OTHER ANNUAL REPORTS
1.31 In addition to the ASC, the Act requires a number of other administrative
bodies to report to the Parliament. These bodies include the Companies
and Securities Advisory Committee (CASAC), the Corporations and Securities
Panel (the Panel), the Companies Auditors and Liquidators Disciplinary
Board, and the Australian Accounting Standards Board (AASB).
1.32 The Committee has also examined the annual reports of these bodies.
These reports do not raise issues requiring the urgent attention of the
Parliament. However, there are operational matters contained in the reports
to which attention should be drawn.
1.33 The CASAC annual report sets out the major activities pursued during
the year, including the publication of several background research papers,
and, in particular, the publication of a major paper on derivatives: Law
of Derivatives: An International Comparison.
1.34 CASAC also referred to this report at the Committee's hearing and
adverted to the regulatory difficulties posed by international trading
in derivatives:
Senator GIBSON - Coming out of the Barings fiasco
and knowing that the traders can take positions in a very short period
of time, are you giving due consideration to how we can have an effective
exchange of information between exchanges with regard to exchange traded
derivatives about positions taken by entities in various exchanges?
Mr Hall - It is an issue that we are aware of but
it is not something that we have paid particular attention to at this
stage. Where it obviously becomes very difficult is when one is dealing
with the cross-border situations because, from a regulatory legislative
point of view, it poses those very obvious difficulties ... I think
the important point to note here is that the most recent initiative,
which came out of the latter part of last year, is a G10 central banks
initiative. So this matter is being looked at internationally, and also
the SFE and the ASX have indicated their recognition of this particular
problem. [18]
1.35 In addition to preparing a number of discussion papers and reports,
CASAC reviewed the Exposure Draft of the First Corporate Law Simplification
Bill and worked on compulsory acquisitions.
1.36 Under the Corporations Law, an auditor is required to send to the
AASB a copy of the auditor's report where it is qualified in relation
to compliance with applicable accounting standards. The AASB refers all
notified instances of non-compliance to the ASC, which has ultimate responsibility
in this area.
1.37 The AASB annual report notes that, from the disproportionate number
of non-compliances being reported by two of the six largest accounting
firms, many instances of non-compliance with accounting standards are
not being notified to it, as required by the Corporations Law. The report
goes on to observe that:
Under section 332A, the circuitous route by which reports of non-compliance
are channelled through the AASB to the ASC is a waste of resources.
It would be far better for the ASC to tackle non-compliances with accounting
standards directly through an examination of the information filed with
them by companies and other disclosing entities.
The Corporations Law Simplification Task Force is currently considering
changes to section 332A, which it is hoped will result in changes to
the current cumbersome procedures. [19]
1.38 The Disciplinary Board, by law, may only consider applications or
complaints referred to it by the ASC. During 1994-95, 25 applications
were lodged with the Board compared to 10 in the previous year. Paragraph
1.13 above refers to some of the outcomes during the year of the activities
of the Disciplinary Board.
1.39 However, in its 1994-95 report, the Disciplinary Board reiterates
some comments concerning its role and its relationship with the ASC:
Last year the Board commented on the referral situation and has
continued to bring to the attention of the Commission and others the
fact its services are not being fully used.
The lack of applications coming to the Board would have some relevance
so far as the current review of the regulation of auditors is concerned.
As mentioned previously the Board remains available to hear additional
applications - it is a matter for the Commission to review its policy
and practices to determine whether it desires to proceed with disciplinary
matters as currently provided by law ...
In its last report the Board expressed concern at the manner in
which some matters were being presented to it by the Commission. Regrettably
overall there has not been an improvement.
The Board's proceedings are run as informally as possible, having
regard to the statute, but nonetheless there is a need for parties,
particularly the applicant, to present cases in an effective manner.
This is not always the case.
The Board is conscious of the problems faced by the Commission
in obtaining experienced staff and endeavours to take such circumstances
into account. There is a need though for competence and the Commission
should address this problem. [20]
1.40 As noted in paragraph 1.14 above, the Committee would appreciate
the ASC's response to these observations.
Corporations and Securities Panel
1.41 As with the Disciplinary Board, the Corporations and Securities
Panel considers applications from the ASC. The Panel's role is to determine
whether there has been an unacceptable acquisition of shares, or unacceptable
conduct in relation to shares or the affairs of a company.
1.42 The Panel notes that it received no applications from the ASC in
1994-95. [21]
Senator Grant Chapman
Chairman
Footnotes
[18] Corporations and Securities Committee,
Committee Hansard, 30 March 1995, p 27.
[19] Australian Accounting Standards Board,
Annual Report 1994-95, AGPS (Melbourne) p 4.
[20] Companies Auditors and Liquidators Disciplinary
Board, Annual report for the year ended 30 June 1995, AGPS, (Canberra)
pp 8-9.
[21] Corporations and Securities Panel, Annual
Report 1994-95, (Sydney) p 4.
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