Operating Standards for Pool OperatorsGTA Advisory and Compliance Workshop 2017

GTA Mission“To facilitate & promote trade by providing products,

services and advocacy for the Australian grain value chain.”

Outline

• Role of GTA & Industry Framework

• Code of Practice

• Background to TGD Review

• Activity so far

• Issues & Obligations

• Outcomes

Industry Driven and Managed Framework to Facilitate Trade

Grain

Trading

Standards

Trade

Rules &

Contracts

Dispute

Resolution

Services

Trade &

Market

Access

Industry

Skills &

Capability

Reflect

Requirements

and capabilities

in:

1. Regulation

2. Production

Sector

3. Supply Chain

4. Consumptive

Sector

Improves

Market

Efficiency.

Ensures

confidence in

commercial

dealings by

providing legal

rigour

Underpins

Contractual

Arrangements &

Performance

Engaging with

Policy makers to

ensure fair &

equitable trade

and access to

domestic &

global markets

Increase

Industry

capacity by

providing

vocational

training and

development

programs

Industry driven and managed

Code of Practice

• COP protects the standards, reputation and confidence in the Aust Grains Industry

• Australia only country with COP• All GTA Members required to

adhere to COP• Pool Providers must adhere to

TGD#4 (sec2.7.4)• COP Complaints Process (2.9)

– 2.9.1 Customer Complaints– 2.9.2 Complaints against Code

Signatories

• COP Review 2017/18

Background

Events• ASIC Exemption

– Sunset 2016– Member Update 13/16 view on exemption

& self regulatory framework– GTA Submission to ASIC

• GTA Submission to ASIC:– Robust & Effective Self Regulation– Regulation would entail higher costs to

growers, and not improve returns– Noted concerns around “unrealistic” EPRs

& cost transparency– Code Of Practice & TGD4

• Support Exemption• Noted industry concerns on “inflated

EPRs” & transparency of fees

• Unfair Contract Laws (ACCC)• Last TGD review in 2013

ASIC Exemption – from MIS • “Ordinarily, grain pools are generally

captured under the definition of a managed investment schemes. Such schemes attract a number of compliance requirements under the Act, however for the past 10 years ASIC has granted relief to Schemes through the Class Order. The regulatory provisions in the Act that the Class Order exempts Schemes from are:

• the requirement to register the scheme with ASIC (subsection 601ED(5));

• he requirement for a person to hold an AFSL (subsection 911A(1));

• the prohibition of hawking (unsolicited marketing of managed investment schemes) (section 992A); and

• the obligation to provide a Product Disclosure Statement (Part 7.9).”

Unfair Contract laws

• Balance in contracts – unilateral rights to amend, indemnities

• GTA Legal advice on GTA SFGCs

• Member Update 12/16 – Awareness & information to Members

• ACCC Reviewing grain and pooling contracts– Balance of power in contracts

– Unilateral changes to contracts (prices and fees)

– Indemnity/limitation of liability within contracts

Timeline & Activity so far…

Time Activity

8/16 Pool Operating Sub-Committee (of Commerce) formed• Members from Pool Ops, Risk Advisors, Non-Pool Ops, Prod Sector

9/16 1. Member Update - ASIC Exemption Submission

12/16 2. GTA Member Update – Review of Pool Operating Stds (TGD4)• Submission from members of pool issues

12/16 to 7/17

4. Sub-Committee Meetings• 9 meetings • ~15-20 hours, several sub-com submission/out of committee work

7/17 5. GTA Member Submission Process- Round 2• Draft TGD, PPGD, Issues for further input

Still to come

• Review Submissions and issues for further input• Finalise draft Docs• Commerce Committee => GTA Board => Release to Industry

Issues Considered and Discussed by Sub-Committee…so far

• Definitions of key terms• Enforceability under the COP• Accountability and Transparency• Product information descriptions and disclosures• Hawking and potential for Misleading Statements• Estimated Silo Returns (ESRs) • Publicly available and accessible historical Pool results/data • Publicly stated closure dates of Pools• Segregation (“Ring Fencing”) of Funds and Activities from Pool Providers

and Pool Managers• Audit of Pools and Guideline documents• Inclusion, or not, of GTA Dispute Resolution and Arbitration services into

Product Terms and Conditions• Inclusion, or not, of GTA Trade Rules into Product Terms and Conditions • Projections and forward looking statements.• Development of template Pool Product Disclosure Guide

Issues Summary

Submissions

• EPRs

• Transparency

• Consistency

• Disclosure

Sub-Committee

• Clear and Common Definitions

• Accountability

• “inflated EPRs”

• Comparative Prices

• Product Disclosure

• Audit

“WVID”….Volume weighted Issues Discussion index!!

TGD #4 Draft DocumentIssue Content Summary

Purpose & Objective Outline Industry accepted base operating standards

Participants Encourage due diligence & awareness (read & research)

Definitions Transparency & consistencyfocus has been on EPRs/ESRs & Ring Fencing

Duties of Pool Provider

• Honesty, integrity, care, diligence, fiduciary responsibility• Disclosure• Abide by definitions• Arbitration• PPDG

TGD #4 Draft Document (cont)Issue Content Summary

EPR • Disclosure Fees & charges• Regular Updates & publish• Justifiable• Adverse material change

Reporting & auditing • 1/4ly report on performance & operations• Publish EPR history• Final Audit (records & compliance)• Consequences……

PPDG • Consistent & Comparative• Explanatory• Principles – timely, relevant, sufficient & important info

General Principles • Statements – past & present• False/misleading /deceptive

• Justifiable forecasts• Opinions / ambiguity / promises• Likely impressions• Examples• Disclosure & accuracy

Specific Issues in Member Update1. EPRs- Whether, or not, Estimated Pool Returns (EPRs) should be made available

or published by Pool Providers while a Pool is open for contracting, and whether the TGD should specifically prohibit the availability or publication of EPR’s while a Pool is open for contracting.

2. Audit - The time period upon which a final audit of a pool must be undertaken (and published) from the final payment of the Pool to Pool Participants.

3. Tonnage - Whether or not the tonnage delivered into each Pool Product should be included in the Final Audit Report. The purpose of this would be to ascertain the relative significance of particular products and performance.

4. Arbitration - Whether GTA Dispute Resolution and Arbitration processes be incorporated into the TGD and Pool Terms and Conditions (noting the Sub-Committee supports this)

5. Trade Rules - Whether GTA Trade Rules be incorporated into the TGD and Pool Terms and Conditions. The Sub-Committee requests further guidance from Industry noting that many of the GTA Trade Rules may not be relevant to Pools and that Pool Providers own terms and conditions cater to specific “Trade” related issues around Pools.

“Pool Product Disclosure Guide”

• Brief (30 word) explanations

• Yes/No

Who

Aim of Mandate of the pool

Legal entity operating the pool

Years this legal entity has run

pools

Legal Entity owning the pooled

grain

Name of responsible Pool

Manager

Pool manager’s years of

relevant experience

What

Aim of the pool

Period open for

deliveries/contracts

Length of pool

Area where pool is offered

Commodities/Grades accepted

Hedging tools used (if any)

Payment options

Fees charged by the pool manager

When will Final Audit be

Completed?

“Pool Product Disclosure Guide”Key Details

Will the pool be offered according to the GTA operating standard for pool

providers?

Does the pool provide participants with an Estimated Pool Return (EPR*)?

Does the pool provide participants with an Estimated Silo Return (ESR*)?

Does the pool provide participants with an Final Pool Return (FPR*)?

Does the pool provide participants with an Final Silo Return (FSR*)?

Does the Pool provide a Guaranteed Pool Return (GPR*)?

Does the Pool provide an Underwritten Pool Return (UPR*)?

Is there a potential for conflict between the pool manager and related

entities?

Are the pool assets owned in a separate entity from the pool manager’s

assets?

Are the pool activities conducted separately from the pool managers

activities

Desired Outcomes

• Updated TDG with revised drafting

• PPDG

• Improved:

– Rigour & consistency

– Consumer Protection

– Clarity & Min Industry accepted Stds

– Reputation & Confidence – Product & Industry

• Approvals:

– Sub-Committee, Commerce Committee, GTA Board

Summary

• Purpose

• Self Regulatory Framework

• Industry Driven- Committee and Consultation

• Key Issues

• Improved Outcome..

Questions & Discussion…..

GTA Contact Details

Pat O’Shannassy– CEOSheryl Brown – Office ManagerWendy Henry – Training Co-ordinatorConsultants:Rosemary Richards– TMA & Conference ConsultantGerard McMullen – Grain Quality

Level 7, 12 O’Connell Street, Sydney NSW 2000

PO Box R1829, Royal Exchange NSW 1225

Phone: 02 9235 - 2155Fax: 02 9235 - 0194Email: admin@graintrade.org.auWebsite: www.graintrade.org.au

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