Compliance: Theory and Practice in the Financial Services Industry

Reading List

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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.

Preliminary Reading

Students (particularly overseas students) who are not familiar with the role of ASIC in regulating financial services in Australia should, by way of general introduction to the course, read:
Chapter 1 of Baxt, Black and Hanrahan, Securities and Financial Services Law (6th edition 2003) LexisNexis Butterworths^^

1. Licensing

Required pre-class reading:
Nil
Recommended additional reading:

Lewis, "When is a Financial Product not a Financial Product?" (2004) 22 CSLJ 103^^
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 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:
Australian Standard AS 3806-2006 - Compliance Programs^^
FPA Guideline for Implementing the Australian Standard on Compliance (AS 3806-1998)^^
Recommended additional reading:
Australian Standard AS 3806-1998 - Compliance Programs (superseded)^^
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)
Basel Committee on Banking Supervision, "Framework For Internal Control Systems In Banking Organisations" (September 1998)
Basel Committee on Banking Supervision, "Sound Practices for the Management and Supervision of Operational Risk" (February 2003)
IOSCO, "Compliance Function at Market Intermediaries" (March 2006)
US Federal Reserve Board, "Manual on Trading and Capital-Markets Activities" – sections 2150 on ethics and 2070 on legal risk

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:
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
SIA/SDIA Best Practice Guidelines for Research Integrity
ASIC Report 24 – Research analyst independence (August 2003)
ASX Listing Rules Guidance Note 8 - Continuous Disclosure
ASIC Regulatory Guide 62 - Better disclosure for investors
ASIC Regulatory Guide 73 - Continuous disclosure obligations: Infringement notices
ASIC Regulatory Guide 79 - Managing conflicts of interest: An ASIC guide for research report providers
ASIC Regulatory Guide 198 - Unlisted disclosing entities: Continuous disclosure obligations

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:
ASIC Regulatory Guide 176 - Short selling: Overview of s1020B
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
SFE Practice Note 3 - Taking Other Side of Client Order^^
SFE Practice Note 30 - Market Practices^^

5. Shareholding Restrictions

Required pre-class reading:
Nil
Recommended additional reading:
ASIC Regulatory Guide 5 - Relevant interests in unissued share capital
ASIC Regulatory Guide 6 - Variation of takeover offers
ASIC Regulatory Guide 11 - Disclosure of offerors' intentions in takeover documents
ASIC Regulatory Guide 25 - Takeovers: false and misleading statements
ASIC Regulatory Guide 27 - Takeovers: minimum acceptance conditions
ASIC Regulatory Guide 31 - Acquisitions and disposals by a broker acting as principal
ASIC Regulatory Guide 35 - Collateral benefits in takeovers
ASIC Regulatory Guide 37 - Takeovers - financing arrangements
ASIC Regulatory Guide 48 - Takeovers aspects of options over shares
ASIC Regulatory Guide 59 - Announcing and withdrawing takeover bids (s653 and s746)
ASIC Regulatory Guide 86 - Tracing beneficial ownership
ASIC Regulatory Guide 102 - Tender offers by vendor shareholders
ASIC Regulatory Guide 128 - Collective action by institutional investors
ASIC Regulatory Guide 143 - Takeovers provisions: Warrants
ASIC Regulatory Guide 145 - Collateral benefits - Takeovers funding and pre-bid purchases
ASIC Regulatory Guide 159 - Takeovers, compulsory acquisitions and substantial holdings
ASIC Regulatory Guide 163 - Takeovers: Minimum bid price principle: s621
ASIC Regulatory Guide 171 - Anomalies and issues in the takeover provisions
ASIC Regulatory Guide 198 - Unlisted disclosing entities: Continuous disclosure obligations
ASIC Regulatory Guide 199 - Broadening the rights issue and dividend reinvestment plan exceptions for takeovers
Foreign Investment Review Board, "Australia's Foreign Investment Policy"
Takeovers Panel Guidance Notes

6. Trade Practices

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
ACCC, "Best and Fairest" Compliance Manual: a Trade Practices Training Program (September 2002) (currently under review)
ACCC, Corporate Trade Practices Compliance Programs (November 2005)
ACCC, Small Business and the Trade Practices Act (May 2008)
ACCC, Advertising and Selling (January 2007)
ACCC, Guide to Unconscionable Conduct (May 2008)
ASIC Regulatory Guide 201 - Unsolicited credit cards and debit cards

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 Regulatory 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 Information Circular No 31 - Guidance for Financial Institutions in Detecting Terrorist Financing Activities
Austrac Guidance Note 08/04 - Record-keeping Requirements
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

8. Retail Customer Obligations and Marketing Financial Products

Required pre-class reading:
Nil
Recommended additional reading:
Australian Standard AS ISO 10002-2006 Customer Satisfaction - Guidelines for Complaints Handling in Organizations^^
ASIC Regulatory Guide 23 - Updating and correcting prospectuses and application forms

ASIC Regulatory Guide 38 - The hawking provisions
ASIC Regulatory Guide 55 - Disclosure documents and PDS: consent to quote
ASIC Regulatory Guide 56 - Prospectuses
ASIC Regulatory Guide 65 - Section 1013DA disclosure guidelines
ASIC Regulatory Guide 66 - Transaction specific disclosure
ASIC Regulatory Guide 69 - Debentures - improving disclosure for retail investors
ASIC Regulatory Guide 70 - Prospectuses for cash box and investment companies
ASIC Regulatory Guide 72 - Foreign securities prospectus relief
ASIC Regulatory Guide 97 - Enhanced fee disclosure regulations: Questions and answers
ASIC Regulatory Guide 99 - Quotation of securities offered by prospectus
ASIC Regulatory Guide 107 - Electronic prospectuses
ASIC Regulatory Guide 125 - Share purchase plans
ASIC Regulatory Guide 126 - Compensation and insurance arrangements for AFS licensees
ASIC Regulatory Guide 150 - Electronic applications and dealer personalised applications
ASIC Regulatory Guide 151 - Fundraising: Discretionary powers
ASIC Regulatory Guide 152 - Lodgment of disclosure documents
ASIC Regulatory Guide 154 - Certificate by a qualified accountant
ASIC Regulatory Guide 155 - Debenture prospectuses
ASIC Regulatory Guide 156 - Debenture advertising
ASIC Regulatory Guide 158 - Advertising and publicity for offers of securities
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

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 (included in reading for Lecture 3)
Recommended additional reading:
Tuch, "Investment Banks as Fiduciaries: Implications for Conflicts of Interest" [2005] MULR 15
Matthews, "Internal Corporate Investigations" (1984) 45 Ohio State Law Journal 655
ASIC Regulatory Guide 181 - Licensing: Managing conflicts of interest

10. Managed Investments

Required pre-class reading:
Nil
Recommended additional reading:
ASIC Regulatory Guide 105 - Licensing: Organisational competence (paragraphs 34, 37, 45, 65 and 80-82)
ASIC Regulatory Guide 132 - Managed investments: Compliance plans
ASIC Regulatory Guide 133 - Managed investments: Scheme property arrangements
ASIC Regulatory Guide 134 - Managed investments: Constitutions
ASIC Regulatory Guide 136 - Managed investments: Discretionary powers and closely related schemes
ASIC Regulatory Guide 148 - Investor directed portfolio services
ASIC Regulatory Guide 166 - Licensing: Financial requirements (paragraphs 54-76)
ASIC Regulatory Guide 167 - Licensing: Discretionary powers (paragraphs 18-23, 85 and 89)
ASIC Regulatory Guide 179 - Managed discretionary account services
ASIC Pro Forma 209 - Australian financial services licence conditions (paragraphs 1, 14-19 and 35-46)
IFSA Standard 1 - Code of Ethics & Code of Conduct
IFSA Standard 10 - Presentation of Past Performance Information and Visual Promotions
IFSA Standard 14 - IFSA/FPA Industry Code of Practice on Alternative Forms of Remuneration in the Wealth Management Industry
IFSA Standard 15 - IFSA/FPA Industry Guide on Rebates & Related Payments in the Wealth Management Industry
IFSA Standard 17 - Incorrect Pricing of Scheme Units - Correction and Compensation
IFSA Guidance Note 7 – Personal Trading
IFSA Guidance Note 8 - Related Party Transactions
IFSA Guidance Note 10 - Brokerage Arrangements

IFSA Guidance Note 24 - IFSA/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 and ASX Stockbroking

Required pre-class reading:
Lecture slides for Lecture 3 (Insider Trading and Chinese Walls), Lecture 4 (Market Conduct Rules) and Lecture 11D (Stockbroking)
Part B 2002 Examination Paper (problem to be discussed in class)^^
Recommended additional reading:
Code of Banking Practice
Mutual Building Societies and Credit Unions Code of Practice
Electronic Funds Transfer Code of Practice
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
ASX, Audio Visual Presentations for New 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, Understanding ASX Listed CFDs
ASX, Introduction to Index Futures and Options

12. Derivatives, Warrants, SFE Futures, FX, Financial Planning and Margin Lending

Required pre-class reading:
Nil
Recommended additional reading:
Chapters 12-15 of Carew, Fast Money 4: the Best Selling Guide to Australia's Financial Markets (1998) Allen & Unwin^^
SFE, Sydney Futures Exchange - An Introduction
SFE Practice Note 23 - Provision of Credit to Clients^^
SFE Practice Note 31 - House and Client Clearing Accounts^^
FPA Code of Ethics and Rules of Professional Conduct

13. Insurance, Superannuation and RSAs

Required pre-class reading:
Nil
Recommended additional reading:
General Insurance Code of Practice
General Insurance Brokers’ Code of Practice
Life Insurance Circular C.I.1 – Derivatives - Use, Management and Control
Superannuation Circular II.D.7 – Derivatives
ASIC Regulatory Guide 84 - Super switching advice: Questions and answers
ASIC Regulatory Guide 184 - Superannuation: Delivery of product disclosure for investment strategies
ASIC Regulatory Guide 200 - Advice to super fund members

^^ These materials will be handed out on CD at the commencement of the course.

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