Law of Australia
[pic 1][pic 2]Victoria UniversityCollege of Law and JusticeBLO3405-Law of Financial Institutions and Securities Lecturer’s name: Marc PosthouwerTutor’s name: Bryan R. Wicks Student name: Tran Thi Hoang Hanh (ID: 4498238)Tutorial day and time: Thursday 13:00 16:00 Vietnam CampusDue date: 6th October, 2014QUESTION 1Issues. The main issues here is a bank would be proposed to form and run over the Australia as a group of investors planning. This new entity will run as a company under the name of Oz Bank Ltd and registered due to the Corporation Act 2001 (Cth). Since when the bank star to run, they will provide and offer to the customers the similar range of financial services and products as other retail banks in Australia are doing. The point is as soon as they want to engage a banking business; they must satisfy about the regulatory requirements for obtaining authorisation from the relevant regulator. Therefore, banking law was necessary give out as a fundamental to clarify duties of a bank that will be justify in the following part. Rules and relevant laws (a) Financial regulation is separated mainly into the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA). As an Australia’s corporate regulator, ASIC is responsible for market integrity and consumer protection and the regulation of investment banks and finance companies. One of the legislation that ASIC is responsible for the administration is the Corporations Act 2011 which will contain those essential relevant laws for a company to be established. Based on chapter 2: Registering a company, part 2A.2: ‘how a company is registered’, in section 117 indicates that to register a company, it requires lodging an application with ASIC. And the application must state the following things: type and name that company proposes to register, necessary information in detail like: family name, date and place of birth, address of each person who consents in writing to become secretary or director, address of company’s proposed registered office or principle place of business as well as proposed opening hours for public company. Besides that, for company limited by share or unlimited company the number and class of shares, amount of shares each member agree in writing to paid for or whether it will be fully paid. If on registration, the company will have an ultimate holding company. Moreover, being a public company and is to have a constitution on registration, a copy of the constitution must be lodged along with the application. The application must be in the prescribed form and it has the consents and agreements referred to in subsection, an offence based on subsection from the previous is an offence of strict liability. In section 118, ASIC gives company ACN, registers company and issues certificate and ASIC must keep the record on registration if it were a document lodged with ASIC. Into section 119, the company becomes existence on registration as a body corporate at the beginning of the day on which it is registered until it is deregistered (Chapter 5A) and the company’s name will be specified in the certificate of registration. In the following sections of this part, they will discuss about the issue that come along with the company during it operating. Consisting of those sections: section 120: ‘members, directors and company secretary of company’, section 121: ‘registered office’, s.122: ‘expenses incurred during promoting and setting up company’ and s.123:’ company may have common seal’. More specifically, the condition for a person to become a director, member or company secretary is they have to be specified in application with their agreement to be these positions as in sec.169 and ‘the share to be taken up by the members as specified in the application are taken to be issued to the members on registration of the company’. The registered office on registration of the company will be as the same with the address of the office that they proposed to register specified in the application and for the expenses incurred as mentioned above may be paid out of the company’s assets. Another thing stand out is the common seal of company, since registering the company may have common seal and if the company does, they must set out on the expression of ACN (Australian Company Name) and ABN (Australian Business Number). Based on these terms of laws the group of investment can form their company as a first stage before engage into the banking of business field.
After considering how to register a company, the next thing to focus on the stage of carrying a banking business is seeking for Banking Act 1959 supervised by APRA. Australian Prudential Regulation Authority (APRA) is the statutory authority that responsible for the licensing and prudential supervision of Authorized Deposit-taking Institutions (ADIs), life and general insurance companies and superannuation funds. The report on a periodic basis to APRA is required for all financial institutions that regulated by APRA. APRA has issued capital adequacy guidelines for banks which are consistent with the Basel II guidelines. Under the Banking Act 1959, it requires the institution searching to be prudentially regulated as an authorised deposit-taking institution (ADI) to be authorised and the APRA is in charge for authorisation process. As in the section 5 of Banking Act indicates that ‘banking business’ as comprising of both taking deposits and taking advantage on money, as well as other financial activities prescribed by regulations made under the Banking Act. Some regulatory requirements that the bank will need to satisfy under the Banking Act 1959 to engage the ‘banking business’ are as follow. In part II which is the ‘provisions relating to the carrying on of banking business’, division 1-section 8 has state that ‘only the Reserve bank and bodies corporate that are ADIs may carry on banking’. In particularly, a body corporate is guilty of an offence if it is neither Reserve Bank nor ADI and the penalty is up to 200 units if doing so. ‘Indictable offence’ is state when an offence against the previous thing mentioned and respect to these issues also is guilty: ‘the first day on which the offence is committed’ and for those ‘subsequent day when the body corporate committing the offence continues’. Regard to sec.9 which is the ‘authority to carry on banking business’; the authority must be in writing, and APRA must give the body corporate of the grating of the authority. It is also noticeable that granted an authority does not mean it is entitled to call itself a bank, body corporate will need to have a consent under section 66-‘restriction on use of certain words and expressions’. For example, it is not an offence against subsection that is guilty offence for the Reserve Bank to assume or use the words bank, banker, or banking in relation to its financial business or for an ADI to assume or use the word banking in referring to the fact that it has been granted an authority under this Act. Under these term laws in Banking Act 1959, the company of Oz bank can gain the authorization from relevant regulator as an essential stage for entering banking business. (b) According to the ‘Financial Services Regulation’ (FSR) which reformed Wallis Enquiry 1997 amended in chapter 7 of the Corporate Act 2001, FSR select a broad scope of financial services to offer to customers, consisting of banking, insurance, financial planning, managed investment schemes and superannuation as objectives. For particularly, following financial services sectors are attached financial products. Banking service: deposit accounts and means of payments services such as smart cards and e-cash, general and insurance service: house and car insurance policies; life insurance policies; managed funds service: indirect investment where customers give funds to a fund manager to invest on their behalf; superannuation service: such as retirement investments, securities industry: the market for shares and debentures; futures and derivatives. In Australia, the principal share marked is operated by the Australian Securities. ASIC administrate the same licensing regime which must comply with financial services provided. The types of financial services and products regard to the Big four Banks in Australia are mainly focus on those main sectors following. Bank account, Credit cards, home loans, insurance, investments and personal loans are those basic ones that commonly offered by these four banks to customers as different from business customers. The subsequent information will clarify more about the financial services and products from Westpac Banking Corporation for instance. Bank account offer everyday services to help customers better manage money and a range of savings accounts to grow customer’s money. This includes ‘everyday bank accounts’- easy to access bank accounts for transaction needs in everyday, ‘saving accounts’- selecting from a range of accounts helping you to save, ‘term deposit’-offering a protected way to invest money with certainty of fixed interest, ‘debit cards’-Debit MasterCard is useful for shopping with your own money, ‘travel card’- the Global Currency Card is prepared Visa card used to make payments in multiple currencies. For the credit card product, customer will receive a lower annual fee or lower purchase rate and it suit a range of lifestyle or financial needs. There are three kinds of credit cards: low rate or low annual fee credit card and reward credit card. Home loans support customers in having a better accommodation with range of incentive offers. Consisting of variable rate, fixed rate or hybrid of both kind home loans, line of credit loan-make the most of equity in your home, home loans package and home loans for special purposes- range of specialized loan for a variety of purposes. Another services is insurance, it help to cover your home, car, contents, life, travel, credit and loans repayments plus income protection and more-with fast claims support, and a range of combined policy discounts and flexible payments options. Investments is can’t be missing because it is an essential services of bank which offer a range of investment options and our financial planners can help customers create a personalized plan tailored to their financial situation and goals, including share trading, financial planning, self-managed super funds, deposits and investment loans. Personal loans are needed to be seen in personal services, which contain unsecured personal loans, car loans and overdrafts-to cover some of life unexpected circumstances with access from $4,000 to $75,000 via Westpac Flexi loan. Besides the Financial services and products of the bank to describe for customers, they also need to concern about the legal obligations, including duties of disclosure required by legislation and industry codes. It is said that banker-customer relationship exist only if there is a contractually bound to provide at least some of the services that normally offer by a banker. In the Bank’s duties of secrecy there are some major sectors to focus on are: Code of banking practice, Privacy Act 1988, Common Law Tournier’s case: subject to four exceptions. The Code of Banking practice is the banking industry customer’s charter on good banking services. The Code sets out the banking industrys key commitments and obligations to customers on standards of practice, disclosure and principles of conduct for their banking services. The Code applies to personal and small business bank customers. In part C:’Disclosure’ of the Code of Banking, section 10.2 shows the terms and conditions of banking services include bank’s obligations regarding to the confidentiality of customer’s information as the same provision with section 13 operation of account. The Part IIIA of the Privacy Act 1988 contains strict provisions about the handling of personal credit information with the primary aim of restricting access to that information so as to protect the individual’s privacy in relation to it. More particular in ‘subdivision D-dealing with credit reporting information’, this contains the information throughout about the obligation of the bank in duties of disclosure. Besides that, there are also four exceptions in the following circumstances from Common Law Tournier’s case: ‘(a) where the disclosure is compelled by law, (b) where there is a duty to the public to disclose, (c) where our interests require disclosure, or (d) where disclosure is made with customer’s express or implied consent. Moreover, in chapter 7 of Corporations Act 2001 give out the ‘licensing of Financial Services Providers’ which applies in bank, insurance company, financial planner, broker, securities dealers. There were criteria duties set out based on this license: with the duties to act efficiently, honestly and fairly, in good faith towards clients, specific in fiduciary duty. The set of duties where the client’s interests are always given priority, obligation to avoid conflicts of interest such as making secret profits and ensure to provide full disclosure about material matters. Additionally, providing dispute resolution facilities for retail clients based on ‘Financial Ombudsman Service’ and complying with other obligation in relation to handling the client’s money and property, keeping records and lodging financial statements. Other three main documents that make a disclosure to certain information for the client are: ‘Financial Service Guide’ (S941A-B): this provide the information about the service and who provide service, benefits for example commission or remuneration of person providing service, specific in association or relationship that affect the service providers; ‘Statement of advice’ (S946A): it require to define the targets, financial situation and what the clients need to be disclosed. The final is ‘Product Disclosure Statement’ (PDS): according to terms and conditions under Code of Banking Practice, it request when the financial product is offered to customer by the issuer of the product if issued in course of its business, in the situation when the product is recommended, or offered for issue, or sold or offered for sale. In general disclosure, it must include all information ‘that might reasonably be expected to have a material influence on the decision of a reasonable person, as a retail client, whether to acquire that product’ (s1013F) and specific disclosure about: issuer, risks or benefits, significant characteristics, fees, expenses, dispute resolution. Concerning on the defective, PDS is told to be so if contains misleading or deceptive statement, or omits certain material information (part 7.9, Division 7) as violate to the provision of customer’s rights under Australian Consumer Law (ACL). Then the client can recover for loss or damage as result of the above (s1022 (B)) or can return product and get a refund in case of defective disclosure (s1016F).