 69 merger matters in the quarter, including announcing its opposition to the proposed acquisition of the assets of Macquarie Generation by AGL Energy Limited (AGL).

The ACCC considered that the proposed acquisition was likely to result in a substantial lessening of competition. AGL has applied for a merger authorisation to the Australian Competition Tribunal. The hearing is set for June 2, 2014.

www.accc.gov.au

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POSTED MAY 23, 2014.

ACCC finally acts on Coles ‘unconscionable conduct’ allegations

THE Australian Competition and Consumer Commission (ACCC) instituted proceedings against retailing giant Coles in the Federal Court of Australia on May 5, in a protracted reaction to allegations of unreasonable dealings with some of its suppliers that emerged from media reports – predominantly on the ABC – as far back as 2011. 

Suppliers including agribusiness and manufacturing businesses had earlier been reluctant to speak out officially, fearing negative repercussions to their trade, and this is believed to have delayed the ACCC’s action.

The ACCC took its court action against Coles Supermarkets Australia Pty Ltd and Grocery Holdings Pty Ltd (together, Coles) alleging that Coles engaged in unconscionable conduct in relation to its Active Retail Collaboration (ARC) program, in contravention of the Australian Consumer Law (ACL).

The ACCC alleged that in 2011, Coles developed a strategy to improve its earnings by obtaining better trading terms from its suppliers. 

It is alleged one of the ways Coles sought to improve its earnings was through the introduction of ongoing rebates to be paid by its suppliers in connection with the Coles ARC program, based on purported benefits to large and small suppliers that Coles asserted had resulted from changes Coles had made to its supply chain. 

ACCC’s investigations showed Coles’ target was to obtain $16 million in ARC rebates from smaller suppliers. Coles was ultimately seeking an ongoing ARC rebate in the form of a percentage of the price it paid for the supplier’s grocery products.

This, for its smaller suppliers, was the sum of a percentage which Coles asserted was referable to the value to the supplier of being able to access the Coles supplier portal and, where applicable, a percentage based on the asserted value to the supplier for Coles having changed its ordering patterns to order products in “economic order quantities”. 

The ACCC alleged that in relation to 200 of its smaller suppliers, Coles required agreement by the supplier to the rebate within a matter of days. 

If these suppliers declined to agree to pay the rebate, Coles personnel were allegedly instructed to escalate the matter to more senior staff, and to threaten commercial consequences if the supplier did not agree.  The ACCC alleges that, in a number of cases, threats were made when suppliers declined to agree to pay the rebate. 

The ACCC alleged Coles had engaged in unconscionable conduct towards 200 of its smaller suppliers, in breach of the ACL by, among other things:

  • providing misleading information to suppliers about the savings and value to them from the changes Coles had made;
  • using undue influence and unfair tactics against suppliers to obtain payments of the rebate;
  • taking advantage of its superior bargaining position by, amongst other things, seeking payments when it had no legitimate basis for seeking them; and
  • requiring those suppliers to agree to the ongoing ARC rebate without providing them with sufficient time to assess the value, if any, of the purported benefits of the ARC program to their small business.

“The conduct of Coles alleged by the ACCC in these proceedings was capable of causing significant detriment to small suppliers’ businesses,” ACCC Chairman Rod Sims said.

“This could have resulted in these businesses becoming less able to plan and less able to innovate in the market, with resulting reduced economic efficiency and consumer detriment.

“The ACCC alleges that Coles used undue pressure and unfair tactics in negotiating with suppliers, provided misleading information and took advantage of its superior bargaining position, so that its overall conduct was in all the circumstances unconscionable. 

“If this conduct is established in court, the ACCC expects that the community will share the ACCC’s view that business should not be conducted in this way in Australia,” Mr Sims said. 

“When we called for market participants to provide information to the ACCC on a confidential basis to assist the ACCC’s investigation, I committed that the ACCC would seek to maintain that confidentiality. 

“In accordance with that commitment, the documents and information relied on by the ACCC in these proceedings were obtained by use of the ACCC’s compulsory statutory information gathering powers in a subsequent phase of the investigation.”  

The ACCC is seeking pecuniary penalties, declarations, injunctions and costs.

The ACCC said the proceedings arose from a broader investigation by the ACCC into allegations that supermarket suppliers were being treated inappropriately by the major supermarket chains. The ACCC said a broader investigation is continuing, not ruling out action against other supermarket groups.

The ACCC v Coles matter is listed for a directions hearing in Melbourne on June 6, 2014.

www.accc.gov.au

Chronology of the ACCC's investigation

November 2011   

Media reports indicated that supermarket suppliers were being treated inappropriately by the major supermarket chains. 

November 2011 – February 2012

The ACCC sought information from market participants about these concerns. But it became clear that suppliers were reluctant to speak to the ACCC for fear of what they perceived may be the consequences of providing information to the ACCC. 

February 2012

The ACCC chairman called on suppliers to provide information to the ACCC on a confidential basis, ensuring the ACCC would seek to protect and maintain that confidentiality.

This resulted in around 50 market participants approaching the ACCC on a confidential basis to discuss practices by the major supermarket chains they were concerned about.

Having identified areas of concern, the ACCC then commenced an in-depth investigation into those issues.

February 13, 2013

The ACCC provided an update to the Senate Estimates Committee of its investigations. The ACCC advised that the allegations raised with the ACCC, which were the subject of its investigation, included allegations of some conduct that the ACCC considered did not conform to acceptable business practice and may be unconscionable or a misuse of market power.  Such conduct, which was not necessarily identical across suppliers, product lines or even supermarkets, included:

persistent demands for additional payments from suppliers, above and beyond that negotiated in their terms of trade;

the imposition on suppliers of penalties that did not form part of any negotiated terms of trade, and which apparently do not relate to actual costs incurred by the major supermarket chains as a result of the conduct which has led to the penalty being imposed;

threats to remove products from supermarket shelves or otherwise disadvantage suppliers if claims for extra payments or penalties are not paid;

failure to pay prices agreed with suppliers; and

conduct discriminating in favour of home brand products.

June 2012 – December 2013  

Extensive in-depth investigation using compulsory information gathering powers that required suppliers and Coles to provide information.

 

Posted May 7, 2014.

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PPSA amendments to leases and motor vehicles

 

THE Federal Government is making amendments to the Personal Property Securities Act (PPSA) to help address anomalies over certain leases and what qualifies as a ‘motor vehicle’. 

The PPS Amendment (Deregulatory Measures) Bill 2014 was introduced to Parliament on March 19.

The bill will repeal section 13(1) (e) of the Personal Property Securities Act 2009 which deems leases of serial numbered goods of 90 days or more to be security interests for the purposes of the Act and make minor consequential amendments to the Act.

The Australian Government has also amended part of the definition of a motor vehicle in the PPS Regulations, to provide that one of the requirements is that the property is capable of travelling at speeds of at least 10km per hour and which has one or more motors with a total power greater than 200 watts. The regulations appear to have had some unintended consequences in this area.

The revised definition will take effect from July 1, 2014. The Personal Property Securities Amendment (Motor Vehicles) Regulation 2014 and the changes to the leases section is available at www.commlaw.gov.au

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Review of the Personal Property Securities Act: affecting small business?

THE FEDERAL Government is undertaking a review into the Personal Property Securities Act 2009 to consider its operation and effects, paying particular attention to the experience of small businesses.

Attorney-General George Brandis has appointed Bruce Whittaker, a partner with the law firm Ashurst, to lead the review.

“Mr Whittaker's extensive legal and industry experience make him an excellent choice for the review,” Mr Brandis said.

“This Act established a national regime for secured finance using personal property. It replaced a complex and costly patchwork of over 70 Commonwealth, State and Territory laws and 23 registers.

“Two years on from the Act’s commencement, it is timely to review its effect to ensure it is meeting its objective of providing greater certainty to lenders and helping business, especially small business, to access finance.

“The government is committed to reducing unnecessary burdens on small business. It is important that any problems or concerns with the Act are identified.

The government has already moved quickly to address some pressing concerns raised by the hire industry about the Act.”

Mr Whittaker has been asked to prepare an interim report by July 31 this year, with recommendations on priority actions for the Federal Government to consider. The interim report will focus on issues raised in relation to small businesses.

The final report is due on January 30, 2015 and is expected to make recommendations on how to improve the Act, including simplification where appropriate, Mr Brandis said.

The review focuses on the effects of the reforms introduced by the PPS Act, as requested by the Attorney-General, on:

  • Australian businesses, particularly small business;
  • Australian consumers;
  • the market for business finance in Australia; and
  • the market for consumer finance in Australia;
  • the level of awareness and understanding of the PPS Act at all levels of business, particularly small business;
  • the incidence and, where applicable, causes of non-compliance with the requirements of the PPS Act particularly among small businesses;
  • opportunities for minimising regulatory and administrative burdens, including costs, on businesses, particularly small business, and consumers;
  • opportunities for further efficiencies in the PPS Act regime including (but not limited to) simplification of the Personal Property Securities Register and its use;
  • the scope and definitions of personal property covered by the PPS Act;
  • the desirability of specifying thresholds for the operation of the PPS Act regime in respect of particular types of personal property;
  • the interaction of the PPS Act with other legislation including the Corporations Act 2001;
  • the review must include consultation with relevant stakeholders.

Mr Whittaker is a partner in Ashurst’s banking and finance group in Melbourne and leads the firm’s PPS practice. Mr Whittaker specialises in debt capital markets, acquisition and leveraged finance, project finance, asset finance and leasing, and banking.

Mr Whittaker has more than 30 years experience in private practice both in Australia and internationally and is recognised as one of the world’s most experienced structured finance lawyers.

Mr Whittaker is also an editor and contributing author of the LexisNexis looseleaf and online service Personal Property Securities Law in Australia, and joint PPS Specialist Editor for LexisNexis’s Australian Encyclopaedia of Forms and Precedents.

The Personal Property Securities Act 2009 (the PPS Act) provides a single national system for the creation, registration, priority and enforcement of security interests in personal property.   The PPS Act commenced on January 30, 2012.

www.attorneygeneral.gov.au

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Fed Govt changes to help strengthen franchising sector

 

THE Federal Government is aiming to improve the viability of the franchise sector by the end of the year, and save it $8.6 million in red-tape, by implementing changes recommended by the Alan Wein-led review.

Treasury has announced it will introduce penalties for breaches of the Franchise Code of Conduct to protect small business owners.

A  'Future of Franchising' statement was released by the Federal Treasury on April 3, outlining plans to build on a review of the sector by Mr Wein last year.  

Mr Wein has a strong connection with franchising and was the co-founder and owner of the House franchise group of homeware stores that operate throughout Australia. He sold his interest in the company in 2000 and he has been involved in various business advisory panels including the Victorian Government’s 2010 VSBC Reference Panel into Improving Business Conduct which included Telstra and Woolworths.

The Federal Government has settled on the policy direction for franchising in light of Mr Wein’s review and started work on legislative changes to improve the sector for its participants.

These changes are expected to help cut red-tape by clarifying and streamlining the Code and removing unnecessary provisions. Treasury estimated red tape reduction for the Franchising Code could save businesses $8.6 million annually and would allow more opportunities for resources to be invested back into franchise systems to drive productivity, innovation and jobs.

A government statement said the proposed changes would “strike the right balance between the needs of franchisors and franchisees and the unique nature of the relationship between the two”.

The Federal Government announced it was committed to:

  • ensuring franchisees and franchisors act in good faith in their dealings with each other;

  • introducing penalties for a breach of certain provisions of the Franchising Code along with enhanced audit powers for the Australian Competition and Consumer Commission;

  • improving the transparency of marketing funds; and

  • improving disclosure including short form, easy to understand information for prospective franchisees.

To ensure the changes are implemented in partnership with the sector, the Federal Government has released the exposure draft bill and regulations amending the Franchising Code of Conduct for public feedback.

Although the franchising review was a concise one, it has benefitted from the long experience of Mr Wein in the sector and related small business areas. In 2008, Mr Wein was appointed by the Victorian Small Business Minister as an ambassador for small business through the Energise Enterprise initiative and in 2010, he was appointed to the Mediator’s Advisory Committee by the Victorian Small Business Commissioner, to assist and advise on legislation, legal issues, mediation practice process and standards.

In 2010, Mr Wein was appointed a member of the Law Council of Australia SME Business Committee.

The Draft Bill documents are available at the Treasury website for a consultation period ending April 30, 2014.

www.treasury.gov.au

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