Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Financial Sector Reform (Amendments and Transitional Provisions) Bill (No.1) 2000

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

1999

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

FINANCIAL SECTOR REFORM (AMENDMENTS AND TRANSITIONAL PROVISIONS) BILL (No. 2) 1999

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

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

the Honourable J.B. Hockey, MP)

 

24346

 



Table of Contents

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

Financial impact statement.............................................................................................................................................. 2

Abbreviations........................................................................................................................................................................... 3

Formal Clauses....................................................................................................................................................................... 4

Explanation of items............................................................................................................................................................ 5

Schedule 1 - Amendment of the Australian Prudential Regulation Authority Act 1998........................................ 5

Schedule 2 - Amendment of the Banking Act 1959........................................................................................................ 7

Schedule 3 - Amendment of the Financial Corporations Act 1974............................................................................ 8

Schedule 4 - Amendment of the Financial Corporations (Transfer of Assets and Liabilities) Act 1993.......... 11

Schedule 5 - Amendment of the Financial Laws Amendment Act 1997................................................................... 14

Schedule 6 - Amendment of the Life Insurance Act 1995........................................................................................... 15

Schedule 7 - Amendment of the Reserve Bank Act 1959............................................................................................. 16

Schedule 8 - Amendment of the Retirement Savings Accounts Act 1997................................................................. 17

Schedule 9 - Amendment of Superannuation Legislation Relating to Financial Assistance to Funds............. 18

Schedule 10 - Other amendments of the Superannuation Industry (Supervision) Act 1993............................... 21

Schedule 11 - Other Miscellaneous minor technical amendments........................................................................... 25

Schedule 12 - Transitional, saving and application provisions............................................................................... 27

Part 1 - Transitional provisions for validation of determinations in relation to financial sector supervisory   levies           27

Part 2 - Transitional provisions related to amendment of the Financial Corporations Act 1974..................... 28

Part 3 - Transitional provisions related to amendments of the Life Insurance Act 1995.................................... 28

Part 4 - Transitional provisions related to amendments of the Reserve Bank Act 1959....................................... 28

Part 5 - Application of amendments of superannuation legislation relating to financial assistance to funds 29



1

Outline

1.1       This Bill continues the legislation to implement the Government’s response to the recommendations of the Financial System Inquiry as announced by the Treasurer, the Hon. Peter Costello, M.P., in the House of Representatives on 2 September 1997.

1.2       The Final Report of the Inquiry and the Government’s response to it are directed to the fundamental goals of the Government, to increase competition and improve efficiency, while preserving the integrity, security and fairness of the financial system.

1.3       The performance of the financial system, and the cost effectiveness of its regulation, are critical to the efficient functioning of the Australian economy.

1.4       The first stage of the reforms introduced a new organisational framework for the regulation of the financial system from 1 July 1998, and a variety of measures to improve efficiency and contestability in financial markets and the payments system.  The second stage of reforms covered the transfer of regulatory responsibility for building societies, credit unions and friendly societies from the States and Territories to the Commonwealth.

1.5       The third stage continues this reform process and enhances the operation of existing financial sector legislation.  Specifically, the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 2) contains key measures designed to:

·        clarify the availability of financial assistance to superannuation funds in the circumstances of fraud which will overcome deficiencies in the operation of the superannuation fraud provisions;

·        extend the time period for qualification for tax relief for foreign authorised deposit-taking institutions (ADIs) transferring assets and liabilities between branches, ADI subsidiaries and money market corporations;

·        allow the electronic lodgement of information by superannuation funds in accordance with the Government’s wider objective of establishing a business entry point;

·        reduce compliance costs on business, increase flexibility and remove unused provisions of the Financial Corporations Act 1974 (FCA); and

·        provide a mechanism, in response to concerns raised by industry, to ensure adequate disclosure to members prior to an ADI affecting a demutualisation.



Financial impact statement

1.6       It is not envisaged that the Bill will have a financial impact on the operations of Government.  The Office of Regulation Review has advised that a Regulation Impact Statement is not required for this Bill as it is of a minor or government machinery nature and does not substantially alter existing arrangements.



2

Abbreviations

The following abbreviations are used in this explanatory memorandum.

ABS

Australian Bureau of Statistics

ADI

Authorised Deposit-taking Institution

APRA

Australian Prudential Regulation Authority

APRA Act

Australian Prudential Regulation Authority Act 1998

ASIC

Australian Securities and Investments Commission

FCA

Financial Corporations Act 1974

FCTAL

Financial Corporations (Transfer of Assets and Liabilities) Act 1993

FS Code

Friendly Societies Code of a State or Territory

LIA

Life Insurance Act 1995

No. 1 Act

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

RBA

Reserve Bank of Australia

Reserve Bank Act

Reserve Bank Act 1959

RSA

Retirement Savings Account

SIS Act

Superannuation Industry (Supervision) Act 1993

The Levy Act

Superannuation (Financial Assistance Funding) Levy Act 1993



3

Formal Clauses

Clause 1 - Short title

3.1       The Short Title of the Bill is defined here.

Clause 2 - Commencement

3.2       This clause provides for commencement of the various proposed amendments.  More details are provided in the notes on items relating to respective Schedules.

Clause 3 - Schedule(s)

Schedule 1 - Amendment of the Australian Prudential Regulation Authority Act 1998

Schedule 2 - Amendment of the Banking Act 1959

Schedule 3 - Amendment of the Financial Corporations Act 1974

Schedule 4 - Amendment of the Financial Corporations (Transfer of Assets and Liabilities) Act 1993

Schedule 5 - Amendment of the Financial Laws Amendment Act 1997

Schedule 6 - Amendment of the Life Insurance Act 1995

Schedule 7 - Amendment of the Reserve Bank Act 1959

Schedule 8 - Amendment of the Retirement Savings Accounts Act 1997

Schedule 9 - Amendment of superannuation legislation relating to financial assistance of funds

Schedule 10 - Other amendments of the Superannuation Industry (Supervision) Act 1993

Schedule 11 - Miscellaneous minor and technical amendments

Schedule 12 - Transitional, saving and application provisions



4

Explanation of items

Schedule 1 - Amendment of the Australian Prudential Regulation Authority Act 1998

Commencement

4.1     Items 1 and 2 will commence on the date of commencement of the APRA Act .

4.2     All other items in the Schedule will commence on the day the Bill receives Royal Assent.

APRA Sales Tax

Items 1 and 2

4.3     These items amend section 55 of the APRA Act to ensure that sales tax is not payable on goods purchased by APRA.  It was the Government’s intention when APRA was established that APRA would be exempt from all Commonwealth and State taxes, including sales tax.

APRA Secrecy

New definition of body regulated by APRA

Item 3

4.4     This item inserts a new definition of body regulated by APRA in subsection 56(1) of the APRA Act.  The purpose of the definition is to extend the protection afforded to documents and information under section 56 to bodies that have, at any time, been regulated by APRA.  This will mean, for example, that information or documents that are protected under section 56 will continue to be protected even after the body to which they relate has ceased to be regulated by APRA.

Amendment to subsection 56(2)

Item 4

4.5     This item amends subsection 56(2) of the APRA Act to provide that it is not an offence to disclose information or produce a document in accordance with new subsections 56(7A) and (7B).

Evidential requirements of the Criminal Code

Items 5 - 10

4.6     These items insert notes after subsections 56(3), (4), (5), (6) and (7) of the APRA Act drawing attention to the evidential requirements of the Criminal Code .

Disclosure relating to public contact, compliance matters and enforcement action

Item 11

4.7     This item inserts new subsections 56(7A) and 56(7B) in the APRA Act.  New subsection 56(7A) will allow APRA to disclose public contact information relating to the bodies it regulates, such as the names, postal and street addresses, telephone numbers, facsimile numbers, e-mail addresses and web sites of those bodies.  This amendment is designed to assist the public in contacting bodies regulated by APRA.  The item also inserts a note after subsection 56(7A) drawing attention to evidential requirements of the Criminal Code .

4.8     New subsection 56(7B) will allow APRA to disclose information relating to whether or not bodies it regulates comply with relevant legislation.  For example, APRA may publish a list of those superannuation entities which are “complying funds” under the Superannuation Industry (Supervision) Act 1993 (SIS Act).  Subsection 56(7B) will also allow APRA to disclose information relating to enforcement action it may take against a person.  This will extend not only to enforcement action taken against bodies regulated by APRA, but also to other parties, such as auditors, actuaries, custodians, investment managers etc.  Such information may include a description of court proceedings taken by APRA in relation to a breach or suspected breach of legislation covered by section 56.  APRA may also disclose descriptions of activities it engages in relating to such breaches or suspected breaches - examples might include details of notices or directions issued to a person by APRA, or details of investigations conducted by APRA.  The item also inserts a note after subsection 56(7B) drawing attention to evidential requirements of the Criminal Code .

Note regarding the Privacy Act 1988

Item 12

4.9     This item inserts a note after subsection 56(11) of the APRA Act drawing attention to the provisions of the Privacy Act 1988 relevant to personal information.

Repeal of section 57

Item 13

4.10   This item repeals section 57 of the APRA Act, which placed restrictions on the disclosure of documents and information not covered by section 56 of the Act.  Section 57 is unnecessary as provisions of the Crimes Act 1914 prohibit the disclosure of such material without authorisation.



5

Schedule 2 - Amendment of the Banking Act 1959

Schedule 2 amends section 63 of the Banking Act 1959 to ensure that an authorised deposit-taking institution (ADI) seeking to demutualise gives proper regard to members’ interests and adequate disclosure.

Commencement

5.1     Schedule 2 will commence on the day the Bill receives Royal Assent.

ASIC Definition

Item 1

5.2     This item inserts a definition of the Australian Securities and Investments Commission (ASIC) into the Banking Act 1959 .

Section 63 - Demutualisation

Item 2

5.3     Section 63 of the Banking Act 1959 requires that an ADI, other than a foreign ADI, must seek the Treasurer’s prior consent before entering into an arrangement or agreement to sell or dispose of its business or effect a reconstruction of the ADI.

5.4     This item extends the term reconstruction in section 63 to capture all demutualisations.

5.5     The Treasurer may, in writing, determine what demutualisation of an ADI, other than a foreign ADI, means for the purpose of section 63.  If the Treasurer does not make a determination then demutualisation would be accorded its common usage.  This approach has been adopted given the legal uncertainty about what constitutes a demutualisation.

5.6     The Treasurer may issue a determination on disclosure of information by an ADI to its members with respect to a proposed demutualisation.  In preparing these disclosure guidelines, the Treasurer must consult with both APRA and ASIC.

5.7     The Treasurer must take any guidelines, if any, into account when deciding whether to provide his or her prior consent for an ADI effecting a demutualisation.

5.8     This item does not limit the operation of the existing provisions in section 63.



6

Schedule 3 - Amendment of the Financial Corporations Act 1974

Schedule 3 amends the Financial Corporations Act 1974 (FCA) to reduce compliance costs on business, to make the information collection provisions more flexible and remove unused provisions, including with respect to the regulation of registered financial corporations.  In addition, the proposed amendments will enable the Reserve Bank of Australia (RBA) to delegate the majority of its functions under the FCA to APRA, the Australian Statistician or a staff member of APRA or the Australian Bureau of Statistics (ABS).

Commencement

6.1     The amendments to the FCA will commence on the day on which this Bill receives Royal Assent.

Object of the FCA

Item 1

6.2     This item repeals the existing object and inserts a new object consistent with the amendments made by this Schedule.  The revised object of the FCA is to enable information to be collected from registered financial corporations to assist the RBA in its formulation of monetary policy.

References to the Statistician

Item 2

6.3     As the role for the Statistician will be limited to accepting delegated functions, the existing definition of the Statistician is no longer necessary and hence this item proposes to remove it.

Threshold for Corporations to which FCA applies

Item 3

6.4     This item lifts the legislative threshold for corporations, to which the FCA applies, to cases where the value of assets of the corporation engaged in the provision of finance, in the course of carrying on retail business of selling goods, exceeds $25 million.

National Health Act

Item 4

6.5     This item makes a technical amendment to the title of the National Health Act.

Corporations to which FCA does not apply

Item 5

6.6     As a result of this item, the FCA will not applying to a corporation and every related corporation with assets of less than $5 million unless a lesser amount is prescribed by the regulations.

References to the Governor

Items 6 - 8

6.7     These items propose to remove the distinction of powers between the Governor of the RBA and RBA by vesting all powers in the RBA.

Provision of Information

Item 9

6.8     This item will enable the RBA to specify, in writing, standards on the information to be provided by corporations registered under the FCA and the form that this information should be provided in.  These standards may apply to all registered corporations or a specified class of corporations or place different requirements to be complied with for different activities or situations.

6.9     Standards issued under the proposed section 11 will be disallowable instruments.

6.10   A registered corporation may be exempted by the RBA under the proposed section 12 from the need to comply with a requirement in a standard.  The exemption may be subject to conditions.  The RBA must ensure that up to date copies of the text of exemptions are accessible.

6.11   The RBA may vary or revoke a standard or exemption at any time.  However, the RBA must ensure that registered corporations and other persons can access the current standards and exemptions.

6.12   A registered corporation, without an exemption, found guilty of the offence of failing to provide the information required by a standard, under the proposed subsection 11(2), may be subject to a maximum penalty of 200 penalty units.

6.13   A registered corporation found guilty of an offence for failing to provide information in the form required by the standards, under the proposed subsection 11(2), may be subject to a maximum penalty of 50 penalty units.

Repeal of Part IV

Item 10

6.14   This item repeals the unproclaimed Part IV of the FCA.  Part IV of the FCA encompasses the provisions relating to the regulation and control of the business of financial corporations (including on asset ratios, interest rates, lending policies, determinations and directions, and exemptions).

Manner of Furnishing Documents

Item 11

6.15   This item updates section 21 of the FCA to remove the reference to the Australian Statistician.  Therefore, documents are only required to be delivered to the Head Office of the Reserve Bank.

Delegation of Functions under the FCA

Item 12

6.16   This item repeals the existing delegation provisions and inserts a new provision that will enable the Governor of the RBA, in writing, to delegate any of the RBA’s functions or powers under the FCA, except the proposed section 11, to a member of the Reserve Bank Board, member of the RBA service or in certain circumstances the Chief Executive Officer of APRA, the Australian Statistician, an APRA staff member or ABS staff member.  The proposed section 11 deals with determining, varying or revoking information standards.

6.17   The Governor, in delegating functions, may vary or revoke a delegation and impose conditions on the delegate’s exercise or performance of functions or powers under a delegation.

6.18   The Governor may direct that references to the RBA in a provision should be modified to reflect the person to whom the delegation is made.

Policy of RBA

Item 13

6.19   This item updates a legislative reference with respect to the policy of the RBA.

Penalty for Corporations

Item 14

6.20   This item proposes to increase the maximum penalty level under section 26 for a corporation holding itself out, in the course of its business, as being registered under the FCA to 50 penalty units.

Advisory Committees

Item 15

6.21   This item repeals section 30 of the FCA that allows the Treasurer to appoint advisory committees.  These committees are unnecessary since the established of the Financial Sector Advisory Council.



7

Schedule 4 - Amendment of the Financial Corporations (Transfer of Assets and Liabilities) Act 1993

Schedule 4 amends the Financial Corporations (Transfer of Assets and Liabilities) Act 1993 (FCTAL) to extend the deadline for foreign ADIs, operating in Australia since 18 June 1993, to obtain a banking authority until 30 June 2000 in order to be eligible for concessional tax treatment for transferring assets and liabilities.  In addition, the legislation will apply where there has been a change in ownership of the foreign ADI.

For any transfer of assets and liabilities to be eligible for any tax relief under the FCTAL, the transfer will still need to be reasonably required for the proper reorganisation of the activities within Australia.

Commencement

7.1     Items 1 and 3 commence immediately after the commencement of consequential amendments made to the FCTAL by the Financial Sector Reform (Consequential Amendments) Act 1998 .

7.2     Items 5, 6, 8 and 10 commence from 22 December 1998, the date the previous deadline expired.

7.3     The remainder of the amendments to Schedule 4 commence on the day which this Bill receives Royal Assent.

Definition of Eligible Foreign ADI

Item 1

7.4     This item corrects a mistake contained in the Financial Sector Reform (Consequential Amendments) Act 1998 which accidentally shortened the time period under which foreign ADIs could apply for a banking authority and still be eligible for tax relief under the legislation.

Item 2

7.5     This item gives foreign ADIs, operating in Australia since 18 June 1993, until 30 June 2000 to obtain a banking authority in order to be eligible for concessional tax treatment when transferring their assets and liabilities.

Definition of Newly Established Local ADI

Item 3

7.6     When the FCTAL was last temporarily extended for two years, as part of the Financial Laws Amendment Act 1997 , the definition of eligible local bank was not amended.  As the Financial Sector Reform (Consequential Amendments) Act 1998 continued this error when replacing references to bank with ADI, this item corrects the earlier error by replacing the three with five with respect to the number of years.

Item 4

7.7     This item gives foreign ADIs, operating in Australia since 18 June 1993, until 30 June 2000 to establish a new local ADI in order to be eligible for concessional tax treatment when transferring their assets and liabilities.

Eligible Money Market Corporation

Item 5

7.8     This item enables money market corporations to still be eligible under the FCTAL regardless of whether there has been a change in their owner since 18 June 1993.

Application of the FCTAL

Item 6

7.9     This item amends section 7 of the FCTAL to ensure that the Act applies whether or not there has been a change in their owner since 18 June 1993.

Period within which Transfers must be Effected

Item 7

7.10   This item amends the period within which transfers must be effected to before 1 July 2003.

Net Capital Losses

Item 8

7.11   This item amends the application of subsection 160ZP(7) of the Income Tax Assessment Act 1936 on the transfer of net capital losses to be consistent with the extended time periods.

Definition of Transfer Year

Item 9

7.12   This item amends the definition of the transfer year.  The transfer year must be one of the 7 income years after the commencement of the FCTAL.

Tax Losses

Item 10

7.13   This item extends the period for which the modifications of the Income Tax Assessment Act 1997 continue with respect to the transfer of net losses.

Net Capital Losses

Item 11

7.14   This item extends the period for which the modifications of the Income Tax Assessment Act 1997 continue with respect to the transfer of net capital losses.



8

Schedule 5 - Amendment of the Financial Laws Amendment Act 1997

Schedule 5 amends the Financial Laws Amendment Act 1997 to correct an error to the definition of newly established foreign bank and make consequential amendments associated with Schedule 3.

Commencement

8.1     Items 1 and 3 of Schedule 5 will commence with the commencement of item 10 of Schedule 3.

8.2     Items 2 and 4 will be deemed to have commenced on 30 June 1997 at the time of the commencement of item 1 of Schedule 4 of the Financial Laws Amendments Act 1997 .

Altered Commencement Provisions

Items 1 and 3

8.3     These items repeal the purported amendments contained in the Financial Laws Amendments Act 1997 that would have converted the penalty levels contained in Part IV of the FCA from dollar amounts to penalty units after the Part was proclaimed.  These amendments are made redundant with the proposed repeal of Part IV of the FCA.

Definition of Newly Established Bank

Item 2

8.4     This item enables the proposed amendments to the definition of a ‘newly established local bank’ to be effective from 22 December 1996 to rectify an earlier error.

Definition of Newly Established Local Bank

Item 4

8.5     When the definition of an ‘eligible foreign bank’ was amended by the Financial Laws Amendments Act 1997 , a similar adjustment should have been made to the definition of a ‘newly established local bank’.  This item corrects this oversight.



9

Schedule 6 - Amendment of the Life Insurance Act 1995

Schedule 6 expands the requirements necessary for the assignment of an interest in a friendly society benefit fund.

Section 16ZA of the Life Insurance Act 1995 (LIA) contains a mechanism for the assignment of friendly societies benefits.  However, some inconsistencies with the section 124 of the Friendly Society Code have been identified.  The proposed amendments only apply to friendly societies.

Commencement

9.1     The Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999 (No. 1 Act) transfers the prudential regulation of friendly societies to the Commonwealth regime.  To enable continuity from the Friendly Societies Code in respect of the assignment of an interest in a benefit fund, the schedule 6 will commence on the same day as the No. 1 Act is due to come into operation.

Assignment of an Interest in a Friendly Society Benefit Fund

Item 1

9.2     This item proposes to extend the requirements already in section 16ZA of the LIA necessary for assigning an interest in a friendly society benefit fund.  For friendly societies, this section applies in the place of subsection 200(2) of the LIA.  Since the drafting of section 16ZA, a decision has been taken to replicate additional requirements for assignment from the Friendly Societies Code.  These include a requirement that the assignment be by memorandum of transfer, signed by both the assignor and assignee, and registered by the friendly society.  Together with the existing provisions, the proposed new requirements in section 16ZA only apply to friendly societies.

9.3     Given the continued application of the majority of section 200 (excluding subsection 200(2)) to friendly societies, the terminology in section 16ZA has been altered to ensure consistency with the rest of the LIA Act.  Specifically, it is proposed that transferor and transferee replace assignor and assignee respectively in all paragraphs in section 16ZA.



10

Schedule 7 - Amendment of the Reserve Bank Act 1959

Schedule 7 will amend the Reserve Bank Act 1959 to disqualify from RBA Board membership any person who is a director, officer or employee of an ADI.  Currently, the disqualification only applies to directors, officers or employees of banks.  Now that non-bank ADIs are becoming more like banks and both are regulated by APRA, it is appropriate to extend this disqualification to all ADIs.

Commencement

10.1    Schedule 7 will commence on the day this Bill receives Royal Assent.

Disqualification

Items 1 - 2

10.2    Currently a person who is a director, officer or employee of a bank is disqualified from RBA Board membership.  Now that non-bank ADIs are becoming more like banks and are regulated by the same body (APRA) limiting this disqualification to only banks is not sufficient.  Therefore the proposal extends this disqualification to all ADIs.

10.3    Conflict of interest is a difficult and sometimes sensitive issue.  While the proposed amendment would address the most obvious conflict of interest, most remaining potential Board appointees are likely to have some conflict of interest as most businesses and individuals are affected by interest rate changes and could make use of any confidential information in this regard.  Conflicts of this type are currently addressed by the provisions in the Commonwealth Authorities and Companies Act .

10.4    The transitional provisions continue any current Board appointments that may be affected by the change in the disqualification provision.



11

Schedule 8 - Amendment of the Retirement Savings Accounts Act 1997

Schedule 8 deletes a redundant reference to a former subsection in the Act.

Commencement

11.1   Schedule 8 will commence on the day the Bill receives Royal Assent.

Amendment of subsection 68(1) of the RSA Act

Item 1

11.2   This item amends subsection 68(1) of the RSA Act to delete a redundant reference to former subsection 191(12) of that Act, and to insert a note drawing attention to the secrecy requirements in section 56 of the APRA Act.



12

Schedule 9 - Amendment of Superannuation Legislation Relating to Financial Assistance to Funds

Schedule 9 clarifies the circumstances in which certain superannuation funds, which suffer losses due to fraud or theft, will be eligible to apply for a grant of financial assistance.

Commencement

12.1   Schedule 9 will commence on the day the Bill receives Royal Assent.

Amendment of the Financial Institutions Supervisory Levies Collection Act 1998

Item 1

12.2    This item amends the definition of fund in section 16 of the Financial Institutions Supervisory Levies Collection Act 1998 to remove self managed superannuation funds (as defined in the SIS Act) from the definition.

Amendment of the Superannuation (Financial Assistance Funding) Levy Act 1993 (‘the Levy Act’)

Items 2 - 4

12.3    These items respectively amend the title, section 3, and the definition of fund in section 5 of the Levy Act to remove self managed superannuation funds (as defined in the SIS Act) from the operation of the Levy Act.

Financial assistance provisions - object

Item 5

12.4    This item amends section 227 of the SIS Act by adding the words “by persons directly or indirectly responsible for their administration” at the end of the section.  The amendment clarifies and limits the object of the financial assistance provisions in Part 23 of the SIS Act.

Definition of Defined Benefit Fund

Item 6

12.5    This item inserts a definition of defined benefit fund in section 228 of the SIS Act.  This definition is required in order to determine a fund’s eligibility for financial assistance under Part 23 of the Act.

Definition of Defined Benefit Member

Item 7

12.6    This item inserts a definition of defined benefit member in section 228 of the SIS Act.  This definition is consequential to the definition of defined benefit fund (item 6).

Definition of Defined Benefit Pension

Item 8

12.7    This item inserts a definition of defined benefit pension in section 228 of the SIS Act.  This definition is consequential to the definition of defined benefit member (item 7).

Definition of Eligible Loss

Item 9

12.8    This item inserts a definition of eligible loss in section 228 of the SIS Act.  This definition is an important element of the revised financial assistance provisions and clarifies the circumstances in which a fund may be eligible to apply for financial assistance (which vary depending whether or not a fund is a defined benefit fund (item 6)).  In order to be eligible for financial assistance, a fund must have suffered loss as a result of fraudulent conduct, or theft, by a person responsible for the administration of the fund.  A person responsible for the administration of the fund may include, but is not limited to, the trustee, investment manager or custodian of the fund, or directors, employees or officers of corporate entities that undertake those functions.

Repeal of definition of Loss

Item 10

12.9    This item repeals the current definition of loss in section 228 of the SIS Act.  This definition has been replaced by the definition of eligible loss (item 9).

Repeal and substitution of paragraph 229(1)(a)

Item 11

12.10  This item repeals and substitutes paragraph 229(1)(a) of the SIS Act to reflect that a fund must suffer an eligible loss (and meet the other requirements of the section) in order to apply to the Minister for a grant of financial assistance.

Ministerial requests for advice

Item 12

12.11  This item inserts new section 230A in Part 23 of the SIS Act.  Section 230A requires the Minister to request the advice of APRA in relation to any application for financial assistance made under Part 23.  Subsection 230A(1) states that the Minister’s request may specify particular matters on which APRA is to provide advice, and may specify the time within which the advice must be provided.  Subsection 230A(2) provides that APRA must comply with the Minister’s request, and may address other issues it considers relevant to the determination of the application.

Minister to consider advice provided by APRA

Item 13

12.12  This item amends subsection 231(1) of the SIS Act to require the Minister to also consider the advice provided by APRA under section 230A (item 12) in deciding whether to grant financial assistance.

Replacing references to Loss

Items 14 and 15

12.13  These items respectively amend subsection 231(1) and section 232 of the SIS Act to replace references to loss with references to an eligible loss , reflecting the new definition (item 9).



13

Schedule 10 - Other amendments of the Superannuation Industry (Supervision) Act 1993

Schedule 10 amends the Superannuation Industry (Supervision) Act 1993 to extend the range of information required under the SIS Act that may be submitted in electronic form.  The schedule also contains consequential amendments to improve the efficiency of arrangements for the lodgement of information required under the SIS Act, including lodgement in electronic form.

Furthermore, the amendments propose to strengthen the safeguards against misuse or fraud in relation to electronic lodgement.  Penalty provisions will apply to unauthorised or fraudulent use or submission by electronic means of election notices and other information required under the SIS Act.

The schedule also contains amendments to remove the SIS Act requirement for the affixing of a common seal to election notices, and makes other minor amendments.

Commencement

13.1    Items 1, 2, 4, 6, 7, 9 and 10 will commence on the day on which the Bill receives Royal Assent.

13.2    The remaining items in schedule 10 will commence on a date to be fixed by proclamation.

Amendment of subsection 6(1) of the SIS Act

Items 1 and 2

13.3    These items respectively amend subparagraph 6(1)(a)(viii) and repeal subparagraph 6(1)(c)(iii) of the SIS Act, the effect of which is to transfer responsibility for the administration of section 140 of the Act from ASIC to APRA.

Definition of Approved Form

Item 3

13.4    The item repeals the current definition of approved form in subsection 10(1) of the SIS Act and replaces it with a new meaning given in section 11A (item 5).

Definition of Signed

Item 4

13.5    This item inserts a new definition of signed in subsection 10(1) of the SIS Act.

New Sections 11A, 11B, 11C and 11D

Item 5

13.6    This item inserts new sections 11A, 11B, 11C and 11D in the SIS Act.  Section 11A sets out requirements that apply where a document or information is required to be lodged in a form approved by the Regulator (an approved form ).

13.7    Subsection 11A(2) provides that an approved form may specify what information must be contained in the completed form.

13.8    Subsection 11A(3) provides that an approved form may require or permit the form to be attached to, or form part of, another document, and/or to be lodged in electronic format, in accordance with specifications determined by the Regulator.

13.9    Subsection 11A(4) provides that an approved form may require the form to be signed.

13.10  Subsection 11A(5) provides that an approved form may make different requirements to be complied with depending on whether or not it is lodged electronically.

13.11  Subsection 11A(6) provides that a purported use of an approved form will not be effective unless any requirements that may be specified under subsections (2), (3) or (4) have been complied with.

13.12  Subsection 11B(1) provides that an approved form lodged in electronic format under paragraph 11A(3)(b) is taken to constitute a written notice, and if the form contains an electronic signature of a person the form is taken to be signed by that person.

13.13  Subsection 11B(2) provides that a person’s electronic signature is a unique identification, in an electronic form, which is approved by the Regulator.

13.14  Subsection 11B(3) makes it an offence to misuse electronic lodgement procedures.  In particular, a person is guilty of an offence if the person lodges an approved form in electronic format under paragraph 11A(3)(b) and either the form purports to be given by another person, or purports to be given on behalf of another person, and that person has not consented to the giving of the form.

13.15  Subsection 11B(4) makes it an offence to give the Regulator an approved form in electronic format under paragraph 11A(3)(b) if the form contains the electronic signature of another person who has not consented to the inclusion of the signature.

13.16  Subsection 11B(5) provides that subsections (3) and (4) are offences of strict liability under the Criminal Code .

13.17  Section 11C applies where a person gives an approved form to the Regulator by electronic means under paragraph 11A(3)(b) on behalf of a trustee or trustees (the responsible trustee ).  Subsection 11C(2) requires that the responsible trustee must first make a signed declaration stating that the person is authorised to give the form to the Regulator on the responsible trustee’s behalf, and that the responsible trustee agrees that the information in the form is correct.  Failure to do so is an offence on the part of the responsible trustee.

13.18  Subsection 11C(3) makes it an offence if the responsible trustee does not retain the declaration referred to in subsection 11C(2) for 5 years after it is made.

13.19  Subsection 11C(4) makes it an offence for the responsible trustee to fail to comply with a request from the Regulator to produce the declaration within the 5 year period mentioned in subsection 11C(3).

13.20  Subsection 11C(5) provides that subsections 11C(2), (3) and (4) are offences of strict liability within the meaning of the Criminal Code .

13.21  Subsection 11D(1) provides that a document that is not required to be lodged in an approved form may be lodged electronically only if the Regulator and the person seeking to lodge the document have agreed in writing that it may be lodged electronically, and the Regulator has approved in writing the electronic lodgement of documents of that kind.  Subsection 11D(2) provides that a document is taken to be lodged with the Regulator only if it conforms to the relevant agreement or approval (including any requirements as to authentication).

Removal of Requirement for Common or Official Seal

Item 6

13.22  This item amends paragraph 18(3)(b) of the SIS Act to replace the words “under the common or official seal of” with “signed by”.  The purpose of this amendment is to remove the requirement for the corporate trustee of an employer-sponsored superannuation fund that elects to be treated as a public offer fund to include its common or official seal on the election notice.  Changes to the Corporations Law have removed the requirement for companies to have common or official seals, and this amendment reflects that change.  The trustee will still be required to ‘sign’ the election notice in a way which will be effective in law and bind the trustee (see item 4).

Removal of Requirement for Common or Official Seal

Item 7

13.23  This item amends subsection 19(4) of the SIS Act to remove the requirement for a corporate trustee of a superannuation fund that elects to be a regulated superannuation fund to include its common or official seal on the election notice.  Changes to the Corporations Law have removed the requirement for companies to have common or official seals, and this amendment reflects that change.  The corporate trustee will still be required to ‘sign’ the election notice in a way which will be effective in law and bind the trustee (see item 4).

Repeal of subsections 36A(4), (5) and (6)

Item 8

13.24  This item repeals subsections 36A(4), 36A(5) and 36A(6) of the SIS Act.  The requirements of these provisions are now contained in section 11A of the Act (item 5).

Amendment of section 131A

Item 9

13.25  This item amends subsection 131A(1) of the SIS Act to remove a redundant reference to former subsection 346(6B) of that Act, and to insert a note drawing attention to secrecy requirements in section 56 of the APRA Act and section 252C of the SIS Act.

Amendment of subsection 140(2) of the SIS Act

Item 10

13.26  This item amends subsection 140(2) of the SIS Act removing the reference to ASIC.  Responsibility for approving the form of notice required under section 140 will now rest with APRA (see also items 1 and 2).

Amendment of subsection 254(1) of the SIS Act

Item 11

13.27  This item amends subsection 254(1) of the SIS Act to remove the requirement that the information required under the subsection be prescribed in the regulations.  The removal of this requirement is to provide greater flexibility should it be necessary to alter the type or range of information required.  However, APRA (or such other body specified in the regulations) will still be required to inform trustees of the information required.  This will be done by specifying the information required on an approved form.

Note following subsection 254(1) of the SIS Act

Item 12

13.28  This item repeals and substitutes the note that follows subsection 254(1) of the SIS Act.  The note now says that the approved form, rather than the prescribed information, may require the tax file number of the superannuation entity.  This amendment is consequential to the amendment to subsection 254(1) (item 11).

Amendment of subsection 299U(8)

Item 13

13.29  This item amends subsection 299U(8) of the SIS Act to provide that the approved form under subsection 254(1) may require the tax file number of the superannuation entity to be given.  This change is consequential to the amendment to subsection 254(1) (item 11).



14

Schedule 11 - Other Miscellaneous minor technical amendments

Schedule 11 makes various miscellaneous technical amendments.

Commencement

14.1    Items 1, 2 and 3 are taken to have commenced immediately after the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 received Royal Assent.

14.2    Item 4 is taken to have commenced immediately after the No. 1 Act received Royal Assent.

14.3    Item 5 commences at the same time as item 5 of Schedule 10.

Update of legislative references

Item 1

14.4    This item amends subsection 2(16) of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 to change references to the Superannuation Legislation Amendment (Choice of Funds) Act 1998 to the Superannuation Legislation Amendment (Choice of Funds) Act 1999 .

Item 2

14.5    This item amends subsection 2(17) of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 to change references to the Superannuation Legislation Amendment Act 1998 to the Superannuation Legislation Amendment Act 1999 .

Item 3

14.6    This item repeals and substitutes the heading to Part 3 of Schedule 17 to the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 , the effect of which is to change a reference to the Superannuation Legislation Amendment Act 1998 to the Superannuation Legislation Amendment Act 1999 .

Change to commencement

Item 4

14.7    This item inserts new subsection 3(7A) in the No. 1 Act to provide that the amendments contained in items 8, 9, 11 and 12 of Schedule 6 to that Act are taken to have commenced immediately after the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 received Royal Assent.

Amendment to Income Tax Assessment Act

Item 5

14.8    This item amends subsection 161(3) of the Income Tax Assessment Act 1936 to remove the word “physically”, as it is unnecessary.



15

Schedule 12 - Transitional, saving and application provisions

These transitional provisions relate to the validation of financial sector supervisory levy determinations, continuation of actions under the FCA, continuation of current RBA Board appointments and the application of financial assistance to superannuation funds that have incurred losses.

Commencement

15.1   Part 1 of Schedule 12 commences on the last day on which any of the relevant levy Acts receives Royal Assent.  These Acts are listed in subclause 2(12) of this Bill.

15.2    The remainder of this Schedule commences on the day the Bill receives Royal Assent.

Part 1 - Transitional provisions for validation of determinations in relation to financial sector supervisory levies

Interpretation

Items 1

15.3   This item inserts relevant definitions.

Deferral of Date for Paying Levy

Item 2

15.4   This item provides the due date for payment of the 1998-99 levies.  If a levy would have been payable under the Financial Institutions Supervisory Levies Collection Act 1998 apart from this item, the levy is taken to be due and payable on the due payment day.  This day is defined in item 1 of this Part as the day six weeks after the day on which this Part commences.

15.5   Any penalty for late payment of the levy is to be calculated from the due payment day.

No Retrospective Criminal Liability

Item 3

15.6   This item prevents the possibility of any offence provision relating to the payment of levy having a retrospective effect.

Part 2 - Transitional provisions related to amendment of the Financial Corporations Act 1974

Inserting Definitions

Item 4

15.7   This item inserts definitions.

Preserving Exemptions or Determinations

Item 5

15.8   This item preserves exemptions or determinations in force immediately prior to the amendments to the FCA contained in Schedule 3 as if they had been issued under the amended FCA.

Preserving Lists, obligations, determinations and requests

Item 6

15.9            This item preserves lists, obligations on the Governor of the RBA, determinations and requests under the old section 10 in force immediately prior to the amendments to the FCA contained in Schedule 3 as if they had been occurred under the amended FCA.

Information Collection

Item 7

15.10  The existing information collection requirements under the regulations of the old Act are preserved until new requirements are issued as a standard under section 11 as proposed by item 9 of Schedule 3.

Part 3 - Transitional provisions related to amendments of the Life Insurance Act 1995

Friendly Society Benefit Fund Assignments

Item 8

15.11 The transitional provisions continue any assignments of an interest in a benefit fund of a friendly society made prior to the commencement of Schedule 6.

Part 4 - Transitional provisions related to amendments of the Reserve Bank Act 1959

Reserve Bank Board Appointments

Item 9

15.12 The transitional provisions continue any current Board appointments that may be affected by the change in the disqualification provision.

Part 5 - Application of amendments of superannuation legislation relating to financial assistance to funds

Commencement of Superannuation Amendments

Item 10

15.13 This item provides that the changes made by Schedule 9 to the financial assistance provisions in Part 23 of the SIS Act apply only in relation to losses incurred by a fund after the commencement of that Schedule.