Over 200 years ago, Thomas Jefferson wrote of US foreign policy: "I know it is a maxim with us, and I think it a wise one, not to entangle ourselves with the affairs of Europe." With the EU now lurching from one financial woe to the next, that strategy sounds appealing.
However, no country these days can duck for cover from the troubles of another; the globalised economy makes us all interdependent, as the recent volatility of equities markets demonstrates. In its latest quarterly report, the Bank for International Settlements made the sobering assessment that: "The European rescue package bought a temporary reprieve from contagion in euro sovereign debt markets, but market concerns about the economic outlook remain."
Similarly, when Europe changes course on regulatory reform, Australia will feel the impact. It is worth stressing this point, as Australian fund managers need to be alert to the fact that we should soon see the European parliament pass its controversial directive regulating alternative investment funds such as hedge funds, private equity and other wholesale investment funds. The directive has onerous requirements which will make it more difficult for Australian funds to raise capital from Europe.
Commenting in the Australian Financial Review recently, Mallesons funds partner, John Sullivan said: "We've noticed so far that there doesn't seem to be a wide level of appreciation in the Australian market of what's coming...the offshore changes ... are actually quite burdensome, particularly in Europe." John writes in detail on these developments in this month's Regulator. On a related note, Berkeley Cox and Paul Smith contribute to this edition with a call for Australian regulators to drive an effective mutual recognition regime, given our reliance on offshore capital.
The US isn't far behind Europe in tightening the regulatory reins. Shortly after the last edition of Regulator was published in May, the US Senate passed landmark legislation to further regulate its banks and Wall Street in what has been viewed as the largest overhaul of the U.S. financial system since the 1930s.
Among the changes are new rules for complex securities and alternative investment funds, a new agency to protect consumers from certain types of financial products and regulations to make it easier to liquidate failing financial firms. The implications for Australia of the Restoring American Financial Stability Act of 2010 are analysed in this edition by Scott Farrell and Richard Mazzochi.
Notwithstanding these developments, the pace of regulatory reform globally isn't uniformly in top gear.
The G20 agreed earlier this month that Basel III anti-speculation rules for banks will be phased in over several years. Britain, the US and Canada bowed to pressure from Germany, France and Japan, which argued that forcing banks to hold more capital to guard against a future financial crisis would starve companies and individuals of finance and risk, putting the global economy at risk of a double-dip recession. Rowan Russell, Martin James and Ian Paterson review the implications of the Basel outcomes for Australia.
Closer to home, Sharon Henrick considers the consequences of ASIC's increase in market powers and John Canning provides an update on the Personal Property Securities regime.
At whatever pace the new world order of regulation is rolled out, the Australian financial services sector needs to carefully understand the implications for our own backyard and plan accordingly. To this end, funds and banking partners in the Mallesons Market Regulation Team are offering client briefings through July on the most immediate changes. Contact your Mallesons relationship partner or write to me and we will organise a briefing at a time that suits.
Best wishesStuart FullerManaging Partner
Mallesons Stephen Jaques has acted for Telstra on its deal with NBN Co to help build the national broadband network.
The transaction, if completed, would deliver to Telstra value of around $11 billion. NBN Co will pay Telstra to decommission its fixed line broadband networks as the NBN is rolled out, and to use Telstra’s duct and backhaul infrastructure for the new network.
The Mallesons Melbourne - led team played a key strategic role in advising on a project highly significant to the future of Telstra, involving a complex intersection of commercial, technical and regulatory issues. The team included Partners Neil Carabine, Renae Lattey, Luke Waterson and Justin Cherrington.
Mallesons has acted for the joint global co-ordinators, Deutsche Bank, Goldman Sachs JBWere and Macquarie Capital Advisers, on the A$1.3 billion IPO by construction group Valemus Limited (the Bilfinger Berger Australia business).
Lead Mallesons Partner on the deal, David Eliakim said: "This is the second largest float since Myer's float at the time the IPO market reopened at the end of 2009. Given its size, it represents a significant milestone in the normalisation of primary equity capital markets following the GFC."
Stuart Fuller presents a summary of this edition.
In response to the GFC, the EU and the US have been developing regulatory reforms for private funds which have significant implications for Asian and Australian fund managers. Read more
By the Fourth of July 2010, the Wall Street Transparency and Accountability Act is expected to be signed and is likely to result in significant changes to the US financial market. | Read more
AuthorScott FarrellRichard Mazzochi
Recent developments offshore will place increased pressure on Australian regulators to finalise their position on regulations that could have a significant impact on securitisation in Australia going forward. Read more
AuthorBerkeley CoxPaul Smith
The Basel Committee is currently “calibrating” the standards which will be required and intends to publish the new rules by the end of 2010 with a view to them being implemented by the end of 2012. Read more
AuthorMartin JamesIan Paterson
Earlier this year, the Hon. Chris Bowen announced proposed changes to strengthen the power of ASIC and to increase penalties for market related offences. Read more
Institutions that fail to conduct proper due diligence on their counterparties will run the risk of the assets of their counterparties falling in value. Read more