Australia: Regulatory Authorities

APRA has released its proposed Basel II approach to margin lending, and draft guidelines for the recognition of external credit assessment institutions (EACIs).

The proposed margin lending requirements relate to the risk-weight for capital requirements for authorised deposit-taking institutions involved in margin lending activities. Although under the Basel II framework margin lending exposures attract a 'zero capital requirement', APRA has proposed an interim 20% risk-weight for liabilities secured by listed equity investments. Other exposures will be considered as secured loans for risk-weight calculation purposes.

The draft guidelines set out the criteria of objectivity, independence, transparency, disclosure, resources and credibility that an EACI must satisfy to be recognised by APRA. Under the prudential framework, banks can only use the risk assessment of recognised EACIs when calculating their capital requirement.

APRA's media release can be accessed via the following link:
http://www.apra.gov.au/media-releases/07_38.cfm.

The draft Guidelines on Recognition of an External Credit Assessment Institution can be accessed via the following link:
http://www.apra.gov.au/ADI/upload/Guidelines_EACI_22Aug07.pdf

ASX has released its annual report to shareholders, which includes an analysis of its performance as a market regulator over the past financial year.

The ASX annual report can be accessed via the following link:
http://www.asx.com.au/about/pdf/asx_2007_annual_report.pdf

On 16 August 2007, Uniden Australia Pty Ltd, a manufacturer and wholesaler of telecommunication products throughout Australia, offered court enforceable undertakings to the ACCC in relation to its claims that Uniden's Atlantis 250 marine radio was waterproof.

Uniden represented that its marine radio, a VHF handheld two-way radio, was waterproof. However the ACCC alleged that Uniden's claims may have amounted to misrepresentations in contravention of the Trade Practices Act 1974 No. 51 (Cth) (Act), as the testing conducted on the radios only found that they were 'splash-proof', not 'waterproof'. Uniden's prominent use of the term 'waterproof' displayed in large font was an integral part of the representations that appeared on marine radio packaging and the product's promotional material, the ACCC said.

Additionally, the ACCC considered the wording of Uniden's own express warranty in respect of the marine radio arguably excluded, restricted or modified the statutory rights available to consumers concerning the conditions and warranties implied into transactions pursuant to the Act. Uniden's warranty may have misrepresented to consumers that they had no statutory protection by the exclusion under its own warranty of coverage for consequential loss or damage.

As part of its undertakings, Uniden will provide owners of the marine radio with the option of a full refund. Uniden has also extended its warranty protection to cover for water damage which will also allow consumers in these circumstances to elect to receive a full refund, product replacement or repair.

Uniden's undertaking to the ACCC can be accessed via the following link:
http://www.accc.gov.au/content/item.phtml?itemId=795991&nodeId=1e64d294b 37827a6787bdf410113830c&fn=Undertaking.pdf

On 13 August 2007, the Federal Court imposed penalties totalling $40,000 against Mr Dally Messenger and Dally M Publishing and Research Pty Ltd for attempting to price fix the prices of funeral ceremonies in Melbourne. The Federal Court held that Mr Messenger and the international College of Celebrancy attempted to make an arrangement that fixed the prices of services supplied by celebrants. The court's orders included an injunction against Mr Messenger from engaging in similar conduct in the future, and orders that Dally M Publishing and Research pay a penalty of $30,000 and that Mr Messenger pay a pecuniary penalty of $10,000.

ACCC's media release can be accessed via the following link:
http://www.accc.gov.au/content/index.phtml/itemId/795320/fromItemId/2332

The Takeovers Panel (Panel), in a review of its previous decision in Rinker Group Limited 02, has again made a declaration of unacceptable circumstances in relation to the affairs of Rinker Group Limited (Rinker).

Rinker was the subject of an off-market takeover bid by CEMEX Australia Pty Ltd (CEMEX). CEMEX announced on 10 April 2007 that the offer it had made for Rinker was its 'best and final' offer, but subsequently announced on 7 May 2007 that it would not exercise its right to deduct a $0.25 dividend, declared by Rinker on 27 April 2007, from its offer price – Rinker shareholders would instead receive the dividend.

On review, the Panel held that Rinker shareholders and directors did not have adequate information to assess the merits of CEMEX's offer, and affirmed its finding at first instance that CEMEX's decision to allow Rinker shareholders to receive the 27 April 2007 dividend did not conform to the 'truth in takeovers' principle – accordingly the acquisition of Rinker by CEMEX 'did not take place in an efficient, competitive and informed market'. The Panel also considered that shareholders who sold their shares after the announcement on the 10 April, but before the 7 May announcement, did not have the opportunity to reap the benefits of CEMEX's increased offer.

The Panel will make orders and publish the reasons for its decision in due course.

The Panel's decision can be accessed via the following link:
http://www.takeovers.gov.au/content/1258/download/MR07-57.pdf.

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