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Financial Sector Legislation Amendment Bill (No. 1) 2000

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2000

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

FINANCIAL SECTOR LEGISLATION AMENDMENT BILL (NO. 1) 2000

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

(Circulated by authority of the Minister for Financial Services & Regulation,

the Honourable Joe Hockey, MP)

 

 

 

 

30831





Table of Contents

Outline........................................................................................................................................................................................ 1

Financial impact statement.............................................................................................................................................. 1

Abbreviations........................................................................................................................................................................... 2

Regulation Impact Statement ........................................................................................................................................ 4

Formal Clauses..................................................................................................................................................................... 11

Explanation of items.......................................................................................................................................................... 12

Clauses 4 and 5.................................................................................................................................................................... 12

Schedule 1 ¾ Amendment of the Banking Act 1959 .................................................................................................. 13

Schedule 2 ¾ Amendment of the Reserve Bank Act 1959......................................................................................... 17

Schedule 3 ¾ Amendment of the Superannuation Industry (Supervision) Act 1993........................................... 18

Part 1 ¾ Amendments relating to enforcement...................................................................................................... 18

Part 2 ¾ Amendments relating to application of Criminal Code........................................................................ 25

Division 1 ¾ Substantive amendments............................................................................................................. 25

Division 2 ¾ Technical amendments................................................................................................................. 33

Schedule 4 ¾ Miscellaneous amendments .................................................................................................................... 37



1

Outline

1.1               This Bill continues the Government’s financial sector reform agenda.  It builds on the financial sector legislation already implemented by the Government in response to the recommendations of the 1997 Financial System Inquiry chaired by Mr Stan Wallis.

1.2               The Bill is an important further step in the Government’s drive to develop and maintain a world class regulatory framework for the Australian financial sector: a framework which assists the financial sector to be efficient, responsive, competitive and flexible, but which retains the principles of stability, prudence, integrity and fairness.

1.3               The Financial Sector Legislation Amendment Bill (No.1) 2000 aims to ensure the safety of superannuation savings, and update and enhance Australia’s financial sector legislation.  The more significant amendments will:

·                      strengthen the enforcement provisions of the Superannuation Industry (Supervision) Act 1993 ;

·                      facilitate the application of the Commonwealth’s Criminal Code to certain offences in the Superannuation Industry (Supervision) Act 1993 ;

·                      enhance the prudential regulation of Authorised Deposit-taking Institutions (ADIs);

·                      rationalise and consolidate the Commonwealth’s unclaimed moneys provisions; and

·                      simplify and modernise service provisions in the Reserve Bank Act 1959 .

1.4               The Bill also clarifies the extent of the Australian Prudential Regulation Authority’s (APRA) powers to provide actuarial services over the period the Australian Government Actuary (AGA) was part of APRA, and makes miscellaneous minor amendments to financial sector legislation.

Financial impact statement

1.5               It is not envisaged that the Bill will have a financial impact on the operations of Government.



2

Abbreviations

The following abbreviations are used in this explanatory memorandum.

AAPBS

Australian Association of Permanent Building Societies

ABA

Australian Bankers’ Association

ADI

Authorised Deposit-taking Institution

AFIC Code

Australian Financial Institutions Commission Code

AGA

Australian Government Actuary

APRA

Australian Prudential Regulation Authority

APRA Act

Australian Prudential Regulation Authority Act 1998

ASIC

Australian Securities and Investments Commission

ASIC Act

Australian Securities and Investments Commission Act 1989

Banking Act

Banking Act 1959

CUSCAL

Credit Union Services Corporation (Australia) Limited

FCA

Financial Corporations Act 1974

FSSA

Financial Sector (Shareholdings) Act 1998

IBSA

International Banks and Securities Association of Australia

ISC

Insurance and Superannuation Commission

ORR

Office of Regulation Review

RBA

Reserve Bank of Australia

Reserve Bank Act

Reserve Bank Act 1959

RIS

Regulation Impact Statement

RSA

Retirement Savings Account

SIS Act

Superannuation Industry (Supervision) Act 1993

SRC Act

Superannuation (Resolution of Complaints) Act 1993

TOB Act

Financial Sector (Transfers of Business) Act 1999

 



3

Regulation impact statement

3.1               The Office of Regulation Review (ORR) has advised that one of the amendments to the Banking Act 1959 (Banking Act) requires a Regulation Impact Statement (RIS).  The requested RIS is included in this Explanatory Memorandum.   In respect of all other amendments included in this Bill, the ORR has advised that they do not require a RIS as the amendments are of a minor or government machinery nature and do not substantially alter existing arrangements.

RIS ¾ The proposed new section 65 of the Banking Act 1959

Background

3.2       A proposed amendment, to be contained in the Financial Sector Legislation Amendment Bill (No.1) 2000, will provide the Treasurer (or delegate [1] ) with the power to impose conditions on his or her consent under section 63 of the Banking Act.  This section requires an ADI (other than a foreign ADI) to gain the Treasurer’s written consent prior to: entering into the arrangement or agreement for the sale or disposal of its business by amalgamation or otherwise; carrying on of business in partnership with another ADI; and/or effecting a reconstruction.  A section 63 application is not a common event.  On average, approximately one application is received per year.

3.3       Under the current legislation, the Treasurer (or delegate) cannot attach conditions to his or her consent.  This is not consistent with other provisions in the Banking Act (for example, section 9) and similar provisions in other legislation such as the Financial Sector (Shareholdings) Act 1998 (FSSA) and the Financial Sector (Transfers of Business) Act 1999 (TOB Act).

Problem Identification

Item 1         What is the problem being addressed?

3.4       As mentioned, section 63 is unlike other powers in the Banking Act (and other similar legislation), in that approvals cannot be granted subject to conditions.  This seriously impedes the strength of this power in practice.  The absence of any power to set and enforce conditions reduces the flexibility of the Treasurer (or delegate) in deciding whether to grant approval under section 63.  This may hinder the applicant receiving a favourable outcome.

3.5       This became a significant problem last year ¾ APRA received informal advances from the sector regarding possible financial sector mergers.  Due to Y2K concerns, APRA indicated in its public policy statements that it would require any mergers undertaken in the latter half of 1999 to only proceed if the parties to the merger undertook not to integrate computer systems until after 1 January 2000.  While APRA made these statements it did not have the ability, in the absence of a conditions power under section 63, to enforce these requirements once the Treasurer had approved a merger.  This could have proved very awkward.

Item 2         Why is government action needed to correct the problem?

3.6       The ability to grant approvals subject to conditions is an important power, since it would allow the Treasurer (or delegate) to maintain some control over the prudential impact of an event that would trigger a section 63 approval.  As the legislation presently stands, it would not be possible for the Treasurer (or delegate) to enforce any undertaking made by an institution prior to consent being granted ¾ effectively an undertaking could be ignored.

Regulatory Objective

Item 1         What are the objectives of government action?

3.7       The object of these regulatory changes is to provide the Treasurer (or delegate) first with the ability to attach conditions to his or her consent under section 63 of the Banking Act and secondly, a mechanism to enforce these conditions should they be breached.

Item 2         Is there a regulation/policy currently in place?  Who administers it?

3.8       Presently no other regulation or policy instrument exists that could specifically address this issue.  The FSSA requires that a person may apply to the Treasurer for approval to hold a stake in a particular financial sector company of more than 15 per cent [2] .  Some FSSA applications also require the Treasurer’s consent under section 63 of the Banking Act.  Consequently, the proposals caught under the FSSA may have an indirect set of conditions attached to their section 63 approval.  However, there are two problems associated with imposing conditions indirectly through the FSSA: not all section 63 proposals require a FSSA application; and under the FSSA the conditions are imposed on the purchaser rather then the vendor. If conditions were to be imposed under section 63, they would generally be imposed on the vendor rather than the purchaser.

3.9       Similar to section 63 applications, FSSA applications are made to the Treasurer (or delegate).

Identification of Alternatives

3.10   Option 1 ¾ MAKE AMENDMENTS TO THE BANKING ACT

3.11   Option 2 ¾ MAINTAIN CURRENT LEGISLATION

Impact Analysis

Item 1         Who is affected by the problem and who is likely to be affected by its proposed solution?

3.12     It is expected that the following parties will be affected by the new regulation:

·                      government and regulatory bodies (the Department of the Treasury, APRA and ASIC);

·                      financial sector entities (other than foreign ADIs), including shareholders; and

·                      consumers of financial services.

Item 2         How will each proposed option affect existing regulations and the roles of existing regulatory authorities?

·                      Government regulatory bodies (the Department of the Treasury, APRA and ASIC).

OPTION 1

3.13     As mentioned, conditions could be imposed on some section 63 applications indirectly through imposing conditions on FSSA or TOB Act approvals as appropriate.  However, this would not encompass all section 63 proposals nor would it necessarily capture all necessary conditions.

3.14     In relation to State and Territory legislation, we are unaware of any similar or conflicting legislation.

3.15     APRA and ASIC have been consulted during the formation of the policy and view the objective as beneficial to the prudential regulation of ADIs.

3.16     However, the imposition of conditions would impose more paperwork, negotiation and consultation with industry, as well as increased monitoring of successful applicants to ensure compliance with conditions.  If conditions were breached, resources would be required to either revoke the consent or apply for an injunction to enforce compliance.

3.17     The ultimate benefit to government is the assurance that an undertaking made by an applicant, that is considered a condition to the consent under section 63, is enforceable.

OPTION 2

3.18     Without the amendment to the legislation, the Treasurer (or delegate) will not be able to attach conditions to his or her consent under section 63.  This will continue to be problematic for two reasons: first, undertakings made by ADIs supporting their applications will not be enforceable; and secondly, applications that do not receive consent may have been approved had a conditions making power been in force.

·                      Financial sector entities (ADIs).

OPTION 1

3.19     Financial sector entities would be required to abide by the conditions attached to the consent.  These may involve the performance of particular activities that may otherwise not be imposed.  It is difficult to give a clear indication of the types of conditions that may be imposed, as each approval is processed on a case-by-case basis.  The following lists potential conditions:

-                a section 63 activity is approved prior to 1 January 2000, given information systems do not change until after 1 January (the Y2K issue);

-                a merger between a foreign and domestic bank is approved subject to the domicile moving to Australia;

-                a section 63 activity is approved subject to particular conditions surrounding the raising of new capital;

-                a section 63 activity is approved subject to particular share ownership agreements; and

-                a section 63 approval is subject to a sale occurring within a particular time limit.

3.20     Although the imposition of conditions may appear to be imposing further requirements on financial sector entities, it is expected that the regulation will result in more section 63 applications receiving consent.  This will allow business to facilitate requested reconstructions, which under the existing regulations would not be permitted.

3.21     In addition, the burden placed on applicants is not expected to be substantial, since applications under section 63 of the Banking Act typically involve extensive consultation and work (for the Treasury or APRA) in order to make a case to the Treasurer for approval.

OPTION 2

3.22     If conditions cannot be imposed under section 63 of the Banking Act, ADIs will continue making undertakings to support their applications that are not enforceable.  Furthermore, the Treasurer (or delegate) does not have the option of approving the application subject to conditions.  Instead, under the current legislation, the proposals may not receive consent.

·                      Consumers of financial services.

OPTION 1

3.23     This amendment will strengthen the prudential framework relating to the activities of ADIs, thereby increasing consumer confidence in the regulatory system by providing more certainty for customers making banking and investment decisions.

OPTION 2

3.24     Without a conditions making power, consumers do not benefit from the certainty that any conditions attached to consent granted under section 63 are enforceable.

Items 3 and 4      Identify and categorise the expected impacts of the proposed options as likely benefits and costs

3.25     The likely benefits of Option 1 are:

-                government can be confident that any undertakings made by a section 63 applicant are enforceable when written into the consent as conditions;

-                it is expected that more section 63 applications will receive consent if conditions may be imposed; and

-                consumers will benefit from a strengthened prudential framework and increased certainty, regarding the activities of an ADI when making banking and investment decisions.

3.26     The likely costs of Option 1 are:

-                increased resources required by government when processing and monitoring a section 63 application, particularly if conditions are to be imposed;

-                financial sector entities receiving consent under section 63 subject to conditions will be required to comply with the outcome; and

-                there are no anticipated costs for consumers.

3.27     The likely benefits of Option 2 are:

-                fewer processing and monitoring resources are required by Government if conditions are not imposed on an applicant;

-                fewer resources are utilised by ADIs receiving consent under section 63 if they are not required to comply with conditions; and

-                there are no direct benefits to consumers.

3.28     The likely costs of Option 2 are:

-                any undertakings made by an ADI when submitting an application for consent under section 63 are not enforceable;

-                applications that might have received consent, had conditions been applied, will be rejected; and

-                reduced certainty for consumers where undertakings are not enforceable.

Item 5         Identify distributional effects and attribute these to the groups affected

OPTION 1

3.29     In relation to distributional effects, there is no direct redistribution of resources from one sector to another.  However, a financial sector entity receiving consent subject to conditions will be required to use appropriate resources to comply with the conditions and government will need to employ the necessary resources to process and monitor the applications.

OPTION 2

3.30.    As the legislation does not change, there are no distributional effects.

Item 6         Identify the data sources and assumptions used in making these assessments

OPTION 1

3.31     Due to the nature of this recommendation, data analysis is not considered appropriate.  In relation to assumptions, when developing this policy, we have assumed the following:

-                where the Treasurer’s (or delegate’s) consent is conditional, appropriate notification will be forwarded to the applicant, allowing the applicant to reconsider its position and submit a revised application if necessary.  This is a realistic assumption, as under the present legislation, the processing of an application involves constant communication with the applicant.

OPTION 2

3.32     In relation to data analysis, please refer to option 1.

3.33     Given no legislative change, we assume that there will be no other regulatory change that might affect the operation of this section.

Item 7         Summary of outcomes for each option examined

RIS summary

3.34     Objective:  To allow the Treasurer (or delegate) to enforce undertakings made by section 63 applicants.

Alternative

Impact on

Likely benefit/cost

Government

ADIs

Consumers

An amendment to the Banking Act.

The ability to make and enforce conditions.

Compliance with conditions.

No major anticipated impact.

More section 63 applications receive consent.  This would create more certainty for government and consumers when making policy and investment decisions respectively.

The current legislation is maintained.

Undertakings made by ADIs are not enforceable.

Unconditional consent.  However, applications may not receive consent without being conditional.

No major anticipated impact.

The current state of  uncertainty is maintained, as undertakings made by ADIs are not enforceable.  In addition, the ratio of approvals to applications is not expected to rise above the current level.

 

Consultation

Item 1         Who were the main parties affected and what were their views?

3.35     Consultation on this issue involved representatives of industry bodies including the Australian Bankers’ Association (ABA), the International Banks and Securities Association of Australia (IBSA), the Australian Association of Permanent Building Societies (AAPBS) and the Credit Union Services Corporation (Australia) Limited (CUSCAL).

3.36     Each industry group has expressed, in writing, broad agreement.

Conclusion and Recommended Option

3.37     Given that government, in relation to this issue, requires the certainty provided by legal sanctions and that universal coverage of the industry is required, option 1 is preferred.  The effectiveness of the amendment rests on the premise that the Treasurer (or delegate) will provide written information to the applicant prior to imposing conditions.  In addition, the Treasurer or delegate should provide the applicant sufficient time to consider, prior to granting consent, the implications of the conditions and respond accordingly.

Implementation and Review

Item 1         How will the preferred option be implemented?

3.38     The relevant amendment to the Banking Act will be made in the Financial Sector Legislation Amendment Bill (No.1) 2000.  A new section 64 will be added to the Banking Act.  The Treasurer (or delegate) will have two remedies available in the event a condition is breached ¾ first, consent may be revoked under section 64 or secondly an injunction may be sought under a new section 65A of the Banking Act.

Item 2         Is the preferred option clear, consistent, comprehensible and accessible to users?

3.39     The conditions making power follows section 63 of the Banking Act and the legislation is clear on the nature of the power and the consequences of breaching a condition.

Item 3         What is the impact on business, including small business, and how will compliance and paper burden costs be minimised?

3.40     When applying for consent, under section 63, a financial sector entity has the discretion to make certain undertakings to support its application when applying.  However, if the Treasurer (or delegate) introduces conditions, an ADI may wish to re-submit an application.  This process would also apply to smaller ADIs such as credit unions.  In relation to compliance with the conditions, it is difficult to ascertain the costs to an ADI, as conditions would vary from application to application.  Potential costs have been discussed previously.

Items 4 and 5      How will the effectiveness of the preferred option be assessed and how frequently?  If the preferred option takes the form of regulation, is there a built in provision to review or revoke the regulation after it has been in place for a certain length of time?

3.41     The effectiveness of the amendment will be assessed on whether realistic conditions are imposed.  This will be tested by whether conditions are breached.  If the new sections are not working effectively, the policy behind the amendment will be reviewed and either altered or revoked in later legislation.



4

Formal Clauses

Clause 1 ¾ Short title

4.1       The Short Title of the Bill is defined here.

Clause 2 ¾ Commencement

4.2       This clause provides for commencement of the Bill (other than item 21 of Schedule 1) on the 28 th day after the day on which the Bill receives the Royal Assent.

4.3       Item 21 of Schedule 1, which relates to rationalisation and consolidation of the Commonwealth’s unclaimed moneys provisions, is to commence on the day on which the Bill receives the Royal Assent.

Clause 3 ¾ Schedule(s)

Schedule 1 ¾ Amendment of the Banking Act 1959

Schedule 2 ¾ Amendment of the Reserve Bank Act 1959

Schedule 3 ¾ Amendment of the Superannuation Industry (Supervision) Act 1993

Schedule 4 ¾ Miscellaneous amendments



 

5

Explanation of items

Clauses 4 and 5

Clause 4 ¾ Actuarial services provided by APRA

5.1       This clause clarifies the extent of APRA’s power to provide actuarial services, including non-prudential actuarial services, to Commonwealth clients over the period the AGA was part of APRA.  The AGA became part of APRA on 1 July 1998, following the dissolution of the Insurance and Superannuation Commission (ISC), and was subsequently transferred to the Department of the Treasury on 1 April 2000.  Clause 4 does not extend or reduce APRA’s power to provide actuarial services that are incidental to another function of APRA.

Clause 5 ¾ Compensation for acquisition of property

5.2       This clause ensures that Clause 4 does not limit the application of paragraph 51(xxxi) of the Constitution concerning the acquisition of property on just terms.



 

6

Schedule 1 ¾ Amendment of the Banking Act 1959

Schedule 1 proposes a number of miscellaneous amendments to the Banking Act 1959 (the Banking Act) designed to enhance the prudential regulation of ADIs.  These amendments include:

-                permitting conditions to be placed on section 63 approvals;

-                providing APRA with the power to seek an injunction to stop breaches of sections 7, 8, 66, 66A or 67 and conditions made under subsection 63(1);

-                broadening the definition of ‘information’ in sections 13 and 62 to include documents;

-                providing APRA with the power to impose directions if APRA considers that an ADI is likely to breach a prudential regulation or standard; and

-                clarifying that APRA has the power to appoint itself to investigate the affairs of an ADI.

Further amendments to the Banking Act will grant the Treasurer the power to delegate the unclaimed moneys provisions, in the Banking Act, to other portfolio agencies in addition to the Department of the Treasury.

Granting APRA the power to issue directions
Item 1

6.1     This item permits APRA to issue directions to a body corporate, (that is an ADI or a Non-Operating Holding Company) if it is likely to breach a prudential regulation or standard and the breach poses a prudential risk.

6.2     This amendment is designed to widen APRA’s directions-making power to encompass circumstances of potential prudential risk.  Presently, it is limited to circumstances where prudential standards have been breached and/or a direct link to depositors’ interests has been established.



Items 2 and 3

6.3          Items 2 and 3 provide APRA with the power to issue directions to a body corporate if it is conducting its affairs in an improper or financially unsound manner.

6.4          A similar provision existed in the Australian Financial Institutions Commission (AFIC) Code, which applied to building societies, credit unions and friendly societies prior to transferring to the Commonwealth’s regulatory regime on 1 July 1999.

Broadening the definition of ‘information’ in section 13 to include books, accounts and documents

Item 4

6.5          This proposed amendment clarifies that in section 13, the reference to information includes books, accounts or documents.  The object of the amendment is to bring the reference to information in section 13 in line with its meaning given in section 61.

APRA has the power to appoint itself to investigate the affairs of an ADI

Item 5

6.6          The object of this proposed amendment is two fold ¾ first it ensures that the reference to information includes books, accounts and documents.  This is in accordance with item 4.

6.7          Secondly, in line with items 7 ¾ 10, this item states that APRA has the power to investigate the affairs of an ADI, as well as the power to appoint a person to do so, if an ADI fails to supply information under section 13 of the Banking Act.

Item 6

6.8     This amendment clarifies that APRA has the power to investigate the affairs of an ADI under section 13A of the Banking Act.

Items 7 - 10

6.9               These items clarify that an investigator (appointed under sections 13 or 13A) is entitled to the books, accounts and documents of an ADI under investigation and amends offence provisions accordingly.  Currently, an investigator only relates to a person appointed by APRA.  The object of this provision is to ensure that section 13B is consistent with the changes made by items 5 and 6 (ie APRA or a person appointed by APRA would be termed an investigator).

6.10           Items 5 and 6 state that APRA, or a person appointed by APRA, have the power to investigate the affairs of an ADI under certain circumstances.

Broadening the definition of ‘information’ in section 62 to include books, accounts and documents

Items 11, 12, 13, 14, 15, and 16

6.11     Similar to the proposed amendment made by item 4, these items clarify that in section 62 the reference to information includes books, accounts or documents.  The object of these amendments is to bring the reference to information in section 62 in line with its meaning given in section 61.



Conditions and section 63 approvals

Conditions on consent to restructure an ADI

Item 17

6.12     This item extends the delegation provision contained in section 63 to also include the functions proposed under section 64.

-                Section 64 gives the Treasurer (or delegate) the power to attach conditions to his or her consent granted under section 63.  To be consistent with section 63, it is necessary to also delegate the conditions-making power under the proposed section 64.

Item 18

6.13     The proposed section 64 is designed to give the Treasurer (or delegate) the opportunity to attach conditions to his or her consent granted under section 63 and to provide remedies in the event conditions are breached.

6.14     In line with similar conditions-making powers throughout the Banking Act, the Treasurer (or delegate) is able to impose conditions and/or revoke, further, or vary conditions already imposed.  If a condition has been breached, the Treasurer has two options ¾ revoke his or her consent under paragraph 64(2)(c) or apply for an injunction under the proposed section 65A.

6.15            Conditions that are imposed, furthered or varied, may be made by the Treasurer (or delegate) on his or her own initiative or on application to the Treasurer (or delegate) by the person who has applied for or has received consent.

Application of new section 64

Item 19

6.16     This item ensures that conditions cannot be attached to consents that have been granted prior to the commencement of the proposed section 64.

Injunctions

Item 20

6.17           The object of this item is to grant the Treasurer, APRA, ASIC and/or members of an affected ADI, the power to seek an injunction if there has been a contravention (or attempted contravention) of a provision of sections 7, 8, 66, 66A or 67 or a condition imposed under the proposed section 64.

6.18           Under the present legislation, sections 7, 8, 66, 66A and 67 contain penalty provisions.  However, these amendments are designed to allow APRA, subject to court approval, to act preemptively to stop undesirable activities rather than simply acting to impose punishment after the damage has occurred.

-                In the case of a contravention of sections 7, 8, 66, 66A or 67, APRA has the power to seek an injunction.  If a condition under section 64 has been breached, the Treasurer and/or APRA have the power to seek an injunction.  If the condition relates to a demutualisation, ASIC and/or members of the affected ADI are also able to seek an injunction, in addition to the Treasurer and/or APRA.

-                The term ‘demutualisation’ takes the meaning given in section 63.

6.19           It should be noted that any breach of a condition, made under sections 66 or 67, is also covered by the proposed section 65A.

6.20           A range of injunctions are available including restraining injunctions, performance injunctions, consent injunctions and interim injunctions.

6.21           In addition to or in substitution of granting of an injunction, the court may require the person receiving (or who would have received) the injunction to pay damages to another person.

Unclaimed moneys

Item 21

6.22           The purpose of this item is to enable the Treasurer to delegate the unclaimed moneys function to other Treasury portfolio agencies in addition to the Department of the Treasury.  Presently, there are various unclaimed moneys functions managed by different agencies across the Portfolio, including provisions in the Life Insurance Act 1995 and the Corporations Law, which are currently administered by ASIC.

6.23           These amendments are designed to facilitate the rationalisation and consolidation of the above functions into one office or agency.



7

Schedule 2 ¾ Amendment of the Reserve Bank Act 1959

Schedule 2 will amend the Reserve Bank Act 1959 (the Reserve Bank Act) to simplify and modernise the Reserve Bank service.  Service provisions cover the Reserve Bank’s ability to engage staff and formulate their conditions of employment.  The replacement provisions are more appropriate to modern day management and are consistent with reforms in the Commonwealth public sector.

 

Definition of staff member of the Reserve Bank service

Items 1, 2, 3, 4, 5, 6, 7, 11, 12, 13, 14

7.1     These items insert the definition of a staff member of the Reserve Bank service (replacing the previous terminology of officers, and temporary and casual employees) and update the terminology in the Reserve Bank Act to reflect this definition.

Simplifying and modernising the Reserve Bank service provisions

Items 8, 9 and 10

7.2     These items repeal the outdated Reserve Bank service provisions and replace them with simplified provisions.  The replacement provisions are more appropriate to modern day management and are consistent with reforms in the Commonwealth public sector.

7.3      The transitional provisions ensure that staff members employed under the provisions to be repealed continue employment under the new provisions with the same rights and entitlements.

 



8

Schedule 3 ¾ Amendment of the Superannuation Industry (Supervision) Act 1993

Schedule 3 makes a range of amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act), including amendments to enforcement powers (Part 1 of the Schedule), and amendments to offence provisions (Part 2 of the Schedule).  Division 1 of Part 2 contains substantive amendments to various offence provisions, which change the nature of the offences in question, and also ensure they are compliant with the Criminal Code .  Division 2 of Part 2 makes non-substantive or technical amendments to various offence provisions, which merely confirm the current operation of the offences while ensuring they are compliant with the Criminal Code .

The amendments in this Schedule will provide the Regulators with various new or enhanced enforcement powers.  These powers will strengthen the regulatory framework for superannuation and facilitate the prosecution of contraventions of the SIS Act.  This in turn will assist in ensuring that superannuation entities are administered prudently and that superannuation savings are adequately protected.

 

Part 1 ¾ Amendments relating to enforcement

Amendment of subparagraph 6(1)(e)(iv)

Item 1

8.1      This item amends subparagraph 6(1)(e)(iv) to remove the words ‘(other than sections 126B to 126F)’.  The effect of this amendment is to give the Commissioner of Taxation general administration of sections 126B to 126F to the extent that they relate to self managed superannuation funds.  APRA retains general administration of those sections to the extent that they relate to funds other than self managed superannuation funds.

Definitions in subsection 10(1)

Items 2 and 3

8.2      These items respectively repeal paragraph (b) of the definition of approved guarantee and the definition of approved non-ADI financial institution .  These definitions are redundant following the passage of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 , which transferred to the Commonwealth responsibility for regulating financial institutions formerly supervised by the States and Territories.

Definition of reviewable decision in subsection 10(1)

Item 4

8.3      This item repeals existing paragraphs (m) and (n) of the definition of reviewable decision .  The new paragraphs (m) and (n) add references to decisions by APRA under subsection 92(5) (see items 8 to 12).

Definition of reviewable decision in subsection 10(1)

Item 5

8.4      This item inserts new paragraphs (pa) and (pb) into the definition of reviewable decision .  They relate to decisions by the Regulator under new section 120A (see item 14).

Definition of reviewable decision in subsection 10(1)

Item 6

8.5      This item amends paragraphs (r), (ra) and (rb) of the definition of reviewable decision to replace references to ‘APRA’ with references to ‘the Regulator’.  This reflects that the Commissioner of Taxation has responsibility for making the decisions mentioned in the paragraphs, to the extent that they relate to self managed superannuation funds.

Repeal of paragraph 71(1)(ba)

Item 7

8.6       This item repeals paragraph 71(1)(ba), which is redundant following the passage of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 .  This Act transferred to the Commonwealth responsibility for regulating financial institutions formerly supervised by the States and Territories.

New paragraph 92(4)(c)

Item 8

8.7      Items 8 to 12 import into the SIS Act, with appropriate amendments, Modification Declaration  No. 10, issued by the former Insurance and Superannuation Commissioner.  The amendments in these items allow non-public offer superannuation funds to make alternate arrangements to satisfy the equal representation rules in Part 9 of the SIS Act.

8.8      Item 8 adds new paragraph 92(4)(c) which provides that non-public offer funds may satisfy the equal representation rules if an arrangement in relation to the management and control of the fund has been agreed to between a majority of the members of the fund and the employer, or employers, of those members, and APRA has approved the arrangement in writing.

New subsections 92(4A) to (4D)

Item 9

8.9      This item inserts new subsections 92(4A) to (4D) which set out APRA’s powers in relation to approving, revoking the approval of, or varying or revoking the conditions attached to the approval of, an arrangement referred to in paragraph 92(4)(c).

8.10    APRA must have regard to any guidelines it may determine in deciding whether or not to grant an arrangement approval .  An arrangement approval may be granted subject to conditions, and may be revoked by APRA by written notice given to the trustee of the fund seeking the approval.

8.11    Subsection 92(4C) sets out the grounds on which an arrangement approval may be revoked.  Subsection 92(4D) allows APRA to vary or revoke the conditions of the arrangement approval by written notice given to the trustee.

New paragraph 92(5)(a)

Item 10

8.12    This item replaces existing paragraph 92(5)(a) with a new paragraph making it clear that the single trustee of the fund must be a constitutional corporation.

New paragraphs 92(5)(c) and (ca)

Item 11

8.13    This item replaces existing paragraph 92(5)(c) with two new paragraphs, the effect of which is to add further requirements in order for a fund to comply with an alternative agreed representation rule.  New paragraph 92(5)(c) requires that the trustee of the fund be an approved trustee under section 26.  New paragraph 92(5)(ca) requires that the trustee’s approval specifies that the trustee is also approved for the purposes of subsection 92(5).

New subsections 92(6) to (9)

Item 12

8.14    This item repeals existing subsections 92(6) to (12) and replaces them with four new subsections.  The new subsections set out the process under which APRA makes decisions in relation to an approval for the purposes of subsection 92(5).

8.15    APRA must have regard to any guidelines it may determine in deciding whether or not to give a trustee’s subsection 92(5) approval (subsection 92(6)).  A trustee’s subsection 92(5) approval may be granted subject to conditions, and may be revoked by APRA by written notice given to the trustee of the fund seeking the approval (subsection 92(7)).

8.16    Subsection 92(8) sets out the grounds on which a trustee’s subsection 92(5) approval may be revoked.

8.17    Subsection 92(9) provides that for the purposes of sections 27A, 27B, 27C, 27D, 27E and 29, the trustee’s subsection 92(5) approval and any conditions to which it is subject are to be treated as conditions to which the trustee’s approval under section 26 is subject.  In essence, the trustee’s subsection 92(5) approval becomes part of the trustee’s approval under section 26.

New paragraph 120(1)(c)

Item 13

8.18    This item adds a new paragraph (c) to subsection 120(1), the effect of which is to provide that a disqualified person, for the purposes of the section, includes a person disqualified by the Regulator under section 120A (see item 14).

New section 120A

Item 14

8.19    This item inserts new section 120A, which gives the Regulator the power to disqualify a person from being the trustee, investment manager or custodian of a superannuation entity.  It applies not only to individual trustees, investment managers or custodians, but also to persons who are responsible officers of bodies corporate that perform these functions.

8.20    Subsections 120A(1) to (3) set out the grounds on which the Regulator may disqualify an individual.  The grounds include that a person has contravened the SIS Act, or the Regulator is otherwise satisfied that the person is not fit and proper.

8.21    Subsections 120A(4) to (7) cover matters such as the date a disqualification takes effect; the circumstances in which a disqualification may be revoked; and notification or gazettal of a decision by the Regulator to revoke, or to refuse to revoke, a disqualification.

8.22    The term ‘Regulator’, as used in this section, refers to the Commissioner of Taxation, in respect of self managed superannuation funds, and APRA, in respect of funds other than self managed superannuation funds.

Sections 126 and 126A

Items 15 and 16

8.23     These items respectively amend sections 126 and 126A to remove the words ‘(other than a self managed superannuation fund)’ from subsections 126(1) and (2) and subsections 126A(1) and (2).  These amendments make it an offence for a disqualified person to intentionally be, or act as, an investment manager or custodian of any superannuation entity, including a self managed superannuation fund.

Sections 126B and 126C

Items 17 to 24

8.24     These items amend sections 126B and 126C to replace references to ‘APRA’ or ‘APRA’s’, wherever they occur, with references to ‘The Regulator’, ‘the Regulator’ or ‘the Regulator’s’ as the case requires.  This reflects the fact that the Commissioner of Taxation will have the general administration of these sections to the extent that they relate to self managed superannuation funds.  APRA will retain general administration of these sections to the extent that they relate to funds other than self managed superannuation funds.  The expression ‘Regulator’, as defined in subsection 10(1), may encompass both APRA and the Commissioner of Taxation.

Note after subsection 126D(1)

Item 25

8.25     This item inserts a note after subsection 126D(1) drawing attention to the fact that APRA’s power under the subsection does not extend to self managed superannuation funds.

New subsection 126D(1A)

Item 26

8.26     This item inserts new subsection 126D(1A).  It is similar to subsection 126D(1) which sets out the circumstances in which APRA must make a declaration waiving a person’s disqualified status.

8.27     New subsection 126D(1A) requires the Commissioner of Taxation to waive a person’s disqualified status where, having taken into account the items in paragraphs 126D(1A)(a) to (e), the Commissioner is satisfied that the applicant is highly unlikely to contravene the SIS Act, and is highly unlikely to do anything that would result in a self managed superannuation fund not complying with the  SIS Act.

8.28     The item also inserts a note after the subsection drawing attention to the fact that the Commissioner’s power under the subsection only extends to self managed superannuation funds.

Sections 126D, 126E and 126F

Items 27 to 32

8.29     These items amend sections 126D, 126E and 126F by replacing references to ‘APRA’ or ‘APRA’s’, wherever they occur (other than in subsection 126D(1)), with references to ‘The Regulator’, ‘the Regulator’, or ‘the Regulator’s’ as the case requires.  This reflects the fact that the Commissioner of Taxation will have the general administration of these sections to the extent that they relate to self managed superannuation funds.  APRA retains the general administration of these sections to the extent that they relate to funds other than self managed superannuation funds.  The expression ‘Regulator’, as defined in subsection 10(1), may encompass both APRA and the Commissioner of Taxation.

New section 131B

Item 33

8.30     This item inserts new section 131B which makes it an offence for a person to falsely hold themself out as an actuary or an approved auditor , as defined under the SIS Act.  The offences in the new section are offences of strict liability, and a note is inserted after the section drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New section 141A

Item 34

8.31     This item inserts new section 141A.  Under section 134, where the Regulator has suspended the trustee of a superannuation entity, the Regulator may appoint an acting trustee .  Under section 138 the Regulator may make an order vesting the property of the relevant superannuation entity in the acting trustee.

8.32     New section 141A will require the person in whom the property of the superannuation entity was vested immediately before the order under section 138 was made (the former trustee ) to give to the acting trustee all books relating to the affairs of the superannuation entity that are in the former trustee’s possession, custody or control.  The former trustee is guilty of an offence if the former trustee does not give the books to the acting trustee within the time period set out in subsection 141A(3).

8.33     New subsections 141A(4) and (5) require the former trustee, if requested in writing by the acting trustee, to identify property of the superannuation entity, explain how the former trustee has kept account of that property, and assist in the transfer of specified property of the superannuation entity to the acting trustee.  The former trustee is guilty of an offence if the former trustee does not take the action requested by the acting trustee within the time period set out in subsection 141A(6).

8.34     New subsection 141A(7) specifies that the offences in subsections 141A(3) and (6) are offences of strict liability.  Notes are inserted after subsection 141A(7) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New paragraph 253(d)

Item 35

8.35     This item adds a new paragraph (d) to section 253, the effect of which is to extend the objects of Part 25 of the SIS Act to include authorising the Regulator to accept written undertakings (see item 36).

New Division 3A of Part 25

Item 36

8.36     This item inserts new Division 3A into Part 25 of the SIS Act.  New Division 3A consists of new section 262A, which provides for the acceptance and enforcement of undertakings by the Regulator.

8.37     New section 262A mirrors similar provisions in section 87B of the Trade Practices Act 1974 and section 93AA of the Australian Securities and Investments Commission Act 1989 , and is designed to provide the Regulator with a flexible and efficient enforcement tool.

8.38     The new section provides that the Regulator may accept a written undertaking given by a person in connection with a matter in relation to which the Regulator has a power or function under the SIS Act.  The Regulator may be APRA, ASIC or the Commissioner of Taxation, depending on the nature of the undertaking and/or the superannuation entity it relates to.

8.39     A person may withdraw or vary an undertaking at any time, but only with the Regulator’s consent.

8.40     If the Regulator considers that the terms of the undertaking have been breached by the person who gave it, the Regulator may take that person to Court to enforce the undertaking.  The Court has power to make various orders set out in subsection 262A(4).

Amendments to subsections 287(2) and (3)

Items 37 to 41

8.41     These items make amendments to subsections 287(2) and (3), the effect of which is to prevent a person subject to investigation under the SIS Act from claiming privilege in respect of the production of books (‘use immunity’), or any information, document or other evidence obtained as a direct or indirect consequence of that person making an oral statement or signing a record of interview (‘derivative use immunity’).

8.42     Similar changes were made to the Corporations Law and the Australian Securities and Investments Commission Act 1989 in 1992 following recommendations by the Parliamentary Joint Committee on Corporations and Securities.

8.43     The experience of the former ISC, and now APRA, is that these immunities make it exceptionally difficult to pursue prosecutions under the SIS Act.  Given the strong growth in superannuation savings, and the increasingly important role they play in ensuring that people make adequate provision for their income in retirement, it is considered that removal of these immunities is warranted in order to allow the Regulator to more effectively prosecute persons who contravene the SIS Act.

Transitional provisions

Item 42

8.44     This item sets out transitional requirements in relation to the application of the amendments in items 37 to 41.

New section 324A

Item 43

8.45     This item inserts new section 324A relating to the time periods within which prosecutions may be commenced under the SIS Act.  It is based on section 1316 of the Corporations Law, which has been recently interpreted by the High Court in Attorney-General v. Oates [1999] HCA 35, to be a facilitative provision, rather than a restrictive one.  That is, in the High Court’s view, section 1316 allows for proceedings for an offence against the Corporations Law to be commenced within 5 years after the date of the offence, or with the Minister’s consent at any later time, despite anything in any other law (for example, even if another law specifies a shorter time period for the commencement of proceedings).  However, section 1316 does not prevent a period greater than 5 years applying where another law allows for this (for example, the Crimes Act 1914 provides that prosecutions for indictable offences may be commenced at any time).  Nor does section 1316 operate to require the Minister’s consent in such cases, even where the prosecution is commenced more than 5 years after the offence.

Subsection 344(12)

Item 44

8.46     Section 344 sets out procedures under which a person who is affected by a reviewable decision (defined in subsection 10(1)) of the Regulator, may apply to the Regulator to have that decision reviewed.  Subsection 344(12) generally provides that a person is taken not to be affected by a reviewable decision of the Regulator unless the person is the trustee of a superannuation entity.  However, certain reviewable decisions are specifically excepted from this, such that persons other than trustees may be considered as a person affected by the reviewable decision.

8.47     This item amends subsection 344(12) by including references to paragraphs (pa) and (pb) of the definition of reviewable decision, which relate to disqualification under new section 120A (see item 14), as decisions which are excepted under the subsection.  Therefore, a person may be considered as a person affected by a reviewable decision made under paragraph (pa) or (pb), even though the person is not the trustee of a superannuation entity.  This is because decisions of the Regulator under paragraphs (pa) and (pb) of the definition of reviewable decision may affect trustees, investment managers or custodians of a superannuation entity.

Part 2 ¾ Amendments relating to application of Criminal Code

Division 1 ¾ Substantive amendments

New section 9A

Item 45

8.48     This item adds new section 9A in Division 1 of Part 1 of the SIS Act.  The section provides that Chapter 2 of the Criminal Code applies to all offences against the SIS Act, other than those offences listed in subsection 9A(1).  The Criminal Code will be applied to these remaining offences when they are amended to ensure compliance with the Criminal Code .

8.49     Subsection 9A(2) provides that sections 17 and 338 do not apply in relation to an offence against the SIS Act to which the Criminal Code applies.  This is because the matters dealt with in section 17 (regarding persons involved in a contravention of the SIS Act) and section 338 (regarding conduct by directors, servants and agents) are adequately covered by provisions in the Criminal Code .

New subsection 36(2)

Item 46

8.50     This item repeals the offence in existing subsection 36(2) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 36A(7)

Item 47

8.51     This item repeals the offence in existing subsection 36A(7) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 64(3) and (3A)

Item 48

8.52     This item repeals existing subsection 64(3) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 64(3) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 64(3A) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.53     The item also inserts notes after new subsection 64(3A) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 103(3)

Item 49

8.54     This item repeals the offence in existing subsection 103(3) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 104(2)

Item 50

8.55     This item repeals the offence in existing subsection 104(2) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 105(2)

Item 51

8.56     This item repeals the offence in existing subsection 105(2) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 107(3) and (4)

Item 52

8.57     This item repeals existing subsection 107(3) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 107(3) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 107(4) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.58     The item also inserts notes after new subsection 107(4) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 108(3) and (4)

Item 53

8.59     This item repeals existing subsection 108(3) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 108(3) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 108(4) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.60     The item also inserts notes after new subsection 108(4) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 111(3) and (4)

Item 54

8.61     This item repeals existing subsection 111(3) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 111(3) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 111(4) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.62     The item also inserts notes after new subsection 111(4) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 112(5) and (6)

Item 55

8.63     This item repeals existing subsection 112(5) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 112(5) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 112(6) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.64     The item also inserts notes after new subsection 112(6) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 113(1), (1A), (2) and (2A)

Item 56

8.65     This item repeals existing subsections 113(1) and (2), relating to the auditing of accounts of a superannuation entity, and replaces them with four new subsections.

8.66     New subsection 113(1) requires the trustee to appoint an approved auditor to report on the operations of the superannuation entity.  This appointment must take place within the period specified in the regulations.

8.67     New subsection 113(1A) imposes an obligation on the trustee to give to the auditor, within 14 days, any documents the auditor may request in writing which are relevant to the preparation of the audit report.

8.68     New subsections 113(2) and (2A) provide a ‘two tier’ offence for contravention of subsections 113(1) and (1A).  New subsection 113(2) is a fault liability offence, which requires the prosecution to prove relevant fault elements, and carries a maximum penalty of two years imprisonment (the same penalty as existing subsection 113(2)).  New subsection 113(2A) is a strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.69     The item also inserts a note after new subsection 113(2) drawing attention to a provision of the Crimes Act 1914 relating to fines, and notes after new subsection 113(2A) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 113(4), (5) and (6)

Item 57

8.70     This item repeals existing subsections 113(4) and (5) and replaces them with three new subsections.  New subsection 113(4) requires the auditor to give his or her report on the operations of the superannuation entity to the trustee within the time period after the end of the year of income specified in the regulations.

8.71     New subsections 113(5) and (6) provide a ‘two tier’ offence for contravention of subsection 113(4).  New subsection 113(5) is a fault liability offence, which requires the prosecution to prove relevant fault elements, and carries a maximum penalty of 6 months imprisonment (the same penalty as existing subsection 113(5)).

8.72     New subsection 113(6) is a strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.  Under section 10.1 of the Criminal Code , the defence of intervening conduct or event is available to the auditor in respect of the offence in new subsection 113(6).

8.73     The item also inserts a note after new subsection 113(5) drawing attention to a provision of the Crimes Act 1914 relating to fines, and notes after new subsection 113(6) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 122(2)

Item 58

8.74     This item repeals the offence in existing subsection 122(2) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 124(2)

Item 59

8.75     This item repeals the offence in existing subsection 124(2) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 154(2) and (2A)

Item 60

8.76     This item repeals existing subsection 154(2) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 154(2) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 154(2A) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.77     The item also inserts notes after new subsection 154(2A) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 169(3) and (4)

Item 61

8.78     This item repeals existing subsection 169(3) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 169(3) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of imprisonment for 1 year.  New subsection 169(4) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.79     The item also inserts a note after new subsection 169(3) drawing attention to a provision of the Crimes Act relating to fines, and notes after new subsection 169(4) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 184(2) and (3)

Item 62

8.80     Division 3 of Part 20 of the SIS Act sets out the insider trading rules.  Subsection 184(1) makes it an offence to contravene these rules.  Existing subsections 184(2) and (3) deal with matters of proof relating to the offence in subsection 184(1).

8.81     This item repeals existing subsections 184(2) and (3) and recasts them to more clearly identify that they are defences to a contravention of subsection 184(1).

New subsection 254(4)

Item 63

8.82     This item repeals the offence in existing subsection 254(4) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 257(2)

Item 64

8.83     Under section 257 of the SIS Act APRA may, by written notice, require the trustee of a superannuation entity to appoint an individual, or committee of individuals, to conduct an investigation into the entity and report on that investigation.

8.84     This item adds new subsection 257(2), imposing an obligation on the trustee to give a copy of the notice from APRA to the appointed individual or committee members within three days of the appointment.

New subsections 260(2) and (3)

Item 65

8.85     This item repeals existing subsection 260(2) and replaces it with two new subsections.  Under existing subsection 260(2) an obligation is placed on the trustee to ensure that the investigation report prepared under section 257 is given to APRA within a certain time period.  The amendments will place this obligation to give the report to APRA on the person who is appointed under section 257 to conduct the investigation (whether as an individual or as a member of a committee), rather than the trustee.

8.86     The new subsections create a ‘two tier’ offence containing fault and strict liability components.  New subsection 260(2) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.

8.87     New subsection 260(3) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.  Under section 10.1 of the Criminal Code , the defence of intervening conduct or event is available to the person in respect of the offence in new subsection 260(3).

8.88     The item also inserts notes after new subsection 260(3) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New section 262

Item 66

8.89     This item repeals the fault liability offence in section 262 and replaces it with a ‘two tier’ offence containing fault and strict liability components.  The offence applies where a trustee contravenes a requirement of sections 257, 258 or 259.  New subsection 262(1) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 262(2) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.90     The item also inserts notes after new subsection 262(2) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 299C(3)

Item 67

8.91     This item repeals the offence in existing subsection 299C(3) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299F(4) and (4A)

Item 68

8.92     This item repeals existing subsection 299F(4) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299F(4) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299F(4A) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.93     The item also inserts notes after new subsection 299F(4A) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299G(4) and (4A)

Item 69

8.94     This item repeals existing subsection 299G(4) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299G(4) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299G(4A) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.95     The item also inserts notes after new subsection 299G(4A) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299H(6) and (7)

Item 70

8.96     This item repeals existing subsection 299H(6) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299H(6) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299H(7) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.97     The item also inserts notes after new subsection 299H(7) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299J(6) and (7)

Item 71

8.98     This item repeals existing subsection 299J(6) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299J(6) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299J(7) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.99     The item also inserts notes after new subsection 299J(7) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299K(6) and (7)

Item 72

8.100   This item repeals existing subsection 299K(6) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299K(6) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299K(7) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.101   The item also inserts notes after new subsection 299K(7) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299L(6) and (7)

Item 73

8.102   This item repeals existing subsection 299L(6) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299L(6) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299L(7) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.103   The item also inserts notes after new subsection 299L(7) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299M(4) and (5)

Item 74

8.104   This item repeals existing subsection 299M(4) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299M(4) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299M(5) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.105   The item also inserts notes after new subsection 299M(5) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 299Y(2) and (3)

Item 75

8.106   This item repeals existing subsection 299Y(2) and replaces it with two new subsections, the effect of which is to convert the existing fault liability offence to a ‘two tier’ offence containing fault and strict liability components.  New subsection 299Y(2) sets out the fault liability offence, which requires the prosecution to prove the relevant fault elements, and carries a maximum penalty of 100 penalty units.  New subsection 299Y(3) sets out the strict liability offence, which does not require proof of fault elements, and carries a lesser maximum penalty of 50 penalty units.

8.107   The item also inserts notes after new subsection 299Y(3) drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 347A(6)

Item 76

8.108   This item repeals the offence in existing subsection 347A(6) and replaces it with an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

 

Division 2 ¾ Technical amendments

New subsection 18(7BA)

Item 77

8.109   This item inserts a new subsection 18(7BA) specifying that the offence in subsection 18(7B) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 29(4)

Item 78

8.110   This item adds a new subsection 29(4) specifying that the offence in subsection 29(3) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsections 63(7A) and 63(10A)

Items 79 and 80

8.111   These items insert new subsections 63(7A) and (10A) specifying that the offences in subsections 63(7) and (10) are offences of strict liability.  The items also insert notes after the respective subsections drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 121(4)

Item 81

8.112   This item adds a new subsection 121(4) specifying that the offence in subsection 121(3) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

Note after subsection 123(1)

Item 82

8.113   This item adds a note after subsection 123(1) drawing attention to the evidential burden on a defendant in relation to the matters in paragraphs 123(1)(a) and (b).

New subsection 123(6)

Item 83

8.114   This item adds a new subsection 123(6) specifying that the offences in subsections 123(4) and (5) are offences of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 140 (3A)

Item 84

8.115   This item inserts a new subsection 140(3A) specifying that the offence in subsection 140(3) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

Note after subsection 163(1)

Item 85

8.116   This item adds a note after subsection 163(1) drawing attention to the evidential burden on a defendant in relation to the matters in paragraphs 163(1)(a) and (b).

New subsection 163(3)

Item 86

8.117   This item adds a new subsection 163(3) specifying that the offence in subsection 163(2) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 201(4A)

Item 87

8.118   This item inserts a new subsection 201(4A) specifying that the offence in paragraph 201(4)(a) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 265(4)

Item 88

8.119   This item adds a new subsection 265(4) specifying that the offence in subsection 265(3) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 303(1A)

Item 89

8.120   This item inserts a new subsection 303(1A) specifying that the offence in subsection 303(1) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

Note after subsection 303(2)

Item 90

8.121     This item adds a note after subsection 303(2) drawing attention to the legal burden on a defendant in relation to the matters in the subsection.

New subsection 331(1A)

Item 91

8.122   This item inserts a new subsection 331(1A) specifying that the offence in subsection 331(1) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.

New subsection 377(3A)

Item 92

8.123   This item inserts a new subsection 377(3A) specifying that the offence in subsection 377(3) is an offence of strict liability.  The item also inserts notes after the subsection drawing attention to the provisions of the Criminal Code relating to general principles of criminal responsibility and strict liability.



9

Schedule 4 ¾ Miscellaneous amendments

This schedule makes consequential amendments to the Australian Prudential Regulation Authority Act 1998 and the Financial Corporations Act 1974 as a result of changes being made to the Reserve Bank Act. Miscellaneous amendments are made to: the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 to repeal redundant provisions which are causing some confusion; the Superannuation (Resolution of Complaints) Act 1993 to remove the current limit on the maximum number of members of the Superannuation Complaints Tribunal; and the Retirement Savings Accounts Act 1997 to clarify the position of a retirement savings account provided by a life company.

 

Australian Prudential Regulation Authority Act 1998 (APRA Act)

Definition of officer of the Reserve Bank Service

Item 1

9.1       The proposed amendments to the Reserve Bank Act (see schedule 2) aim to simplify and modernise the Reserve Bank service.  For example the term ‘officer of the Bank’ will be omitted and replaced with ‘a staff member of the Reserve Bank service’.  Consequently, any references to these terms in other legislation require updating.

9.2       The definitional section of the APRA Act contains a reference to an officer of the Reserve Bank service.  This amendment omits the term ‘officer’ and replaces it with ‘person’.

Financial Corporations Act 1974 (FCA)

Items 2 and 3

9.3       Similar to item 1, the FCA makes reference to an officer of the Reserve Bank service.  Item 2 proposes to omit the reference in paragraph 22A(1)(b) to ‘officer’ and replace it with ‘a staff member’.

9.4               The amendment made by item 3 omits the reference to subsection 66(2) of the Reserve Bank Act and replaces it with a reference to section 66.  This change is made in accordance with the changes to the Reserve Bank Act.



Financial Sector Reform (Amendments and Transitional Provisions ) Act (No. 1) 1999

Items 4 and 5

9.5     Subsections 3(14) and (15) relate to the Superannuation Legislation (Commonwealth Employment) Repeal and Amendment Bill 1999, which is still before the Senate.  The repeal of these subsections is necessary for two reasons: first this Bill is referred to as an Act in the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 and this is causing some confusion.  Secondly, subsections 3(14) and (15) have become redundant as the schedules to the Bill did not commence prior to the transfer date of 1 July 1999.

Retirement Savings Accounts Act 1997

Item 6

9.6      Item 6 clarifies that the retirement savings account (RSA) business undertaken by a life company is a life policy for the purposes of the Life Insurance Act 1995 .  This will ensure that the RSA business is offered through a statutory fund (or the equivalent benefit fund for a friendly society) and is subject to the full scope of prudential measures.

Superannuation (Resolution of Complaints) Act 1993 (SRC Act)

Item 7

9.7       The proposed amendment will remove the current limitation on the maximum number of members of the Superannuation Complaints Tribunal.  Current sub-section 7(1) of the SRC Act limits the number of members of the Tribunal to a maximum of ten.

9.8       The proposed amendment will increase the capacity of the Tribunal to handle complaints and provide additional flexibility in scheduling matters.  It will also assist in dealing with the current backlog of complaints which result from a temporary curtailment of the Tribunal’s powers following a 1998 Federal Court decision.

 




[1] Under section 63 of the Banking Act, the Treasurer has the power to delegate his or her functions to the Australian Prudential Regulation Authority (APRA), an APRA Board member or an APRA staff member; an officer of the Department and, in relation to demutualisations, to the Australian Securities and Investments Commission (ASIC).

[2] Under the FSSA, a financial sector company is defined as (a) an ADI or; (b) an authorised insurance company; or a holding company covered by (a) or (b).