The Australian Securities and Investments Commission (ASIC) today issued two policy statements and two practice notes to explain the new requirements of the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9).

The CLERP 9 policies issued today are:

• Policy Statement 180: Auditor registration [PS 180]
• Revised Practice Note 34: Auditors’ obligations: reporting to ASIC [PN 34]
• Revised Practice Note 66: Transaction-specific disclosure [PN 66], and
• Revised Policy Statement 173: Disclosure for the on-sale of securities and other financial products [PS 173].

‘ASIC welcomes the important reforms that CLERP 9 makes to corporate reporting and disclosure laws’, said Mr Malcolm Rodgers, ASIC Executive Director of Policy and Markets Regulation.

‘We are issuing these CLERP 9 policies today to give as much notice as possible about how ASIC will administer the CLERP 9 provisions. We have concentrated on developing policy for requirements in CLERP 9 that will have an immediate effect.

‘In particular, we have established an online registration system to support the new registration process for individual company auditors, and for companies to apply for registration as an authorised audit company.

‘We will launch this new system when the final CLERP 9 regulations are made, as certain matters concerning the registration of auditors will be covered by the regulations’, Mr Rodgers said.

Information will be available from ASIC’s website www.asic.gov.auwhen the regulations are made.

The CLERP 9 policies issued today are in ‘proof’ form and are based on the CLERP 9 legislation as passed by the Parliament on 25 June 2004. Before finalising the policies, ASIC will review them in light of the final form of the CLERP 9 legislation and regulations, and any further industry comment. Until the policies are issued in final form, we will apply the policy set out in these ‘proof’ versions.

A more detailed summary of ASIC’s CLERP 9 policies is provided in the attachment.

End of release

Download a copy of the policies

• Policy Statement 180: Auditor registration [PS 180]
• Revised Practice Note 34: Auditors’ obligations: reporting to ASIC [PN 34]
• Revised Practice Note 66: Transaction-specific disclosure [PN 66], and
• Revised Policy Statement 173: Disclosure for the on-sale of securities and other financial products [PS 173].

Download a copy of the related class orders as PDF files:

• [CO 04/653] On-sale disclosure relief for scrip bids
• [CO 04/670] Continuously quoted securities - amendment
• [CO 04/671] Disclosure for on-sale of securities and other financial products
• [CO 04/672] Extension of on-sales exemptions
• [CO 04/681] Disclosure for on-sale of securities and other financial products - amendment
• [CO 04/682] Wholly-owned entities - amendment

Attachment to [IR 04-29]

A summary of the main changes to ASIC’s policy proposals set out in our three policy proposal papers (PPPs) - Auditor registration, Audit and financial reporting obligations and Product disclosure - issued for public comment in April 2004.

Two issues raised in our PPPs are not covered by our CLERP 9 policies.

‘Clear, concise and effective’ presentation of prospectuses

The CLERP 9 Act requires disclosure documents (such as prospectuses) produced under Chapter 6D of the Corporations Act 2001 (the Act) to be ‘clear, concise and effective’. This mirrors the requirement for Product Disclosure Statements. We do not propose to give any further guidance on the clear, concise and effective presentation requirement for prospectuses at this stage. We will provide further guidance on this topic in due course based on our regulatory experience.

Until that work is completed, we will have regard to the guidance in ASIC Policy Statement PS168 Disclosure: Product Disclosure Statements (and other disclosure obligations) on ‘clear, concise and effective’ disclosure and we will apply our existing stop order policy in regard to breaches of the clear, concise and effective requirement.

Financial reporting and audit relief powers

Where an application is made to us seeking relief from any CLERP 9 audit or financial reporting obligations (where we do not have a more specific relief power), we will apply our existing policy on relief as set out in PS 43: Financial reports and audit relief. We are reviewing PS 43 as part of our general policy update program and expect to release an updated version of PS 43 in the next few months.

PS 180: Auditor registration

Policy Statement 180: Auditor registration sets out our approach to the registration of an individual as a company auditor or a company as an authorised audit company.

PS 180 specifies the evidence that must be given to us to satisfy us that an applicant for registration as a company auditor:

• has completed the educational requirements specified in s1280(2A) of the Act or has equivalent qualifications and experience
• meets the prescribed practical experience requirements set out in regulations or an approved competency standard, and
• is capable of performing the duties of an auditor and is otherwise a fit and proper person.

PS 180 also sets out the process we will follow in assessing an application for approval of a competency standard.

PS 180 states that we will impose conditions (as permitted by the regulations) on the registration of individual company auditors at the time of registration and that we will impose a condition on the registration of an authorised audit company that the company notify us if it becomes aware that it is no longer eligible to be registered.

We cannot register an authorised audit company unless the company is owned and controlled by registered company auditors, the company has adequate professional indemnity insurance (see our PPP: Authorised audit companies: insurance arrangements issued on 16 June 2004), and the company is not in external administration.

PN 34: Auditors’ obligations: reporting to ASIC

We have revised PN 34 to provide guidance on the reporting obligation for auditors in s311 of the Act by including factors that we consider might be relevant to determining when a suspected contravention is ‘significant’. We have also revised PN 34 to take account of changes since it was last reviewed in 1994, particularly to include guidance on the requirement that an auditor have ‘reasonable grounds to suspect’ that a contravention has occurred.

PN 66: Transaction-specific disclosure

We have revised PN 66 to provide guidance on how we will administer the new provisions allowing the issue of a transaction-specific product disclosure statement. It primarily provides guidance on new provisions introduced under CLERP 9. This practice note also discusses when ASIC will use a new power to exclude an entity from relying on the transaction-specific PDS provision.

PS 173: Disclosure for on-sale of securities and other financial products:

We have revised PS 173 to give:

• secondary sales relief for stapled securities;
• technical relief to allow people relying on some accounting class orders to use the CLERP 9 on-sale exemptions;
• some further guidance about particular instances where will grant individual secondary sales relief taking into account recent ASIC relief decisions.

PS 173 also discusses when ASIC will use a new power to exclude people from using the legislative secondary sales exemptions under CLERP 9.