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Expert Advice on NECS
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The State Project Team has been considering jurisdictions' business practice requirements for NECS.
The National Steering Committee obtained expert advice from Clayton Utz to inform decision making on consistent business practices in relation to:
Client Identity Verification (CIV)
Client Authorisation (CA)
Instrument Certification (IC)
Please click here to view additional advice from Clayton Utz.
Additional advice was also obtained on digital signature certification (DSC). Please click here to view additional advice from Clayton Utz on DSC.
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The National Steering Committee has obtained expert advice in various areas to inform its decision-making on the implementation of electronic conveyancing.
The areas are:
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The Risk Assessment: identification and assessment of all of the risks associated with what is proposed and development of cost effective and equitable means of liability management for all parties with exposure to significant adverse outcomes. Please click here to view additional advice.
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The Regulatory Review: review of the regulatory environment in which what is proposed will operate having regard for National Competition Policy, trade practices requirements and any other relevant regulatory controls
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The National Office engaged the following consultants to undertake these bodies of work.
- Ongoing Governance
Dench McClean Carlson - Anne Larkins
Level 10, 155 Queen Street, Melbourne, VIC 3000
Email: alarkins@dmcca.com.au
- Regulatory Review
Gilbert & Tobin - Nick Taylor
Allen Consulting Group - Jeremy Thorpe
GPO Box 3810, Sydney, NSW 2001
Email: ntaylor@gtlaw.com.au
Email: jthorpe@allenconsult.com.au
- Risk Assessment
Clayton Utz - Mark Sneddon
333 Collins Street, Melbourne, VIC 3000
Email: msneddon@claytonutz.com
Below are summaries of each of the areas identified for expert advice. Background details are also available from the National Business Model and the National Implementation Strategy.
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This assessment is critical to the success of electronic conveyancing. The issue of risk, who bears it and how it is shared, is one of the principal determinants of widespread industry support for a new way of carrying out property conveyancing. The necessary changes in industry business practices and the inclusion of electronic settlement introduce new risks and change existing risks and risk allocations.
The assessment included:
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Thorough assessment of all identifiable risks of an operational, financial or technical nature in the business model, including identification of who bears each liability, rating of their significance and development of appropriate management proposals
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Scoping the nature and content of a single set of System Rules to be applied to all users of electronic conveyancing as one means of containing and allocating some of the liabilities
The risk assessment recommended a risk management regime consisting of:
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Risk Mitigation Measures: these consist of each role minimising its risk exposures through adequate and well documented practices and procedures.
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Risk Transfers: these primarily involve a comprehensive set of participation rules implemented as bilateral contracts between Subscribers and the NECS and back-to-back indemnity arrangements with service providers to the NECS.
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Liability Insurances: these involve Subscribers, and some Certifiers, having adequate professional indemnity cover and the NECS securing market insurance for its residual risk in any transaction. A fallback position, if NECS is unable to obtain market insurance, is a compensation fund separate from each of the jurisdiction's existing Torrens Assurance Funds.
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A key feature of the proposed business model is a National Electronic Conveyancing System (NECS) that will be a monopoly service to all users of electronic conveyancing throughout Australia. In addition, the model provides, at the discretion of each jurisdiction, for Licensed Service Providers (LSPs) to offer system access, service integration and support services to users of the NECS. This review included:
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Reviewing the business model and the above features in particular for compliance with National Competition Policy, Cth Trade Practices Act 1974 and any other State or Commonwealth regulatory requirements with a view to either providing certainty that the intended arrangements fully comply or identifying the issues needing to be addressed and the way in which they should be addressed
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Assistance with the securing of any clearances necessary from the Australian Competition and Consumer Commission and/or any other State or Commonwealth regulatory body
The regulatory review found that there are no regulatory impediments to NECS proceeding. It made recommendations with regard to:
- Competitive neutrality
- Trade practices
- Financial Services Regulation
- Privacy protection
- Money laundering regulation
- Payment systems regulation
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The interim arrangements being put in place to govern the current phase of work are not intended to be used when the NECS becomes operational. A more permanent arrangement using an incorporated entity is envisaged for ongoing operation, maintenance and development of the system in the best interests of all stakeholders.
This involved:
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Consulting with all key stakeholders
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Exploring all appropriate structure options and their advantages and disadvantages
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Developing proposals and a recommendation for ongoing governance, including ownership, control and any special arrangements. The proposals and recommendations must have regard for the nature of the NECS, the structure and scale of the industry it will serve, the preferences of key stakeholders and the inherent risk and regulatory issues needing to be managed.
The governance review advised that the NECS should be a body corporate owned by the jurisdiction governments. The recommendations included:
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Equal shareholdings among the jurisdiction governments
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A skills-based board of directors responsible for the management and operation of NECS
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Six board committees of directors, industry representatives and independent advisers
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Resourcing of NECS services through a comprehensive outsourcing contract secured by competitive tender.
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