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Australian Securities Commission Act - Australian Securities Commission - Report - 1993-94


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Contents

Achievements k . i n ­

C hairm an s R .v ,e w Facilitating Business

Market and Corporate Integrity

Credible Public Information

Appendix 2

Appendix 3

Appendix 4 t I s ’’ -B ' '* > '· £ ί? ν y v -

Index S i ® i < h·Î½ ’.

Financial Statements '-'a' - -·

k i .· < i ; | e ;

Our Mission is to achieve

I maximum

credibility of

Australian

corporations

and securities

markets.

. \ r

What is important in achieving our Mission

The active involvement of the community, business, industry associations, regulatory bodies and government

♦ Our staff who are essential to our success ♦ Treating the people we deal with professionally and equitably

« , and efficiency

vxr sm sS

Objectives

” 1*1 'i i m '■£ Facilitating business ASC regulatory decisions M Btrvr.e . ♦, build confidence in markets and co V "■ ♦ maintain investor protection a

Law . ,,

. - ♦ enhance commercial certainty

appropriate disclosure to the securities and r futures markets " ' 1

♦ responsible intermediaries and professionals ♦ honest and diligent management of corporations.

Credible public information A quality public information service on corporations and other reporting entities which ♦ adds value to commerce ♦ is readily accessible, accurate, relevant and cost-

effective ♦ minimises procedural requirements for

The ASC A highly professional, focused and well- managed ASC.

1

The Australian Securities Commission (ASC) is established under the

Australian Securities Commission Act 1989. It administers the Corporations Law

(referred to as the Law in this Report) throughout the Commonwealth, States

and Territories.

The ASC began operations on 1 January 1991. Its functions encompass

♦ regulation of fundraising and securities and futures markets

♦ licensing of securities and futures dealers and advisers, and registration of auditors and

liquidators

♦ collecting, processing and providing public access to company information

♦ modification of, and exemptions from, the Law, consistent with legislative policy

♦ investigation and enforcement of corporate and securities law

♦ advising the Attorney-General on the practical operation of the Law, including proposals for

statutory change.

The ASC is accountable to the Commonwealth Parliament through the Attorney-General. The

Attorney-General may, under sections 12 and 14 of the ASC Act, give directions to the ASC.

No Ministerial directions were given during the year.

In 1993/94, the Commission comprised three full-time members - a Chairman, a Deputy

Chairman and Statutory Member - appointed by the Governor-General. Their terms and

conditions of appointment appear on page 60. In July 1993 Bill Robinson was appointed acting

Deputy Chairman and Kathleen Farrell was appointed acting Statutory Member. O n 11 October

1993 Lynn Ralph was appointed Deputy Chairman for a three-year term, and Bill Robinson

resumed his position as Statutory Member.

The ASC is required by the ASC Act to establish a Regional Office in each State and Territory,

and to appoint a Regional Commissioner to manage these offices. Their names and terms of

appointment are set out on page 60. The ASC is staffed under the Public Service Act 1942. Details

of senior executive staff and numbers of all staff employed are at pages 60 and 61 respectively.

Information officer: Janet O ’Connor, Corporate Relations, ASC, GPO Box 4866, Sydney, NSW

2001. Phone: (02) 911 2096

Achievements

Facilitating business

♦ New policy initiatives in the areas of derivatives and master funds to meet market needs

♦ Quicker registration of prospectuses (44-5 per cent within three days) despite a 31 per cent increase to 933 in the number of prospectuses lodged for registration

♦ Faster processing of applications for relief from the Law (64 per cent within five days) despite a 14 per cent increase to 4774 in the number of applications received

Market and corporate integrity

♦ Major criminal prosecutions successful in 53 of 68 cases, and major civil actions successful in 25 of 31 cases

♦ Civil actions, commenced in the public interest, seek to recover nearly $500 million on behalf of investors

♦ Surveillance programs lift standards of disclosure and improve compliance with the Law

Credible public information

♦ ASC Information Division achieves international quality certification - a world first for an information management organisation

♦ Successful pilot of system to allow companies to lodge documents electronically with the ASC

♦ Client survey finds lodging parties believe ASC has improved the accuracy and speed of document processing

♦ Faster company incorporations (98.1 per cent within 24 hours) despite a 36 per cent increase to 83,516 in the number of new companies incorporated

The ASC

♦ Comprehensive market research commenced to monitor external perceptions of ASC performance. Results will be used to identify areas for improvement

♦ Wide-ranging Strategic Review commenced to ensure internal processes and structures deliver results efficiently and effectively

ASC C h a i r m a n , Al a n C a m e r o n ( c e n t r e ) , wi t h | /

| Al a n M c G r e g o r , C h a i r m a n of F H P a u l d i n g & Co

■' a n d P a t r i c i a K h o r , c o n s u l t a n t w i t h P e m b r o k e

I F i n a n c i a l P l a n n e r s L t d , M e l b o u r n e i p ' S @ |" I H

A d e l a i d e

M S

■ ■ V o many people, the ASC

φ is the organisation *! seeking to extradite a

prominent former company

director from Spain, or the

source of insistent demands

that a company annual return

be lodged, NOW! Enforcement

of the Corporations Law is a

vital role for the ASC,

although our public image in

this area has recently been

dominated by issues that reflect

events of the late 1980s.

Public interest in these matters

is understandable, but it is

important also to recognise the

positive contribution the ASC

is making to business and

investment in Australia todav.

I believe our role in improving

standards of disclosure and

compliance, and in setting

regulatory policy is

increasingly accepted by

business. Similarly the success

of our publicly accessible

Chairman's Review

national corporate database is becoming

better appreciated. Though not widely

reported, the international quality

certification of the ASC’s Information

Division recognised the hard work our staff

have put into meeting the information needs

of Australian commerce in the 1990s. I will

briefly touch on some elements of these

significant contributions in this overview,

but details are to be found in the rest of the

report.

It is my view that an unintended but

welcome consequence of the delay in not

establishing a single national corporate and

securities regulator until 1991 is that many of

the difficulties faced in other countries,

especially those with federal systems of

government, have been eliminated or

substantially reduced. There are no conflicts

between regulators with different

geographical and industry jurisdictions. We

have no State or Territory registry offices to

incorporate companies, and we have no

separate futures regulator - the distinction

between futures and securities being

(curiously) both more important and harder

to find than ever. The challenge for the ASC

is to ensure that its performance is at the

high level which its structure ought to

permit.

In the coming year, there will be two

significant regulatory developments. First,

the new statutory enhanced disclosure regime

will commence. The ASC’s primary role in

this area will be with unlisted public entities,

where it will be the initial recipient of

company information. We will need to

decide what level of surveillance is required

for these entities, as well as for listed entities

where the Australian Stock Exchange will be

the initial recipient of information. As a

result, our role as statutory regulator

supporting and monitoring self-regulatory

organisations such as the Stock Exchange

and the Sydney Futures Exchange will

receive more attention in 1994/95.

Second, the Government will announce its

conclusions following the Collective

Investments Review. This is likely to require

an increased ASC commitment in this area.

Facilitating business

The continuing and welcome upsurge in

corporate activity during the year has

provided the ASC with new opportunities to

demonstrate its capacity to support such

activity in various ways. Every day business

and its professional advisers seek exemptions

from or modifications of the Corporations

Law. They also want to register documents

such as prospectuses and takeover offers, and

obtain occupational licences and professional

registration. We have been working with

them and investors to build confidence,

provide commercial certainty, simplify

processes and reduce costs.

Greater corporate activity has seen the

number of applications for relief from the

Law increase to nearly 5000, and the number

of prospectuses lodged for registration climb

by 31 per cent to more than 900. A key

challenge is to ensure proper consideration of

these applications in a timely way.

New business opportunities in the complex

area of derivatives have brought about

increased involvement of non-professional

traders, and the increasing complexity of

instruments traded outside regulated markets

Chairm an' s Review

has raised new issues as to the scope and

nature of regulation in this area, both

domestically and overseas. The ASC has

developed important regulatory policy to

ensure appropriate protection for less

sophisticated traders, and in due course, law

reform may be needed to ensure appropriate

disclosure of risk levels of market

participants.

We have also held public hearings and

extensively reviewed “master funds" in light

of the increasing popularity of these

investments, and in response to doubts

expressed in some quarters about the

applicability to master funds of the usual trust

regulatory requirements.

Market and corporate integrity

All business involves risk-taking, and the

ASC seeks to encourage investors in

securities and futures to take risks, by

ensuring full disclosure and access to honest,

efficient and fair investment advice. There

remains considerable work to be done in

these areas. Our market research indicates

that many investors read prospectuses (more

of them, and to a much greater extent, than

is popularly believed) but find them difficult

to understand, and there is some scepticism

about the quality of advice from investment

advisers and their representatives. (In July

1994 we announced a major review of the

licensing regime regulating securities advisers

with a view to ensuring that the system

encourages quality advice.)

Increasingly we are promoting compliance

through education and surveillance, because

we believe the vast majority of market

participants want to work with us to improve

confidence and encourage investment. Many brokers and fund managers are now

appointing or strengthening the role of

compliance officers to ensure that their own

processes produce a fair outcome for

investors. As well, industry associations are

developing codes of best practice.

action remain

essential. Without

trust in company

officers and

market

participants

people will not be

prepared to invest,

and without this

investment our

economy will

stagnate.

This year the

number and

seriousness of

reports made to

the ASC of

suspected

corporate

wrongdoing has declined. Many reports come

to us from receivers and liquidators. With the

decline in corporate insolvencies, this

downward trend is to be expected.

Nonetheless, information gathered through

ASC surveillance activities suggests that

serious misconduct is less prevalent today

than in the 1980s. One challenge for the

Commission in this context is to establish

criteria to determine which complaints of less

serious misconduct ought to be investigated.

Where serious contraventions of the Law are

suspected, investigations and effective

enforcement

Lynn Ralph, Deputy Chairman

Chairman' s Review

In relation to the “fallout” from the 1980s, I

should mention that the Courts this year

handed down a number of prison sentences

including two relating to the Estate Mortgage

Trusts, and a lengthy term of imprisonment

to an investment adviser who stole clients’

funds. Investigations into the last remaining

major 1980s matter continued at year end,

but it is now in the course of being referred

for consideration to the Commonwealth

Director of Public

Prosecutions. As

mentioned earlier,

the ASC is also

actively

supporting efforts

to extradite

Christopher Skase

from Spain.

During the year

the ASC

commenced major

civil actions in the

public interest to

recover company

funds for the

benefit of

Bill Robinson, Statutory Member

members of

Adelaide

Steamship

Company Ltd, and

for unitholders in

the Aust-Wide Property Trust.

Credible public information

The business community, credit providers

and investors continue to speak highly of the

benefits they derive from the ASC’s national

corporate database. The successful testing

and imminent implementation of electronic ,

lodgement of annual returns will markedly

assist companies in lodging statutory

information quickly and reliably.

I am also proud to report that during the year

our Information Division, which manages

document lodgement, information searching

and information technology services,

achieved international quality certification.

Our quality auditors informed us that the

ASC is the first information management

organisation in the world to be granted

certification, and the Commission

appreciates the efforts of all Information

Division staff who worked hard and well to

achieve this result.

Relations with Parliament

The Senate Standing Committee on Legal

and Constitutional Affairs has been

conducting an inquiry into the investigatory

practices of the ASC. In addition to its

general submission, the ASC appeared during

the year at three public hearings where it

responded in detail to particular issues raised

before the Committee, which has not yet

reported its findings.

Without pre-empting what the Committee

may find, we want our processes of

investigation and enforcement to be fair and

open, and the people we deal with to be

treated professionally and equitably. I am also

conscious that our investigations must be

timely, given concerns about potential delays

in the investigative process as well as in the

judicial system. This concern has been raised

with us by the Parliamentary Joint

Committee on Corporations and Securities,

with which we continue to meet on a regular

basis.

8

Chair m an' s Review

Relations with other agencies

Our relationship with the Commonwealth

Director of Public Prosecutions continues to

be satisfactory and there is effective

cooperation at all levels. There have been no

disputes requiring formal resolution by the

National Steering Committee on Corporate

Wrongdoing, established by Ministerial

direction on 30 September 1992.

There has been a review of law enforcement

agencies within the Attorney-General's

portfolio. As a result, cooperative

arrangements have been strengthened. At

the request of the Minister, I have been

appointed to membership of the new

Commonwealth Law Enforcement Board,

which brings together the heads of the

National Crime Authority, the Australian

Federal Police, the Attorney-General’s

Department and the ASC.

As the largest single user of the Law, the

ASC supported the Attorney-General’s

decision to appoint a taskforce to seek to

simplify the Corporations Law, and has

supported these efforts to the fullest extent.

The ASC is also continuing to build a

cooperative relationship with the Insurance

and Superannuation Commission to ensure

that investors are protected, and to minimise

regulatory overlap.

Review of the national corporate regulation scheme

The ASC participated in a Government

review of the national corporate regulation

scheme. The first phase examined statutory

fees charged under the scheme, and a Report

was submitted to the Attorney-General in

February 1994. Fees (which are collected for

the government and are not directly related

to ASC running costs) were adjusted to

reflect more accurately the costs of the

scheme. The second phase of the review

looked at the overall performance of the

national scheme, including the ASC and

other agencies, and is expected to report to

the Attorney-General by the end of August

1994.

Improving ASC performance

The Commission has

undertaken two

major initiatives this

year to improve the

performance of the

organisation.

The first is our

Strategic Review

which is examining

how we carry out our

activities. This is a

voluntary initiative

undertaken to ensure

that our processes Kathleen Farrell, acting Statutory Member and structures (July - October 1993)

continue to deliver

results as efficiently and effectively as

possible. This Review is a participative

process, and includes consultation with the

business community. While acknowledging

that much has been achieved by the

outstanding efforts of staff during the past

three years, the Commission has identified

five main opportunities for improvement

• increasing our understanding of and

responsiveness to the markets

Chairman' s Review

• delivering more consistent decision

making across the entire organisation

• better use of information in order to

improve the focus of our strategies and

activities

• developing a quality program for

continuous improvement

• ensuring our support processes such as

training and information technology

promote our core activities.

The second initiative is comprehensive

market research within the business

community about our regulatory role. More

than 35 in-depth interviews and 450

telephone interviews will be conducted

nationally to assess the degree of

“stakeholder” satisfaction with our

performance, and to identify any key areas for

improvement. This will provide fresh insights

for our future plans. We will also be seeking

feedback on our performance in 300

telephone interviews with those who lodge

company information.

Membership of the Commission

In July 1993, the Attorney-General

appointed our Statutory Member, Bill

Robinson, to act as Deputy Chairman and

the then National Enforcement Coordinator,

Kathleen Farrell, to act as a Member of the

Commission, pending the appointment of a

substantive Deputy. I should record my

personal thanks to both for their support and

contribution in these roles.

On 11 October 1993, Lynn Ralph took office

as the new Deputy Chairman. The

Commission decided to reallocate particular

responsibilities at this time. The Chairman

now has responsibility for national

enforcement matters, the Deputy Chairman

has responsibility for policy development in

regulatory issues involving markets and

companies, and the Statutory Member has

responsibility for specific administrative

issues, accounting policy, auditors and

liquidators regulation, and the operations of

the Information Division.

Regional Commissioner, South Australia

In June 1994, John Welters resigned his

position as South Australian Regional

Commissioner to take up an appointment as

Deputy Secretary of the Victorian

Department of Justice. Mr Wolters

contributed greatly to the ASC not merely in

establishing and leading our South

Australian office but in our overall national

effort. His expertise in the areas of

international securities law and self-

regulatory market systems, his enthusiastic

participation in the work of the Commission

both in South Australia and nationally, and

his sound advice and good humour, will all be

missed.

Alan Cameron

Chairman, Australian Securities Commission

Chair m an' s Review

Regional Commissioner! (I te r): Michael Braham, NSW; Peter Cranswick, Tas; Rita Harvey, NT; John

Pinkerton, ACT; John Wolters, SA; Executive Director, Information Division, Bemie Mithen; Regional

Commissioners: Barrie Adams, Old; Murray Allen, WA; Ron Trevethan, Vic.

The ASC’s c o o p e r a t i o n in a s s i s t i n g us o v e r c o me a n u mb e r

of nove l a s p e c t s in r e l a t i o n t o t h e i s s u e of our p r o s p e c t u s

f or Fr a n k e d I n c o me Fund o p t i o n s w a s mu c h a p p r e c i a t e d

- J a m e s Gr a h a m, Ma n a g i n g Di r e c t o r ,

Gr e s h a m P a r t n e r s M a n a g e m e n t Lt d, S y d n e y

The ASC has three basic objectives in business facilitation: enhancing commercial

certainty and reducing business costs,

maintaining investor protection as provided

by the Law and building confidence in

markets and corporations.

The ASC facilitates business

by making regulatory

decisions. Many decisions

provide relief from strict

compliance with the letter of

the Law by changing or setting

aside particular provisions.

Other decisions include

registering documents so that

fundraising and takeovers may

proceed, licensing securities

and futures dealers and

advisers, and registering

company auditors and

liquidators.

The great majority of ASC

decisions in this context are in

response to applications

submitted by businesses or

their professional advisers.

The ASC deals with most of

these according to published

policy and “pro-forma”

instruments which lay out

precisely the form in which the

relief will be granted.

This enables applicants to

apply for a particular

iflfstfiirhTrit cTMcrrHtrA'SC ··â– ·’-

know that minor or technical

variations may be required. In

novel or complex matters, the

ASC may need to establish

new policy on how it will

regulate particular types of

commercial activity before

deciding individual

applications.

Facilitating B usiness

Policy initiatives to meet market needs

In several important areas this year the ASC

has set new policy to deal effectively with

emerging developments in the markets. The

ASC has received encouraging feedback that

its policy responses are usually appropriate

and that there is constructive dialogue with

industry groups.

A t the same time, the number of new policy

applications has fallen to 112 this year from

180 last year. To improve the service the

ASC provides to business, the Commission is

aiming to deal more swiftly with new policy

applications, while maintaining the high

quality of policy work done to date.

The major areas in which policy initiatives

were taken during the year are listed below.

Derivatives and futures markets

Derivatives are financial instruments whose

value is derived from or based on the price of

one or more underlying assets, or indexes of

asset values. Assets or indexes include

interest rates, currencies, commodities,

equities or other valuable rights. Derivatives

represent one of the fastest growing sectors of

financial markets worldwide, and much of

the growth has been in non-exchange, “over-

the-counter” (OTC) markets. The ASC

advises the Minister on whether to approve

new futures and securities markets and is

responsible for the supervision of authorised

markets.

Under current law, most O TC derivatives in

Australia comprise interest rate and currency

swaps, and forward rate agreements which are

expressly excluded from the definition of

“futures contract”. However, products based

on share prices, or on the prices of physical

commodities such as minerals or agricultural

output, are becoming more common.

The ASC studied the regulatory issues raised

by OTC derivatives market activity in

Australia and overseas and consulted

extensively with industry participants.

As a result, the ASC issued Policy Statement

70, which sets out the criteria by which

applications for exempt futures markets will

be assessed. The central element is a “safe

harbour" policy, providing for ASC support

of applications which meet specified criteria.

The criteria are designed to facilitate

transactions between sophisticated market

participants while maintaining the level of

investor protection required by the Law for

retail participants. The criteria also seek to

ensure that market operators are subject to

appropriate capital standards supervision.

The policy requires that applicants, who will

be the market providers, be subject to an

appropriate prudential regulation regime

based on recognition of appropriate lead

regulators. It also requires that counterparties

be professional market participants.

The ASC forwarded to the Minister a report

on OTC derivatives markets, recommending

a thorough review of the regulation of

derivatives markets, especially non-exchange

markets. Market participants are concerned

that current legislation has failed to keep

pace with market developments and has

consequently become uncertain in its

application. The ASC is concerned that the

regulatory regime should provide an adequate

level of investor protection and should

contribute to the stability and integrity of

derivatives markets. The ASC also supported

Facilitating B usiness

changes by regulation to the definition of

“securities” and “futures” to accommodate

new products.

Master funds

Master funds have become increasingly

popular in recent years offering investors

flexibility, investment choice and simplified

administration. In response to their rapid

growth, the ASC published an Issues Paper

and held public hearings in Sydney,

Melbourne and Perth to consider regulatory

issues. This allowed extensive consultation

with affected parties.

As a result, the ASC has taken a number of

policy initiatives that affect master funds and

managed funds generally. These initiatives

help protect investors through raising the

standard of information available to them,

while facilitating new business development.

One initiative is the development of a

specific disclosure regime for member

discretionary funds (master funds that allow

investors to select the underlying invest­

ments). This regime recognises that master

fund investors (who are retail investors) are

entitled to a comparable standard of dis­

closure as direct investors, but that strict

enforcement of the Law may have an

impractical result.

Another outcome will be the introduction of

a special category of securities dealers licence

for the management companies of managed

funds (not just master funds). In future, a

management company will have to satisfy the

ASC, on entry and on an ongoing basis, that

its operating systems and internal controls

are adequate.

Stock market provisions

Computerised communications systems now

make alternative trading systems outside the

traditional stock exchange model

increasingly feasible.

Over the last few years there have been an

increasing number of proposals for new types

of stock markets which could not be

accommodated within previous policy. The

ASC has released a draft Policy Statement

for public comment on the ASC’s approach

to making recommendations to the Minister

about applications to conduct such markets.

The definition of “stock market” under the

Law is broadly drafted. Accordingly, the

ASC draft policy sets out circumstances

where it considers that there would be little

regulatory benefit in seeking to enforce the

prohibition against the operation of an

unauthorised stock market. These

circumstances include the operation of

certain information bulletin boards, activity

otherwise regulated by the Law, low volume

matching activity and the conduct of some

markets by licensed intermediaries within the

context of a regulated market.

In relation to approval as a stock exchange,

an approved securities market or an exempt

market, the draft policy sets out criteria

relating to investor protection, market

integrity and market oversight which the

ASC considers appropriate for each category

of stock market approval.

Short-selling

In May 1994, the ASC released a discussion

paper on “short-selling” - the practice of

selling securities not owned by the seller.

This followed concerns about the wide scope

Facilitating B usiness

of short-selling provisions and the desire of

practitioners for law reform in professional

fixed interest markets.

Downstream acquisitions

In November 1993, Policy Statement 71 was

released setting out the relief available in the

case of a downstream acquisition resulting

from a takeover of a foreign upstream

company. The Law otherwise “prevented" a

takeover of a foreign company if that

company held more than 20 per cent of an

Australian company.

Investors’ use of prospectuses

For some time brokers and investment

advisers have commonly believed that

investors do not read prospectuses before

deciding to invest. The A SC decided to test

how prospectuses were used, and com­

missioned a market research survey which

interviewed 300 retail investors and 41

investment professionals.

The survey results, released in April 1994,

showed that prospectuses are read in detail by

about 70 per cent of investors, and are the

second most frequently cited source of

information about investments ranking only

behind advisers or brokers. O n average, it was

found investors spend more than an hour

reading a prospectus. However, many

investors had difficulty understanding them.

Issues raised were lack of plain English

expression, lack of adequate “sign-posting” or

omission of risk exposure information, and

insufficient information about cost of entry,

management and exiting of tmst funds. The

ASC will draw on the survey evidence when

deciding policy in relation to fundraising

issues, and will encourage the development

by industry of prospectus “best practice”

guidelines.

Foreign collective investment schemes

Relief granted by the ASC allowed

Australian investors, for the first time, direct

access to foreign collective investment

schemes. In September 1993, the ASC

released Policy Statement 65, which

establishes the terms on which relief from the

prospectus provisions of the Law would be

granted to foreign collective investment

schemes in Australia, where foreign

regulatory regimes provide a level of investor

protection comparable to that under the Law.

Review of rules governing property trusts

Government intervention in 1991 to freeze

redemptions of units in unlisted property

trusts enabled the industry to restmcture

itself and establish a more stable footing. The

ASC believed it was timely to review the

policy it had put in place immediately after

the freeze in light of improved market

conditions.

In December 1993, the ASC released its

policy on property trusts and property

syndicates, providing substantial relaxation of

requirements and taking account of

legislative changes. The Policy Statement

sets out the extent to which relief will be

granted from the fundraising and prescribed

interests provisions of the Law in respect of

property securities trusts, unlisted property

trusts, listed property trusts, fixed term

property trusts and fixed term property

syndicates.

Time-sharing schemes

In September 1993, the ASC released Policy

Statement 66, which provides prospective

Facilitating B usiness

purchasers of time-shares with a longer

cooling-off period of ten business days, and

ensures that they are fully informed of their

rights under the Law. Any person who carries

on a business of selling interests in time­

sharing schemes must be a licensed securities

dealer. The ASC provided relief from the

prospectus provisions of the Law to assist

unitholders who wanted to on-sell their

interests.

Company title properties

In October 1993, the ASC executed a Class

Order relieving owners of company title

home units from the requirement to lodge a

prospectus before selling their property.

Film, writing and entertainment industry

The ASC executed a Class Order to ensure

that the common practice in these industries

whereby writers, performers and producers

receive fees based partly on a percentage of

revenue generated by the final work could

continue without breaching the fundraising

provisions of the Law.

Superannuation funds

Throughout the year, the ASC worked

closely with the Insurance and Super­

annuation Commission (ISC) to assist in the

transition of regulation of superannuation

funds to the Superannuation Industry

(Supervision) Act (SIS). ASC initiatives

included extending prospectuses which

would otherwise have expired before the

changeover date of 1 July 1994, and exempting all funds regulated by SIS from

the fundraising provisions of the Law.

In line with Government efforts to facilitate

the incorporation of superannuation tmstee

companies, in April 1994 the fee to

incorporate companies acting solely as

trustees of superannuation funds was reduced

from $550 to $100. The annual return

lodgement fee was reduced to $30,

substantially less than that applying to

companies operating for profit.

Charitable bodies

The ASC has provided relief from the Law to

allow for more flexible regulation of

investment schemes offered by charities.

During the year, public hearings were held to

examine whether the scope of relief from the

fundraising provisions should be further

extended. A proposal has been circulated for

public comment.

Australian Stock Exchange (ASX)

During 1993/94, the ASC considered a large

number of amendments to ASX Business and

Listing Rules, in order to advise the Minister,

as required by the Law, on whether powers to

disallow such changes should be exercised.

A number of these changes will facilitate the

introduction of the Clearing House

Electronic Sub-Register System (CHESS).

CHESS will eventually allow the ASX to

move to a three-day settlement regime and a

paperless securities register. The ASC has

worked closely with the Attorney-General’s

Department, ASX Settlement and Transfer

Corporation (ASTC), the CHESS Project

Team and the Trade Practices Commission

on the project. The ASC’s main role has

been to ensure that CHESS be developed

within an appropriate legal and regulatory

framework. (Since the end of the financial

year, the Minister has approved ASTC as the

Securities Clearing House under s779B(2) of

the Law.)

Facilitating B usiness

Accounting issues

The ASC has provided responses to the

Australian Accounting Research Foundation

and the Australian Accounting Standards

Board on the following significant issues

• Revisions to Schedule 5

• Emerging Issues Group

• Recoverable Amount

• ED 60: Accounting Policies (Materiality).

The ASC has also contributed to the

International Organisation of Securities

Commissions (IOSCO) Working Party No.l

on Multinational Reporting and Disclosure.

Commercial applications generally

With the end of the recession, business

activity has increased significantly. This is

reflected in the increased number of

commercial applications received by the

ASC - from 4190 last year to 4774 this year.

This marked increase in applications for

relief from the Law has created pressure on

staff to meet business needs for quick

decisions.

Processing times improved

Despite the increased volumes, processing

time has improved significantly. This is

attributable to the process of streamlining

many of the routine, standard applications

discussed in last year’s Annual Report. Of

4050 standard applications for discretionary

relief received, 3055 (or 75 per cent) were

processed in under five days, compared with

65 per cent last year. There were 612

applications received for minor or technical

variations from standard forms of relief, of

which 351 were processed in under ten days.

Of 112 applications requiring new policy

determinations, 49 were processed in less

than 15 days.

Among the more significant applications for

relief were

♦ In March 1994, the ASC provided relief

to NRMA Ltd and NRMA Insurance Ltd to

allow for public debate about a proposed

Faster processing of applications for

relief from the Law

Faster processing of prospectuses lodged

for registration

Facilitating B usiness

which 59 were approved. restructuring of the NRMA Group, prior to the release of a prospectus. The ASC acted to

ensure that provisions intended to regulate

fundraising did not unduly stifle this

discussion.

♦ The ASC was involved in negotiations

with the Commonwealth and several State

governments over the float of government

business enterprises. These floats raised issues

about Crown immunity and led to an ASC

Practice Note on the subject. Various novel

applications for relief were processed in

connection with these floats.

♦ In August 1993, the Administrative

Appeals Tribunal (AAT) upheld an ASC

decision to grant relief enabling Sagasco to

proceed with its bid for US company,

Magellan Petroleum Corp. The AAT agreed

that, in the interests of international comity,

if foreign takeovers occur in a manner

consistent with the Eggleston principles they

ought to be allowed to proceed.

♦ The ASC granted relief enabling a

merger between Burmine Ltd, Europa

Minerals Group Pic (a UK company) and

Austmin Gold NL to proceed. The relief

related to provisions governing the

acquisition of shares, and was conditional

on shareholder approval of the merger. The

A A T reviewed and upheld the ASC

decision, see also page 45.

Occupational licensing and registration

The Law requires anyone conducting a

securities dealing, investment advice, or

futures broking business to be licensed.

During the year, 230 applications for licences

were received and 220 new licences were

granted. The ASC received 144 applications

for registration as an auditor, of which 104

were approved. Sixty-seven applications for

registration as a liquidator were received, of

Faster registration of prospectuses

The number of

prospectuses lodged or

submitted for registration

increased to 1226 this

year from 959 last year.

Those submitted for

registration rose by 31 per

cent from 712 to 933.

The ASC has

nonetheless improved

processing time - 44.5 per

cent were registered in

three days or less this

year, compared to 41.8

per cent last year. The

full number of

applications processed and documents

registered is set out in Appendix 2.

The Corporate Law Reform Act 1994, which

introduced the new continuous disclosure

regime for listed and other fundraising

entities, extended the accounting require­

ments of the Law to other “disclosing

entities” as well as companies. It provides for

six monthly reporting for companies and

other “disclosing entities”, and changes the

prospectus requirements for rights issues and

secondary sales of securities. It also made

some important prospectus reforms, including

provision for extended life prospectuses. The

ASC has been preparing for these changes,

part of which commence on 1 July 1994, and

the remainder on 1 September 1994.

Changes to the Law

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M arket & Corporate I ntegrity

vulnerable areas of the markets, and many

reports are referred to ASC surveillance

teams to help identify issues or individuals for

inspection. Smaller company matters are

dealt with through a program targeting

misuse of companies, formerly known in the

ASC as abuse of the corporate form, which

typically focuses on ensuring that those

people who are disqualified from company

management are in fact removed from

running companies. This spread of activity

enables the ASC to deal with most serious

allegations and with most segments of market

and corporate activity.

Criminal and civil enforcement actions

Investigations

The ASC devotes substantial resources to

investigating serious matters that are likely to

lead to litigation. Reports of suspected

corporate wrongdoing are received from

auditors, receivers and liquidators (all of

whom have a statutory duty to report such

matters), the ASX, the Sydney Futures

Exchange (SFE) and from members of the

public. The ASC is actively working with all

these sectors of the market to improve the

timeliness and quality of reports, and the

timeliness and effectiveness of ASC

responses in appropriate cases. Investigations

also result from ASC surveillance visits and

from monitoring activity in the securities

markets.

Recently the number of suspected serious

contraventions reported to the ASC has

declined. This year the ASC commenced 163

investigations, compared to 244

investigations last year. (A considerable

number of previously commenced matters are

still under active investigation or before the

Courts.) While there may have been some

improvement in corporate and market

U.S. S ecurities and Exchange Commission Chairman,

Arthur Levitt (left), and ASC Chairman, Alan Cameron, signing

a regulatory agreem ent in W ashington DC.

M arket & Corporate I ntegrity

behaviour, the major source of adverse

reports is from receivers and liquidators,

usually at the bottom of the business cycle.

During an economic upturn, with far fewer

company failures, it is less likely that

contraventions will be detected through this

source.

Market referrals

In contrast, the number of matters referred to

the ASC by the ASX has increased to 31,

compared to 23 matters last year. All but two

of these matters were assessed within 21 days

and investigations were commenced in 25

cases. The ASC is placing greater emphasis

on obtaining market intelligence and

information about corporate behaviour. One

ASC staff member is currently seconded to

the ASX surveillance unit in Sydney.

In November 1993, the ASC signed a

memorandum of understanding (MOU) with

the ASX promoting cooperation in the

monitoring, surveillance and enforcement of

rules and regulations governing the conduct

of ASX members. Negotiations for another

MOU dealing with corporate continuous

disclosure are well advanced.

In June 1994, an MOU was signed with the

SFE formalising arrangements for the

supervision and surveillance of the SFE’s

futures market and its members. The SFE has

already referred some matters to the ASC.

International cooperation

During the year memoranda of understanding

were also signed with the Securities and

Exchange Commission of the United States

and with the Hong Kong Securities and

Futures Commission. (In July 1994, the ASC

signed an MOU with the Securities

Commission of New Zealand.) These

agreements formalise arrangements for the

exchange of regulatory information and

investigative assistance in areas such as

securities fraud, market manipulation, insider

trading, failure to report to regulatory

authorities, and violations of disclosure laws.

In June 1994, a senior officer from the

United States Commodity Futures Trading

Commission was seconded to the ASC to

assist in reviewing priorities and plans for

surveillance of the futures industry.

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The investigative process

Investigating corporate wrongdoing is a

complex process, often requiring detailed

scrutiny of voluminous company records and

examination of witnesses on oath.

Traditionally, corporate investigations have

been very time-consuming. The ASC has set

itself the challenging target that all

investigations should be completed within 12

months of the date on which they were

M arket & Corporate Integrity

resourced. During the year, of 137

investigations completed into alleged serious

contraventions, 52 met the 12 months’

target. The A SC expects to improve this

performance next year.

Public hearings into ASC investigatory

practices conducted during the year by the

Senate Standing Committee on Legal and

Constitutional Affairs provided the ASC

with an opportunity to hear concerns about

how its powers are exercised. The Committee

has not yet reported, but the ASC has

informed the Committee that it will meet at

least some of these concerns by

♦ publication of a booklet explaining how

to report suspected corporate wrongdoing,

and how the ASC will assess such reports

(this booklet was published in August 1994)

♦ publication of clear, uniform procedures

for handling complaints about alleged abuse

of powers or other complaints about ASC

68 major criminal prosecutions com pleted

staff, and

♦ improving the standard of ASC

communication with members of the public

who become involved with investigative

processes as informants or witnesses.

Criminal and civil litigation

Once an investigation is completed,

information gathered may be formally

handed over to the Commonwealth Director

of Public Prosecutions (DPP) to consider

prosecution of indictable criminal offences,

or to ASC lawyers in civil actions and

summary criminal matters. During 1993/94,

the ASC commenced 35 major civil actions

and 48 major criminal prosecutions. At

30 June, there were 26 major civil actions

and 121 major criminal prosecutions in

progress.

The ASC succeeded in 25 of 31 major civil

actions and 53 of 68 major criminal

31 major civil actions com pleted

M arket & Corporate Integrity

prosecutions completed during the year. It

should be noted that the legal process, which

lies largely outside ASC control, can be

protracted. This in turn can diminish the

regulatory and deterrent effect of

enforcement actions on market behaviour.

The most significant developments in ASC

criminal and civil enforcement actions are

set out below. O ther significant matters are

updated in Appendix 3, and detailed

investigative/litigation statistics are in

Appendix 2. Full information on ASC

litigation is published quarterly in the

ASC Digest.

The Adelaide Steamship Company Ltd

(Adsteam) In April 1994, the ASC

commenced civil proceedings against former

directors John Spalvins, Michael Kent, Neil

Branford, Kenneth Russell and Michael

Gregg, and Adsteam’s former auditors,

seeking the recovery of $228 million plus

interest. The ASC contends that the

company’s profit for 1990 was overstated by

at least $518 million, and that directors

authorised the payment of $228 million in

dividends when no profits were available and

when the company should have reported a

substantial loss. The action has been taken

on behalf of Adsteam and any proceeds from

the action will flow to the company.

Aust-Wide Management Ltd (AWM)/

Permanent Trustee Australia Ltd (PTA)

In March 1994, former AWM chairman Ron

Kerr was charged with improperly using his

position by redeeming units held by his

private company immediately prior to the

announcement of a suspension of

redemptions in July 1990. In April 1994, civil

proceedings were commenced against PTA,

as trustee of the Aust-Wide Trust and former

trustee of the Australia-Wide Flexi Property

Fund, and Permanent Trustee Co Ltd, as

guarantor of PTA. The ASC alleges

investments in the No. 1 O ’Connell Street

project were made in breach of the trustee’s

duty to invest in authorised investments only

and to exercise due diligence, care and

prudence. The ASC is seeking to recover

more than $130 million on behalf of

unitholders in the Aust-Wide Trust and the

Australia-Wide Flexi Property Fund.

Bond Corporation Holdings Ltd (BCHL)

In June 1994, an application by former

chairman Alan Bond to have a committal

hearing on four ASC charges adjourned on

grounds of ill health was refused by the Perth

Magistrates Court. The committal hearing on

charges of breaching his duties as an officer of

the company, furnishing false information to

fellow directors, and furnishing misleading

information to the company’s auditors began

in July 1994. An investigation into the affairs

of BCHL and related companies is

continuing.

Brunswick NL In February 1994, former

chairman Robert Champion de Crespigny

and former managing director Thomas

Meiklejohn were charged with breaching the

Companies (Acquisition of Shares) Act and

the Companies Code in relation to a 1989

takeover bid by Brunswick NL for Bendigo

Gold.

Bum s Philp Trustee Company (Canberra)

Ltd In June 1994, the ASC obtained orders

in the ACT Supreme Court for the

appointment of a liquidator to the company.

The orders were obtained to protect

approximately $18 million held by the

M arket & Corporate I ntegrity

company as agent or trustee for various

clients. The ASC also successfully took legal

action in the United States to lift an

injunction obtained by a US-based majority

shareholder. The injunction had prevented

compliance with an ASC notice to produce

company documents. (The company is

unrelated to Burns Philp and Co Ltd.)

Cluden Properties Pty Ltd In November

1993, former investment adviser Anthony

Burgess was sentenced to 40 months

imprisonment after pleading guilty to six

charges of theft involving more than

$300,000.

Direct Acceptance Corporation Ltd (DAC)

In November 1993, former director Raymond

Lord was charged with four counts of making

improper use of his position to gain an

advantage for himself. He had previously

been charged with three counts of making

false or misleading statements to the trustee

for DAC debenture and noteholders. Former

DAC officer John Riordan has also been

charged with making improper use of his

position to gain an advantage for himself.

Estate Mortgage Ltd In November 1993,

former managing director Richard Lew and

his father Reuben Lew were sentenced to two

years imprisonment and three years

imprisonment, respectively, for breaching

their duties in relation to the funding of

constmction projects. Reuben Lew was also

ordered to pay $500,000 to the trustees of

Meridian Investment Trust (formerly Estate

Mortgage Trusts). Fifteen months of Richard

Lew’s sentence was suspended on condition

that he be of good behaviour for two years. In

March 1994, the former valuer to the Estate

Mortgage Trusts, Anthony Arnold, was

sentenced to one years imprisonment,

suspended, after pleading guilty to aiding

and abetting Reuben Lew.

Gavcorp Pty Ltd In September 1993, former

investment adviser Gavin Anderson was

sentenced to six years imprisonment

following his conviction on six counts of

theft totalling $557,500. The sentence was

reduced on appeal to four and a half years.

Linter Group Ltd In September 1993,

former director Katy Boskovitz was

committed for trial on 21 charges relating to

improper use of her position in transactions

by Linter Group and the Entrad Group. In

1992, warrants were issued for the arrest of

former director Abraham Goldberg on

related charges. (In August 1994, Katy

Boskovitz pleaded guilty to eleven charges

under the Crimes A ct and Companies Code.)

Pivot Group Ltd In May 1994, former

director Peter Laurance faced charges relating

to the giving of financial assistance by a

Pivot subsidiary to Mr Laurance's private

company Q-West Pty Ltd in connection with

the purchase of Pivot Group shares. He was

also charged with misusing his position for

the benefit of Q-West. The charges allege

that a Pivot subsidiary made interest

payments on Q-West loans for the purpose of

assisting Q-West in the takeover of Pivot

Group. Two other Pivot directors Graeme

Hughes and Peter Searson have also been

charged.

Pro-Image Studios Ltd/Quatro Ltd From

September 1993 to January 1994, eight

former company officers John Kavanagh,

Kevin Donovan, Peter Massey, Robert

Williams, William Turner, Stephen Howard,

M arket & Corporate Integrity

David Mackie and David Cole were charged

with a series of offences relating to the misuse

of company funds following inquiries into the

affairs of Pro-Image Studios, Quatro,

Distronics Ltd, Communications and

Entertainment Ltd and W hitehall Ltd. One

former director Peter Massey was extradited

from the United States in January 1994. The

series of criminal charges follow civil

proceedings brought by the ASC in May

1993 seeking recovery of $15 million from

four former directors and former auditor,

John Tunbridge. (In August 1994, David

Cole was sentenced to 15 months

imprisonment, suspended, after pleading

guilty to acting dishonestly with intent to

deceive members and creditors.)

Qintex Ltd In January 1994, a warrant was

issued for the arrest of former chairman

Christopher Skase. An appeal against the

arrest warrant was dismissed and he was

arrested in Spain in February 1994.

Extradition proceedings are now in train and

a substantive hearing of the matter by a

Spanish Court was held in July 1994. The 32

charges against Mr Skase relate to misuse of

his position to gain an advantage for himself.

(In September 1994, Spanish authorities

agreed to his extradition to Australia to face

criminal charges laid by the ASC.)

Southern Cross Airlines Holdings Ltd In

April 1994, a series of charges were laid

against former deputy chairman Douglas Reid

alleging that he used company funds for his

own benefit about the time of the

establishment of Southern Cross Airlines

(Compass II), and that he created false

documents and made false statements. In

May 1994, former bank officer Robert Tingiri

was charged with dishonestly obtaining

financial advantage for Mr Reid.

Spedley Securities Ltd In January 1994,

former managing director Brian Yuill was

sentenced to six years imprisonment for

offences relating to his authorisation of

payments totalling $2.8 million for his

personal gain. In June 1994, this conviction

was overturned on appeal and a new trial

ordered. Mr Yuill faces further charges of

improperly using his position as an officer of

GPI Leisure Corporation Ltd. (In September

1994, he was sentenced to a minimum term

of two years and ten months imprisonment

after being found guilty of breaching s229(4)

of the Companies Code.) In October 1993, a

former officer of Bisley Asset Management

Pty Ltd, John Comer, was committed for trial

on charges of improperly procuring

$2.22 million from Spedley for his benefit. In

January 1994, a former officer of Spedley,

James Craven, was committed for trial on

charges of improperly using his position to

procure $21.99 million from the company.

Westmex Ltd In April 1994, former

chairman Russell Coward was charged with

making a false or misleading statement likely

to induce the purchase of Westmex shares,

contrary to the Securities Industry Code.

Surveillance

The ASC conducts a number of surveillance

programs, the most important of which relate

to prospectuses, takeovers, financial

statements, tmstees and fund managers,

securities dealers and advisers, and misuse of

companies.

ASC surveillance is generally carried out

through review of documents, field visits and

M arket & Corporate I ntegrity

discussions with directors and professional

advisers to promote compliance with the Law

and protection of investors and creditors.

In many cases, surveillance is routine and is

not based on a suspicion of misconduct.

Surveillance is also activated by market

intelligence or other reports reaching the

ASC. Surveillance programs can trigger

enforcement action where unacceptable

conduct has been detected, although some

problems can be remedied by negotiation

with the business or individual concerned.

Feedback the ASC has received from

business suggests that surveillance programs

have made a positive contribution in

encouraging greater compliance. The quality

of disclosure in prospectuses and financial

statements has improved, and securities

dealers and fund managers are in many cases

appointing compliance officers and

implementing compliance programs.

Nonetheless, as part of its commitment to

continuous improvement, the ASC is

planning a careful review of its surveillance

activities to ensure they continue to meet

ASC objectives and are conducted efficiently

and effectively. The surveillance programs

reported below will continue throughout

1994/95, and programs for the following year

will be settled in the first half of 1995.

Prospectuses

The Law no longer requires the ASC to

conduct in-depth scrutiny of prospectuses

before registering them. However, to

encourage disclosure of all matters that an

investor or professional adviser would

reasonably expect to find in a prospectus, the

ASC examines or “post-vets" selected

prospectuses after registration.

During the year, of 1226 prospectuses lodged

with or registered by the ASC, 302 were

post-vetted. The ASC required

supplementary prospectuses in 45 cases and

caused six prospectuses to be withdrawn.

Interim stop orders were issued in eight cases

and final stop orders issued against two

prospectuses. In seven matters formal invest­

igations were commenced where the ASC

suspected contraventions of the Law. The

following cases arising from surveillance or

other sources were among the most significant.

Century Drilling Ltd In January 1994, an

interim stop order was revoked after the

company lodged a supplementary prospectus.

The company had not complied with

accounting standards relating to the

treatment of a premium on consolidation,

and recognition and amortisation of

goodwill.

Global Funds Management (NSW) Ltd In

February 1994, an interim stop order was

revoked after the company lodged a

supplementary prospectus addressing ASC

concerns about a Global Residential Property

Development Fund prospectus.

Greenchip Development Capital Ltd/

Greenchip Resources Ltd In July 1993,

these companies published a notice

explaining the nature of comparisons

between “greenchip” stock performance and

“bluechip" stock performance which

appeared in their respective prospectuses,

following ASC concerns that insufficient

information had been provided.

Metalcorp Ltd In July 1993, the company

M arket & Corporate Integrity

lodged a supplementary prospectus addressing

ASC concerns about a lack of disclosure

regarding information in an investigating

accountant’s report on differences between

operating profit after tax and before

extraordinary items, and lack of detail and

explanation about intangible assets of $10.5 million.

Red River Ltd In May 1994, the company

withdrew a rights issue prospectus from

circulation following ASC concerns about

discrepancies between abridged financial

information and half-yearly reports to the

ASX, the treatment of material transactions,

and the absence of pro-forma financial

information.

During the year, the ASC had discussions

with several companies regarding concerns

about the disclosure of share values and

goodwill in prospectuses where shares had

been issued instead of cash to the company

from which assets were acquired, with the

shares issued at a discount or at par value.

These discussions resulted in supplementary

prospectuses disclosing required information.

Another prominent issue was the treatment

and disclosure of intangible assets in

prospectuses. The ASC sought to ensure that

companies classify intangible assets according

to the requirements of the Law, relevant

accounting standards and ASC policies.

Generally, in the three years since the

prospectus surveillance program began, the

ASC considers that there has been a settling

down of the new prospectus provisions, and

market perceptions are that the quality of

prospectuses has improved, albeit at some cost

to issuers. The quality of information

concerning future prospects of companies

being floated is of some concern to the ASC,

and in the coming year it will target as a high

priority examination of profit forecasts and

other information from which investors might

reasonably infer future profitability.

Takeovers

Takeover documents and the conduct of

takeovers are examined to ensure proper

disclosure and the observance of investors’

rights. During the year, 140 takeover

documents were lodged with the ASC,

including 76 Part As (initial takeover offers)

and 56 Part Bs (initial response from the target

company). The ASC post-vetted documents in 55 cases, resulting in amendments to

documents in 17 instances and the

commencement of five formal investigations.

Significant cases arising from surveillance or

other sources included the following.

Goldsearch Ltd In December 1993, orders

were obtained vesting 1.7 million Goldsearch

shares in the ASC. This followed settlement

of proceedings commenced against Goldsearch

chairman John Merity, and others, in 1992.

The ASC had alleged breaches of the 20 per

cent takeover threshold and failure to disclose

beneficial ownership of shares.

Jubilee Gold Mines NL In March 1994, the

ASC obtained interim orders restraining

Harman Nominees Pty Ltd from disposing of

10.9 million Jubilee Gold Mines shares. The

orders also restrained Ian Christian from

disposing of 301,000 shares, and Rock (Nominees) Ltd, a UK company, from

disposing of 1.4 million shares. These proceedings followed inquiries into

sharetrading by Kerry Harmanis and suspected

M arket & Corporate Integrity

contravention of the takeover and substantial

shareholder provisions. In April 1994, civil

action against Mr Harmanis was settled by his

conceding he failed to disclose his full

entitlement and agreeing to reduce his Jubilee

Gold Mines shareholding to the 20 per cent

threshold imposed by the Law.

Tern Minerals Ltd/Sierra Gold Pty Ltd In

November 1993, the ASC obtained Court

orders under which Sierra Gold agreed to sell

a parcel of Tern Minerals shares, which the

ASC alleged had been purchased in

contravention of the takeover provisions.

Terrex Resources NL/Portman Mining Ltd

In September 1993, the ASC obtained

interim orders restraining International

Minerals Ltd from disposing of 4.1 million

Portman Mining shares. An order was also

granted restraining Portman Mining from

disposing of 12 million Terrex Resources

shares. In December 1993, the proceedings

were partly settled on the basis that Portman

Mining sell its Terrex Resources shares to

unrelated parties. (In July 1994, proceedings

were fully settled with International Minerals

agreeing to sell its Portman Mining shares to

unrelated parties.)

Takeover activity picked up during the year,

after being at relatively low levels during the

past few years. There appears to be increased

professionalism in the preparation of

takeover documents, partly as a consequence

of the willingness of parties to challenge

defective documents in the Courts.

Financial statements

There has been some public discussion of the

role of the ASC in this area. Briefly, the

ASC has a duty to enforce accounting

standards set by the Australian Accounting

Standards Board, which is an independent

statutory body.

During the year the ASC examined 463 sets

of financial statements for appropriate

disclosure and compliance with the Law and

accounting standards. From this information

the ASC identified a number of issues such as

accounting for goodwill, and accounting for

research and development syndications, on

which media releases or Practice Notes were

issued to encourage better financial reporting

(see also page 35).

Major remedial action flowed from this

surveillance program in 40 cases (including

26 matters involving listed public

companies). Matters included

♦ Western Mining Corporation Holdings

Ltd agreed to not give undue prominence to

equity accounted profits before abnormals,

ahead of profits after tax and abnormals

♦ WH Soul Pattinson & Co Ltd agreed to

consolidate the accounts of an associated

company, Brickworks Ltd

♦ Finders Gold NL adjourned its annual

general meeting, and withdrew and reissued

its accounts, following discrepancies noted by

the ASC, and

♦ two auditors were referred to the

Companies Auditors and Liquidators

Disciplinary Board (CALDB) as a result of

this surveillance program.

In June 1994, the ASC issued a Class Order

relating to directors’ remuneration, providing

relief from the disclosure requirements of

AASB 1017, which differed from Schedule 5

requirements. The Class Order is designed to

remove anomalies between Schedule 5

M arket & Corporate I ntegrity

Role of courts and Government agencies in enforcing the Corporations Law

conduct enforcement proceedings

Courts of superior criminal jurisdiction - Supreme Courts

indictable prosecutions

Corporations & Securities Panel

• unacceptable circumstances in takeovers

• ultimate prosecution decision

•conduct prosecutions

Director of Public Prosecutions

Companies Auditors and Liquidators Disciplinary Board

• conduct of auditors and liquidators

Australian Federal Police

investigative assistance

• execute search warrants

suspects

Magistrates Courts

• summary prosecutions

• issue search warrants

• review administrative decisions

Courts of civil jurisdiction - Federal Court of Australia and Supreme Courts

• interim and final - orders

Administrative proceedings before ASC

• conduct of securities and futures licensees

directors of failed companies (s600)

enforcement decision

investigation

requirements and those of AASB 1017 -

Related Party Disclosures, with respect to

computation and disclosure of

superannuation/retirement benefits and

directors’ remuneration.

Overall, the experience of ASC staff in the

field is that the standard of financial

reporting has improved. W hile there is little

change in the “defect” rate in accounts

examined, the application of accounting

standards is not always straightforward. The

ASC has also improved its targeting of

financial statements, and its staff are now

more technically sophisticated.

Trustees and fund managers

The ASC conducted 49 inspection visits to

fund managers and 25 visits to trustees. This

resulted in remedial action in 22 cases.

Significant cases arising from surveillance or

other sources were

Corplan Nominees Pty Ltd In May 1994,

the A SC successfully applied for the

M arket & Corporate Integrity

appointment of receivers and managers to

the company, which was trustee of the

Beneflex Retirement Plan. Beneflex is an

approved superannuation fund for the

hospitality industry. The application was

brought because all directors of Corplan

Nominees had resigned. The ASC is seeking

damages against former directors. (The

conduct of this matter was coordinated with

the ISC.)

Grosvenor T rust In November 1993, the

ASC reviewed documentation relating to the

planned restructure of the Grosvenor Trust.

As a result, Heine Management Ltd (the

manager) and Permanent Trustee Australia

Ltd (the trustee) agreed to appoint an

independent expert to examine various

transactions and give an opinion as to

whether the proposal was in the interests of

unitholders. The ASC was a party to Court

proceedings brought by the manager

regarding the voting rights of certain

unitholders. This judgement clarified several

legal interpretations of prescribed covenants

as they apply to property trusts.

The industry is increasingly dominated by

large fund managers who are now devoting

further resources to setting up appropriate

compliance mechanisms. There appear to be

fewer fringe tax avoidance schemes and an

overall improvement in the level of

compliance.

Securities and futures dealers and advisers

At 30 June 1994, there were 1727 licensed

dealers and advisers in the securities and

futures industry. The ASC conducted 235

inspection visits of licensees and 459 visits to

authorised representatives. These inspections

provided an opportunity to educate, monitor

and assist with compliance in the areas of

quality of advice given, and the training and

supervision of more than 35,000 authorised

representatives.

As a result of ASC surveillance, four licences

were revoked, one was suspended, 13 licences

were surrendered and there were 17 instances

of licence conditions being amended. Seven

authorised representatives were banned from

the industry as a result of surveillance

activities. It should be noted that such

banning orders cannot prevent banned

persons from advising on and selling life

insurance products. In ten cases formal

investigations were commenced where

contraventions of the Law were suspected.

Some significant cases arising from

surveillance or other sources are listed below.

Country Estate & Agency Company Pty

Ltd In April 1994, the ASC amended the

licence conditions of the company, which is

a securities dealer which offers to buy shares

off-market. The new conditions require the

company, when making unsolicited offers for

securities at below-market prices, to state the

extent to which the offer price is below the

market price.

Melbourne Asset Management Ltd In

November 1993, the ASC revoked the

dealers licence held by the company

following contraventions of its licence

conditions.

Reid Sinclair Ltd In September 1993, the

ASC issued orders banning Nigel Pashley

and Carl Wall from the securities industry for

six years and two years, respectively, after

M arket & Corporate Integrity

surveillance revealed evidence that client

funds had been used inappropriately.

NSB United Financial Services In January

1994, Robert Lewis surrendered his dealers

licence following an ASC surveillance visit.

Subsequent inquiries revealed a significant

shortfall in investors’ funds, and the ASC has

taken steps to secure remaining funds.

This surveillance program has been operating

nationally for three years with the active

support of the Financial Planning

Association, which represents a significant

number of participants in the industry. In

many instances, and in a number of cases at

the ASC’s insistence, securities firms have

appointed officers to oversee compliance

with the Law. While the level of disclosure to

investors and the quality of advice has

improved, the ASC believes further improve­

ment is necessary, especially among author­

ised representatives. (In July 1994, the ASC

announced a major review of the licensing

regime regulating securities advisers.)

Auditors and liquidators

During the year the ASC conducted 40

inspection visits of auditors resulting in five

referrals to the CALDB. O f 19 liquidators

visited, there were two referrals to the

CALDB. Surveillance of auditors and

liquidators is a relatively new program for the

A SC which has enhanced its understanding

of and relationship with the industry. There

is evidence that many auditors and liquidators are now implementing improved

quality control procedures.

Disciplinary actions against auditors and liquidators

Significant cases arising from surveillance or

other sources referred to the CALDB by the

ASC included

♦ the Federal Court upheld a CALDB

decision to cancel the registration of

Queensland auditor, John Hodgkinson. This

matter has been separately appealed by the

auditor to the A A T for review on the merits

of the CALDB decision

♦ auditor and liquidator Colin Ward had

his registration cancelled after being found to

have made false statements in applications

and triennial statements

♦ auditor Price Williams, who was

responsible for audits of the National Safety

Council of Australia (Victoria Division) from

1983-87, was suspended for five years after he

was found to have failed to properly perform

his duties

♦ auditor Richard Young was reprimanded

after his audit of a licensed securities dealer

was found to be of an inadequate standard.

He gave an undertaking not to perform any

additional audits for two years

♦ the AAT found that the conduct of a

senior auditor warranted a reprimand. The

A A T upheld an appeal by the ASC against a

decision of the CALDB to dismiss the ASC’s

application to have the auditor disciplined.

(In August 1994, an order suppressing the

auditor’s name was lifted. Alan Davies of

Arthur Andersen & Co has appealed the

A A T decision to the Federal Court.)

♦ liquidator Graeme Lean was suspended

for five months and required to undertake

insolvency education during the suspension.

During the year, auditor Duncan Fischer,

who audited the failed Estate Mortgage

Trusts, had his registration cancelled.

M arket & Corporate I ntegrity

Misuse of companies

This program targets directors who appear to

misuse companies through repeated

involvement in company collapses which

return less than fifty cents in the dollar to

creditors on liquidation. It also targets

individuals who manage companies while

disqualified or insolvent, and directors who

fail to cooperate with liquidators.

The ASC may ban persons from managing

companies if they have been involved in two

corporate collapses which paid less than fifty

cents in the dollar on liquidation. During the

year, the ASC served 172 notices calling

upon individuals to show cause why they

should not be disqualified, leading to 58

disqualifications. O n 30 June 1994, the total

number of persons on the public register of

disqualified persons was 225.

During the year, 367 cases were identified

where bankrupts, in contravention of s229 of

the Law, appeared to be involved in company

management, leading to prosecution action

in ten instances. Another 178 of these

matters were resolved through directors

notifying changes in those holding office or

through deregistration of relevant companies.

ASC assistance to liquidators caused the

lodgement of reports as to affairs by directors

of insolvent companies in 367 cases. There

were 211 prosecutions concluded for failure

to provide documents to liquidators. The

ASC will be reviewing the content of this

program, and will consider the particular

concerns of the Parliamentary Joint

Committee on Corporations and Securities

about misuse of companies to avoid paying

employee entitlements.

Statutory records

To assist companies in maintaining accurate

registers as required by the Law, the ASC conducted 1590 inspections and found 833 corporations in breach. Most companies had rectified their registers by the time of a

follow-up visit, but penalty notices were issued in 19 cases, and two formal investigations were commenced. This

program will be reviewed in 1994/95 in light

of government initiatives to simplify small

company record-keeping requirements.

Education to improve compliance

The ASC regularly publishes Practice Notes

and booklets to guide professional advisers and directors in complying with the Law.

Commission members and senior ASC staff frequently address business and professional

gatherings, and contribute articles on compliance issues to various specialist publications. The ASC also organises major conferences with wide external participation.

Directors’ duties

Many first-time directors are not fully aware

of their responsibilities, and this can lead to breaches of obligations to creditors and investors. As a first step in tackling this

problem, the ASC published, in conjunction

with the Australian Society of Certified Practising Accountants and the Institute of

Chartered Accountants in Australia, a booklet The Company Director’s Survival Kit: What you need to know about the duties of company directors. The booklet is aimed at inexperienced directors and is distributed

primarily through accountants.

Securities recommendations

During the year the ASC issued a Practice Note indicating how it would enforce s851 of

M arket & Corporate Integrity

the Law and the general requirements relating to securities recommendations. These requirements are that recommendations must be appropriate to a client’s individual circumstances.

Section 851 of the Law (referred to as the “reasonable basis for advice" rule) requires an adviser to understand the characteristics of recommended securities to ensure that clients’ needs are met.

In March 1994, the ASC conducted a seminar for compliance officers of securities industry firms, providing an opportunity for extensive discussion. Such seminars are likely to become an ongoing feature of the ASC’s activities in this area.

Accounting issues The Law now requires the observance of all accounting standards in the preparation of financial statements. Compliance in this area

is essential to an informed market, although the practical application of accounting standards can be complex and differing views may be held in good faith. In these circumstances educational strategies are essential. The ASC publishes Practice Notes and commentary to explain its interpretation of accounting standards to professionals and

to assist in uniform reporting of company financial information.

Accounting issues addressed included ♦ amortisation of goodwill, with the ASC noting that amortisation methods should reflect the pattern of benefits expected to be derived from goodwill, and examining the need for disclosure of periods and methods used by companies to amortise goodwill as a charge to the profit and loss account. The ASC also noted that it considered the “inverted sum of the digits” method to be

inappropriate except in rare and exceptional

circumstances

♦ the ASC’s view of “virtual certainty" in relation to accounting for tax losses ♦ classification of takeover defence costs

♦ the disclosure of “vendor consideration” in fundraising documents, including the provision of discounted shares in prospectuses, and

♦ accounting for research and development syndications, which examined current methods of recognising revenue and assets. In the ASC’s view this requires a related obligation to make a payment by the R&D company to be recognised as a liability and not a contingent liability.

Expert and valuation reports To assist experts and companies who use expert reports and valuations, the ASC released two Practice Notes dealing with expert reports appearing in Part B statements

(responses to takeover bids), schemes of arrangement, acquisitions approved by resolution of a target company, and valuation reports generally.

In June 1994, the ASC issued a warning to

licensed experts involved in the preparation

of expert reports for takeover documents that

they must act efficiently, honestly and fairly.

This followed ASC analysis of reports

prepared in relation to s623 (shareholder-

approved) acquisitions and s648 (Part B)

statements, which found that some experts

had not fully addressed the needs of

shareholders or fully complied with the

requirements of the Law and ASC policies.

In some s623 reports, it appeared the expert

had been instructed to justify a specified price

for shares, a practice the ASC views as totally

unsatisfactory.

B e i n g a l a r g e r e g i o n a l l a w f i r m w e u s e t h e

A S C o n - l i n e f a c i l i t y q u i t e a b i t a n d c o n s i d e r

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T h e A SC is r e s p o n s i b l e fo r m a in ta in in g a

p u b lic ly a c c e s s i b l e n a tio n a l d a t a b a s e o n

c o r p o r a tio n s a n d o t h e r p e r s o n s r e q u ir e d to

r e p o r t in f o r m a tio n u n d e r t h e L aw .

Covering Australia’s 885,118

companies, the ASCOT

database is supported by a

document retrieval system,

DOCIMAGE, which at

30 June 1994 stored images of

7,465,602 company

documents, comprising

28,438,809 images.

The database contains

information about

• companies, including

incorporation details, directors

and other officers, financial

information, details of charges

over assets, principal

■ . * '

functions, and location of

registered offices

• securities and futures

industry licensees

• auditors and liquidators

• persons prohibited under

the Law from managing a

company

• persons banned from

acting as securities or futures

representatives.

Quality certification: a world first

During the year the ASC

Information Division, which

manages the public database

and information technology

services, achieved international

quality certification by Bureau

Veritas Quality International

- . _

Credible Public I nformation

Certificate o f Approval

B oom U nto Qaahty latemattaaalcerufj that the Management Isyotm of the abate supplier bet keen assessed end found m be n accordance vttb the rtyurrmena of the fualuy sundaes

and scope ofsupplp detailed Mam

under Australian quality standard AS3901

(which is equivalent to international

standard ISO9001). Certification means the

Information Division has been assessed as

having in place a “quality management

system” encompassing the design,

implementation and delivery of information

___________ products and services.

This is the first time in

the world that an

information management

organisation has

achieved international

quality certification.

m

Certification recognises

the success of the

Division’s Quality

Information program, a

four-year plan developed

in 1992/93 which guides

development of the A SC’s public

information services. The program is based

on continuous improvement, and aims to

provide accurate and timely information

products and services while reducing the

costs of compliance for Australian

companies.

Delivering information to business

During the year there were 1,637,992

searches of the A SC O T database, and

203,462 requests for images of documents,

amounting to 3,048,189 pages of

information, provided through the

DOOM AGE retrieval system.

Access to the database is available through

12 Business Centres, 20 Local ASC

Representatives (private firms in selected

regional centres), or on-line through

Information Brokers (private firms linked to

the ASC information system).

The A SC has adopted a strategy of

promoting electronic lodgement of

documents and on-line searching as a means

of improving its service delivery to clients

and enabling it to deal with increasing

volumes of documents. This strategy has

increased the number of on-line company

searches conducted through Information

Brokers, and this year the number of on-line

searches exceeded those conducted over-the-

counter at Business Centres. During the year

866,435 searches were conducted through

Information Brokers (compared with 780,869

last year), and 771,557 searches were

conducted through Business Centres

(compared with 859,933 last year). Changes

to the Corporations Law fee structure

announced by the Attorney-General on

10 May 1994 have removed the price

disincentive previously affecting on-line

searches. This should further accelerate the

trend to on-line searching, which the ASC

welcomes as it allows Business Centre staff to

focus on such matters as company

incorporations, urgent document lodgements

and more complex issues for clients.

Processing new documents into the database

New company incorporations during the year

totalled 83,516. This is the highest number of

new companies incorporated in one year in

Australia. ASC staff dealt with a 36 per cent

increase in volume, compared to last year,

and still improved the timeliness of

processing.

Credible Public I nformation

A recently completed independent survey of

300 firms and individuals who lodge

company information found that clients

believe the ASC has improved its

performance in the time taken to process

documents and in the accuracy of recording

company mfonnation. A t the same time,

client expectations have increased, and they

are seeking improved communications with

the A SC as well as further improvement in

data accuracy. The A SC is developing a

number of strategies to meet this identified

need. One example is the client manager

program which will see the formation of a

team responsible for all of a client’s

document lodgement needs. During the year,

the ASC began implementing a client

communications strategy to develop

materials and information products directed

toward the needs of specific client groups.

Improving document lodgement services

Electronic lodgement

Testing for the electronic document

lodgement project began in 1993 and was

followed by a successful pilot program in early

1994. The project, known as EDGE, will for

the first time allow electronic lodgement of

company documents and payment of fees. It

is part of an A SC strategy to improve its

performance in information collection and

retrieval. W hen fully operational, EDGE will

deliver greater convenience and reduced

compliance costs to more than 880,000

Australian companies, as well as significant

improvements in the quality of information

on the database.

T he EDGE pilot involved 74 lodging parties

who together lodged more than 400 annual

returns. By 30 June 1994, training courses for

potential users had been established, and in

July 1994 nine software developers had their

software registered for use with the EDGE

system. The EDGE system will be released

nationally for the lodgement of company

annual returns in September 1994· The

system has been designed to operate similarly

to other electronic document lodgement

procedures commonly in use in accountants’

offices to encourage its acceptance in the

marketplace.

A pilot program for lodging company

documents other than annual returns will

begin in late 1994, with national release

expected in 1995.

I M onthly number of se a rc h e s through

Information Brokers com pared to monthly

num ber of Business Centre se a rc h e s '____________________________

- · - * | I 1 ■

mmm ·

Credible Public I nformation

Registered agents

The ASC operates a network of registered

agents, usually clients who lodge documents or

perform searches on a large scale. A database of

registered agents allows the ASC to provide

faster services and gather client information

needs. At 30 June 1994, there were 9220

registered agents.

Ensuring lodgement of public information

Annual returns provide the foundation for

company information held on ASCOT, and

all companies are required to lodge a return

each year. Before the establishment of the

ASC, the accuracy of data varied greatly

from State to State with the result that there

were a great many companies on the public

register which were defunct or had not

lodged returns for some years.

Making lodgement easier

The ASC publishes brochures and its staff

regularly address the business community to

keep company secretaries and directors

informed about their obligations. Drawing on

existing information, the ASC pre-prints

annual return forms for companies already on

the public register. In many cases the

recipient need only provide updated financial

and other data, sign the form and return it.

Enforcement action improves lodgement

Since May 1992, the ASC has reinforced its

education program with an enforcement

strategy designed to improve lodgement of

company information. The focus has been on

annual returns, although in future it may be

extended to other company information. To

encourage the timely and accurate lodgement

of information for the public record,

company secretaries have penalties imposed

on them for non-lodgement of annual

returns. Failure to satisfy a penalty notice

may result in prosecution of the company

secretary or deregistration of the company.

The ASC is pleased to note there has been a

steady decline in the number of penalty

notices and prosecutions, indicating better

lodgement practices. Last year, approximately

118,000 penalty notices were issued to

company secretaries for failure to lodge 1991

annual returns, and 3840 company secretaries

were ultimately convicted in the Courts for

failing to lodge relevant documents. This

year, 71,387 penalty notices were issued for

failure to lodge 1992 annual returns, and

2505 company secretaries were convicted. It

is expected that approximately 66,000

penalty notices will be issued for failure to

lodge 1993 annual returns. It appears from

these figures that the A SC’s combination of

education and enforcement strategies is

encouraging compliance with lodgement

requirements.

Higher late fees to encourage timeliness

Following a review of fees charged under the

Law, the Government has substantially

increased fees for late lodgement of

documents in order to encourage prompt

notification of changes. This will benefit

investors, creditors and others who need up-

to-date, publicly available information about

companies with which they deal.

From 1 July 1994, for documents lodged up to

one month late there is a $50 penalty, rising

to $200 for documents more than one month

late. This compares with previous penalties of

$20 and $81, respectively. Annual returns for

1994 lodged up to one month late will not

incur a late fee, enabling businesses to adjust

Credible Public Information

to the new fees. However, returns for 1994

lodged more than one month late will incur

the $200 late fee. (The increased $50 fee

applies from 1 July 1994 for late documents,

other than annual returns, which notify

changes to company information.)

During the year the ASC deregistered 25,076

companies on grounds that they had ceased

operation. A further 13,519 companies were

removed from the public register on

application by the company or its liquidator.

Enhanced disclosure

The new reporting obligations and

requirements to lodge documents with the

ASC under the Corporate Laui Reform Act

1994 will affect not only entities that

presently report under the Law, but also some

bodies not previously required to lodge

documents with the ASC. ASC databases

have been adapted for these changes. For each

prescribed interest undertaking there will be a

prescribed interest number, linked to the

manager and trustee, so that it will be possible

to search the database by manager or trustee.

The prescribed interest number does not,

unlike an Australian Company Number, have

to be included on documents.

New services

There will be a number of important new

services available to clients. For example,

Business Centres have now been equipped

with scanning equipment which enables the

instant storage of documents on to

DOOMAGE. Information will be available

through the ASCOT system generally within

two hours of lodgement. Arrangements are

being negotiated with the ASX to ensure

that information disclosed to the market will

be quickly placed on the database. Clients

can fax in and order a DOOM AGE of

particular documents. The ASC is now

planning for “enhanced searching” so clients

can place a “standing order” for any

document that may be lodged by a particular

organisation in the future.

Information Processing Centre

The ASC’s Information Processing Centre,

located in Traralgon, Victoria, is the central

facility for processing and storing company

data, including the imaging of all company

documents on to the D OOM AGE system.

During the year the I PC mailroom handled

1,726,461 incoming documents.

The year also saw the expansion of

DOOM AGE applications to cover enhanced

disclosure (ENCORE), imaging support for

litigation, electronic lodgement interface

(EDGE), contract work for outside bodies,

and production of image output on CD

ROM. The feasibility of using “heads-up

processing” (imaging before processing) was

also piloted. This pilot is part of the ASC’s

continuous improvement process to enhance

productivity.

Corporations Fees

O n 10 May 1994, as part of the Budget, the

Attorney-General announced comprehensive

changes in fees charged under the Law. This

Report has already noted changes to

searching and late fees. In addition, there

were changes to fees for lodging documents

generally. For small and privately owned

companies, the fee for lodging annual returns

was increased from $152 to $175. The fee

structure itself was overhauled and simplified,

and anomalies removed.

The ASC

of the main users of the Law it makes a

substantial contribution to issues before the

Companies and Securities Advisory

Committee (CASAC), the Attorney-

General’s Department and other bodies

involved in the law reform process. During

the year it provided submissions on a number

of proposals to amend the Law, and worked

closely with the Attorney-General’s

Department on the Foreign Evidence Bill

1993. The ASC is also a major participant in

the simplification of the Corporations Law program.

Administrative review of ASC decisions

Many ASC decisions are subject to

administrative review. The Ombudsman,

freedom of information legislation, and

formal administrative and judicial review

provide mechanisms to ensure that decision­

making is open, equitable and fair. As

reported last year, s27A of the Administrative

Appeals Tribunal Act 1975 requires decision­

makers to give notice about rights of appeal

to persons affected by decisions. The ASC

was granted some discretion in determining

how this notice would be given. A Practice

N ote was published in January 1994

explaining how the ASC administers its

obligations to notify persons of their rights of

appeal to the AAT.

T he procedures appear to be working

satisfactorily both for potential appellants

and the ASC. In a particularly complex

matter, the A A T commented in its

judgement that “the way in which the

respondent (the ASC) arrived at its final

decisions, so far as procedural fairness is

concerned, was in our view exemplary”

[Mt Edon Gold Mines (Aust) Ltd; Burmine

Ltd v ASC (1994) 12 ACSR 712 at 716].

The Privacy Commissioner conducted a

privacy principle audit of the ASC’s NSW

Regional Office in January 1994, focusing on

the register of investigations. As a result, the

ASC is reviewing existing procedures for

handling personal information. The ASC

will consider the matter further when the

Privacy Commissioner’s final report is

received.

Relations with other agencies

The ASC attended meetings of the

Ministerial Council for Corporations as an

observer. The Council is chaired by the

Commonwealth Attorney-General and

includes the Attomeys-General of the States

and Territories. It is the formal consultative forum on regulatory issues and amendments

to the Law.

The ASC is a member of the Council of

Financial Supervisors (with the Reserve

Bank, the ISC, and the Australian Financial

Institutions Commission) which brings

together supervisors of the financial system.

The ASC also participated in meetings of the

Heads of Commonwealth Law Enforcement

Agencies, and the ASC Chairman is ex­

officio a member of the Commonwealth Law

Enforcement Board.

International relations

The ASC has implemented a training

program in securities and futures regulation

to facilitate interaction with regulatory

agencies in the Asia-Pacific region. The

Securities and Exchange Commission of

Thailand and the Malaysian Securities

The ASC

Commission have participated in the

program, and officers from several other

Asian regulatory authorities are likely to join

in 1994/95. The program affirms the ASC’s

commitment to building effective

relationships with regulators in the region.

Orathai Nimtavorn (left) and Ram Riamsri

of T hailand's Securities and Exchange

Commission on a training program at

the ASC's Old Regional Office.

The ASC continued its active involvement

as a member of the Executive and Technical

Committees of IOSCO. ASC officers

participated in working groups of the

Technical Committee, most notably in the

areas of screen-based proprietary trading

systems and regulation of investment

management. The Regional Committee of

IOSCO is also becoming more active, with

full ASC participation.

Human resources

At 30 June 1994, the ASC employed 1579

staff in 23 offices throughout Australia.

Considerable attention is paid to training

and development to ensure that staff have

the skills to carry out their jobs. Technical

training has focused on priority areas

identified by a National Training

Committee. A number of opportunities to

share training with clients and with the

professions have been valuable in lifting

awareness of marketplace issues. Skilled

technical practitioners have been given

special responsibility to work with training

units in developing and coordinating courses,

conferences and training modules.

Management and leadership training has

remained a priority, with programs featuring

detailed case study analysis to assist in the

translation of classroom learning to the

workplace.

The average staff turnover rate in the ASC

during the year was approximately seven per

cent. This rate was not consistent throughout

the organisation, with some offices

experiencing significantly higher rates.

Overall, there has been no particular trend in

the type of skills and experience of

individuals leaving the organisation.

Although the seven per cent rate is higher

than recent historical rates in the public

sector, the ASC believes there are benefits

for both the private sector and the ASC in

staff moving between the two sectors. As the

level of business activity in the private sector

increases, the turnover rate for particular

skills (such as legal and accounting) are

expected to increase. In future, the ASC may

have to review its strategies for attracting

and, where appropriate, retaining staff.

The ASC

Information technology services

The ASC is highly dependent on the use of

information technology (IT) services for its

core business of corporate regulation and

company registry activities, as well as its management systems.

There are more than 1500 users on 1450

personal computers, 500 printers, 26 servers,

numerous communications lines and the

A SC’s voice network. ASC imaging systems

and use of imaging technology, such as CD

ROM, have been significantly expanded to

support regulatory and enforcement activities

in Regional Offices. IT services (including

support, training and systems

documentation) are delivered throughout the

ASC by local or regional IT support units, a

systems and D O OM A G E team at the

Information Processing Centre, and IT

Services Branch in Sydney. During the year

IT Services achieved international quality

certification as part of the ASC Information

Division.

In April 1994, the ASC implemented

ASCTEC, a new mainframe computer system

which supports a national register of

operational work in hand, results achieved,

and generates statistical information needed

by managers at all levels. Most importantly, it

promotes information sharing across regions

and divisions, as well as consistency in

procedures and outcomes. Its implementation

required training of more than 500 staff

around Australia.

During the year replacement of the ASC’s

computer equipment, under the information

technology acquisition council process,

commenced. The ASC has upgraded and

replaced some of its DOOM AGE facilities

and many network printers. Next year

replacement will focus primarily on PCs and

implementation of the mainframe

facilities upgrade.

Mainframe development has continued with

the delivery of ASCTEC, the ASC’s task

management system, and the EDGE

electronic lodgement pilot. ASCOT, our

company registration system, has been

enhanced, and new versions of the financial

and personnel management systems, FINEST and NOMAD, have been implemented and

maintained.

Internal audit

The ASC has recently reorganised its

internal audit function, contracting a private

firm, KPMG Peat Marwick, to assist staff in

finding and implementing ways to improve

operations, and to provide assurances to ASC

management about the efficiency of

operating systems. The new arrangements

will allow ASC offices to refer specific issues

to the internal audit team to examine

procedures and suggest changes.

Additional management information

Further details about internal ASC

management are set out in Appendix 4.

Appendix 1 Australian Business Information

Company registrations (as at 30 June)

1994 885,118

1993 839,593

1992 859,678

1991 892,749

1990 837,595

1989 803,775

Charges registered against companies

1993/94 52,364

1992/93 40,620

1991/92 38,268

1990/91 36,051

1989/90 36,418

1988/89 34,480

Companies registered (as at 30 June 1994) State or Limited by sh a res Limited by

Territory public proprietary guaran tee

Ltd by sh a res No liability Unlimited 8i guarantee Total

NSW 3,255 309,357 4,734 40 155 172 317,713

VIC 1,778 263,415 1,745 239 103 250 267,530

QLD 869 123,738 1,102 27 70 61 125,867

W A 955 78,751 101 6 528 38 80,379

SA 464 56,083 107 1 35 87 56,777

T A S 127 11,815 236 6 5 12 12,201

A C T 594 17,161 386 9 12 12 18,174

N T 39 6,406 16 1 13 2 6,477

T otal 8,081 866,726 8,427 329 921 634 885,118

New companies incorporated (1 July 1993 - 30 June 1994) S tate or Territory Limited by sh a res

public proprietary Limited by g u arantee Ltd by shares

& guarantee No liability Unlimited Total

N SW 209 29,907 173 5 22 1 30,317

V IC 111 23,920 89 18 14 7 24,159

QLD 64 14,116 87 2 12 0 14,281

W A 55 8,106 15 2 119 1 8,298

SA 26 4,067 10 0 8 1 4,112

T A S 7 801 7 2 1 0 818

A C T 50 1,132 19 0 1 0 1,202

N T 1 326 1 0 1 0 329

T o ta l 523 82,375 401 29 178 10 83,516

A u s t r a l ia n B u s in e s s I n f o r m a t io n

Corporate insolvencies and terminations

S tate or Territory

1 July 8 9 ­ 30 Ju n e 90 1 July 9 0 ­ 30 Ju n e 91

1 July 91 -

30 Ju n e 92 1 July 9 2 ­ 30 Ju n e 93* 1 July 9 3 ­

30 June 94*

NSW 2,859 3,715 4,297 3,726 3,222

VIC 1,212 1,794 2,846 2,222 2,215

QLD 1,540 1,002 1,324 1,264 965

WA 635 735 651 496 456

SA 692 643 779 719 562

TAS 114 91 103 90 87

A C T 252 302 261 272 233

N T 90 84 100 70 32

T otal 7,394 8,366 10,361 8,859 7,772

The corporate external administration statistics are published on the basis that they are provisional. It is possible that documents relating to the appointment of external administrators during this period may still be outstanding and the statistics are subject to change when these documents are lodged and processed. * These figures include new types of external administrators affected by legislation introduced 23 June 1993.

Securities licences and authorisations on issue 30 Ju n e 90 30 Ju n e 91 30 June 92 30 Ju n e 93 30 Ju n e 94

Securities dealers - natural persons 241 243 208 204 191

- others 1,301 1,224 1,127 1,115 1,174

Sub-total 1,542 1,467 1,335 1,319 1,365

Investm ent advisers - natural persons 150 156 152 140 134

- others 111 115 120 108 114

Sub-total 261 271 272 248 248

Dealers/advisers - authorised 23,456 17,914 28,140 29,081 35,745

representatives Total 25,259 19,652 29,747 30,648 37,358

Futures licences on issue 30 Ju n e 90 30 Ju n e 91 30 June 92 30 Ju n e 93 30 Ju n e 1994

Futures brokers 87 83 85 85 87

Futures advisers 11 11 23 26 27

Takeovers: Part A and Part C statements registered (1 July 93 - 30 June 94) S tate or Part A Part C Total

Territory registered registered takeover bids

NSW 19 1 20

VIC 19 0 19

QLD 13 1 14

W A 21 0 21

SA 0 1 1

TAS 0 0 0

A C T 0 0 0

N T 0 0 0

T otal 72 3 75

49

Appendix 2 ASC Regional Office information (Section references in these tables refer to the Corporations Law unless otherwise specified.)

ACT NSW NT QLD SA TAS VIC WA

BUSINESS FACILITATION

Applications for exem ptions, m odifications & discretionary relief

Standard Processed: 0-5 days 41 1925 0 71 89 55 672 202

Processed: 5+ days 63 219 0 55 38 0 463 157

Minor/technical variation Processed: 0-10 days 1 206 0 9 13 8 87 27

Processed: 10+ days 1 91 0 4 5 1 83 76

New policy Processed: 0-15 days 0 46 0 0 1 0 0 2

Processed: 15 + days 0 45 0 5 1 1 8 3

Prospectuses Non-registrable prospectuses 2 73 0 52 5 2 28 131

Received for registration 31 417 0 92 28 16 198 151

Relief applications 21 275 0 72 38 31 206 324

Relief granted 23 236 0 62 34 30

195 319

Relief refused 1 38 0 4 0 1

8 7

Prospectus withdrawn 1 18 0 10 0 0 6

8

Refused registration 7 55 0 4 3 0 15

33

Registered 0-3 days 10 149 0 66 11 16 112

51

Registered 4-7 days 12 162 0 8 13 0 47

39

Registered 7+ days 2 22 0 2 1 0

33 30

Supplementary prospectuses 6 132 0 36 15 9 68

45

Takeovers

Part A ’s lodged 0 20 0 10 2 0

23 21

Part B’s lodged 0 15 0 9 1

0 17 14

Part C’s lodged 0 1 0 1 3

0 0 0

Part D’s lodged 0 0 0 1 2

0 0 0

$730 applications 0 29 0 3 11 0

59 36

s730 granted 0 32 0 3 11 0

52 19

s730 refusals 0 13 0 0 0

0 5 12

s728 applications 0 19 0 6 7 0

18 13

s728 granted 0 19 0 5 6

0 18 11

2 s728 refusals 0 6 0 1 0 0 0

Total

3055 995

351 261

49 63

293 933 967 899

59 43 117 415

281 90 311

76 56 5 3 138 117

30 63 59 9

A ppendix 2

ACT NSW NT QL0 SA TAS VIC WA Total

Trust deeds

New deeds lodged 0 48 0 15 6 2 25 8 104

New deeds approved 0 50 0 13 6 2 23 11 105

New deeds refused 0 2 0 0 0 0 0 0 2

New deeds withdrawn 0 1 0 1 0 0 0 0 2

Supplementaries lodged 10 225 0 29 13 6 111 34 428

Supplementaries approved 9 230 0 24 13 6 102 30 414

Supplementaries refused 1 0 0 0 0 0 0 0 1

Supplementaries withdrawn 0 1 0 1 0 0 0 3 5

S ecurities and futures licensing Applications received 7 87 0 25 12 4 74 21 230

Applications withdrawn 1 4 0 1 1 0 7 1 15

Applications refused 0 3 0 0 2 0 3 0 8

Licences issued 4 91 0 30 6 3 70 16 220

Licences surrendered 0 72 0 10 4 0 25 13 124

Licences amended by consent 2 233 0 25 19 1 128 42 450

Auditor registration

Applications received 4 63 0 17 13 7 26 14 144

Applications withdrawn 0 24 0 4 3 0 3 4 38

Applications approved 3 34 0 11 7 6 34 9 104

Applications refused 0 8 0 0 0 0 1 0 9

Registration surrendered 0 37 0 3 13 1 67 14 135

Liquidator registration

Applications received 0 27 2 14 4 1 10 9 67

Applications withdrawn 0 4 0 2 1 0 0 1 8

Applications approved 0 20 1 10 1 0 16 11 59

Applications refused 0 0 0 0 0 0 0 1 1

Registration surrendered 0 11 0 6 11 0 31 1 60

M andatory court app earan ces (Not elsewhere included: eg schemes o f arrangement, defunct companies other than enforcement actions)

Appearances 6 64 1 3 3 7 392 92 568

MARKET AND CORPORATE INTEGRITY

S ecurities dealers and investm ent advisers surveillance

Licensees visited 29 101 1 20 8 4 57 15 235

Licence revoked after visit 0 1 0 1 0 0 2 0 4

Licence suspended after visit 0 0 0 0 0 0 1 0 1

Licence conditions amended after visit 1 3 0 2 1 0 8 2 17

Licence surrendered after visit 0 3 0 1 0 0 7 2 13

O ther remedial action 10 28 0 9 5 1 24 2 79

Proper authorities (PA) visited 79 162 10 49 61 22 57 19 459

PA’s banning orders 0 4 0 0 1 0 2 0 7

O ther PA’s remedial action 4 20 0 40 54 6 20 14 158

Formal investigations 0 6 0 1 0 0 1 2 10

A ppendix 2

ASC Regional Office information

ACT NSW NT OLD SA TAS VIC WA Total

Financial reporting surveillance Statements examined 135 115 11 62 30 16 58 36 463

Listed public companies - leaders Major remedial action 0 2 0 0 1 0 3 1 7

Other remedial action 0 1 0 1 0 0 3 1 6

Listed public companies - others Major remedial action 0 11 0 1 0 0 4 3 19

Other remedial action 2 27 0 5 13 3 21 16 87

Unlisted public companies Major remedial action 7 3 0 1 0 1 0 0 12

Other remedial action 33 4 0 8 1 0 0 0 46

Proprietary companies Major remedial action 0 2 0 0 0 0 0 0 2

Other remedial action 2 4 0 0 0 0 1 0 7

All companies CALDB referral: auditors 0 0 0 2 0 0 0 0 2

Formal investigations 0 0 0 0 0 0 0 0 0

Litigation action 0 0 0 0 0 0 0 0 0

Prospectus post-vetting Prospectuses post-vetted 9 174 0 19 8 10 53 29 302

Supplementary prospectuses lodged 2 21 0 2 5 3 9 3 45

Prospectuses withdrawn 0 2 0 2 0 0 0 2 6

Stop Orders (interim) 0 6 0 1 1 0 0 0 8

Stop Orders (final) 0 2 0 0 0 0 0 0 2

Other remedial action 2 23 0 1 1 1 8 1 37

Formal investigations 0 3 0 0 1 0 1 2 7

Takeovers post-vetting

Takeovers post-vetted 0 5 0 2 1 0 14 33 55

Amendments to Parts A, B, C o r D 0 9 0 0 0 0 6 2 17

Other remedial action 0 3 0 2 0 0 13 4 22

Formal investigations 0 0 0 0 2 0 2 1 5

Litigation action 0 0 0 0 0 0 5 0 5

Trustees and m anagers of collective investment schem es surveillance

Trusts visited 0 40 0 6 0 0 1 8 55

Fund managers visited 2 31 0 6 1 1 5 3 49

Trustees visited 0 5 0 5 1 1 3 10 25

Remedial action 0 20 0 1 0 0 0 1 22

Formal investigations 0 0 0 0 0 0 0 0 0

(No managers’ licences revoked, suspended or amended. O ne trustee approval suspended.)

A ppendix 2

ACT NSW NT OLD SA TAS VIC WA Total

Auditors and liquidators surveillance Liquidators visited 0 3 1 0 5 5 5 0 19

Referrals to CALDB 0 0 0 0 2 0 0 0 2

O ther remedial action 0 2 0 0 5 0 4 0 11

Auditors visited 20 6 0 0 0 5 9 0 40

Referrals to CALDB 0 2 0 0 2 0 1 0 5

O ther remedial action 10 3 0 0 0 3 6 0 22

M isuse of com panies surveillance

Failure to lodge reports as to affairs (RATAs) (s429, 430 & 475) Matters considered 50 255 8 228 69 7 336 32 985

RATAs lodged 10 63 5 91 33 2 143 20 367

Prosecutions concluded 37 98 1 53 14 1 5 2 211

Matters written off 7 107 0 94 19 0 182 8 417

Insolvents removed from company management (s229) Matters considered 6 8 18 85 22 30 106 92 367

Company deregistration (s572) 0 0 1 19 1 10 4 40 75

Prosecution action (s229) 0 0 2 2 3 0 3 0 10

Returns of changed directors 4 0 1 34 27 0 13 24 103

Removal of directors (two or more company failures) (s600) Matters considered 1 123 12 ;139 75 0 100 28 578

“Show cause" notice served 2 59 4 12 8 0 82 5 172

Hearings conducted 3 15 1 15 18 0 16 2 70

Disqualification following » failure to respond to notices 0 2 0 2 0 0 13 0 17

considering submissions 0 4 1 4 0 0 11 2 22

hearing 1 1 0 4 6 0 6 1 19

Assistance to liquidators and controllers (s431 & s590) Matters considered 2 55 2 29 16 3 59 32 198

Books/records lodged 0 12 1 0 5 3 27 4 52

Prosecutions concluded 0 0 0 0 0 0 3 0 3

Matters written off 0 16 1 29 4 0 24 9 83

Formal investigations* 0 3 0 4 12 2 7 24 52

O ther litigation action* 0 0 0 0 0 2 0 0 2

* Covers all elements o f Misuse of companies program.

Statutory records surveillance

Companies inspected 56 47 123 288 128 5 421 522 1,590

Companies in breach 30 43 99 186 118 5 57 295 833

Penalty notices issued 0 4 4 0 0 1 3 7 19

O ther remedial action 1 40 85 185 118 4 65 202 700

Formal investigations 0 0 0 1 0 0 1 0 2

A ppendix 2

ASC Regional Office information

ACT NSW NT OLD SA TAS VIC WA Total

ASX referrals Referrals received 0 14 0 3 0 0 6 8 31

Assessed within 21 days 0 13 0 3 0 0 5 7 28

Assessed after 21 days 0 0 0 0 0 0 1 1 2

Referrals: other remedial action 0 1 0 1 0 0 2 1 5

Referrals: formally investigated1 0 12 0 2 0 0 3 8 25

Interim civil orders 0 3 0 0 0 0 0 0 3

Final civil orders 0 1 0 0 0 0 0 0 1

Criminal prosecutions 0 0 0 0 0 0 0 0 0

No further action 0 0 0 1 0 0 4 2 7

Reports of suspected breaches of the Law On hand 1/7/93 161 718 20 277 165 94 395 364 2,194

Received 1/7/93 - 30/6/94 144 2,247 61 1,002 497 141 2,189 665 6,946

No investigation warranted 37 1,453 11 518 426 42 897 65 3,449

Referred to other agency 0 9 2 30 7 3 23 0 74

Concluded 259 1,129 56 675 201 176 1,264 893 4,653

On hand 30/6/94 9 374 12 56 28 14 400 71 964

Not assessed within 28 days 8 259 0 0 20 0 7 2 296

Analysis of reports on hand at 30/6/94

Not yet screened 0 6 0 9 7 0 123 27 172

Under preliminary review 9 154 9 25 21 9 57 13 297

Awaiting investigation 0 2 3 0 0 0 18 4 27

Under investigation 0 0 0 1 0 4 96 9 110

Referred to surveillance 0 212 0 21 0 1 106 18 358

Investigations in progress

0-6 months 9 286 7 49 28 10 295 69 753

6-12 months 0 45 3 7 0 4 56 2 117

12-18 months 0 43 2 0 0 0 13 0 58

18-24 months 0 0 0 0 0 0 22 0 22

24 months+ 0 0 0 0 0 0 14 0 14

Formal investigations Investigations commenced 32 15 4 36 19 17 12 28 163

Notices requiring appearance at examination (sl9 ASC Law) 11 116 6 88 14 22 94 109 460

Investigations com pleted

Serious contraventions:

0-12 months 2 5 0 13 3 11 7 11 52

Other matters: 0-12 months 29 0 3 21 2 73 33 121 282

Serious contraventions:

12+ months 9 17 0 16 2 10 11 20 85

Other matters: 12+ months 17 0 3 13 0 27 25 13 98

Matters referred to DPP 4 0 3 12 2 11 24 1 57

A ppendix 2

ACT NSW NT QLD SA TAS VIC WA Total

Administrative enforcem ent actions Licence revocations 0 0 0 1 0 0 1 1 3

Licence suspensions 0 0 0 0 0 0 0 2 2

Imposed licence variations 0 2 0 1 0 0 0 1 4

Securities banning orders 0 2 0 0 1 0 11 0 14

Total Companies Auditors Liquidators Disciplinary Board (CALDB) referrals

Auditors Referrals 0 2 0 3 2 0 1 0 8

Pending with CALDB 0 2 0 3 2 0 3 0 10

Action by CALDB 0 5 0 0 0 0 0 1 6

Withdrawn by ASC 1 9 0 0 0 0 1 1 12

Liquidators Referrals 0 0 0 0 2 0 0 0 2

Pending with CALDB 0 0 0 0 2 0 0 0 2

Action by CALDB 0 1 0 0 0 0 0 1 2

N ew litigation

Major civil 3 10 1 4 2 3 0 12 35

Minor civil 12 391 11 49 22 1 423 83 992

Major criminal 2 6 1 8 9 6 2 14 48

Minor criminal 10 315 5 37 1 0 517 2 887

Penalty' notice prosecutions 624 1,968 16 1,056 835 395 2,632 910 8,436

Litigation in progress Major civil 1 6 0 7 4 1 2 5 26

Minor civil 5 44 1 9 20 0 10 4 93

Major criminal 3 20 2 16 14 10 13 43 121

Minor criminal 4 57 0 3 0 0 144 0 208

Penalty notice prosecutions 0 0 0 1 35 48 0 0 84

Litigation com pleted Major civil actions Settled/orders in ASC’s favour 2 4 2 2 2 2 1 10 25

O ther settlements/orders 0 1 0 0 1 0 0 0 2

Discontinued 0 3 0 0 0 0 0 1 4

M inor civil actions Settled/orders in ASC’s favour 11 365 12 85 0 1 251 67 792

O ther settlements/orders 1 5 0 0 45 0 260 0 311

Discontinued 0 14 1 4 0 0 0 0 19

Major criminal matters Convictions 1 3 0 13 6 3 21 6 53

Acquittals 0 3 0 0 0 3 1 3 10

Discontinued 0 0 0 3 0 0 1 1 5

A ppendix 2

ASC Regional Office information

ACT NSW NT OLD SA TAS VIC WA Total

Minor criminal matters Convictions 12 228 5 56 7 1 13 2 324

Acquittals 2 18 0 0 0 0 0 1 21

Discontinued 3 62 2 14 18 0 295 1 395

Penalty notice prosecutions Convictions 203 672 9 500 193 19 780 129 2,505

Acquittals 0 5 0 0 12 3 0 11 31

Discontinued 425 1,316 9 557 549 478 2,087 777 6,198

New public interest actions

s25 releases (ASC Law) 1 14 2 8 9 0 18 4 56

s50 actions (ASC Law) 0 1 0 0 1 0 2 0 4

s51 hearings (ASC Law) 0 0 1 0 0 1 0 7 9

$1274(11) actions 0 0 0 0 0 0 0 0 0

sl323 actions 1 2 0 1 1 0 0 0 5

sl324 actions 0 2 1 1 0 0 0 0 4

s!330 interventions 0 1 0 2 0 0 0 0 3

A ppendix 2

Percentage Number Total

PUBLIC INFORMATION

Document lodgem ent and processing

ASC Information Division indicators

Annual Returns Number lodged 726,424

Lodged on time 61% 443,119

Peak processing time - December to March 448,983

processed 0 Ί 0 days 47% 211,022

incomplete returns requiring requisitions 16.8% 75,429

Off-peak processing time - April to December 264,520

processed 0-10 days 37% 97,872

incomplete returns requiring requisitions 18% 47,614

Number of penalty notices (includes 71,387 notices for 1992 Returns) 81,277

O ther documents Service documents processed at IPC and Business Centres - 489,890

0-24 hours 83.5% 409,058

2-5 days 12.2% 59,767

6-10 days 2.2% 10,778

10+ days 2.1% 10,287

Compliance documents processed at IPC and Business Centres - 2,514,262

Peak processing time 913,663

processed 0-10 days 68% 621,291

processed 10+ days 32% 292,372

Off-peak processing time 1,600,599

processed 0-10 days 77% 1,232,461

processed 10+ days 23% 368,138

Customer service

Telephone enquiries 784,523

Company incorporations within 24 hours 98.1% 82,178 83,770

Search requests via Business Centres and IPC - 822,013

ASCOT 74.1% 609,462

DOOM AGE 19.7% 162,095

Microfiche 6.2% 50,456

Search requests via Information Brokers - 866,435

ASCOT 95.2% 825,068

DOOM AGE 4.8% 41,367

Total search requests 1,688,448

System indicators

Response time within two seconds 95.3%

System up-time (business hours) 99.9%

Appendix 3 Significant criminal and civil enforcement actions Arafura Finance Corporation Ρίγ Ltd

In May 1994, former director Kevin McCarthy was convicted in the Darwin Supreme Court of failing to act honestly with intent to defraud or deceive creditors. His sentence of 12 months imprisonment was suspended upon his entering a good behaviour bond for two years. (In September 1994, former director Roman Solczaniuk was convicted of breaching s229( 1) of the Companies Code and s227(l) of the Criminal Code. His sentence of six

months imprisonment was suspended upon his entering a two-year good behaviour bond.)

Compass Airlines Pty Ltd

In May 1994, the Federal Court directed that the ASC’s civil action against former directors and senior officers be heard in May 1995. The ASC alleges former directors breached their duties to the company (Compass 1) by allowing it to continue to trade while insolvent. The proceedings seek damages on behalf of Compass Airlines and Compass Holdings Ltd.

Duke Group Ltd

In August 1993, former directors Harold Abbott, Paul Fitzsimmons and Peter Reid appeared in Court charged with causing a company to finance dealings in its own shares. Solicitor, Charles Kovess, was charged with being knowingly concerned in the offence. Fitzsimmons and Reid have also been charged with acting dishonestly as directors.

ENT Ltd

It was reported last year that David McQuestin was convicted and fined after pleading guilty to failing to exercise due care and diligence as a director. In October 1993, in the Tasmanian Supreme Court, he successfully appealed the Magistrate’s decision not to dismiss the charge under the Probation of Offenders Act.

Entity Group Ltd

In July 1993, auditors Desmond Crane and David Reynolds appeared in Court charged with making false or misleading statements in an investigating accountant’s report to shareholders of ATS Resources Ltd (which later changed its name to Entity Group). In 1992 Garry Carter, Dennis Vickery and Christopher Blaxland were committed for trial on charges relating to the alleged diversion of Entity Group funds.

Equity M inerals Ltd

In May 1994, former directors Simon Lill, Michael Bibby and Brian W elch were committed for trial on charges of making improper use of their positions in a series of transactions surrounding the transfer of control of Equity Minerals and Equity Finance Ltd (now named Biron Corporation Ltd).

Excel Finance Corporation Ltd

It was reported last year that Kenneth Eustice and Daryl Allert were charged with making improper use of their positions as directors, and with being knowingly concerned in Excel Finance assisting in the acquisition of its own shares. (In August 1994, they were found by the South Australian District Court to have no case to answer.)

Farrow Finance Company Ltd

In May 1994, 15 third-parties were joined to civil proceedings initiated in 1993. The ASC is seeking in excess of $20 million in damages from ANZ Executors Trustee Co Ltd as trustee for Farrow Finance noteholders, auditors Day Neilson Jenkins & Johns and investigating accountant Hugh Somerville. Statements of claim alleging breach of duties relating to false statements and non­ disclosure in prospectuses have been filed on behalf of more than 1350 noteholders.

Geneva Finance Ltd

In March 1994, former directors Raymond Jones, Robert Howat and John McAlwey were committed

A ppendix 3

for trial on charges of making improper use of their positions to gain an advantage for themselves. The charges relate to loans made by Geneva Finance.

Girvan Corporation Ltd

This investigation was concluded when it was determined there were no grounds for criminal or civil action. A report under si 7 of the ASC Law has been prepared for the Minister.

Independent R esources Ltd

In October 1993, former directors Michael Fuller and Joseph Cummings were committed for trial on a series of charges relating to improper use of their positions. In April 1994, former director Richard W ebb pleaded guilty to failing to exercise care and diligence. He was fined $1700 and is prohibited from managing a company for five years.

Interw est Group

In April 1994, former chief executive John Avram was committed for trial on charges of misusing his position to gain advantage for his private company. In 1992 Avram, former chairman Stanley Schneider and Peter Jordan were committed for trial on charges relating to the issue of 25 million Interwest shares to Jordan.

Je a n Scene Pty Ltd

In April 1994, the Tasmanian Supreme Court declared former directors Phillip Chugg and Wesley Chalke personally liable for debts of $200,000 after allowing the company to trade

while insolvent. The declaration was sought by the A SC following their convictions for insolvent trading.

M etrogrowth Property Trust

This investigation was concluded when it was determined there were no grounds for criminal or civil action.

Pro-Image Studios Ltd

In September 1993, applications to strike out an A SC claim under s542 of the Companies Code to recover $15 million damages from former directors and the former auditor were dismissed. In May

1994, these civil proceedings were adjourned pending the hearing of a series of criminal charges

against eight former officers of the company.

Rothwells Ltd

In May 1994, Dallas Dempster was convicted of falsifying accounts, fined $4000 and by virtue of the conviction banned from managing a company for five years. He has appealed against the conviction. He was acquitted of a charge relating

to Rothwells giving financial assistance to Dempster Holdings Pty Ltd to purchase Rothwells shares. In January 1994, charges against former managing director Tony Lloyd relating to an alleged scheme to support the price of Paragon Resources NL shares were adjourned until 1995. Former directors Laurie Connell and Peter Lucas, and former auditor Louis Carter, also face criminal charges. In August 1993, Alexander Vrisakis successfully appealed against a conviction for breaching his duties as a Rothwells director. (In July 1994, former stockbroker Harold Christensen was charged in relation to alleged manipulation of

Paragon Resources NL’s share price.)

Sun Sovereign Ltd

In November 1993, former directors Chor Kian Yap, Oliver Douglas and Desmond Matthews were charged with improperly using their positions. Warrants have been issued for the arrest of Yap, who is outside Australia. The DPP has lodged an appeal against the acquittal in March 1994 of Douglas and Matthews on some of these charges. In June 1994, Douglas was convicted of failing to show reasonable care and diligence, fined $2000 and by virtue of the conviction banned from managing a company for five years.

W estpac Banking Corporation Ltd

A n investigation into a rights issue prospectus was concluded when it was determined there were no grounds for criminal or civil action.

W hite Constructions Ltd

It was reported last year that the ASC had applied for judicial review of a Magistrate's decision in 1992 to dismiss charges against five former directors and an investigating accountant. (In July

1994, the Federal Court declined to grant judicial review of the Magistrate’s decision.)

Appendix 4 Members of the ASC Alan Cameron, Chairman (appointed for five-year term, ending 31 December

1997) Lynn Ralph, Deputy Chairman (appointed for three-year term, ending 10 October 1996)

Bill Robinson, Statutory Member (re-appointed for further three-year term, ending 30 June 1995)

Part 5 (sl08-l 19) of the ASC Law sets out the terms and conditions of Commission members’ appointments (including si 11, which provides the grounds for termination).

Regional Commissioners

Barrie Adams, Regional Commissioner, Queensland (appointed for five-year term, ending 31 December 1995) Murray Allen, Regional Commissioner, Western Australia (appointed for four-year term, ending 31 December 1994) Michael Braham. Regional Commissioner, New South Wales (appointed for five-year term, ending 31 December 1995)

Peter Cranswick, Regional Commissioner, Tasmania (appointed for five-year term, ending 31 December 1995) Rita Harvey, Regional Commissioner, Northern Territory (re-appointed for two-year term, ending 31 December 1995)

John Pinkerton, Regional Commissioner, Australian Capital Territory (appointed for five- year term, ending 31 August 1996) Ron Trevethan, Regional Commissioner, Victoria

(appointed for five-year term, ending 31 December 1995) John Welters, Regional Commissioner, South Australia (re-appointed for two-year term, ending 31 December 1995; resigned 1 July 1994)

Senior Executive Service (at 30 June 1994)

Office of the Chairman

Ian Cameron, Director, Resources Branch Dreda Charters-Wood, Director, Business Services (Acting) Guy Corrigall, Director, Business Development Michael Dunn, Director, Corporate Directorate

George Durbridge, General Counsel Carlos Iglesias, Director, IT Services Phil Khoury, Project Team Leader, Strategic Review Bemie Mithen, Executive Director, Information Division

Chris Robson, Director, Policy and International John Rutherford, Director, Corporate Supervision James Taylor, Director, Companies Branch Shane Tregillis, Director, Markets Branch

Information Processing Centre

Alan Ruff, General Manager

New South W ales

Glynn Hardingham, Director, Companies and Accounts Stephen Howell, Director, Investigations Maurice Martin, Executive Director, Corporate Regulation Geoff Shelley, Executive Director, Investigations Peter Stepek, Regional General Counsel Raema Troy, Director, Fundraising

Queensland

Robyn Chapman, Executive Director, Investigations Tony Stumm, Executive Director, Corporate Regulation Greg Tanzer, Regional General Counsel

South Australia

Frank Lindsay, Executive Director, Investigations

Walter Malinaric, Regional General Counsel Nikki Mortier, Executive Director, Corporate Regulation

Victoria

Morris Broder, Director, Fundraising and Markets (Acting) Peter Chapman, Director, Special Investigations

David Clements, Director, Operations (Investigations) (Acting) Richard Cockbum, Executive Director, Corporate Regulation Angelo Fonti, Director, Companies and Accounts Mardi Waters, Regional General Counsel Pat Whitehouse, Executive Director, Investigations

A ppendix 4

W estern Australia

Fiona Low, Regional General Counsel

Jamie Ogilvie, Executive Director, Investigations (Acting)

Tim Phillipps, Director, Bond Investigation Team Derek Smith, Executive Director, Corporate Regulation

Senior Consultants

Stuart Grant, Executive Director, Accounting Policy

Andrew Procter, National Coordinator Enforcement

B usiness Centres

Vincenzo Aiossa, Manager, Melbourne (Acting) Peter Anderson, Manager, Brisbane Edith Arul-Anandam, Manager, Sydney Peter Kelly, Manager, Adelaide Ray Mantell, Manager, Gold Coast Bob Mitchell, Manager, Geelong (Acting) Susan Molloy, Manager, Newcastle (Acting) Yvonne Musgrave, Manager, Darwin Michael Pullen, Manager, Hobart (Acting) W ayne Simpson, Manager, Canberra John Waight, Manager, Perth Brian Wilson, Manager, Townsville

Human resources

Staffing Full time staff numbers varied during 1993/94 from 1494 in August 1993 to 1618 in January 1994. At 30 June 1994, staff totalled 1579, comprising 1466 permanent staff and 1)3 temporary staff. The IPC employed temporary staff to meet seasonal demand from December 1993 to March 1994, with the highest number of temporary staff (92) employed during January.

A t 30 June 1994, 32 of the 36 positions in the Senior Executive Service (SES) were substantively filled.

Staffing by State/Territory at 30 June 1994

Region Total %

NSW 438 27.7

VIC* 641 40.6

QLD 150 9.5

SA 95 6.0

W A 162 10.3

A C T 49 3.1

TAS 21 1.3

NT 23 1.5

Total 1579 100

* includes IPC

Consultants Under si 21 (1) of the ASC Act, the ASC may engage consultants. The ASC has continued to adhere to guidelines on consultants, issued in June

1993, to ensure that consultants are engaged only when adequate expertise is unavailable within the organisation. The guidelines ensure that engaging consultants meets the principles of strictest essentiality, fair competition, ability to withstand public scrutiny, effective service and value for money.

A total of 61 consultants were engaged to provide essential specialist services and provide high level advice in investigations, legal, corporate regulation and accounting functions.

Contractors In addition the ASC employed 28 contrators under si 21 (1) of the ASC Act to provide services for Information Technology Services Branch.

Equal Employment Opportunity The ASC Equal Employment Opportunity (EEO) program, approved by the Public Service Commissioner in April 1992, is a two-year planned management program which seeks to identify and eliminate inequality of opportunity and introduce measures to enable women, Aborigines and Torres Strait Islanders, people from non-English speaking backgrounds and people with disabilities to pursue careers in the ASC as effectively as other people. The program encompasses all aspects of

employment - selection, recruitment, staff development and conditions of service. Within the Office of the Chairman, the EEO coordinator within Human Resources Section is responsible for policy development associated with EEO and the program. The coordinator reports on EEO matters to the senior executive responsible for EEO, the Director Resources. W ithin the Regional Offices and the IPC are EEO contact officers, responsible for overseeing the implementation of EEO.

As the current EEO program ended on 30 June 1994, during 1993/94 work commenced on the evaluation of this program to assess whether aims and objectives had been met. The priority for

1993/94 is the continuation of the evaluation of the program and from this developing a new program for 1994-96. It is intended that the Public Service Commission’s new model for EEO programs will be used.

As at 30 June 1994 women made up 49.5 per cent of the ASC’s staff. O f SES staff 16.1 per cent were women, and 22.3 per cent of senior officers and equivalents were also women. Women made up

A ppendix 4

42.8 per cent of legal staff. 41 individuals identified themselves as having a disability, 10 identified themselves as Aboriginal and Torres Strait Islander. 160 staff identified themselves as having a non-English speaking background.

Occupational Health and Safety Occupational Health and Safety (OHS) within the ASC refers to the agency fulfilling its obligations under the Occupational Health and Safety (Commonwealth Employment) Act 1991.

The ASC does this via the workplace implementation of its Occupational Health and Safety Agreement and Human Resource Management OHS Policy. Under the Agreement the ASC has established designated work groups,

elected and trained health and safety representatives, and formed local health and safety committees.

During 1993/94 a program of manager/supervisor OHS training has been conducted throughout the ASC. A component on OHS has also been included in the Middle Management Program.

Ongoing OHS initiatives developed under the agreement namely first aid programs, eye sight testing, and access to employee assistance programs have been firmly established on local OHS agendas.

The OHS agreement and policy which were drafted in 1992 have been redrafted to cover the ASC’s obligations over the next two years and include specific guidelines on first aid and use of screen based equipment.

Industrial Democracy The ASC Industrial Democracy (ID) Plan 1992 continued throughout the year as the formal mechanism for ongoing consultation on significant issues between ASC senior management and the Community and Public Sector Union, and for facilitating sound ID practices. The principle ID forum, the National Consultative Council, chaired by the Statutory Member, met on three occasions during the year and was supported by sub­ committees on equal employment opportunity (three meetings), occupational health and safety (two meetings) and technological change (two meetings). Consultative Councils continued to operate throughout the Regional Offices and the

IPC. The Director Resources is responsible for ID, and is supported by a senior officer within the branch as ID facilitator.

Workplace Bargaining Workplace Bargaining has been one of the key Human Resource Management issues being addressed within the ASC during 1993/94-

Considerable progress has been made during the year towards the finalisation of an ASC agency agreement. Facilitators have been established in each region, extensive awareness training has been conducted throughout the ASC, and all staff have had an opportunity to contribute productivity

ideas. The Workplace Bargaining Committee consisting of management and Community and Public Sector Union representatives has developed a draft agency agreement incorporating a range of organisational/process based productivity

initiatives and staff management improvements as well as greater flexibilities in several employment conditions.

Performance appraisal and performance based pay The SES completed their initial performance appraisal cycle in June 1993 and received their first performance based pay in July 1993, while the senior officers, legals and other equivalent classifictions completed their second performance appraisal in April 1994.

Details of the distribution of performance based pay to eligible SES and senior officers and equivalent classifications are in the graphs below.

SES Performance Pay

1 E

11 £ =

™ Ι­

έ

i

20

15

10

5 -

| ■

S s

Performance pay received as a percentage of maximum permissible performance pay

A ppendix 4

Senior Officer Performance Pay

200 __________________

During the year, performance appraisal programs for these classifications were evaluated through a series of participant surveys and focus group discussions. This process will result in developing

more relevant and effective programs during 1994/95.

T raining The A SC has provided extensive training to its staff, with 6421 staff days devoted to formal training. This equates to about four days of training per staff member on average, and an expenditure of over $900 per officer. The total budget expenditure for training amounted to $1,491,322. During the year 70 per cent of staff attended formal training activities.

Better management of internal information

Activity tracking and document management The different history and wide distribution of ASC offices across Australia can present problems in ensuring that decision making is consistent and accords with national policy. To meet the need for national standards, the ASC has developed two new computer information systems, ASCTEC and ASCRIBE. Both systems are designed to promote and facilitate information sharing between offices and officers.

ASCTEC, which was implemented in early 1994, analyses and tracks all the ASC’s operational activities. It automatically accumulates program information statistics, and provides a standard framework for reporting.

ASCRIBE, scheduled for implementation early in 1995, will support new national procedures for controlling and handling documents obtained for investigation, and their organisation and analysis, and eventual presentation as evidence. It will capitalise on the ASC’s investment in imaging technology to reduce handling of original material, and will allow briefs and disclosures to be provided in electronic form.

Library services The ASC has libraries in each Regional Office and in the Office of the Chairman in Sydney and Melbourne, as well as a smaller working collection

in the IPC. ASC libraries answered 17,000 reference questions this year, over 30 per cent using on-line or CD ROM resources. Over 16,500

loans were completed and the national database now has over 11,000 records and 70,500 items. 1993/94 was the year of electronic document delivery for the ASC library service. The library catalogue is used to deliver the full text of legal opinions and journal contents pages at the touch of a button. CD ROMs were networked successfully at ten sites, delivering legislation and secondary materials to the desktop.

Policy Statem ents and Practice Notes issued by

the ASC from 1 July 1993 to 30 Ju n e 1994

Policy Statem ents

7 July 1993 PS 59 - Extension of time for dispatch of Part B statement 15 July 1993

PS 60 - Schemes of arrangement — s411(17) 19 July 1993 PS 61 - Underwriting - application of exemptions 20 July 1993 PS 62 - Takeovers - disclosure of interests of overseas and trustee associates 30 August 1993 PS 63 - Access to debenture and prescribed interest registers PS 64 - Failure to lodge documents 6 Septem ber 1993 PS 65 - Foreign collective investment schemes

™ 180

1 140

1 120 E | 100

Ξ 80

T 8 60

Performance pay received as a percentage of maximum permissible performance pay

A ppendix 4

23 September 1993 PS 66 - Time-sharing schemes 6 October 1993 PS 67 - Real estate companies 25 October 1993

PS 68 - Debenture fundraising by Australian banks and life companies 1 November 1993 PS 69 - Entitlement where relevant interest disregarded 15 November 1993 PS 70 - Exempt futures markets PS 71 - Downstream acquisitions 6 December 1993

PS 72 - Foreign securities prospectus relief 13 December 1993 PS 73 - Directors over 72 years 8 December 1993 PS 74 - Acquisitions agreed to by shareholders PS 75 - Independent expert reports to shareholders 23 December 1993 PS 76 - Related party transactions 24 January 1994 PS 77 - Property trusts and property syndicates 28 February 1994 PS 78 - Confidentiality 7 March 1994 PS 79 - Prospectuses - material contracts 24 March 1994 PS 80 - Prescribed interests not for money 5 April 1994 PS 81 - Destruction of books 30 March 1994 PS 82 - Covenants in deeds - non-mining primary production schemes 2 May 1994 PS 83 - Reinstatement of companies 9 May 1994 PS 84 - Covenants in deeds - film and theatrical schemes 6 June 1994 PS 85 - Cattle breeding schemes

Practice Notes

5 July 1993 PN 34 - Auditors’ obligations 19 July 1993 PN 35 - Disclosure of offerors’ intentions in takeover documents 5 August 1993 PN 36 - Future income tax benefits 27 September 1993 PN 37 - Takeovers - financing arrangements 26 September 1993 PN 38 - Research and development syndications - current accounting methods

4 November 1993 PN 39 - Accounting for goodwill 19 November 1993 PN 40 - Reconstruction meetings 24 November 1993 PN 41 - Securities advisers’ recommendations 8 December 1993 PN 42 - Independence of experts’ reports PN 43 - Valuation reports and profit forecasts 24 January 1994 PN 44 - Notification of rights of review PN 45 - Supplementary prospectuses 21 January 1994 PN 46 - Transition to Corporations Law 5 April 1994 PN 47 - ACN, ARBN and company names PN 48 - Takeovers aspects of options over shares 18 April 1994 PN 49 - Enforcement action - no undertakings 28 April 1994 PN 50 - External administrators - reporting matters and lodging documents 16 June 1994 PN 51 - Fees for subpoenas 20 June 1994 PN 52 - Serving legal documents on the ASC

ASC publications 1993 -1994 Brochures and booklets Annual Report 1992/93 Strategic Plan 1994-1997 An ASC Guide to the Registration and Supervision of Auditors (January 1993)

An ASC Guide to the Registration and Supervision of Liquidators (September 1994) An ASC Guide to Securities Industry Licensing (March 1994) A SC fees (July 1994) ASC locations and services (November 1993)

Company forms (October 1994) Company searches (July 1994) Electronic lodgement (March 1994) How to report suspected breaches of the Corporations Law (August 1994) Incorporation (January 1993) Local ASC Representatives (April 1993) On-line public access (September 1994) Registration (under Part 4.1 of the Corporations Law)

(January 1993) Statutory obligations (August 1994) The Company Directors Survival Kit, published jointly with Australian Society of Certified Practising Accountants and the Institute of Chartered Accountants (1994) Don’t Kiss Your Money Goodbye, published jointly with Financial Planning Association of Australia

(August 1994)

A ppendix 4

Serials ASC Digest ASC Hearings Manual ASC Procedures Manual: Takeovers, Prospectuses, Securities and Futures Licensing, Trustee Approvals, Auditors and Liquidators Registration, published as a single service or available separately ASC Working Guide for Accountants

Categories of docum ents held by the ASC (required to be published under section 8 of the Freedom of Information Act 1982)

Agendas for and minutes of meetings of the ASC, meetings between the ASC and other agencies, and technical committee meetings relating to licensing, prospectuses and prescribed interests. Correspondence and other documents relating to

the licensing technical committee. Procedural handbooks. Documents containing statistics on the registration of licensees. Documents relating to licensee surveillance. Documents relating to securities markets including business and listing rules, fidelity funds, national guarantee funds and other matters. Policy documents concerning licensing of securities dealers and advisers, and the authorisation of their representatives. Requests for legal advice and copies of advice received. Proposals for amendments to the Corporations Law and copies of draft legislation. Internal working papers and records. Ministerial and general correspondence. Handbooks, manuals and other documents issued by the ASC. Filing system indexes. Registers of instruments of delegation, direction and authorisation. Staff management records. Records, papers, accounts and correspondence relating to auditors, liquidators and official liquidators. Internal working papers and statistics relating to the examination and assessment of financial and accounting information. Reports, papers, records, briefs, legal opinions, court documents, correspondence and interview records relating to investigations. Books and records of companies under review or subject to investigation. Papers, precedents and working documents on the conduct of inquiries and offences. Papers received from within the ASC or other agencies, associated notes and correspondence.

Documents relating to applications and submissions made to the ASC. Documents relating to Heads of Commonwealth Operational Law Enforcement Agencies.

Documents relating to FOI Act, ADJR Act, Privacy Act and AAT Act. Correspondence with Commonwealth Ombudsman, Attorney-General’s Department and other agencies.

Documents signed under the seal of the ASC. Documents relating to speech notes, press releases, Policy Statements, Practice Notes and ASC Digest. Documents relating to accommodation, estimates, accounts, expenditure and banking arrangements. Documents relating to human resources, personnel policy and staff development and training. Documents relating to EEO, Industrial Democracy and Occupational Health and Safety policy. Documents relating to inter-governmental committees on corporate regulation, parliamentary questions and correspondence with Attomeys- General.

Documents relating to computer purchases, information systems, Information Division management systems and projects.

Note: The ASC makes available to the public in the ASC Digest the following documents: Policy Statements, Practice Notes, information brochures, media releases, information statements, significant memoranda relevant to the public, issues papers, public hearings, legal commentary and accounting

commentary. The ASC Digest is available to the public by subscription from the Centre for Professional Development (telephone: 03 - 853 0600).

The following manuals are available for a charge from Centre for Professional Development - ASC Hearings Manual ASC Procedures Manual - Prospectuses, Takeovers, Securities and Futures Licensing, Trustee Approvals, Auditors and Liquidators Registration, published as a single service or available separately ASC Working Guide for Accountants

FOI requests should be addressed to FOI Officer Australian Securities Commission GPO Box 9827 in the capital city of your State or Territory.

A ppendix 4

ASC Regional Liaison Committee members

New South W ales Q ueensland

John Bills Charles Coulson

Brendan Birthistle George Deeb David Blackwell Frank Haly Don Blyth Bany Jardine

Ken Breakspear Andrew Knox Colin Cahill Russell McCrory

David Castle lan Ovens

John Colley Jim Planincic

Allan Cowper Bruce Scott

John Currie Peter Short

Neil Drabsch Barry Ward

Ari Droga Rod Wyatt

Gordon Elkington Rob Elliott Victoria

Ken Farrow Mervyn Baker

Gwen Fletcher Ray Barlett

Phil Gray Keith Baumgartner

John Hall Peter Bearsley

Ron Hamlyn John Bills

Ron Hardaker Tom Bostock

Bryce Hardman Roy Boyce David Hartgill David Boymal

Les Hosking John Brooke

Peter Hutley Bmce Cameron

Alison Iverach Eric Cohen

Brian James Geoff Cohen

Harry Khouri John Craig

Martin Kinski David Crawford

John Kluver Geoff Dewar

Nick Komer John Dick

Wayne Lonergan Michael Dwyer Jon Masters Alan Flanders

Ian Matheson Robert Gartside

Russell McKimm Katherine Gawler Shaughn Morgan Stuart Gooley Ross Polkinghome Tony Greenwood Max Powditch Ian Haigh

Ted Rofe Doug Hawley

Prue Sale Tony Hodgson

Ian Schlipalius Alastair Jenkins Malcolm Stan- Terence Keefe

Graham Stubington Graham Lindsay Hugh Thomas Simon Lucas

Peter Walford Richard Morrow

Robert Walker Gary Nolan

Peter Wame Paul Pattison

Kevin White Jim Perry

Andrew Wood Harley Price

Michael Robinson

Charles Rosedale John Harris Philip Smith Paul Harris

Julian Stock Steven Hemyk

John Wilkin Anthony Hughes

Raymond Lorkin

A ustralian Capital Arthur Orchard Territory Joan Roberts

Erik Adriaanse Warwick Smith Warren Aitken Michael Alves Northern Territory

George Carter Bob Cowling

Stewart East Geoff Crowe

John Fielden Bronte Evans

David Gaul Adam Gordon

Frank Kelly Bob Hudson

John Malouf Judith Kelly

John Muir Ann McCallum

Roger Nicholls Mark Norman Allan Richards Katherine Philp Barry Taylor Mike Vallentine

Roger Thompson Peter Watters Anne Trimmer W estern Australia

South A ustralia Ian Anderson

Tony Abbott Gregory Hancock

Peter Barrett Geoffrey Hick

Bruce Carter Joe Lenzo

Geoff Catt Richard Lester

Ian Colyer Dan Marfatia

Ken Foggo Peter Messer

Chris Guille Peter Patrikeos

Lance Hatcher Peter Quigley

Kym Kelly Laurie Shervington

Keith Langley Tom Tranter

Brian Lilley Gino Vitale

Jeff Lucy John Neuling David Olifent Rob Patterson ASC Audit Commit!

David White members

Geoff White David Boymal

Brenton Wood (Chairman)

Alan Yates Brian Jamieson

(Deputy Chairman)

Tasm ania

Bill Robinson

Mike Bessell Bemie Mithen David Catchpole Robyn Cochrane Nick Cretan Damian Egan

A ppendix 4

ASC organisational chart

Information Processing Centre

Information Technology S ervices

— Business

Developm ent

Business Services

Business Centres

Index ΑΑΤ 19,33,45 accounting issues/standards 18,30,35 annual return 8,17,39-41 ASC Digest 25,44,65

ASCOT 37,38,40,41,44,47 ASX 6,17,22,23,29,41 Audit Committee 66 auditors 10,19,22,30,33,37 Australian Accounting Research Foundation 18 Australian Accounting Standards Board 18,30 Australian Federal Police 9 Australian Financial Institutions Commission 45 Australian Society of Certified Practising

Accountants 34 Business Centres 38,41,61 CALDB 30,33 CASAC 45 charitable bodies 17 CHESS 17 civil action 3,8,21-27 Collective Investment Review 6 commercial applications 18 Commission 2,7-10,14,34,43,44,60 Commonwealth Law Enforcement Board 9,45 company title properties 17 Consolidated Revenue Fund 44,76,84 consultants 61 Council of Financial Supervisors 45 criminal prosecution 3,21-27 derivatives 3,6,14-15 Director of Public Prosecutions 8,9,24 directors duties 34,40

DOCIMAGE 38,41,47 downstream acquisitions 16 EEC 61-62 electronic lodgement 3,8,38,39,41,47 enforcement policy 8,9,10,22,25,28,40,43,47 enhanced disclosure 6,41 expenditure 43,63 expert reports 35 fees, Corporations 9,17,38,39,40-41,44 Financial Planning Association 33 financial statements 27-28,30-31,35,69 foreign collective investment schemes 16 freedom of information 45,65 Heads of Commonwealth Law Enforcement

Agencies 45 human resources 46,61 industrial democracy 62 Information Brokers 38 Information Division 6,8,10,37,38,43,47

Information Processing Centre 41,47,60 Institute of Chartered Accountants 34 Insurance & Superannuation Commission 9,17,32,45 internal audit 47 international cooperation 23,45-46 investor protection 13-17,21,28 IOSCO 18,46 law reform 7,16,19,44-45 licensing 19 liquidators 7,10,13,22,23,33,34,37 Local Representatives 38 market research 3,7,10,16,44 master funds 3,7,15 Memorandum of Understanding 23 Ministerial Council for Corporations 45 Ministerial direction 2,9

misuse of companies 22,27,34 National Steering Committee on Corporate Wrongdoing 9 occupational health & safety 62 Parliamentary Joint Committee on Corporations

& Securities 8,34 performance based pay 62,63 Policy Statements 44,63-64 Practice Notes 34,44,64 property trusts 16,32 prospectuses 3,6,7,16,17,19,27,28-29,35,44 publications 64,65 see also ASC Digest quality certification 3,6,8,37,38,47 Regional Liaison Committees 44,66 Regional Offices 2,43,44,45,47,60 registered agents 40 securities dealers & advisers 7,13,15,17,27,32-33,34 securities recommendations 34-35 Senate Standing Committee on Legal &

Constitutional Affairs 8,24 SES 60-61,62-63 short-selling 15-16 statutory records 34 stock market provisions 15 Strategic Review 3,9,44 streamlining 18 superannuation funds 17,32 surveillance 3,22,27-28,32,33,44 Sydney Futures Exchange 6,22,23 takeovers 13,27,29-30 time-sharing schemes 16-17 training 10,32,39,45,46,47,63 trustees & fund managers 17,27,31-32 workplace bargaining 62

Financial Statements AUSTRALIAN NATIONAL AUDIT OFFICE

Level 7

130 Elizabeth Street

Sydney NSW 2000

I N D E P E N D E N T A U D I T R E P O R T A u s t r a l i a n S e c u r i t i e s C o m m i s s i o n

To the Honourable the Attorney-General

Scope

I have audited the financial statements of the Australian Securities Commission for the year

ended 30 June 1994· The statements comprise:

• Statement of Financial Position

• Operating Statement

• Statement of Cash Flows

• Notes to and forming part of the Financial Statements, and

• Members’ Statement.

The members of the Commission are responsible for the preparation and presentation of the

financial statements and the information they contain. I have conducted an independent audit of

the financial statements in order to express an opinion on them to the Attorney-General.

The audit has been conducted in accordance with Australian National Audit Office Auditing

Standards, which incorporate the Australian Auditing Standards, to provide reasonable assurance

as to whether the financial statements are free of material misstatement. Audit procedures

included examination, on a test basis, of evidence supporting the amounts and other disclosures

in the financial statements, and the evaluation of accounting policies and significant accounting

estimates. These procedures have been undertaken to form an opinion whether, in all material

respects, the financial statements are presented fairly in accordance with Australian accounting

concepts and standards and statutory requirements so as to present a view which is consistent

Financial Statements

I N D E P E N D E N T A U D I T R E P O R T c o n t i n u e d

with my understanding of the Commission’s financial position, the results of its operations and its

cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion

In accordance with section 138 of the Australian Securities Commission Act 1989,1 now report

that the statements are in agreement with the accounts and records of the Commission, and in

my opinion:

(i) the statements are based on proper accounts and records,

(ii) the statements show fairly in accordance with Statements of Accounting Concepts and

applicable Accounting Standards the financial transactions and cash flows for the year

ended 30 June 1994 and the state of affairs of the Commission as at that date,

(iii) the receipt, expenditure and investment of moneys, and the acquisition and disposal of

assets, by the Commission during the year have been in accordance with the

Australian Securities Commission Act 1989, and

(iv) the statements are in accordance with the Guidelines for Financial Statements of

Public Authorities and Commercial Activities.

David C. McKean

Executive Director

Australian National Audit Office

Sydney

1 September 1994

Financial Statements

F I N A N C I A L S T A T E M E N T S f o r t h e y e a r e n d e d 3 0 J u n e 1 9 9 4

Australian Securities Commission

M E M B E R S ’ S T A T E M E N T

In our opinion the financial statements, including the notes thereto, have been properly drawn

up so as to show fairly the Australian Securities Commission’s:

- operating result for,

- financial position as at the end of, and

- cash flows during,

the financial year.

These statements have been made out in accordance with applicable Accounting Concepts and

Standards and the Guidelines for Financial Statements of Public Authorities and Commercial

Activities issued by the Minister for Finance.

A.J. CAMERON

Chairman

15 August 1994

L.S. RALPH

Deputy Chairman

15 August 1994

Financial Statements

Australian Securities Commission

O P E R A T I N G S T A T E M E N T f o r t h e y e a r e n d e d 3 0 J u n e 1 9 9 4

1 9 9 3 / 9 4 1 9 9 2 /9 3

Note SOOOs SOOOs

COST OF SERVICES Operating Expenses Administrative 4(a) 29,153 32,959

Property 4(c) 21,296 20,300

Salaries & related 4(d) 77,129 73,619

Depreciation 4(e) 11,742 9,741

External legal & other 4(b) 3,406 5,391

Total operating expenses 142,726 142,010

Operating revenue from independent sources 3 5,318 6,295

Net Cost of Services 137,408 135,715

REVENUE FROM GOVERNMENT Parliamentary appropriation received 2 136,192 135,439

Resources received free of charge 18 409 100

Total revenue from government 136,601 135,539

Operating result -807 -176

Accumulated Results of Operations at beginning of year 20,826 21,002

Accumulated Results of Operations at end of year 20,019 20,826

The accompanying notes form an integral part of these financial statements.

Financial Statements

Australian Securities Commission

S T A T E M E N T O F F I N A N C I A L P O S I T I O N as a t 3 0 J u n e 1 9 9 4

1 9 9 3 /9 4 1 9 9 2 /9 3

N o te SOOOs SOOOs

C u r r e n t A s s e t s

Cash 5 4,883 4,176

Receivables 6 1,492 1,261

Investments 7 5,000

Other 8 1,287 2,407

Total current assets 12,662 7,844

N o n - C u r re n t A s s e t s

Property, plant & equipment 9 33,690 35,930

Toral non-current assets 33,690 35,930

T o ta l A s s e t s 46,352 43,774

C u r r e n t L ia b ilitie s

Creditors 10 1,806 1,671

Provisions 12 9,395 8,531

Other 10 1,438 384

Total current liabilities 12,639 10,586

N o n - C u r r e n t L ia b ilitie s

Provisions 12 7,550 6,776

Other 11 6,144 5,586

Total non-current liabilities 13,694 12,362

T o ta l L ia b ilitie s 26,333 22,948

N e t a s s e t s 20,019 20,826

E q u ity

Accumulated Results of Operations 20,019 20,826

T o ta l e q u ity 20,019 20,826

The accompanying notes form an integral part of these financial statements.

Financial Statements

Australian Securities Commission

S T A T E M E N T OF C A S H F L O W S for t he year e n d e d 30 J une 1994

1 9 9 3 /9 4 1 9 9 2 /9 3

Note SOOOs SOOOs

Cash Flows From Operating Activities

Inflows:

Parliamentary Appropriation 136,192 135,439

Bank Interest 954 1,020

Miscellaneous 4,132 4,742

Outflows:

Salaries & related expenses -75,336 -73,179

Property -18,251 -20,748

External Legal and Other -3,493 -5,140

Administrative -28,814 -31,882

Net cash provided by operating activities 21 15,384 10,252

Cash Flows From Investing Activities

Inflows:

Proceeds from sale of property, plant & equipment 47 83

Outflows:

Purchase of property, plant & equipment -9,724 -8,124

Fixed term deposit -5,000 -

Net cash used by investing activities -14,677 -8,041

Net increase in cash held 707 2,211

Cash at beginning of year 4,176 1,965

Cash at end of year 5 4,883 4,176

The accompanying notes form an integral part of these financial statements.

Financial Statements

N O T E S T O A N D F O R M I N G P A R T O F T H E F I N A N C I A L

S T A T E M E N T S f o r t h e y e a r e n d e d 3 0 J u n e 1 9 9 4

Australian Securities Commission

1. Summary of significant accounting policies (a) Basis of Accounting The financial statements have been prepared in accordance with the Guidelines for Financial Statements of Public Authorities and Commercial Activities issued by the Minister for Finance. They are prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation and are consistent with applicable accounting concepts and standards, as amended by the Guidelines.

(b) Cash

For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand which are used in the cash management function on a day to day basis.

(c) Investments Investments are stated at cost and comprise fixed term deposits.

(d) Taxation

Section 139 of the Australian Securities Commission Act 1989 provides that the Australian Securities Commission (ASC) is not subject to taxation under a law of a State or Territory or under a law of the Commonwealth (other than the laws imposing sales tax, the Debit Tax Act 1982 or the Fringe Benefits Tax Act 1986).

(e) Acquisition of assets The cost method of accounting is used for all acquisition of assets. Cost is determined as fair value of asset given up at the date of acquisition plus any costs incidental to the acquisition. Assets acquired for more than $1,000 are capitalised in the year of acquisition and assets procured for less than $1,000 are expensed in the year of procurement.

The accounting policy relating to the costs for purchases and enhancements of software has been revised. In the previous years all costs for purchases and enhancements of software were expensed in the year in which they were incurred. During the current year, to accord with acceptable accounting principles (Statement of

Accounting Concepts 4), the costs for purchases and enhancements of software, exceeding the capitalisation threshold and having future service potential, have been capitalised and amortised over their estimated useful lives.

As a consequence of the above change in accounting policy, the costs for software purchases and enhance­ ments to the value of $546,639, which would have been expensed in the previous year, have been capitalised.

(f) Revaluation of land and building The ASC has adopted a policy to revalue land and buildings on a three yearly cycle. Independent assessments are obtained from a registered valuer on the basis that the valuation reflects the present use of the property by the Commission. Revaluation increments are credited directly to the Assets Revaluation Reserve and the decrements are brought to account in the Operating Statement unless those revaluations reverse previous

increments or decrements.

The 1993/94 valuation was performed by C. J. Jordan who is a member of the Australian Institute of Valuers on 28 June 1994.

(g) Leased assets All leased assets have been classified as Operating Leases. Lease expenses are charged to the operating account in accordance with the manner in which the pattern of benefits is derived.

Financial Statements

(h) Depreciation and amortisation Depreciation is calculated on straight line basis to write off the costs or revalued amounts of property, plant and equipment over their estimated useful lives. Estimates of remaining useful lives of assets are made annually.

The group method of accounting has been adopted for computer equipment, comprising the Local Area Network. Under this method of accounting, all grouped asset costs are written out of the accounts automatically on the assets attaining their group life. No adjustments are necessary for individual assets which may be physically retired before or after the assets group life.

Leasehold improvements are amortised over the term of the lease or the expected useful lives of the improvements, which ever is shorter.

(j) Employee benefits Annual leave provision is based on actual entitlements of staff at balance date. It includes amounts owing to former State employees who joined the Commission in January 1991.

Annual leave bonus provision is based on outstanding leave liability as at balance date and is calculated at 17.5% of the weekly salary for the number of weeks accrued up to the maximum amount payable for each year.

Long service leave provision is based on an estimate of the liability at balance date. The calculations take into consideration prior service with other government organisations and includes any amount payable to former State employees who joined the Commission in 1991. Accrual of the provision occurs after staff have accumulated five years eligible service and is generally payable only upon employees attaining 10 years service.

(k) Superannuation To maintain continuity of employment conditions of staff taken over from various States, the ASC has adopted a policy to continue contributing to Commonwealth, State and private superannuation schemes which were operating prior to its inception.

(l) Revenue/receipts The Commission is substantially funded by Parliamentary Appropriations received to cover expenditure incurred in carrying out the functions of the Commission under the Corporations Law.

The Operating revenue from independent sources comprise incentives received towards lease improvements, bank interest, business names receipts, recoveries of investigation costs and prosecution disbursements, and sales of microfiche and publications.

The ASC has been provided with free access to several agencies’ databases including the Attorney-General’s Department’s Scale/Info-one database system. The benefits derived from free access to databases are brought to account or disclosed in the notes to accounts only where the benefits could be reliably measured.

Statutory revenue arising from services rendered by the ASC under the Corporations Law are collected and deposited in the Consolidated Revenue Fund on behalf of the Commonwealth. Statutory revenue comprise fees for the lodgement of annual returns and other prescribed fees, voluntary enquires from clients for microfiche, certificates and document images.

(m) T rust monies/statutory revenue Receipts of a mandatory or voluntary nature are not considered to be revenue of the Commission, hence any amount held by the Commission at year end is considered to be held in trust on behalf of the Commonwealth. Typically such amounts include those awaiting classification prior to being paid to the Commonwealth and any amount received by the Commission which has remained unclaimed at year end.

(n) Receivables Trade debtors The Commission has adopted the policy of recognising in its books trade debtors and all recoverable costs in respect of non-statutory service revenue. No provision for doubtful debts is considered necessary.

Financial Statements

Statutory revenue debtors Statutory revenue debtors are not recognised in the books of the Commission as the amounts are payable into the Consolidated Revenue Fund on realisation. The amounts outstanding at year end are disclosed in the notes to the accounts. Provision is made for the amount considered doubtful of collection. The amounts deemed uncollectable are written off, after obtaining approval from the Minister for Finance, pursuant to section 70C (1) of the Audit Act 1901.

(o) Expenditure Pursuant to sections 171, 202 and 224 of the Australian Securities Commission Act 1989, the Commission is required to support boards and a panel to promote activities which enable the ASC to attain its mission. The salaries and administrative expenditure incurred on behalf of these boards and the panel are included in the Operating Statements of the Commission.

(p) Economic dependency The activities of the ASC are dependant upon the appropriation of monies by the Parliament. In excess of 95% of its expenditure has been funded by appropriations. W ithout these appropriations, the ASC would not be able to carry out its functions under the Corporations Law.

(q) Segment reporting The A SC’s mission is to achieve maximum credibility of Australian corporations and securities markets. The Commission operates in a single activity and has offices in each State and Territory in Australia.

(r) Rounding

Amounts have been rounded off in the accounts to the nearest $1,000 and previous years’ figures have been recast to conform with changes in presentation in the current year with the exception of notes 19,20 and 22.

2. Parliamentary Appropriations

1993/94 1992/93

SOOOs SOOOs

Appropriation A ct N o 1 127,222 132,960

Appropriation A c t N o 2 8,300 -

A ppropriation A c t N o 3 670 -

A ppropriation A ct N o 5 - 2,479

T otal 136,192 135,439

3. Operating Revenue Lease incentives - 1,800

Business Names receipts 1,475 1,232

Cost recoveries (a) 1,066 1,912

Other 1,814 282

Interest 963 1,069

Total 5,318 6,295

(a) The ASC has been a frequent litigant in local courts. The amounts paid by the Commission for Court Costs, Investigations and Prosecution Disbursements are recovered in some instances. These amounts are shown separately and are not netted off against the expenditure incurred on the basis that the recoveries are not certain and collection is not assured.

Financial Statements

4. Expenditure

1993/94 1992/93

(a) Administrative

SOOOs SOOOs

Computer 6,234 8,116

Fees & Services 7,292 5,357

Travel 5,357 4,468

Office Requisites 4,074 3,789

Imaging Expenses 671 3,496

Communication 2,678 2,756

Software purchases (note 1(e)) 370 2,320

Loss on Disposal of Fixed Assets 223 205

Other 2,254 2,452

Total Administrative 29,153 32,959

(b) External legal and other 3,406 5,391

(c) Property expenses Rental of property 17,357 17,329

Other 3,939 2,971

Total Property Expenses 21,296 20,300

(d) Salaries and Related Salaries 59,515 54,740

Superannuation 9,463 8,619

Employee benefits 4,748 4,175

Other 3,403 6,085

Total Salaries and Related 77,129 73,619

(e) Depreciation 11,742 9,741

Total Expenditure 142,726 142,010

5. Cash

Cash at bank 4,727 4,019

Cash on hand 156 157

Total 4,883 4,176

6. Receivables Trade debtors 674 794

Receivable from the Commonwealth 818 467

Total 1,492 1,261

7. Investments - current Fixed term deposit 5,000

Financial Statements

8. Other Current Assets

Prepayments Accrued Income

T otal Other C urrent Assets

9. Property, Plant & Equipment Computer Equipment Less accumulated depreciation

N et book value

Leasehold Improvements Less accumulated depreciation

N et book value

Land at independent valuation (note 1(0)

Building at independent valuation (note 1(0)

Furniture & Fittings Less accumulated depreciation

N et book value

Imaging Equipment Less accumulated depreciation

N e t book value

Motor Vehicles Less accumulated depreciation

N e t book value

Office Equipment Less accumulated depreciation

N et book value

T otal assets

10. Current Liabilities Trade creditors O ther (note 11)

1993/94 1992/93

SOOOs SOOOs

1,287 2,360

- 47

1,287 2,407

23,384 18,243

12,497 8,756

10,887 9,487

28,970 27,827

15,791 9,982

13,179 17,845

30 30

140 142

4,947 4,876

1,644 1,155

3,303 3,721

2,855 670

304 147

2,551 523

39 88

11 17

28 71

7,839 7,042

4,267 2,931

3,572 4,111

33,690 35,930

1,806 1,671

1,438 384

Total 3,244 2,055

Financial Statements

11. Non-Current Liabilities

1993/94 1992/93

SOOOs SOOOs

Other 6,144 5,586

The amount represents deferred rental accrued to 30 June 1994 in respect of property lease incentives. The payments of this amount will be made over the life of the lease, commencing after the expiry of the rent deferral period.

The allocation of Deferred Rental between Current Liabilities and Non-Current Liabilities has been made in accordance with amounts determined as payable immediately within 12 months of the balance date. The remaining amount has been classified as Non-Current Liabilities.

12. Provision for employee entitlements Current liability Annual leave 6,625 6,076

Annual leave bonus 982 889

Long service leave 1,788 1,566

Total 9,395 8,531

Non-Current Liability Long service leave 7,550 6,776

Total 16,945 15,307

The allocation of employee entitlement between current and non-current liabilities has been made in accordance with previous year’s experience.

13. Trust Monies

Monies held in trust Mandatory & voluntary requirements 6,873 5,074

Unclaimed & unidentified monies 2,507 1,891

Total 9,380 6,965

Section 462 receipts Opening balance 416 118

Receipts 447 685

Disbursements -367 -387

Closing balance 496 416

Security deposits under s786(2)(d) Cash 80 200

1BD 830 2,326

Stock 1,319 902

Insurance bonds 1,220 420

Bank guarantees 21,905 20,375

Total 25,354 24,223

Financial Statements

1993/94 1992/93

Security deposits under s 1284(1)

SOOOs SOOOs

Cash 50

1BD 50

Stock 25 50

Insurance bonds 53,175 52,850

Bank guarantees 1,750 1,850

Total 55,000 54,800

Settlement Monies Opening balance 95 1

Receipts 133 124

Disbursements -143 -30

Closing balance 85 95

14. Expenditure relating to Boards and Panel Salaries and administrative expenses were incurred during the year by the Commission pursuant to sections 171, 202 and 224 of the Australian Securities Commission Act 1989 for:

Corporations and Securities Panel (CSP) Companies Auditors and Liquidators

113 128

Disciplinary Board (CALDB) Australian Accounting Standards

380 166

Board (AASB) 608 606

15. Superannuation The ASC provides superannuation benefits to staff under provided below: a number of schemes. A summary of payments is

Commonwealth schemes Public Sector Scheme (PSS) 4,723 4,088

Commonwealth Super Scheme (CSS) 1,767 1,511

Total 6,490 5,599

State schemes South Australia 193 166

New South Wales 532 685

Queensland 299 301

W estern Australia 31 71

T asmania 9 23

Victoria 471 417

Total 1,535 1,663

Private schemes 43 22

Superannuation Productivity Benefit 1,395 1,335

T otal superannuation contribution 9,463 8,619

Financial Statements

Details of the last actuarial assessment and the amount of any unfunded past service costs, (if any), for the state and private schemes is not known by the ASC, as required by the Guidelines for Financial Statements of Public Authorities and Commercial Activities issued by the Minister for Finance.

3% Productivity superannuation Payment made on behalf of staff members in accordance with the requirements of the Superannuation (Productivity Benefit) Act 1988 were $1,395,136 (1992/93 - $1,335,275).

16. Commitments Commitments for property and equipment operating leases. 1993/94 1992/93

SOOOs SOOfls

Less than 1 year 17,160 16,993

Greater than 1 year and less than 2 years 16,901 17,206

Greater than 2 years and less than 5 years 40,766 44,153

Greater than 5 years 47,342 60,856

Total Commitments 122,169 139,208

17. Auditors remuneration Amounts received or due and receivable in connection with the audit of the financial statements are listed below.

Australian National Audit Office 250 230

18. Resources received free of charge During the year the ASC received services at no cost from the following organisations:

Attorney General’s Dept - Info-One Database 100 100

Australian Federal Police (AFP) 260 -

Total 360 100

Administrative services were also provided to the ASC with respect to the processing of accounting and salary transactions from:

Department of Finance _________ 49_________________________

Total resources received free of charge 409

19. Contingent liabilities The nature of the Commission’s activities is such, that on occasions, the Commission incurs liabilities for costs in the course of it carrying out its obligations under the Corporations Law. Based on an assessment of the position as at 30 June 1994, the Commission could be required to meet a liability of up to $5,000,000 (1992/93 - nil).

20. Related parties The members of the Commission during 1993/94 reporting period were:

A.J. Cameron (Chairman) W.J. Robinson L.S. Ralph L.K. Farrell

(appointed 11 October 1993) (term expired 10 October 1993)

Financial Statements

Remuneration of Members and Executives Remuneration of members, (excluding superannuation) during the year for services provided to the Commission were within the following bands.

Remuneration of Members

1993/94 1992/93

Band of income Members Members

$30,000 - $39,999 1

$80,000 - $89,999 1

$100,000- $109,999 1 _

$120,000-$129,999 1

$130,000-$139,999 1 _

$150,000-$159,999 1

$160,000 -$169,999 1

$170,000-$179,999 - 1

The aggregate amount of remuneration to members for 1993/94 amounted to $436,822 (1992/93 · Superannuation payments on behalf of members totalled $54,267 (1992/93 - $68,266). - $463,969).

Remuneration to Executives

1993/94 1992/93

Band of income Executives Executives

$100,000-$109,999 21 5

$110,000-$119,999 3 2

$120,000 -$129,999 3 -

$130,000-$139,999 1 2

$140,000 - $149,999 2 -

$150,000-$159,999 1 -

The aggregate amount of fixed remuneration paid or payable to the above officers for 1993/94 amounted to $3,224,470 (1992/93 - $1,016,695).

The aggregate amount of performance pay paid or payable to the above officers for 1993/94 amounted to $286,125 (1992/93 -nil).

21. Cash flow information

1993/94 1992/93

SOOOs SOOOs

Reconciliation of net cash flows from operating activities to operating result O p e r a t i n g re s u lt -807 -177

D e p r e c ia tio n 11,742 9,741

In c re a s e in e m p lo y e e e n ti t l e m e n t s 1,639 2,950

In c re a s e (d e c re a s e ) in p re p a id e x p e n s e s 1,073 -366

In c re a s e in d e b to rs -232 -939

In c re a s e (d e c re a s e ) in c re d ito rs 134 -2,384

I n c r e a s e in o t h e r lia b ilitie s 1,612 1,222

L oss o n sale o f n o n - c u r r e n t a ss e ts 223 205

N et cash provided by operating activities 15,384 10,252

Financial Statements

22. Statutory revenue

(a) Revenue collected by the ASC under the Corporations Law is deposited in the Consolidated Revenue Fund on behalf of the Attorney-General’s Department. Collections include:

(i) Those arising from voluntary enquiries from clients. Examples include requests for extracts, microfiche records, certificates and document images. Collections amounted to $6,909,570 (1992/93 - $5,242,403).

(ii) Those arising from acts which are mandatory under the Corporations Law. Examples include lodgement of annual returns and other fees prescribed in Fees Regulations. Collections totalled $202,050,797 (1992/93 -$191,488,549).

(iii) Those arising from other acts which are voluntary under the Corporations Law. Examples include Information Brokers fees $6,785,797 (1992/93 - $5,243,360) and Court recoveries relating to the Summary' Prosecution program $510,937 (1992/93 - $125,442).

Total revenue transferred to the Commonwealth during the year ended 30 June 1994 amounted to $216,257,001 (1992/93 - $202,099,754).

(b) Uncollected Commonwealth revenue at 30 June 1994 amounted to $4,336,401 (1992/93 - $4,082,809). The Commission is pursuing a strategy to collect this revenue which may include recommendations for legislative amendments.

The total of uncollected Commonwealth revenue classified by age analysis is as follows:

1993/94 1992/93

$ $

less than 30 days 908,293 1,005,277

30 to 60 days 583,160 766,772

greater than 60 days 2,844,948 2,310,760

Total owing 4,336,401 4,082,809

(c) The total of amounts which are due to be received at 30 June 1994 but which are not expected to be fully recovered is $2,651,045 (1992/93 - $1,806,687).

(d) The number, and aggregate amount, of Commonwealth monies, or amounts of monies that the Commission is entitled to receive on behalf of the Commonwealth, written off during the financial year pursuant to subsection 70C(1) of the Audit Act 1901 is as follows: 11,531 items totalling $723,702 (1992/93 - 75,337 items totalling $2,644,051).

(e) The number, and aggregate amount, of amounts owing to the Commonwealth, the recovery of which was waived during the financial year pursuant to subsection 70C(2) of the Audit Act 1901 (being amounts that the Commission would, but for the waiver, have been entitled to receive on behalf of the Commonwealth) is as follows: 8,326 items totalling $538,781 (1992/93 - 12,034 items totalling $607,122).

A S C D irectory

Locations of ASC offices

Office of the Chairman

M elbourne Level 22 600 Bourke Street G P O Box 5179AA

Melbourne VIC 3001 telephone 03 280 3300 facsimile 03 280 3385

Sydney Level 18 6-10 O'Connell Street G PO Box 4866 Sydney NSW 2001 telephone 02 911 2000 facsimile 02 911 2030

Information Processing Centre Australian Securities Commission Gippsland Mail Centre Morwell VIC 3841 telephone 051 77 3700 enquiries 051 77 3988 facsimile 051 77 3000

Regional Offices

Australian Capital Territory 6th Floor 15 London Circuit G PO Box 9827 Canberra A CT 2601

telephone 06 250 3800 facsimile 06 250 3811

N ew South W ales Level 10 135 King Street G PO Box 9827 Sydney NSW 2001 telephone 02 911 2200 facsimile 02 911 2333

Business Centres

Adelaide Level 4 100 Pirie Street G P O Box 9854 Adelaide SA 5001 telephone 08 202 8500 facsimile 08 202 8510

Brisbane Level 4, Central Plaza O ne Annexe 345 Queen Street G P O Box 9854 Brisbane QLD 4001 telephone 07 360 7900 facsimile 07 360 7930

Canberra 5 th Floor 15 London Circuit G P O Box 9854 Canberra A C T 2601

telephone 06 250 3850 facsimile 06 250 3888

Northern Territory 5th Floor 8 McMinn Street G PO Box 9827

Darwin N T 0801 telephone 089 43 0900 facsimile 089 43 0910

Queensland Level 22 240 Queen Street G PO Box 9827

Brisbane QLD 4001 telephone 07 360 7700 facsimile 07 360 7725

Darwin Ground Floor 8 McMinn Street G PO Box 9854

Darwin N T 0801 telephone 089 43 0950 facsimile 089 43 0960

Geelong Ground Floor 200 Malop Street PO Box 9854 Geelong VIC 3220

telephone 052 29 2966 facsimile 052 29 2940

Gold Coast Level 2, West Tower Holden Place, Bundall PO Box 9854 Gold Coast Mail Centre QLD 4217

telephone 075 74 0155 facsimile 075 74 0738

South Australia Level 8 100 Pirie Street GPO Box 9827 Adelaide SA 5001

telephone 08 202 8400 facsimile 08 202 8410

Tasmania Level 2 66-80 Collins Street GPO Box 9827 Hobart TAS 7001

telephone 002 35 6800 facsimile 002 35 6811

Hobart Level 2 66-80 Collins Street G PO Box 9854

Hobart TAS 7001 telephone 002 35 6850 facsimile 002 35 6860

M elbourne First Floor 459 Collins Street GPO Box 9854 Melbourne VIC 3001 telephone 03 280 3500 facsimile 03 280 3550

N ew castle Ground Hoor T& G Building 45 H unter Street PO Box 9854 Newcastle NSW 2300

telephone 049 29 4555 facsimile 049 29 1759

Victoria Level 20 485 La Trobe Street GPO Box 9827 Melbourne VIC 3001 telephone 03 280 3200 facsimile 03 280 3444

W estern Australia Level 3 66 St Georges Terrace G PO Box 9827 Perth WA 6001 telephone 09 261 4000 facsimile 09 261 4010

Perth Level 1 66 St Georges Terrace G PO Box 9854 Perth WA 6001 telephone 09 261 4200 facsimile 09 261 4210

Sydney Level 8 55 Market Street GPO Box 9854 Sydney NSW 2001 telephone 02 911 2500 facsimile 02 911 2550

Townsville Level 5 Northtown Towers 280 Flinders Mall

PO Box 9854 Townsville QLD 4810 telephone 077 21 3885 facsimile 077 21 3803

THE PARLIAMENT OF THE COMMONWEALTH O F AUSTRALIA

P A R L I A M E N T A R Y

P A P E R

No. 263 of 1994 ORDERED TO BE PRINTED ISSN 0727-418