Compliance: Theory and Practice in the Financial Services Industry

Reading List

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Notes

Where material is listed under "required pre-class reading", you are expected to read that material in advance of the relevant lecture so that you can discuss it in class. This material may be the subject of questions in the examination.

The recommended additional reading is for those who have a particular interest in, or who would like a reference source for additional materials on, a topic. You are not expected to read any of this additional material. It will only be the subject of questions in the examination if and to the extent that it is expressly dealt with in the lecture slides.

Most of the reading materials are freely available online. The few items in the required pre-class reading that are not freely available online (marked ^^ in the list below) will be handed out in hard copy at the commencement of the course.

Preliminary Reading

Students (particularly overseas students) who are not familiar with the regulatory framework that applies to financial services in Australia should, by way of general introduction to the course, read Chapter 1 of the current edition of Baxt, Black and Hanrahan, Securities and Financial Services Law, available in the Sydney University Law School library.

1. Licensing

Required pre-class reading:
  Nil
Recommended additional reading:
 

Lewis, "When is a Financial Product not a Financial Product?" (2004) 22 CSLJ 103

 

Lewis, "A Decade On - Reforming the Financial Services Law Reforms", a paper delivered at the 6th Annual Supreme Court Corporate Law Conference in August 2011 (see '2. The definition of 'financial product'')

  Eastwood, “Breach reporting: Some difficult issues to consider” (2014) 32 CSLJ 251
  ASIC Regulatory Guide 1 - AFS Licensing Kit: Part 1 — Applying for and varying an AFS licence
  ASIC Regulatory Guide 2 - AFS Licensing Kit: Part 2 — Preparing your AFS licence application
  ASIC Regulatory Guide 3 - AFS Licensing Kit: Part 3 — Preparing your additional proofs
  ASIC Regulatory Guide 36 - Licensing: Financial product advice and dealing
  ASIC Regulatory Guide 78 - Breach reporting by AFS licensees
  ASIC Regulatory Guide 98 - Licensing: Administrative action against financial services providers
  ASIC Regulatory Guide 104 - Licensing: Meeting the general obligations
  ASIC Regulatory Guide 105 - Licensing: Organisational competence
  ASIC Regulatory Guide 121 - Doing financial services business in Australia
  ASIC Regulatory Guide 146 - Licensing: Training of financial product advisers
  ASIC Regulatory Guide 166 - Licensing: Financial requirements
  ASIC Regulatory Guide 167 - Licensing: Discretionary powers
  ASIC Regulatory Guide 175 - Licensing: Financial product advisers – Conduct and disclosure
  ASIC Regulatory Guide 176 - Licensing: Discretionary powers - wholesale foreign financial services providers
  ASIC Regulatory Guide 185 - Non-cash payment facilities
  ASIC Pro Forma 209 - Australian financial services licence conditions

2. The Role of Compliance

Required pre-class reading:
  International Standard ISO 19600 Compliance Management Systems - Guidelines^^
  FPA Guideline for Implementing the Australian Standard on Compliance (AS 3806-1998)^^
Recommended additional reading:
  Australian Standard AS 3806-2006 Compliance Programs^^
  Australian Standard AS 3806-1998 Compliance Programs^^
  Parker & Conolly, "Is there a Duty to Implement a Corporate Compliance System in Australian Law?" (2002) 30 ABLR 273
  Carroll & McGregor-Lowndes, "A Standard for Regulatory Compliance? Industry Self-regulation, the Courts and AS3806–1998" (2001) 60 Australian Journal of Public Administration 80
  Parker, "Evaluating Regulatory Compliance: Standards and Best Practice" (1999) 7 TPLJ 62
  Parker, "The Emergence of the Australian Compliance Industry: Trends and Accomplishments" (1999) 27 ABLR 178
  Basel Committee on Banking Supervision, "Compliance and the Compliance Function in Banks" (April 2005)
  IOSCO, "Compliance Function at Market Intermediaries" (March 2006)

3. Insider Trading and Chinese Walls

Required pre-class reading:
  ASIC v Citigroup Global Markets Australia Pty Limited (No. 4) [2007] FCA 963, paragraphs 466-598
  ASX Market Rules Guidance Note 13 - Prohibition of Advice to Clients
  SEC Report, "Broker-Dealer Policies and Procedures Designed to Segment the Flow and Prevent the Misuse of Material Non-public Information" [1990] Fed Sec Law Reports ¶84,520^^
  NYSE/NASD Info Memo 91-22 - Chinese Walls Policies and Procedures
  Slade v. Shearson, Hammill & Co., Inc, selected judgments
Recommended additional reading:
 

Lewis, "A Decade On - Reforming the Financial Services Law Reforms" (see '4. Continuous disclosure and insider trading')

  Rubenstein, "The Regulation and Prosecution of Insider Trading in Australia: Towards Civil Penalty Sanctions for Insider Trading " [2002] CSLJ 89
  Goldwasser, "Recent Developments in the Regulation of Chinese Walls and Business Ethics - In Search of a Remedy for a Problem that Persists" [1993] CSLJ 227
  Doty and Powers, "Chinese Walls: The Transformation of a Good Business Practice" (1988) 26 American Criminal Law Review 155
  Bollen, "Research Analysts and the Australian Market Misconduct Regime" [2003] MurUEJL 19
  NYSE Disciplinary Proceedings 98-069
  ASIC Regulatory Guide 62 - Better disclosure for investors
  ASIC Regulatory Guide 73 - Continuous disclosure obligations: Infringement notices
  ASIC Regulatory Guide 95 - Disclosing entity provisions relief
  ASIC Regulatory Guide 198 - Unlisted disclosing entities: Continuous disclosure obligations
  ASIC Regulatory Guide 238 - Suspicious activity reporting
  ASX Listing Rules Guidance Note 8 - Continuous Disclosure: Listing Rules 3.1 - 3.1B

4. Market Conduct Rules

Required pre-class reading:
  Summary of ASX Business Rules Guidance Note 8/00
  ASX Business Rules Guidance Note 8/00 - Trading Practices
Recommended additional reading:
 

Lewis, "A Decade On - Reforming the Financial Services Law Reforms" (see '3C(ii) The inappropriate extension of former futures laws to OTC derivatives and other financial products - Order precedence requirements' and '5. Short selling')

  ASIC Regulatory Guide 196 - Short selling
  ASIC Regulatory Guide 238 - Suspicious activity reporting
  ASX Market Rules Guidance Note 1 - Prevention of Manipulative Trading - Transactions Involving no Change in Beneficial Ownership
  ASX Market Rules Guidance Note 11 - Client Order Priority
  ASX Business Rules Guidance Note 12/01 - Order Record Keeping
  ASX Business Rules Guidance Note 11/97 - Short Selling

5. Shareholding Restrictions

Required pre-class reading:
  Nil
Recommended additional reading:
 

Lewis, "A Decade On - Reforming the Financial Services Law Reforms" (see '3C(ii) The inappropriate extension of former futures laws to OTC derivatives and other financial products - Takeovers and relevant interests')

  ASIC Regulatory Guide 5 - Relevant interests and substantial holding notices
  ASIC Regulatory Guide 6 - Takeovers: Exceptions to the general prohibition
  ASIC Regulatory Guide 9 - Takeovers bids
  ASIC Regulatory Guide 10 - Compulsory acquisitions and buyouts
  ASIC Regulatory Guide 25 - Takeovers: false and misleading statements
  ASIC Regulatory Guide 59 - Announcing and withdrawing takeover bids (s653 and s746)
  ASIC Regulatory Guide 71 - Downstream acquisitions
  ASIC Regulatory Guide 74 - Acquisitions agreed to by shareholders
  ASIC Regulatory Guide 86 - Tracing beneficial ownership
  ASIC Regulatory Guide 102 - Tender offers by vendor shareholders
  ASIC Regulatory Guide 128 - Collective action by investors
  ASIC Regulatory Guide 163 - Takeovers: Minimum bid price principle: s621
  ASIC Regulatory Guide 222 - Substantial holding disclosure: Securities lending and prime broking
  Treasury, "Australia's Foreign Investment Policy" (December 2015)
  Takeovers Panel Guidance Notes

6. Competition and Consumer Law

Required pre-class reading:
  Nil
Recommended additional reading:
  Parker and Nielsen, "Do Businesses Take Compliance Systems Seriously? An Empirical Study of the Implementation of Trade Practices Compliance Systems in Australia" [2006] MULR 15
  ASIC Regulatory Guide 96 - Debt collection guideline for collectors and creditors
  ASIC Regulatory Guide 201 - Unsolicited credit cards and debit cards
  ASIC Regulatory Guide 220 - Early termination fees for residential loans: Unconscionable fees and unfair contract terms

7. Combating Crime

Required pre-class reading:
  Nil
Recommended additional reading:
  Fisse, "Minimising Exposure to Liability under the New Legislation: Developing Effective Corporate Compliance Systems", Chapter 19 from Fisse, Fraser & Coss, The Money Trail: Confiscation of Proceeds of Crime, Money Laundering and Cash Transaction Reporting (1992) The Law Book Company Limited
  Daley, "Effectiveness of United States and International Efforts to Combat International Money Laundering" (2000) Saint Louis-Warsaw Transatlantic Law Journal 175
  Wilder and Ahrens, "Australia’s Implementation of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions" [2001] MelbJIL 22
  Basel Committee on Banking Supervision, "Customer Due Diligence for Banks" (October 2001), "General Guide to Account Opening and Customer Identification" (February 2003) and "Consolidated KYC Risk Management" (October 2004)
  Austrac Compliance Guide
  Austrac Typologies and Case Studies Reports
  Austrac Guideline No 1 - Suspect Transaction Reporting
  Addendum 1: Suspect Transaction Reporting - The Use Of Cheques In Money Laundering
  Addendum 5: Suspect Transaction Reporting - Identifying Suspect Transactions by Call Centres
  Austrac Guideline No 4 - Merchant Bankers and Stock Brokers Suspect Transaction Reporting
  Enclosure 1: Areas of Suspect Activity - Money Laundering
  Enclosure 2: Areas of Suspect Activity - Tax Evasion
  Enclosure 3: Areas of Suspect Activity - Corporate Fraud
  Enclosure 4: Areas of Suspect Activity - Securities Offences
  Austrac Guidance Note 07/01 - Correspondent Banking
  Austrac Guidance Note 11/02 - Verification of Identity (e-Verification)
  Public Legal Interpretation No. 2 – Item 54 of table 1 in section 6 of the AML/CTF Act
  Public Legal Interpretation No. 4 – What constitutes a reporting entity
  Public Legal Interpretation No. 6 – Suspect transactions and suspicious matter reports
  Public Legal Interpretation No. 7 – Significant cash transaction and threshold transaction reports
  Public Legal Interpretation No. 8 - Cross-border movements
  Public Legal Interpretation No. 9 – Customer identification requirements under the AML/CTF Act
  Public Legal Interpretation No. 10 - Agency and the AML/CTF Act
  Public Legal Interpretation No. 11 - Electronic funds transfer instructions and international funds transfer instructions

8. Retail Customer Obligations and Marketing Financial Products

Required pre-class reading:
  Australian Standard AS ISO 10002-2006 Customer Satisfaction - Guidelines for Complaints Handling in Organizations^^
Recommended additional reading:
 

Lewis, "A Decade On - Reforming the Financial Services Law Reforms" (see '6. Product disclosure')

 

ASIC Regulatory Guide 38 - The hawking provisions

  ASIC Regulatory Guide 53 - The use of past performance in promotional material
  ASIC Regulatory Guide 55 - Disclosure documents and PDS: consent to quote
  ASIC Regulatory Guide 65 - Section 1013DA disclosure guidelines
  ASIC Regulatory Guide 66 - Transaction specific disclosure
  ASIC Regulatory Guide 69 - Debentures and notes - improving disclosure for investors
  ASIC Regulatory Guide 70 - Prospectuses for cash box and investment companies
  ASIC Regulatory Guide 72 - Foreign securities prospectus relief
  ASIC Regulatory Guide 90 - Example Statement of Advice: Scaled advice for a new client
  ASIC Regulatory Guide 97 - Disclosing fees and costs in PDSs and periodic statements
  ASIC Regulatory Guide 107 - Fundraising: Facilitating electronic offers of securities
  ASIC Regulatory Guide 125 - Share purchase plans
  ASIC Regulatory Guide 126 - Compensation and insurance arrangements for AFS licensees
  ASIC Regulatory Guide 139 - Approval of external complaints resolution schemes
  ASIC Regulatory Guide 141 - Offers of securities on the Internet
  ASIC Regulatory Guide 151 - Fundraising: Discretionary powers
  ASIC Regulatory Guide 154 - Certificate by a qualified accountant
  ASIC Regulatory Guide 156 - Advertising of debentures and notes to retail investors
  ASIC Regulatory Guide 165 - Licensing: Internal and external dispute resolution
  ASIC Regulatory Guide 168 - Disclosure: Product disclosure statements (and other disclosure obligations)
  ASIC Regulatory Guide 169 - Disclosure: Discretionary powers
  ASIC Regulatory Guide 170 - Prospective financial information
  ASIC Regulatory Guide 173 - Disclosure for on-sale of securities and other financial products
  ASIC Regulatory Guide 175 - Licensing: Financial product advisers – Conduct and disclosure
  ASIC Regulatory Guide 182 - Dollar disclosure
  ASIC Regulatory Guide 189 - Disclosure relief for rights issues
  ASIC Regulatory Guide 190 - Offering securities in New Zealand and Australia under mutual recognition
  ASIC Regulatory Guide 221 - Facilitating digital financial services disclosures
  ASIC Regulatory Guide 228 - Prospectuses: Effective disclosure for retail investors
  ASIC Regulatory Guide 234 - Advertising financial products and advice services: Good practice guidance
  ASIC Regulatory Guide 244 - Giving information, general advice and scaled advice
  ASIC Regulatory Guide 245 - Fee disclosure statements
  ASIC Regulatory Guide 246 - Conflicted remuneration
  ASIC Regulatory Guide 254 - Offering securities under a disclosure document

9. Miscellaneous Compliance Issues

Required pre-class reading:
  Bonds & Securities Trading Pty Ltd v Glomex Mines NL [1971] 1 NSWLR 879 - summary on website
  ASIC v Citigroup Global Markets Australia Pty Limited (No. 4) [2007] FCA 963, paragraphs 254 - 456
Recommended additional reading:
  Lewis, "A Decade On - Reforming the Financial Services Law Reforms" (see '3C(i) - The inappropriate extension of former futures laws to OTC derivatives and other financial products - Client segregated accounts and margins')
  Tuch, "Investment Banks as Fiduciaries: Implications for Conflicts of Interest" [2005] MULR 15
  Matthews, "Internal Corporate Investigations" (1984) 45 Ohio State Law Journal 655
  SIA/SDIA Best Practice Guidelines for Research Integrity
  ASIC Regulatory Guide 79 - Research report providers: Improving the quality of investment research
  ASIC Regulatory Guide 181 - Licensing: Managing conflicts of interest
  ASIC Regulatory Guide 212 - Client money relating to dealing in OTC derivatives

10. Managed Investments

Required pre-class reading:
  Nil
Recommended additional reading:
  ASIC Regulatory Guide 80 - Managed investment schemes - interests not for money
  ASIC Regulatory Guide 94 - Unit pricing: Guide to good practice (joint publication with APRA)
  ASIC Regulatory Guide 105 - Licensing: Organisational competence (paragraphs 34, 37, 45, 65 and 80-82)
  ASIC Regulatory Guide 116 - Commentary on compliance plans: Agricultural industry schemes
  ASIC Regulatory Guide 117 - Commentary on compliance plans: Financial asset schemes
  ASIC Regulatory Guide 118 - Commentary on compliance plans: Contributory mortgage schemes
  ASIC Regulatory Guide 119 - Commentary on compliance plans: Pooled mortgage schemes
  ASIC Regulatory Guide 120 - Commentary on compliance plans: Property schemes
  ASIC Regulatory Guide 127 - Additional investments in managed investment schemes
  ASIC Regulatory Guide 132 - Managed investments: Compliance plans
  ASIC Regulatory Guide 133 - Managed investments and custodial or depository services: Holding assets
  ASIC Regulatory Guide 134 - Managed investments: Constitutions
  ASIC Regulatory Guide 136 - Managed investments: Discretionary powers and closely related schemes
  ASIC Regulatory Guide 148 - Platforms that are managed investment schemes
  ASIC Regulatory Guide 149 - Nominee and custody services
  ASIC Regulatory Guide 166 - Licensing: Financial requirements (appendices 2, 3 and 4)
  ASIC Regulatory Guide 167 - Licensing: Discretionary powers (paragraphs 18-23, 85 and 89)
  ASIC Regulatory Guide 178 - Foreign collective investment schemes
  ASIC Regulatory Guide 179 - Managed discretionary account services
  FSC Standard 1 - Code of Ethics & Code of Conduct
  FSC Standard 17 - Incorrect Pricing of Scheme Units - Correction and Compensation
  FSC Guidance Note 7 – Personal Trading
  FSC Guidance Note 8 - Related Party Transactions
  FSC Guidance Note 10 - Brokerage Arrangements
 

FSC Guidance Note 24 - FSC/FPA Guidance on Managing Mutual Obligations Under Chapter 7 of the AML/CTF Rules

11. Deposit Products, Non-Cash Payment Facilities, FHSA Products, Credit Facilities, Margin Lending and ASX Stockbroking

Required pre-class reading:
  Nil
Recommended additional reading:
  Code of Banking Practice
  Customer Owned Banking Code of Practice
  ePayments Code
  ASIC Regulatory Guide 40 - Good transaction fee disclosure for bank, building society and credit union deposit and payments products (transaction accounts)
  ASIC Regulatory Guide 202 - Credit registration and transition
  ASIC Regulatory Guide 203 - Do I need a credit licence?
  ASIC Regulatory Guide 204 - Applying for and varying a credit licence
  ASIC Regulatory Guide 205 - Credit licensing: General conduct obligations
  ASIC Regulatory Guide 206 - Credit licensing: Competence and training
  ASIC Regulatory Guide 207 - Credit licensing: Financial requirements
  ASIC Regulatory Guide 208 - How ASIC charges fees for credit relief applications
  ASIC Regulatory Guide 209 - Credit licensing: Responsible lending conduct obligations
  ASIC Regulatory Guide 210 - Compensation and insurance arrangements for credit licensees
  ASIC Regulatory Guide 214 - Guidance on ASIC market integrity rules for ASX and ASX 24 markets
  ASIC Regulatory Guide 219 - Non-standard margin lending facilities: Disclosure to investors
  ASIC Regulatory Guide 223 - Guidance on ASIC market integrity rules for competition in exchange markets
  ASIC Regulatory Guide 226 - Guidance on ASIC market integrity rules for capital and related requirements: ASX, ASX 24, Chi-X and APX markets
  ASX, Audio Visual Presentations for First-Time Investors
  ASX, Getting Started in Shares
  ASX, CHESS - Clearing House Electronic Subregister System
  ASX, Options - a Simple Guide
  ASX, Understanding Options Trading
  ASX, Low Exercise Price Options Explanatory Booklet
  ASX, Understanding Trading and Investment Warrants
  ASX, Introduction to Index Futures and Options

12. Derivatives, Warrants, ASX 24 Futures Broking, FX and Financial Planning

Required pre-class reading:
  Lecture slides for Lecture 3 (Insider Trading and Chinese Walls), Lecture 4 (Market Conduct Rules) and Lecture 11E (Stockbroking)
  Part B 2002 Examination Paper and sample answer
Recommended additional reading:
 

Lewis, "A Decade On - Reforming the Financial Services Law Reforms" (see '3. Derivatives')

  FPA Code of Professional Practice
  ASIC Regulatory Guide 214 - Guidance on ASIC market integrity rules for ASX and ASX 24 markets
  ASIC Regulatory Guide 226 - Guidance on ASIC market integrity rules for capital and related requirements: ASX, ASX 24, Chi-X and APX markets
  ASIC Regulatory Guide 250 - Guidance on ASIC market integrity rules for risk management and other requirements: ASX 24 market

13. Insurance, Superannuation and RSAs

Required pre-class reading:
  Nil
Recommended additional reading:
  General Insurance Code of Practice
  General Insurance Brokers’ Code of Practice
  ASIC Regulatory Guide 184 - Superannuation: Delivery of product disclosure for investment strategies
  ASIC Regulatory Guide 229 - Superannuation forecasts
  ASIC Regulatory Guide 252 - Keeping superannuation websites up to date

 


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